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44–186 PDF 2008

THE 15th REPLENISHMENT OF 

THE INTERNATIONAL DEVELOPMENT 

ASSOCIATION (IDA) AND THE 11th 

REPLENISHMENT OF THE 

AFRICAN DEVELOPMENT FUND (AfDF) 

HEARING 

BEFORE THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

JUNE 18, 2008 

Printed for the use of the Committee on Financial Services 

Serial No. 110–121 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

BARNEY FRANK, Massachusetts, Chairman 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

GWEN MOORE, Wisconsin, 

LINCOLN DAVIS, Tennessee 

PAUL W. HODES, New Hampshire 

KEITH ELLISON, Minnesota 

RON KLEIN, Florida 

TIM MAHONEY, Florida 

CHARLES WILSON, Ohio 

ED PERLMUTTER, Colorado 

CHRISTOPHER S. MURPHY, Connecticut 

JOE DONNELLY, Indiana 

ROBERT WEXLER, Florida 

JIM MARSHALL, Georgia 

DAN BOREN, Oklahoma 

BILL FOSTER, Illinois 

ANDRE ́ CARSON, Indiana 

SPENCER BACHUS, Alabama 

DEBORAH PRYCE, Ohio 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

CHRISTOPHER SHAYS, Connecticut 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

GINNY BROWN-WAITE, Florida 

J. GRESHAM BARRETT, South Carolina 

JIM GERLACH, Pennsylvania 

STEVAN PEARCE, New Mexico 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

GEOFF DAVIS, Kentucky 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

ADAM PUTNAM, Florida 

MICHELE BACHMANN, Minnesota 

PETER J. ROSKAM, Illinois 

KENNY MARCHANT, Texas 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

DEAN HELLER, Nevada 

JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel 

(III) 

C O N T E N T S 

Page 

Hearing held on: 

June 18, 2008 .................................................................................................... 1 

Appendix: 

June 18, 2008 .................................................................................................... 43 

WITNESSES 

WEDNESDAY, JUNE 18, 2008 

Beckmann, David, President, Bread for the World Institute ............................... 24 

Bell, Edward, Senior Program Advisor, International Alert ................................ 27 

Lowery, Hon. Clay, Assistant Secretary for International Affairs, United 

States Department of the Treasury .................................................................... 7 

Molina-Gallart, Nuria, Policy and Advocacy Officer, European Network on 

Debt and Development ........................................................................................ 25 

Udall, Lori, Senior Advisor, The Bank Information Center ................................. 29 

APPENDIX 

Prepared statements: 

Carson, Hon. Andre .......................................................................................... 44 

Waters, Hon. Maxine ........................................................................................ 46 

Beckmann, David ............................................................................................. 49 

Bell, Edward ..................................................................................................... 52 

Lowery, Hon. Clay ............................................................................................ 60 

Molina-Gallart, Nuria ...................................................................................... 65 

Udall, Lori ......................................................................................................... 71 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Frank, Hon. Barney: 

Letter from Peter Bakvis, Director, ITUC/Global Unions ............................. 106 

Wall Street Journal article entitled, ‘‘Report on World Bank Sees Deregulation Bias,’’ dated June 13, 2008 ................................................................ 108 

Letter from Hon. Clay Lowery providing additional information for the 

record ............................................................................................................. 109 

(1) 

THE 15th REPLENISHMENT OF 

THE INTERNATIONAL DEVELOPMENT 

ASSOCIATION (IDA) AND THE 

11th REPLENISHMENT OF THE 

AFRICAN DEVELOPMENT FUND (AfDF) 

Wednesday, June 18, 2008 

U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. 

The committee met, pursuant to notice, at 10:03 a.m., in room 

2128, Rayburn House Office Building, Hon. Barney Frank [chairman of the committee] presiding. 

Members present: Representatives Frank, Waters, Sherman, 

Baca, Scott, Green, Cleaver, Moore of Wisconsin, Ellison, Klein, 

Carson; Bachus and Feeney. 

The CHAIRMAN. This hearing of the Committee on Financial 

Services will come to order. 

One of the most important but least noticed parts of this committee’s jurisdiction is our jurisdiction over the relationships between 

the United States Government and the various international financial institutions, which is one that I am very pleased that we have. 

In the Senate, the jurisdiction is in the Foreign Affairs Committee, 

but here it is in the Financial Services Committee. One strong reason for that is that under our statutory scheme, the American representatives to those institutions are affiliated with the Treasury, 

and the Secretary of the Treasury has the major impact, and I 

think that is appropriate. 

This committee has a history of a lot of concern in this area. In 

the previous Congress, when the Republicans were in the Majority, 

at the initiation of then-Chairman Leach, the current Ranking 

Member Mr. Bachus, myself, and Ms. Waters, four fairly senior 

members of the committee, we got together to push debt relief, 

frankly, over the objections of the Republican leadership in the 

House, the Democrat leadership in the House, and the Clinton Administration. People say, ‘‘I don’t like to say I told you so,’’ but I 

do, and we did, and we were right. And debt relief has been very 

successful. 

We recently, in a totally bipartisan way, initiated a second 

round. In the Congress before that, when the Democrats were last 

in control, we took some action that led, I believe, to the establishment of the inspection panels by dragging our feet on funding the 

tranches, and we also, I think, had a good impact on openness and 

transparency. 

2 

We have recently addressed in the Jubilee Act, in a bipartisan 

way, a set of views on conditionality. Again, it was a bipartisan 

one. I commend people to look at the comments that this committee 

added, not the comments, but the legislation regarding conditionality. It is a very bipartisan piece of legislation. Some of the language was suggested by each side. 

This brings us to two of the issues we have today. I believe that 

we are much better off having these institutions than not. I think 

there have been significant improvements. In fact, when we were 

considering this in the 1990’s, we were in the midst of the 50 Years 

Is Enough campaign. While 50 years may have been enough, 60 

years doesn’t appear to be, because I am pleased that we do not 

now have the strong argument from many of the NGOs that the 

time had come to abolish the World Bank and the IMF. 

The IMF is, I will acknowledge, in a bit of a search. It is less 

clear than it used to be just exactly what it is the IMF is supposed 

to be doing because currency regimes have changed. But the need 

for development assistance to diminish poverty is, of course, as 

great as it ever was. So with regard to the World Bank, the International Development Association, the International Financial Corporation, and the other regional banks and their concomitant entities, that job is still very important. I remain very supportive, and 

I believe this committee is supportive as well. 

But there are two issues. I believe that 10 years ago and more, 

there was a serious ideological bias in the approach that was 

taken. The market obviously is a great developer of wealth, but an 

excessive faith in the market alone and a hostility to public-sector 

activity can be taken too far. I do believe that in the Asian crisis 

of about 10 years ago, the Clinton Administration was guilty of at 

first pushing the wrong remedies. 

We have evolved some, and I am pleased that the World Bank 

itself has issued principles that say that conditionality has gone too 

far. The IMF has acknowledged that. Structural adjustment is a 

thing of the past, theoretically, but there remain two problems. 

First, we have received strong evidence, I believe, that more conditionality survives than was supposed to, if you read the statements. 

Now some kinds of conditionality are very important. We embody 

in our Jubilee Act a mandate with regard to debt relief for what 

I would call procedural conditionality, for openness, for democracy, 

and for opposition to corruption. But there are public policy choices 

that ought to be made without coercion by the public elements. 

This committee did a trip to Africa, a bipartisan trip, and there 

was staff on both sides, and we heard in Ghana, for instance, 

which has been a very successful economic entity, complaints about 

excessive pressure to privatize their water system. I think there 

continues to be more conditionality than there ought to be, but less 

than there used to be. That is one of the things we will be concerned about. 

Second, we have the ‘‘Doing Business’’ report. The ‘‘Doing Business’’ report, it is clear, does have an impact on allocations, and 

contains ideological biases, in particular, the worker section. When 

countries are incentivized by the World Bank to cut down on vacation time and to lower pay, these are not appropriate measures for 

the World Bank to recommend. People can debate them or not. I 

3 

would obviously be on the other side from many of them. But we 

are not here debating whether the World Bank is right or wrong 

to include these substantively, but procedurally. They just not 

should not be imposed on countries. When Saudi Arabia looks better than Sweden in some aspects because of employment practices, 

things have gotten very much out of hand. 

Those two areas we will continue to discuss: excessive conditionality of a substantive sort; and an intrusion of a bias with regard 

to worker rights and treatment of workers in the ‘‘Doing Business’’ 

report. Those are two of the issues that we will have before us. 

We have the legislative jurisdiction. I think it is time to do funding for the International Development Association and for the African Development Bank. The normal way these work, people should 

know—it has for some time been unwise to bring these to the Floor 

of the House. But this committee has developed the expertise, and 

we are in touch with the Appropriations Subcommittees on Foreign 

Operations in both the House and the Senate which do the actual 

legislating. The usual procedure I hope to follow here is that we 

will be marking-up our version of these next week, and we will be 

transmitting what we vote out to the Appropriations Subcommittees on Foreign Operations, and we will hope that they will be responsive. As I said, we will be looking in part at those issues. 

The final one—I appreciate the indulgence in time and I will give 

equal time to all—is the difficult issue with the fragile states. The 

first two, I think it is clear to me what we would like to see done 

and not done, at least to many of us. The fragile state issue is less 

ideologically charged, more a question of competence and specificity. We do want to guard against the possibility that fragility 

will invite even more intervention of the wrong kind. But the fundamental issue is what is the appropriate way to help fragile 

states, and that is one where we want to be totally cooperative and 

supportive in trying to figure out what to do. 

Now the ranking member, who has been from the time of the 

debt relief a leader in the effort to get policies that are truly responsive to the terrible needs of poverty in the world, the gentleman from Alabama. 

Mr. BACHUS. I thank the chairman for holding what I think is 

a very important hearing on authorizing the United States’ commitment to the International Development Association, the IDA, 

and the African Development Fund, thereby fulfilling our previous 

commitment to these 82 highly indebted poor countries. 

I want to associate myself with the remarks of the chairman 

when he said that this committee in a bipartisan way has been 

committed to supporting authorization and appropriation of these 

funds, which I believe are increasingly becoming more effective and 

now have an established track record of achievement and success 

in many of these countries. 

By fulfilling the United States’ commitment to IDA 15, or the 

15th replenishment of IDA, and to the AfDF 11, we fund two of the 

most effective vehicles for delivering aid to the world’s most impoverished countries. As examples, in the last 15 years, IDA contributions have helped rebuild—and these are just some specific examples—9,000 miles of roads in Ethiopia, tripled the number of girls 

attending Bangladesh secondary schools, and helped improve availVerDate Aug 31 2005 12:37 Sep 16, 2008 Jkt 044186 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 K:\DOCS\44186.TXT TERRIE
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ability and access of 25 million people in the world’s poorest counties to safe drinking water and sanitation. 

For countries unable to borrow at market rates to meet the basic 

medical, educational, and nutritional needs of their peoples, both 

programs are a vital financial lifeline. Not even the strongest proponents contend that these programs are perfect, and today’s hearing offers this committee an opportunity for oversight to work with 

the Administration, NGOs, the World Bank, and others to help 

strengthen and ensure that the funds that U.S. taxpayers contribute are being used wisely and effectively. 

In this regard, recent reforms undertaken by the IDA with encouragement from the United States and other donor nations are 

worth noting. Among other steps, the IDA has reevaluated the conditions placed on countries, improved its system for monitoring results, increased its role in engagement in fragile and postconflict 

states, and is working to become more transparent. As the chairman said, we have to be very careful with the conditions that we 

impose and how we impose those. 

Next week, the committee will consider legislation authorizing 

funding for both of these entities. It is my hope that we will fulfill 

our prior commitments to assist these 82 heavily indebted countries and approve a bill free of new conditions that would weaken, 

not strengthen, the United States’ voice within the World Bank. 

As I have said before, the cost of not acting is not just hopelessness, but increased political unrest throughout the world, because 

poverty creates a fertile environment for terrorism and corruption 

and creates the type of conditions that allow dictators to thrive. 

This sentiment is echoed in the report of the 9/11 Commission, 

which states: ‘‘When people lose hope, when societies break down, 

when countries fragment, the breeding ground for terrorism is created.’’ 

I think there is general consensus among the Administration and 

both the Majority and the Minority in this Congress that this legislation is very consistent with our foreign policy objectives and really strengthens and helps us achieve those objectives. 

Mr. Chairman, the United States Government has pledged this 

funding. It is now up to Congress to authorize it. This is an important and noble task. We have an opportunity to make a difference 

over the long term to countries mired in poverty and strife. We 

should not turn our backs on this important work or on them. 

While I look forward to hearing the testimony of all of our witnesses, including Assistant Secretary Lowery and witnesses on our 

second panel, I want to extend a special welcome to David Beckmann, or Dave Beckmann, president of Bread for the World. Mr. 

Beckmann and I have worked together on providing assistance to 

developing countries in the past, and his book, ‘‘Grace at the 

Table,’’ helped inspire me to become involved in this effort. He is, 

in many regards, a mentor to me. 

With that, Mr. Chairman, I thank you again for your leadership 

on this issue. You are an inspiration to others. I applaud you for 

holding this hearing, and I yield back the balance of my time. 

The CHAIRMAN. I thank the gentleman. I think our collaborative 

efforts in this area over a long period of time have really been one 

of the highlights of the committee’s work. 

5 

The gentleman from California is recognized for 5 minutes. 

Mr. SHERMAN. I have always been an extremely strong supporter 

of increased American effort to help the world’s poor, and that is 

why nothing is more embarrassing to me than the World Bank and 

the stubborn effort of this Administration and others to funnel our 

scarce foreign resources, foreign aid resources, through the World 

Bank. 

We have a choice when we tax the American people and use 

those funds to help the world. We can funnel that money through 

the World Bank, through other international organizations, or directly through USAID and other organizations totally separate 

from the United States Government. 

There are those who are say that whatever flaws the World Bank 

has, if we don’t put money in, the Europeans and the Japanese 

won’t either, and they will cut their foreign aid. What an outrageous attack on the morality and ethics of the people of Europe 

and Japan to think that they would use our decision, a possible decision that I would advocate, not to use the World Bank institution, 

as an excuse to reduce their total aid to the world. They might join 

with us and decide to funnel their foreign aid through other organizations, but to use as the boogeyman that we have to fund the 

World Bank or Europe and Japan will immorally cut their efforts 

to the world’s poor is an insult to our intelligence and to their morality. 

Why is the World Bank such an embarrassment? Why does it 

pose a great threat to all of us Members of Congress and others 

who support increased foreign aid? There are many reasons. I will 

focus on just one. That is the decision of the World Bank to loan 

$1.35 billion to the Government of Iran over the last 8 years. 

We will be told that this is from the IBRD and not the IDA, and 

that if we in Congress are really stupid, we will think there is a 

big difference. Let’s look at the World Bank Web site, the one before they took it down in order to hide the truth, the one they had 

up for many years, which says IBRD and IDA are run on the same 

lines. They share the same staff, the same headquarters, report to 

the same President, and use the same rigorous standards when 

evaluating projects. IDA simply takes its money out of a different 

drawer. 

A country must be a member of IBRD before it can join IDA. Let 

me quote again the words, ‘‘They use the same rigorous standards 

when evaluating projects.’’ Why would we take our scarce foreign 

aid dollars and route them through a staff who decides that one of 

the good uses of money is to send it to Tehran, and how are we 

supposed to go to our colleagues and urge them to vote for more 

foreign aid when we expose them to the risk that their constituents 

will notice that some of that money is going to Iran? 

I would say there are so many deserving organizations, so many 

ways in which we can support ending poverty in the world. For us 

to send the money to the World Bank is an abdication of our responsibility and imperils U.S. support for foreign aid. 

What does sending that money to Tehran do? It allows Iranian 

politicians to stand in front of water purification plants or sewage 

plants and cut the ribbon in the same way those in Congress know 

is so important to staying in power, because you have to bring 

6 

home the bacon. I know it is not kosher, but you have to bring 

home the bacon. But what better way to illustrate to the Iranian 

people that the nuclear program of their country hardly cuts them 

off from the world, but rather that the whole world is sending 

money to that government. What better way to illustrate that they 

are losing nothing by building nuclear weapons than to cut the ribbon in front of a project funded by the World Bank, funded by an 

organization which is just one drawer away from a drawer in which 

we are being told to put more American money. 

Let us support our efforts to help the world’s poor by stopping 

our involvement with the World Bank until it stops funding the 

Iranian Government. That is the only way to go back to our districts with a straight face, not having to hope that our constituents 

don’t know what we are up to, but rather to be able to go back and 

honestly advocate for more foreign aid. 

I yield back. 

The CHAIRMAN. The gentleman from Texas. 

Mr. GREEN. Thank you, Mr. Chairman. I especially thank you for 

holding this hearing. I believe it to be exceedingly important. 

I have had the opportunity to travel to Darfur, Africa, and I have 

seen some of the conditions there that merit a lot of attention. But 

I have also had an opportunity, Mr. Chairman, to travel to Haiti, 

and Haiti is in our hemisphere, just off the coast of Florida. In 

Haiti, we have a poverty rate of about 80 percent. We have about 

70 percent of the people living off of $2 per day, or less; about 56 

percent, more than 50 percent, live off of $1 per day, or less. They 

have the highest HIV/AIDS rate in the Western Hemisphere. 

In Haiti, they have five seasons. Of course, we have four. The 

fifth season is the hunger season, a time when they can predict 

hunger will exist to the extent that it will cause great pain and 

death to some people. 

So I am very pleased that this hearing is taking place because 

I am very much interested in what is happening just off the coast 

of Florida in a country that begs for help. They do not have a fishing industry. They are now becoming a staging point for drugs. 

They have large-scale corruption that is being dealt with. It is my 

hope that somehow we can see some help flow to a country that 

is so near to us and in desperate need of attention. 

Mr. Chairman, again, I thank you, and I thank the ranking 

member as well. 

I yield back the balance of my time. 

The CHAIRMAN. There being no further members—Ms. Moore has 

joined us. The gentlewoman from Wisconsin is recognized. 

Ms. MOORE OF WISCONSIN. Thank you, Mr. Chairman. 

Thank you, panel, for joining us today for this very, very important issue of World Bank conditionality. This is something that is 

of real interest to me, given that the chairman has given me responsibilities as the committee’s representative to the Parliamentary Network on the World Bank. 

I am very interested in your comments. I have more questions 

than I do answers. So with that, I will yield back the balance of 

my time. 

The CHAIRMAN. The gentleman from Indiana. 

7 

Mr. CARSON. Thank you, Chairman Frank and Ranking Member 

Bachus, for holding this hearing today regarding the 15th Replenishment of the International Development Association and the 11th 

Replenishment of the African Development Fund. 

As we consider these proposals today, we face critical questions 

about the effectiveness of current aid and how we can work to rebuild failed or fragile states. I am very pleased that the Administration sought significant increases in the U.S. contribution to IDA 

and for the African Development Fund. We must target these crucial multilateral resources towards fighting the HIV/AIDS epidemic 

across the globe, combating global climate change, stabilizing 

weakened governments, and addressing the global food crisis. 

Yesterday, I met with David Miner, chair of the board of directors for Bread for the World, and a highly respected member of the 

Indianapolis community and a very proud Hoosier. He highlighted 

the severity of the world food crisis and how important it is that 

we give weight to this problem in examining how global assistance 

through the IDA is directed. 

He said that the current food prices represent a significant setback that at this point he doesn’t think the world community has 

fully realized the impact of, and I could not agree with him more. 

I would also like to add that during my recent trip to Haiti, I 

was deeply moved by those I saw suffering from extreme poverty 

and hunger. In a world with such wealth and resources, we must 

aggressively fight to make sure the resources we devote to foreign 

assistance can truly bring about the substantive and structural 

changes within governments to help those living at the margins of 

society. 

Further, I appreciate that since 2005, the World Bank has been 

increasingly open to suggestions about policy and has recognized to 

some extent the negative implications of imposing harsh 

conditionalities on recipient countries. Privatization of public services and user fees on secondary education, health care, and even 

water have not stimulated economic growth in these countries. 

Rather, they have served only to exacerbate the dire circumstances 

of the citizens within recipient nations. 

Lastly, I think it is very important to note that Chairman Frank 

has been a great leader in promoting transparency and accountability within the World Bank. I commend him for his work and 

would note how important it is for affected citizens to be able to 

weigh in on the policies imposed by the Bank and offer opinions on 

how to strengthen those policies. 

I would like to thank the witnesses today for attending, and I 

look forward to this important discussion. Thank you. 

The CHAIRMAN. We will now hear from a regular and welcome 

witness, the Assistant Secretary for International Affairs at the Department of the Treasury, Clay Lowery. 

Mr. Lowery. 

STATEMENT OF THE HONORABLE CLAY LOWERY, ASSISTANT 

SECRETARY FOR INTERNATIONAL AFFAIRS, UNITED STATES 

DEPARTMENT OF THE TREASURY 

Mr. LOWERY. Thank you, Chairman Frank, Ranking Member 

Bachus, Congresswoman Moore, and Congressmen Green, Carson, 

8 

and Sherman. Thank you for the opportunity to discuss the Administration’s request for the authorization of the United States to participate in the 15th Replenishment of the International Development Association, known as IDA. 

IDA is the main vehicle of the World Bank to support 82 of the 

poorest countries around the world by providing the largest source 

of interest-free loans, grants, and debt relief of any multilateral development institution. Our request for $3.7 billion over 3 years represents a 30 percent increase over IDA 14. 

Due to the shortness of time, I am not going to be discussing the 

African Development Fund replenishment, but I am happy to take 

any questions on that. 

There are a myriad of reasons to support the authorization and 

appropriations of IDA. Today, I want to highlight three: effectiveness; leverage and coordination; and U.S. foreign policy objectives. 

The bulk of development research suggests that for assistance to 

be effective, it should be country-driven, performance-based, and 

measured systematically for results. IDA is a leader in all three 

areas. Countries receive assistance from IDA that reflects their 

own priorities. IDA helps countries build the systems and capacity 

within governments to enable them to tackle barriers to growth 

and poverty reduction, working across sectors such as agriculture, 

education, infrastructure, and health. IDA is performance-driven, 

as the top-performing 10 percent of countries receive 7 times as 

much assistance on a per capita basis as the poorest-performing 10 

percent of countries. 

IDA is also the first international financial institution to systematically track the outcomes that countries achieve under their programs, such as educating girls. This measuring for results system 

provides greater accountability, as well as a valuable evaluative 

tool. 

IDA’s effectiveness can be seen in such areas as IDA countries 

in the last 40 years—in IDA countries, people are living on average 

15 years longer than they did; illiteracy has been cut in half over 

the past 30 years, from 50 percent to 25 percent of the population; 

and 80 percent of children now complete primary education. 

There are many country-specific examples. I will just give you 

one. In Senegal, IDA supported the country’s rural infrastructure 

projects, which improved roads, strengthened decentralization and 

financed microprojects, including water, schools, livestock, and 

other development needs. The results are that beneficiary households in the 110 participating rural communities reported a 25 percent increase in incomes. Markets, schools, and health facilities are 

now more accessible. Children now typically spend 10 minutes getting to school, instead of 30 minutes, and the weight and height 

under 3 years of age has improved. 

These efforts are being noticed. In a recent article Bill Easterly, 

who is a notable development expert and very harsh critic of development assistance providers, ranked IDA as the number one donor 

using best practices in aid in his evaluation of 39 multilateral and 

bilateral agencies. 

As a multilateral institution, IDA provides financial leverage for 

development resources. For every dollar the United States contributes to IDA, it is expected that $15 will be provided in loans or 

9 

grants to those countries. IDA’s leverage, though, is not simply financial. At a time when the average number of donors per country 

has grown from 12 in the 1960’s to more than 30 today, IDA can 

support the country by providing coherence among donors and 

sharply reducing the transaction costs for recipient countries. 

IDA is also renowned for its convening power, as has been very 

evident lately, given Congressman Carson’s question about the 

World Bank’s response to increasing food prices. Through the effective leadership of President Zoellick, the World Bank has played a 

central role in galvanizing the international community to try to 

meet not only the short-term needs of many poor countries, but 

also advocating the appropriate policies to address ways to include 

agricultural productivity in the long run. 

The United States has a wide international reach, however, we 

can’t do it alone. The greatest opportunities and the most serious 

threats to U.S. interests now come from the developing world. 

While IDA accounts for only a small amount of the Administration’s foreign assistance request, its global reach and expertise 

make it a very effective instrument for advancing U.S. strategic objectives abroad. For instance, since 2002, the World Bank has committed $1.56 

billion for 36 reconstruction projects and 3 budget support operations in Afghanistan, and just last week it committed another $1.1 

billion over the next 5 years in Afghanistan. This assistance has 

helped rehabilitate schools and decentralize management to increase enrollment across grades, especially among girls. 

My boss, Secretary Paulson, is fond of saying that if the privatesector organization does not change with the times, it is likely to 

go out of business, whereas a public-sector institution is likely to 

become irrelevant. 

Thus, the United States uses the IDA replenishment negotiations 

as a platform to leverage reforms that we think are necessary to 

make the World Bank change with the times. Over the years, our 

forum agenda has taken IDA to new frontiers on measuring and 

achieving development results, delivering 100 percent debt relief to 

potentially over 40 countries, securing grant finance for the poorest 

countries, and enhancing accountability and transparency. In the 

latest negotiations, we made a major effort on a number of areas 

that you all have commented on, such as working to coordinate and 

find mechanisms to assist in the revitalization of fragile and 

postconflict countries in a much more effective way. 

IDA is now taking a much greater role in supporting regional 

projects, which are important for many countries to address water 

management, road networks, trade facilitation, and energy assets. 

In conclusion, the fight against global poverty is one of the biggest challenges of our time. As both a courageous and generous Nation, the United States is a natural leader in this fight to support 

those in the greatest need. IDA is probably the most effective institution through which we can invest to achieve that goal. This is not 

to say IDA and the World Bank are perfect. Rather, it underscores 

the need to constantly reevaluate IDA’s approach to find out what 

works and what doesn’t. 

In the end, what we would ask for is the full funding of our request, which is something that IDA needs to help make those conVerDate Aug 31 2005 12:37 Sep 16, 2008 Jkt 044186 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 K:\DOCS\44186.TXT TERRIE
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tributions and to help pay for that debt relief. The continued arrears by the United States jeopardizes our ability to deliver on our 

promises and hurts our influence to lead IDA. 

We respectfully urge your support. I look forward to answering 

any of your questions. 

[The prepared statement of Assistant Secretary Lowery can be 

found on page 60 of the appendix.] 

The CHAIRMAN. Mr. Secretary, we share, many of us, the Administration’s view that support for these institutions is important, but 

you just heard a very strong argument that might have some appeal here from our colleague from California. What is your response to those who say, ‘‘Well, but the World Bank is lending 

money to Iran, and therefore we should sever relations?’’ What are 

we doing about that, and how do you respond to that? 

Mr. LOWERY. Congressman Sherman’s question, I know he is no 

longer here, but it is true that IDA and the IBRD are associated, 

but the IBRD is financed through putting bonds out in the market. 

IDA is financed through donor support. 

The World Bank, over the objections of the United States, strong 

objections, has provided finance in the past to Iran. The last time 

that was done was over 3 years ago. 

If you cut assistance to IDA, what you are cutting is assistance 

to Haiti, Liberia, Afghanistan, Ghana, and Uganda. You are not 

cutting assistance to Iran. So in that respect, I think it is a mistake 

to think that there is no distinction between IDA and the IBRD. 

Secondly, in terms of what is going on in Iran, we have been very 

critical of the World Bank providing any assistance to Iran. Most 

of the assistance was associated with the earthquake in Bam a few 

years ago, to help provide support to help with the problems that 

happened with that earthquake. 

We have nothing against the Iranian people; we have something 

against the Iranian Government. I would say I can’t think of anybody who has done more to try to help stop financing to Iran than 

Secretary Paulson and Under Secretary Levey at the Treasury Department. So we stand very strongly with the Congressman from 

California on the goals of what he wants to achieve. We just don’t 

think his methodology is correct. 

The CHAIRMAN. Two things. This is a financing separation, but 

let’s talk about what is going forward. Is there anything pending 

from the World Bank? Part of the problem with Iran is not simply 

that we have very legitimate concerns with the irresponsibility of 

the government and its continued insistence on getting nuclear 

weapons. It would be an inconsistency between tough economic 

sanctions and this. But it would come as a surprise to people who 

think of the Bank as trying to help poor countries. Iran must be 

edging up into the category of countries that even the middle-income countries aren’t there. 

Are there any pending proposals to provide aid to Iran? I assume 

we would strongly oppose them. We have this alliance with several 

of our allies. We don’t ourselves have the votes solely to block it, 

but I would think if you got the countries that have been working 

with us on sanctions, the Western Europeans and others, we ought 

to have the votes to say no to it. 

11 

Mr. LOWERY. That is a good question. The World Bank, as I said, 

has not provided any assistance to Iran for over 3 years in terms 

of making new commitments. My understanding is that there is no 

plans or pipeline coming up to provide new assistance to Iran. I believe that there are disbursements from old loans that are still 

going out, and those are very difficult to stop once the decision has 

been made to let them go forward. 

As I said, we thought it was a mistake to let them go forward. 

I think we have been proven right, as we have now seen since 

those have gone forward, the U.N. has taken a number of sanctions 

on Iran. Just this week, we saw the European Union agreeing with 

the United States on taking financial sanctions against one of the 

financial institutions in Iran. 

But to my understanding, the World Bank—one thing we were 

questioning is whether the World Bank is actually living up to 

U.N. sanctions. The general counsel of the World Bank has given 

an opinion after discussing it with the U.N. general counsel that 

they are. 

I agree with you completely, we need to continue to stop this 

until the Government of Iran does change— 

The CHAIRMAN. I think it would be helpful, both as a matter of 

policy in general—and again, we are not talking about poverty 

there. If they can afford to do some of the things they are doing, 

I would think they don’t need the World Bank’s help. But I would 

tell you, I think a letter from the Secretary of the Treasury not 

only reaffirming our intention to vote against any new money for 

Iran, but reassuring us that this Administration is working in concert with various allies to get the votes to block it, which we ought 

to be able to do. I would think if our European allies and Japan 

and some others who have joined us in this were to join, we could 

block it. 

I also would hope that Mr. Zoellick would certainly not be supportive of this, and I don’t think he would be, both, again, because 

of the economic necessity, etc. I understand it is a different story 

to be disbursing what is already there. If we can get those assurances, I think that would be very helpful 

Mr. LOWERY. We can definitely look into that. 

The CHAIRMAN. The last thing I would add, I have here the 

‘‘Doing Business’’ report. They gave some awards. The head of 

Doing Business was—the Bank gave out its annual Doing Business 

Reformers’ Club Awards. The best reformer was that noted paragon of human rights and equity, Egypt. Unfortunately, Saudi Arabia and China were only in the top 10. 

Now, a report which talks about how good Saudi Arabia and 

China are just can’t be what we want to see. They won this award 

because—and I notice one of the things they say in here is that 

they worry that people get 1 day a week off, and some other things. 

This index is really a problem. Saudi Arabia and China are in 

the top 10; that can’t be good. So I would hope you would join us 

in trying to deal with this. That is another threat to the level of 

continued support that we want. 

I would ask at this point to put into the hearing record—I am 

quoting from the letter from Peter Bakvis, the Director of the 

International Confederation of Free Trade Unions, his Washington 

12 

office, to his labor colleagues; and an article from that radical publication, the Wall Street Journal, authored by Mr. Bob Davis. The 

headline is, ‘‘Report on World Bank Sees Deregulation Bias.’’ That 

is a report from the Bank’s own internal investigator. 

I ask unanimous consent to put these in the record. Without objection, it is so ordered. 

The gentleman from Alabama is recognized. 

Mr. BACHUS. I thank the chairman. 

It does appear that a lot of the resistance to this bill deals with 

channeling our efforts through the World Bank. One thing in this 

regard I think is important for us on this committee to keep in 

mind is that I think Bob Zoellick is providing wonderful leadership 

at the World Bank. He is very well respected, not only here in the 

United States, but I think throughout the globe. It is a difficult balancing act. 

But I will ask you that question, Assistant Secretary Lowery. Is 

it better for us to contribute to the World Bank or to give—is that 

the most effective way, or is it more effective to give through our 

own government programs? 

If we do give through our own government programs, do we sacrifice some of the marshalling and coordination where the World 

Bank convenes and will marshal assets, and really, in my mind 

sometimes, the total effect is greater than the parts? 

Mr. LOWERY. I think you ask a very good question. I used to 

work for one of the bilateral development agencies, the Millennium 

Challenge Corporation. I think it is important to actually have a 

broad strategy on how you are doing development. There are things 

that USAID does that, frankly, they do better than anybody else 

in the world. There are things that MCC is doing—I don’t think 

MCC has the track record to say they are doing it better than anybody else in the world, but they are doing something that I think 

is very different, and I am very hopeful about their future. 

Then there is the World Bank. The World Bank is doing things 

in a way in terms of leveraging others’ resources and in terms of 

the way they focus on such issues as measuring results and actually providing assistance to the poorest countries on a performancebased allocation system and working with those countries that is 

very, very highly rated. 

I mentioned Bill Easterly in my testimony. But the United Kingdom, for instance, increased its resources to IDA by 50 percent in 

this last replenishment mainly because they said we did our own 

rating of all the development agencies out there, and IDA was the 

best one that there is. 

So I think it is an effective institution, and obviously we think 

it should be supported. 

Mr. BACHUS. Thank you. 

I would agree with you that they have expertise in certain areas 

that we simply don’t have. I think by participating with others as 

partners, I believe that there is a lot of benefit and value in that, 

and because of Bob Zoellick, simply because he is president gives 

me much greater comfort. 

Mr. Assistant Secretary, is it correct that if we do not authorize 

the entire IDA package, that the United States actually forfeits 

$232 million prepaid credit toward our share of debt relief for the 

13 

world’s poorest countries, money we pledged but have not paid, and 

what would be the consequences if that happened? 

Mr. LOWERY. If we do not authorize the 3-year increase and appropriate what we have done, there are a couple of things that will 

happen. One is the effect that you are talking about, which is that 

part of the IDA replenishment is to actually help fund the debt relief through IDA, so it is basically using the reflows and funding 

that. 

We had basically agreed with the world that we would try to do 

this on a dollar-for-dollar basis to continue to provide new assistance to poor countries, so IDA will be basically paying for the debt 

relief. Right now that is why, if you look at our arrears request, 

it was for $42 million for IDA. That was basically so we could make 

good on the debt relief part of our IDA request. We actually have 

a higher IDA number in arrears than that $42 million, but we 

wanted to get at what was vital to debt relief. So if we don’t approve the whole thing, we could easily get into a situation where 

we are no longer financing the debt relief that we pushed so hard 

for. 

In addition, the reason why we are looking for a 3-year authorization is because IDA is trying to make sure that it has 60 percent 

of its commitments to start putting out new money by December 

of this year. The authorization on a 3-year basis is about basically 

trying to get to that 60 percent number. The United States is obviously the second largest donor to IDA, so that is a good way at getting toward that 60 percent figure. 

Mr. BACHUS. Thank you. 

The CHAIRMAN. The gentleman from California. 

Mr. SHERMAN. Thank you, Mr. Chairman, and thank you for joining with me and others in focusing on the Iran part of the World 

Bank’s portfolio. 

About a year ago, the Secretary of the Treasury was here before 

us and he described in detail all the hard work he had done—calling finance ministers around the world, putting America’s credibility on the line, hour after hour of hard work to try to save Mr. 

Wolfowitz’s job. He also indicated that he hadn’t spent a full 60 

seconds of personal effort to prevent the World Bank from disbursing money to Iran. 

Are you aware of what the Secretary of the Treasury has personally done? How many hours of his time would you estimate he has 

put in; how many finance ministers has he personally called in an 

effort to halt all further disbursements to Iran? 

Mr. LOWERY. I can say this: Under Secretary Paulson’s leadership, not one new dime has been committed to Iran by the World 

Bank. 

Mr. SHERMAN. My question was— 

Mr. LOWERY. You asked about his leadership, and that is his 

leadership. 

Mr. SHERMAN. I phrased the question very carefully; I said to 

prevent disbursements. By that, I think we clearly understand disbursements on the $1.3 billion of money in the pipeline already approved. So as to stopping disbursements, how many finance ministers has the Secretary personally called? 

14 

Mr. LOWERY. I don’t have an answer to your question. I can say 

this, that the Secretary of the Treasury has worked hard to basically stop disbursements to Iran. He has worked, I know, and had 

discussions with not just finance ministers, but also with the president of the institution. He has asked us, and we have followed up 

on making sure that is Iran’s disbursements by the World Bank in 

line with U.N. sanctions, to the point where the General Counsel’s 

Office at the World Bank went and talked to the general counsel 

at the U.N. to make sure that they were within sanctions to continue the disbursements, and it turns out they are. It just turns out 

legally they are. 

I can also say that the Secretary of the Treasury has spent innumerable numbers of hours, and there is no way I can count it, on 

basically working on stopping finance to Iran. In fact, I would suggest that nobody you know has spent more hours than Secretary 

Paulson on that issue. 

Mr. SHERMAN. Sir, by changing the question, you were able to 

give me the answer that you wanted to give. Are you saying that 

the United States takes credit for the fact that of the $1.35 billion 

approved for disbursal during this Administration, only half has actually been disbursed? Are you saying that the United States takes 

credit for the fact that roughly $667 million has not been disbursed 

yet? 

Mr. LOWERY. I don’t take credit for any of it because we voted 

against those commitments. We think it was outrageous that the 

World Bank made those loans. We tried to prevent them. We were 

unsuccessful. That doesn’t mean we didn’t work hard at it. 

Mr. SHERMAN. We have had testimony before this committee that 

indicates that you did very little except vote ‘‘no,’’ and, of course, 

you are required to do that by law. 

But you are missing my question. My question is not preventing 

approval of the loan, it is taking the extraordinary action of blocking disbursements after the loan has been approved. Some $667 

million has not actually been disbursed, even though it has been 

approved. Does the Administration take credit for the fact that 

there seems to be a slowness in the checks being cut? 

Mr. LOWERY. I don’t think I would want to take credit for that. 

I think that basically we have worked hard to prevent any new 

funding from going to Iran. We have been successful at that. We 

are working hard—we would like to stop the disbursements, but we 

are right now not in a position that we can block those disbursements. We do work with our partners on those issues, but I don’t 

want to take credit for that. 

Mr. SHERMAN. World Bank practice is not to approve loans unless there is a country assistance strategy in force. There was no 

country assistance strategy for the two projects approved in 2005, 

and yet they were approved anyway. So the World Bank has violated its own practices in order to approve loans to Iran. 

What assurance do you have that a new country assistance strategy will not be approved by the World Bank? If they approved one 

tomorrow, would that be in violation of any promises that have 

been made to us either by World Bank executives or by the board 

members in the countries they represent? 

15 

Mr. LOWERY. My understanding is that the World Bank does not 

have any new loans in their pipeline for Iran. They do not have a 

country assistance strategy that is being prepared for Iran, and we 

obviously would be working against that. We would work with our 

European and Japanese allies on such a issue. My guess is, given 

the way the sanctions have been done over the last few years, that 

some of their positions on World Bank financing for Iran will have 

changed over that time. 

Mr. SHERMAN. So we have fond hopes, but no promises. Have we 

indicated that our policy toward any other country on any issue 

would be affected? In effect, have we used linkage to indicate to our 

European and Japanese friends that approval of additional loans to 

Iran or disbursements of loans in the pipeline may adversely affect 

our opinion of some issue of importance to them? 

Mr. LOWERY. I don’t know of anything. 

The CHAIRMAN. Will the gentleman yield? 

It is a central question. My staff, who does an excellent job of 

keeping up with this, tells me the reason the general counsel of the 

U.N. was able to tell the general counsel of the World Bank that 

this did not violate sanctions is that there was an explicit loophole 

or an explicit exception for Iran getting—for the World Bank and 

the sanctions resolution. If that is the case, one of the things that 

would be helpful is, as it does appear to be a toughening on the 

part of some of our allies, to try and get a new resolution that rescinded that permission, because apparently it is not a surprise 

that there is language in the resolution that went through the Security Council. Maybe that was the best deal we could get at the 

time. But if there is going to be new Security Council resolutions, 

rescinding that exception would seem like one way. Then you 

would have a much stronger argument on the disbursements. 

Mr. LOWERY. The exception is for humanitarian and development 

assistance purposes, which is not just the World Bank, I am sure. 

But it is an exception we actually have tried to close in various 

U.N. negotiations. We have not been successful at that. 

Mr. SHERMAN. Just reclaiming my time for a second, the reason 

our U.N. sanctions have such loopholes, including this one, and the 

reason the loopholes aren’t closed is our unwillingness to use linkage, our unwillingness to tell Russia or China that how they voted 

at the United Nations will have any effect on what we do on issues 

important to them, whether currency valuations or anything else. 

Likewise, the Under Secretary has indicated that our European 

and Japanese friends have never been told that how we react to 

any issue of concern that comes within Treasury’s jurisdiction will 

be affected by their actions with regard to Iran. So in the absence 

of any ability to bargain, it is not surprising our diplomats have— 

Mr. LOWERY. I will also say that it is the efforts of the Treasury 

Department that have been able to actually get just this week the 

European Union to actually put sanctions down on something like 

Bank Melli, which was a large effort on our part, and now successful effort, in terms of the European Union to have the same type 

of sanctions we already have, and that is an effort, frankly, of the 

Treasury Department as well as the State Department. 

The CHAIRMAN. I would also remind you that this House passed 

a bill that originated in this committee, the Iran Sanctions Act— 

16 

and the gentleman from California was a major sponsor—that 

would remove any obstacles from corporations or State governments from divesting, and that has been bottled up in the Senate. 

It would be helpful if there was some action there. 

The other thing, as you say, we talk about the inspection panel. 

Fifteen years ago, this committee did the inspection panel. Sidney 

Key was then our staff director and played a major role. The way 

it was done, we had no authority to order the World Bank to do 

an inspection panel. They had no ability to order to provide them 

the money. What we did was to act on the principle that the gentleman from California is basically invoking, the ankle bone is connected to the shoulder bone ultimately. So we would advise some 

attention to that. 

The gentleman from Georgia. 

Mr. SCOTT. Thank you very much, Mr. Chairman. 

Mr. Lowery, let me just bring your attention to another area. Let 

me find out what you are all doing, what is IDA doing with Haiti, 

and what are you doing with Africa, because there are many things 

that the human body can do without, and none of them are either 

food or water. 

It just breaks my heart as I watch the television screens and 

read in the newspapers of the devastation of hunger and people 

going without food in Haiti, which is right off our shores. I want 

to know what IDA is doing to help with that situation. 

Secondly, I want to know, now we have a problem with water on 

the Continent of Africa, especially in the area of Rwanda. I want 

to know what the IDA is doing to help with water scarcity in that 

area. I do understand you are moving in some directions with the 

program in Rwanda, but I think that all of us on this committee, 

and the American people, certainly would like to know. These are 

two very pressing humanitarian issues of the maximum degree, 

food and water. 

In Haiti and Africa, what are we doing about it, what is IDA 

doing about it, how much money are you spending on it, and can 

you give us a complete understanding of the gravity of the situation and where you are placing that on your agenda? 

Mr. LOWERY. Thank you. You asked a couple of questions in 

there. Let me try to see what I can do. 

In Haiti and in Africa, the United States has been leading the 

way, although IDA has been doing a lot of work, on providing a significant amount of debt relief to those countries. Haiti is basically—this one, I would say, has been a big U.S. effort—going to 

get over $1 billion in debt relief from the IMF, the World Bank, 

and the Inter-American Development Bank. There is no way that 

would have ever happened without the United States. It would 

never have happened. 

Secondly, the African countries, most African countries, are getting a huge amount of debt relief. I just had it next to me. Rwanda 

is going to get $1.8 billion of debt relief from the IMF, the World 

Bank, and the African Development Bank, as well as debt relief 

from its bilateral creditors. 

Mr. SCOTT. Can you explain to me, I am just a country boy from 

Georgia here, tell me how directly debt relief will be able to put 

17 

food directly in the stomachs of the people in Haiti and get water 

to the people in Africa. 

Mr. LOWERY. Basically, the idea is that what debt relief does is 

take the stock of debt and basically reduces i. That means that the 

flows from debt do not have to be paid any more. So because of 

that, you actually have savings from that. 

Now, the idea is that they use the savings to do things like put 

more money towards education or health care or water systems or 

towards agricultural production, which is important for food. On 

top of that, going beyond debt relief, the World Bank provides obviously a lot of new assistance to countries like Haiti, Rwanda, and 

so forth through IDA. And that is what this whole allocation system, that is what I am here doing today. In Haiti, for instance, the 

World Bank was going to provide $80 million in the first half of 

this year alone to Haiti as a grant. But because of what has been 

going on with food prices and food inflation, they are putting another $10 million on the table basically as emergency food support 

for the people of Haiti. So these are the type of things they have 

been doing. 

In fact, President Zoellick—I know the ranking member had 

mentioned his leadership in a number of areas—I would say his 

biggest area that he has been a leader on is this agricultural problem. How do we get short-term assistance to countries like Haiti 

and other countries? And he has basically led an effort to get about 

$1 billion around the world to countries. On top of that, how do we 

address the medium-term and longer-term agricultural productivity 

issues so we don’t get back into these problems? 

Mr. SCOTT. Mr. Lowery, is there a way that IDA can help put 

pressure on getting food now into Haiti? Is there any role that you 

can play that—the people are hungry right now. 

Mr. LOWERY. Yes. 

Mr. SCOTT. The people are starving right now. This is an urgent 

matter that is not going to wait on a crop to grow. So what can 

you do, what can your agency do to help put pressure, and where 

would that pressure be to get food there now? 

Mr. LOWERY. That is an example of what the World Bank is 

doing. They are providing short-term assistance. When I say shortterm assistance, that is about providing food now. And that is— 

sometimes it is done through the World Food Programme, which is 

a U.N. organization. Sometimes it is done through bilateral organizations. IDA is already putting on the table an emergency $200 

million, of which $10 million is going to Haiti to actually put food 

down there now. 

Mr. SCOTT. All right. Good. 

Now, please, Mr. Chairman, just one little question I have. I 

know my time is running out. But on the water— 

Mr. LOWERY. Yes. 

Mr. SCOTT. —are there specific programs—why is this? This is a 

phenomena to me. I am just finding out about this today as a matter of fact, that they have a water problem there; people going 

without water. And you are involved in that. Can you give a quick 

summary of what you are doing there? And are you moving ahead 

with what we call harvesting water for the future? 

18 

Mr. LOWERY. No, I think that—I mean, the World Bank’s efforts 

on issues like water are going to be about the future most of the 

time, because it is—what they are doing is they are not a humanitarian organization. So if there are humanitarian needs, usually it 

is not the World Bank. It is things like the United Nations; or 

USAID is, I think, the best humanitarian organization in the world 

probably; or NGOs and so forth. 

What the World Bank will have the best expertise on is providing support, financial support, technical support on developing 

better water systems, and so increasing water so that you can get 

water for the future, such as, you know, there are different ways 

of building systems. I think that is where the World Bank has the 

expertise. 

I don’t know the specifics in terms of Rwanda in terms of how 

much financial assistance they are providing. We can get that for 

you. But that is where the World Bank usually focuses its attention. 

Mr. SCOTT. Okay. 

Thank you very much, Mr. Chairman. 

If you could get me a report to my office on what specifically you 

are doing for the immediate situation and crisis in Haiti, and what 

you are doing for the immediate situation with the water crisis in 

Rwanda, I would deeply appreciate it. 

Mr. LOWERY. Yes, sir. 

Mr. SCOTT. Thank you, Mr. Chairman, for your indulgence. 

Mr. BACHUS. Mr. Chairman? 

The CHAIRMAN. Yes, the gentleman from Alabama. 

Mr. BACHUS. If I could take maybe 1 minute to address what the 

gentleman from Georgia was referring to. I think it would also be 

helpful—one thing I don’t want the committee to miss is what the 

Assistant Secretary said about Bob Zoellick’s leadership in, not 

only addressing the short-term needs, which are going to continue 

to be needs if you don’t increase the domestic productivity in agriculture. And so the report could also include the efforts of the 

World Bank and the IDA to promote policies which lead to greater 

agricultural production in a lot of these countries, and long term, 

these countries feeding their own people is really, that is the very 

best solution. I think that is one of the things that leads to the best 

successes. 

Now, we also have another situation, and that is not for this 

hearing, but it is the effect of ethanol on the world food prices. And 

that is—I won’t get into that. 

Mr. SCOTT. [presiding] The gentleman from Texas, Mr. Green. 

Mr. GREEN. Thank you, Mr. Chairman. 

Mr. Lowery, as you know, I opened up with a Haiti question, so 

please don’t feel as though we are picking on you as it relates to 

Haiti. 

But it is something that really does touch our hearts and our 

souls and shocks our consciences because I have actually been 

there, and I have seen the circumstances of which others read 

about. And it really is deplorable and in need of some immediate 

attention. 

You indicated that we have provided about $1 billion in debt relief. What is the total amount of debt owed, please, from Haiti? 

19 

Mr. LOWERY. I don’t have that figure in front of me, but I can try to get it. I don’t have that figure. I know that it is about $1.1 

billion of debt relief. My guess is that is almost—I think that 

should be related to basically 100 percent of the debt from bilateral 

official creditors and the multilateral official creditors. There is 

probably some small change left after that. Haiti is still going 

through this debt relief program. It should conclude that program 

by early next year. 

Mr. GREEN. I am concerned about the debt relief, because you 

have explained that, in essence, what happens is this: When you 

have debt relief, you can then take your funds and rechannel them 

to other things that are more urgent. 

Mr. LOWERY. Yes. 

Mr. GREEN. Why is it, in a country wherein you have about 70 

percent of the population living off of $2 a day or less, more than 

50 percent living off of $1 per day, 80 percent poverty, the highest 

HIV/AIDS rate in the Western Hemisphere; they have a hunger 

season; why can we not give them total debt relief given that we 

can see that the debt is a part of the problem? There is no escaping 

the fact that the debt is a part of the problem. Why can we not 

give them total debt relief? 

Mr. LOWERY. We are giving them total debt relief. 

Mr. GREEN. But we are—excuse me, just a minute, and I don’t 

mean to be rude, crude, and unrefined, but I have little time. ‘‘We 

are giving’’ is not quite the same as ‘‘We have given.’’ 

Mr. LOWERY. Right. 

Mr. GREEN. And I want to get to the ‘‘We have given’’ point in 

the conversation. 

Mr. LOWERY. Yes. 

Mr. GREEN. When can we have total debt relief for Haiti? 

Mr. LOWERY. It is expected that total debt relief for Haiti will be 

finished and completed by early next year. 

Mr. GREEN. I take early next year to mean some time in the 

month of January. That would be my definition. If my definition— 

Mr. LOWERY. I am hoping it will be earlier than that. 

Mr. GREEN. —is incorrect, I would gladly want to hear yours. 

Mr. LOWERY. No, no, right now the best expectations, basically 

the way the debt relief initiative has been set up a long time ago 

for all countries, Haiti and lots of other countries, is you start receiving debt relief on what is called an interim basis. That means 

on a flow basis, and then so you start getting the debt relief on the 

flow basis. The stock, where you do the 100 percent debt relief, that 

happens once you have completed kind of a program. The program 

is associated with some of the type of criteria that was in the Jubilee bill this year. 

Mr. GREEN. Yes, because I have limited time I will look forward 

to hearing more from you about the debt relief. And maybe you and 

I can remain in contact with each other such that we can— 

Mr. LOWERY. I would be happy to talk to you or your staff at any 

time. 

Mr. GREEN. —get more intelligence on this as it progresses. 

Next point, sir, sometimes shining a light on a problem will 

cause more attention and more help to manifest itself. Have we 

done any trips to Haiti at the level of the Secretary, wherein someVerDate Aug 31 2005 12:37 Sep 16, 2008 Jkt 044186 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 K:\DOCS\44186.TXT TERRIE
20 

one actually goes there and you actually take the world there 

through the lens of the camera so that people can see what I have 

seen and perhaps have a much more sympathetic response? 

Mr. LOWERY. Yes. Well, Secretary Paulson has not gone to Haiti. 

I know that he has met— 

Mr. GREEN. Have you gone, by any chance? 

Mr. LOWERY. I have, but it was in a previous job. I have been 

to Haiti. 

Mr. GREEN. You know about the food riots? 

Mr. LOWERY. Yes. In fact, actually, I met with the prime minister 

who gave up his seat literally 2 weeks before the food riots, where 

he basically said, ‘‘I need to step down.’’ 

Mr. GREEN. Can we look at a trip to Haiti, someone, so that we 

can show the world what is happening right here in the Western 

Hemisphere? 

Mr. LOWERY. Right. I think that actually—I know that Assistant 

Secretary Shannon from the State Department, and I know that 

other high-level officials from our State Department and our AID 

have been to Haiti. At the Treasury Department, we only have a 

few people who travel. And so it is—there are many things. But let 

me look into it. 

Mr. GREEN. I really believe someone needs to make a trip to 

Haiti a priority so that we can bring the world’s eye in by the way 

of the lens of a camera. 

Let me just share this with you. Here we have this some 9 million people as I understand it. They are on an island. If they leave 

and they come to the United States, we immediately send them 

back. They don’t have the benefit of wet foot/dry foot. Doesn’t matter if they are completely dry and they get there and they have a 

job, they are still going to be sent back. So they are locked into this 

land mass with the highest HIV/AIDS rate in the Western Hemisphere, a high infant mortality rate, living off of $1 to $2 per day, 

drugs now coming through there because it is a staging point to get 

drugs to the United States of America. This is a human tragedy of 

the highest proportion, and it is right off the coast of Florida. We 

really have to do more. And I beg that you would be a part of that 

avant garde to make that change that is necessary. Thank you. 

Mr. LOWERY. I can say I do know that our Agency for International Development has stepped up its efforts and is putting another $45 million on the table to do what you were just saying to 

help the people of Haiti. So, we are doing things in the Administration; it just might not necessarily always be at the Treasury Department. 

Mr. GREEN. Thank you very much, sir. 

I yield back. 

Mr. LOWERY. You are welcome. 

Mr. SCOTT. Thank you very much, Mr. Green. 

Mr. Cleaver from Missouri is recognized for 5 minutes. 

Mr. CLEAVER. Thank you, Mr. Chairman. 

Mr. Lowery, I apologize. I am shuttling—you know how this system works—between two committee hearings, and I desperately 

wanted to be here. 

I wanted to follow up on my colleague’s questions. And I am wondering if there is any pushback from Treasury on World Bank conVerDate Aug 31 2005 12:37 Sep 16, 2008 Jkt 044186 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 K:\DOCS\44186.TXT TERRIE
21 

ditionality in terms of greater transparency so that parliamentarians, people around the world can actually have—can actually look 

at the conditionality issues and participate in decisions at the 

World Bank. 

Mr. LOWERY. I think that in the United States, we actually have 

been probably the leading advocate for pushing for as much transparency as possible from the World Bank, including putting loan 

documents, which is where you get into conditionality and covenants and so forth, on the Web site. 

So, yes, we are a big supporter of that. 

Mr. CLEAVER. What is the likelihood that greater transparency 

will in fact occur? I mean, if the United States is supportive, what 

else is needed? Is there something that we— 

Mr. LOWERY. I think the World Bank actually has become more 

and more transparent over the last I would say probably 10 years 

and puts a number of documents on its Web site. In fact, if anything, the one problem sometimes is the Web site is just filled with 

documents. 

But I think in terms of conditionality, what the World Bank has 

done is it has done a study, it has brought in independent advisors 

to talk to it about its conditionality. It goes to Chairman Frank’s 

questions earlier or points earlier about how there is probably too 

much conditionality. How do you streamline it? How do you make 

it more targeted so it is specific about getting the outcomes that 

you want out of particular programs? And we are a big supporter 

of as much transparency as possible. 

I think you have a witness on the next panel whom I believe has 

had fairly significant access to World Bank files on the types of 

conditionality they have. 

Mr. CLEAVER. Is the World Bank conditionality database available on the Web site? 

Mr. LOWERY. I am hearing both ‘‘yes’’ and ‘‘no’’ behind me. I don’t 

know the answer myself. Why don’t we get you an answer in writing on that one, sir? 

Mr. CLEAVER. Okay. Who is going to do it? 

Mr. LOWERY. We at the Treasury Department will take care of 

that. 

Mr. CLEAVER. All right. 

Thank you, Mr. Chairman. I yield back the balance of my time. 

The CHAIRMAN. Thank you. 

The gentlewoman from Wisconsin, who has been one of the members with the greatest interest in the IFIs, and especially with regard to Africa, but not exclusively. 

The gentlewoman from Wisconsin. 

Ms. MOORE OF WISCONSIN. Thank you so much, Mr. Chairman. 

I have listened very intently to your testimony, Mr. Lowery. I 

was particularly interested in a comment that you made in your 

written testimony about the complex international aid architecture. 

I think I will steal that for future rhetoric. I think it is very, very 

telling. 

Just sort of piggybacking on questions that others of my colleagues have already asked, I just want to laud the Treasury Department; I want to laud the World Bank and the IDA for its inVerDate Aug 31 2005 12:37 Sep 16, 2008 Jkt 044186 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 K:\DOCS\44186.TXT TERRIE
22 

creased transparency that you have mentioned over the last 10 

years. 

And it is only because of this transparency that we know so 

much about how conditionality sometimes undermines the very admirable goals of eliminating or reducing poverty. We have already 

talked about conditionality. Bad habits are hard to break, as we all 

know. And so, even though we have called for reducing some of the 

conditionality, there are still tremendous calls for governments to 

issue presidential or executive orders which undermine legislative 

oversight, call for labor market flexibility that undermines worker 

protections and violates the spirit of international laws. And we 

have seen poverty, quite frankly, rise. 

Can you tell me, can you describe for me how the IDA works 

within this complex international aid architecture with the International Finance Corporation, with whom you have a relationship, 

and the WTO, and maybe the Organization for Economic Cooperation and Development, other sort of trade laws that in fact maybe 

could spawn this continued conditionality? And I can give examples, but go on. 

Mr. LOWERY. Well, IDA is usually one of the largest, if not the 

largest, donor in almost every country because of the size of it. And 

you can leverage resources from around the world. 

IDA actually focuses on development. I mean, that is what they 

do. And they focus on—they have people who are experts on specific functional issues, like how do you get better agriculture productivity? How do you build a road? How do you basically educate 

kids in a better way? And they obviously have people who are 

country experts. 

They work very closely with the bilateral aid community. And 

the couple of organizations you mentioned, the WTO is obviously 

about trade negotiations and trade type of issues. The OECD is 

mainly like sort of a think tank for developed countries in terms 

of economics around the world; although there is a coordinating 

mechanism under the OECD that actually tries to help coordinate 

among some bilateral donors on the aggregated basis as opposed to 

the country-specific basis. The World Bank is much more about the 

country-specific type of coordination. 

In terms of how that relates to conditionality, I think the World 

Bank has basically tried over—through a number of analyses that 

it has done internally and externally, has basically taken their criteria for conditionality and tried to streamline it over time. And in 

some respects, I think they have been pretty successful, and tried 

to make it much more focused, much more targeted on what it is 

you are trying to achieve in that particular loan or that particular 

program. 

That doesn’t say they are perfect. It means they are making 

progress. 

Ms. MOORE OF WISCONSIN. Let me stop—for example, let me give 

you another example, Afghanistan currently. We are sort of forcing 

a lot of privatization of public institutions. We have talked a lot 

here today about water and so on. We have seen in recent times 

a great deal of inequality and lack of services, really no payback 

to many countries, and yet we continue to do that. 

23 

In terms of streamlining these conditionalities, all you do is put 

two or three conditions within one condition, and then you can say, 

‘‘We only have 27 conditions,’’ but actually the average is about 72 

conditions. 

So right now, in Afghanistan, we are forcing them to privatize. 

And that continues to be two of the main thrusts of conditionality, 

privatizing. We have seen it contribute extensively to poverty. This 

is one of the conditions that doesn’t seem to be able to be extracted 

from these agreements. Can you tell us, as we look at replenishing 

the IDA fund, can you give us a defense of privatizing? 

Mr. LOWERY. I am not sure I agree with your analysis. 

First of all, I am not sure there are 72 conditions. In fact, I 

would say there are probably more like 13 that IDA tries to do. 

There are sometimes benchmarks within those. And by the way, 

I am a big supporter. You need to have benchmarks. How are you 

doing on your program? What is actually happening here? Is this 

program working? 

In terms of conditionality, in terms of privatization in Afghanistan, Afghanistan will not succeed unless it has a private sector 

that is actually thriving so you can get greater economic growth 

and reduce poverty. 

That said, to my knowledge, the World Bank has not conditioned 

any programs in Afghanistan on privatization. But that doesn’t 

mean that it is not a good thing. Sometimes privatization is a good 

thing. Sometimes it is not the appropriate thing. 

Ms. MOORE OF WISCONSIN. Sometimes it is, and sometimes it 

isn’t. But the parliamentarians have to decide that. 

Mr. LOWERY. Parliamentarians, I mean, it depends on your system. I don’t know the governmental system. I have just been to Afghanistan, and there are private sector institutions that are starting to pop up, and they are starting to do well. And I think that 

we should, as a country, and the World Bank should try to help 

create the conditions so that you can have a private sector that actually does thrive in Afghanistan. If that doesn’t happen, then Afghanistan will never grow its way out of the problems that it has. 

Ms. MOORE OF WISCONSIN. My time has expired too soon. 

The CHAIRMAN. The gentleman from Indiana. 

The gentleman has no questions. 

Mr. Lowery, I thank you. The staff of the committee, I think bipartisan, will be available to work with you on a couple of the 

issues. The Iranian one is obviously an important one, but conditionality, as you can see, is also. We would like to be able to work 

with you to a common end here. And I thank you for your testimony. 

Mr. LOWERY. Thank you very much. 

The CHAIRMAN. We will have the next panel. 

Mr. CLEAVER. Mr. Chairman? As he is leaving— 

The CHAIRMAN. Mr. Lowery, can you hang for one second for Mr. 

Cleaver? 

Mr. CLEAVER. No, you don’t need to answer. There are 37 conditions. You said 13. There are 37. 

Mr. LOWERY. In what? 

Mr. CLEAVER. Per loan, average conditionality. 

24 

Mr. LOWERY. I am not sure I agree with that, but why don’t I 

work on it and get a letter to your office. 

Mr. BACHUS. Mr. Chairman, Assistant Secretary Lowery, one 

thing, I will just say this, one thing the Assistant Secretary said 

was that much of the aid that went to Iran is for the earthquake. 

The CHAIRMAN. Yes. 

Mr. BACHUS. It would be helpful to— 

The CHAIRMAN. Mr. Secretary? 

Mr. BACHUS. —have those figures. 

The CHAIRMAN. Probably, if you would leave, we could get started. You will never get out of here otherwise. 

And obviously, the hearing record remains open, and there can 

be some further conversations and we will preserve them for the 

record. 

The next panel is four people from various organizations that 

have been very much involved here. 

We will begin with David Beckmann, who is president of Bread 

for the World and Bread for the World Institute. 

Mr. Beckmann. 

STATEMENT OF DAVID BECKMANN, PRESIDENT, BREAD FOR 

THE WORLD INSTITUTE 

Mr. BECKMANN. Chairman Frank, Ranking Member Bachus, and 

members of the committee, I really do think this committee has 

done a great job over a period of years making the World Bank and 

the other MDBs into better institutions. They are better institutions, and this committee has led the way. So I applaud you. 

And I thought the questions today, especially the questions about 

what is going on in Haiti and Rwanda, the sense that something 

really bad is going on, again the committee, I think, is ahead of the 

curve. 

I want to start by talking about the hunger crisis that we are 

going through right now, because I think it changes the context for 

the work of the World Bank and the African Development Fund, 

and then talk a little bit about the World Bank and the African Development Fund and my recommendations for the committee. 

I think that the great majority of the poorest billion people in the 

world have suffered a serious reduction in their miserable living 

standards over the last year or so. I don’t think it has dawned on 

most of us yet how severe a setback the world has suffered in its 

work to overcome poverty. It is mainly because of high food prices 

because very poor people spend almost all their money on rice or 

wheat or corn, and all those prices have gone up by roughly 100 

percent over the last year. But it is also high fuel prices and other 

malfunctions in the economy, that mean that a lot of the poorest 

people in the world are down to one meal; they are pulling their 

kids out of school; they have sold the goat. And their governments, 

the poor country governments that import food and fuel are going 

broke in a hurry. My guess is that food-importing low-income countries are spending $70 billion more on food this year than they did 

2 years ago. 

Now, in this context, the World Bank has done a remarkably 

good job. The whole world, I think, has been a little slow off the 

mark. But the World Bank has been a leading agent in catching 

25 

on to what was going on, responding in a quick way, and leading 

the world in a very sophisticated way in figuring out how to respond. They have set up—they are increasing their lending, their 

credits for agriculture. 

But the most impressive thing is that they have set up a rapid 

response facility which will fund emergency humanitarian activities, but also fertilizer and seeds. This is a case in which they are 

not being ideological about prices. They are helping these governments subsidize fertilizer and seeds for poor farmers because the 

farmers can’t afford fertilizers at today’s prices. They would like to 

respond to high prices for food, but they need fertilizer and seed. 

I think the Bank’s quick response in this situation illustrates 

some of the strengths of the MDBs, their analytical capacity. In the 

case of the African Development Bank, the analytical capacity is 

not as formidable as the World Bank, but its African capacity. They 

are focused on poverty more than most institutions, certainly more 

than the Agency for International Development. Partly because of 

congressional mandates, the Agency for International Development 

does a lot of other things besides poverty reduction. So if you look 

at where the money goes, the money that you authorize for IDA 

and the African Development Fund goes to poor countries. The 

money that Congress gives to AID mostly doesn’t go to poor countries. 

Third, I think the MDBs have pretty good partnership relationships with the recipient governments and much more than in the 

past with civil society. 

And finally, I just want to give the World Bank credit for its system of self-evaluation and its, compared to the past, just dramatically more open attitude toward diverse opinions and criticism of 

the Bank. 

So my recommendation to the committee at this point, you know, 

Bread for the World has been critical of the Bank over the years, 

but my recommendation to the committee at this point is that you 

authorize these replenishments, that you give them clean 3-year 

authorizations. I think the banks have earned a vote of confidence, 

partly because of your past work. I think the United States will be 

a stronger leader in these institutions if the United States comes 

across as a team player. 

Also, this world hunger crisis is going to require a significant financial response. And authorization of the replenishments is one 

thing that you can help with. 

[The prepared statement of Mr. Beckmann can be found on page 

49 of the appendix.] 

The CHAIRMAN. Next, we have Nuria Molina-Gallart, who is a 

policy and advocacy officer at the European Network on Debt and 

Development. 

Ms. Molina-Gallart. 

STATEMENT OF NURIA MOLINA-GALLART, POLICY AND ADVOCACY OFFICER, EUROPEAN NETWORK ON DEBT AND DEVELOPMENT 

Ms. MOLINA-GALLART. Thanks very much, Mr. Chairman and 

members of the committee, for inviting us to share our views on 

World Bank conditionality today. 

26 

Conditionality is still a heavy burden on developing countries, as 

we have heard today. It makes it unpredictable. It undermines— 

The CHAIRMAN. Why don’t you pull the microphone closer, because as you drop your head, you lose it. So pull the microphone 

very close, up closer that way. Yes. 

Ms. MOLINA-GALLART. I guess I am too short. 

The CHAIRMAN. No, it is when you read, and you move your 

head. 

Ms. MOLINA-GALLART. Yes. It makes aid unpredictable, as I was 

saying. It undermines domestic accountability, as it has been said 

today, as well. The World Bank has acknowledged that it hasn’t 

been efficient in leading the reforms that they were intended for, 

and it is very questionable that it has contributed to poverty reduction. 

Because of all these criticisms, criticisms from NGOs but also 

from the British Government, in 2005, the World Bank adopted the 

Good Practice Principles on conditionality to govern the way they 

apply conditionality, mainly intended to streamline conditionality, 

reinforce country ownership and mutual accountability, and customize conditions to the country’s circumstances. 

What has happened since? Well, two reports from the World 

Bank have been published, in 2006 and 2007, but they paint an 

overly optimistic picture. And here I come to the issue on numbers 

that was very recently being discussed. Is it 37, or is it 13 or 12, 

like the representative from Treasury was saying? Well, according 

to a Eurodad report published in November 2007, precisely to provide an alternative and more independent view to the World Bank 

reports, conditions have only dropped from 46 before the implementation of the good practice principles to—2 years after the approval 

of the good practice principles, they have only dropped to 37. And 

here basically we count, we include the benchmarks that the representative of the Treasury has mentioned basically because benchmarks are future conditions in future loans, and because developing countries, according to a survey conducted by the World 

Bank in 2005, perceived these benchmarks as if they were binding 

conditions. So they have the same impact. 

But these numbers could be higher, because actually the Bank 

usually uses what they call umbrella conditions. It bundles different policy actions into a single condition. And if these are 

unbundled, actually numbers could increase around 12 percent. Basically, if this committee recommends Treasury to advise that IDA 

should have an independent monitoring system on conditionality, 

should systematically assess the impacts of reforms, and improve 

implementation of Good Practice Principles, you will agree with me 

that this is three conditions. This is not one. And this is the way 

the World Bank sometimes bundles conditions. 

Seventy-one percent of all grants and loans, according to the 

Eurodad study, still contain some sort of sensitive policy reforms, 

such as price liberalization, privatization, commodity price regulation, or trade reform or tariff reductions, and 12 out of the 16 countries assessed face privatization-related conditions. 

I agree here with the representative of the Treasury that privatization and liberalization are not bad, per se. Sometimes it is the 

right policy needed. But I agree as well with Representative Moore 

27 

that this is a decision that needs to be taken by national governments in dialogue with national constituencies and parliaments 

and not by outside actors. 

It is also important that regulatory frameworks are in place, and 

these are not rushed processes. And mostly, it is very important 

that the impact of the reforms on the poor is carefully assessed. 

The World Bank has committed to do these sort of assessments 

of the impact of the reforms they are putting as condition on the 

poor. But, actually, for instance, in the case of Mali, these assessments showed that the privatization condition of the Bank on the 

cotton sector could increase poverty in 4.6 percent. What happened? Well, the report was not made public. 

Even worse, in Afghanistan, as it has been also said, the World 

Bank has backed, in 2007, a policy to privatize more than 50 stateowned enterprises. This is very problematic in a fragile state such 

as Afghanistan. 

And also more striking is privatization, as we have heard, in essential services, provision of essential services, such as water or 

health. This is also happening in 2007 in Sierra Leone or in the 

case of the health sector in Afghanistan. 

The Bank claims that these are conditions which are owned by 

these countries. But recently a partner that we work with in Uganda said, yes, it is true the Bank has put the governments in the 

driver’s seat, but the Bank, the passenger, still writes the map. So 

basically the concept of ownership needs to be carefully reassessed. 

And not only conditionality, but also the Bank gives advice and 

technical assistance. 

To wrap up, I would like to recommend to this committee to 

apply pressure, as it has done in previous occasions, to set up targets to streamline and reduce the number of conditions until conditions are completely phased out, to increase transparency and participation of parliamentarians and also the Bank focus on development outcomes, and most importantly, to systematically assess the 

impact of the reforms they put as conditions on the poor. 

It is also most important that an independent monitoring system 

be set up, because the fact that the Bank monitors its own progress 

is obviously, clearly problematic. 

Last but not least, I would also support the suggestion of Mr. 

Cleaver to publicize the World Bank database on conditionality, 

which, no, indeed, it is not accessible on the Web site. 

Thank you. 

[The prepared statement of Ms. Molina-Gallart can be found on 

page 65 of the appendix.] 

The CHAIRMAN. Thank you. 

Next, Mr. Edward Bell, who is senior program advisor at International Alert. 

STATEMENT OF EDWARD BELL, SENIOR PROGRAM ADVISOR, 

INTERNATIONAL ALERT 

Mr. BELL. Thank you very much. It is a great honor to be here, 

and thank you for the opportunity to speak to you. 

I have spent the last 18 months doing research in the field and 

from London on the World Bank decisionmaking in fragile and conflict-affected countries. And what I would like to do in the 5 minVerDate Aug 31 2005 12:37 Sep 16, 2008 Jkt 044186 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 K:\DOCS\44186.TXT TERRIE
28 

utes that I have is try to shift the emphasis a little here onto political analysis, the actual governance context in which the World 

Bank is making very difficult decisions. 

So just in three parts then: First, I would like to talk about the 

role of the World Bank in these places; second, the institutional 

blockages to more effective action; and third, some suggestions on 

ways forward that I hope the committee will support. 

So, first, there are still some very influential people who think 

that the World Bank should not be involved in fragile contexts. It 

is too political. It is too difficult, and security situations often make 

Bank behavior or Bank activities very difficult. 

I think this is wrong headed. I think that due to the dire realities 

of poverty in these situations and the global and regional spillovers 

from them, I think it is essential for the World Bank to continue 

to engage and deepen their engagement in these countries. 

Second, I think it is important, as specific teams and the Bank 

have recognized, that all economic development and social sector 

activities impact on fragility and the peace-building context in 

these very difficult, unstable countries. 

So the question is, how does the Bank behave better to turn 

around that state and societal fragility? There are three institutional blockages to this, I think, and they are interrelated. The first 

relates to the Bank’s organizational culture. This is changing, but 

I think the World Bank needs to do more to deepen its understanding of political contexts, because if you don’t understand the 

conflict dynamics in these 40 to 50 countries in the world, then I 

think the activities will be simply wrong. And I think maybe we 

will come back to it in the question and answer period, but this has 

major implications on conditionality. The point about conditionality 

is how to change government behavior, get people involved in the 

decisionmaking on what works in that particular country. 

Second, my point about institutional blockages relates to the 

Bank’s results measurement system. I think this is absolutely key 

to the incentives for staff, motivating decisionmaking in country operations. The Bank certainly needs a global standardized assessment system so that it can market its quality to the people who 

fund it. But I think there needs to be some reassessment of what 

incentives need to be in place for staff in decisionmaking in very, 

very difficult political and security contexts. 

The third area I think I wanted to mention is the administrative 

budget of the World Bank. This is currently—it is very, very complex, but in simple terms, it is pegged to the IDA allocation to that 

particular country. So you can end up in a situation with immensely difficult, fragmented, factional political systems where the 

Bank is very short staffed on the ground. And I would urge the donors to IDA and the board members to it to allow a little bit more 

flexibility to put people on the ground working in these difficult political environments so that the Bank can provide the most effective technical accompaniment, facilitating ironing out problems and 

working with national actors, and ensuring the participation in negotiation, that it involves the people of these countries in the 

Bank’s work and in the national-led development. 

So my third and last section is just looking at the ways forward 

for the World Bank. I hope that this committee and the United 

29 

States Representatives working with the Bank can do this. First is 

to shift the mind set. I think I absolutely applaud President 

Zoellick for driving down throughout the Bank attention to strategic directions on fragility and conflict. I think it is absolutely essential. And at the same time, to continue to support this emerging 

governance and accountability facility, looking at how Bank analysts, Bank public-sector governance expertise can help deliver on 

poverty reduction and social service delivery efforts. 

I think the Bank needs to accelerate its efforts to adapt and nuance its results framework so that it can integrate qualitative as 

well as quantitative results measurements. 

And lastly, the point I mentioned about the administrative budget, it is absolutely essential that the Bank is able to accompany, 

facilitate, and sort out the difficulties that inevitably arise in these 

incredibly difficult operating environments like Liberia, Burundi, 

and Sri Lanka. The list is extremely long, too long. 

Thank you very much. 

[The prepared statement of Mr. Bell can be found on page 52 of 

the appendix.] 

The CHAIRMAN. Finally, Lori Udall, who is a witness who has 

been here before and was in fact very much involved when we 

acted 15 years ago to do the inspection panel and related matters. 

She is a senior advisor to the Bank Information Center. 

STATEMENT OF LORI UDALL, SENIOR ADVISOR, THE BANK 

INFORMATION CENTER 

Mr. UDALL. Thank you, Chairman Frank, Representative Bachus, and other committee members. 

Fifteen years ago, during the negotiations of the 10th replenishment of IDA, it was you, Chairman Frank, with bipartisan support, 

who provided the vision and leadership by pressuring the World 

Bank to establish two public accountability reforms: The creation 

of the World Bank Inspection Panel; and the revision of the Bank’s 

information disclosure policy. These two reforms constituted a sea 

change in the way the Bank relates to civil society and to the people who are adversely affected by Bank projects and programs. 

For those committee members who may not know, the panel is 

a three-member team independent of Bank management that reports directly to the Bank’s Board of Executive Directors. The panel 

receives and investigates claims from people who are directly adversely affected by Bank projects as a result of violations of Bank 

policy. The panel remains, to this day, the only avenue for affected 

people to obtain an independent investigation of a World Bank public project or to have an indirect voice at the board level. 

The panel was the first of its kind among the international financial institutions and it set a precedent for the other banks. Today, 

all the regional banks also have similar mechanisms. And the commercial arm of the World Bank also has a mechanism called the 

Compliance Advisor Ombudsman. 

A testament to the panel’s importance is the extent to which it 

has been used by adversely affected people and communities in developing countries. In the 15 years that it has existed, the panel 

has processed 52 claims, with mostly positive outcomes for claimants. In its 2006–2007 annual report, the panel stated that it was 

30 

the busiest year that it had since its creation. It registered six new 

claims, completed two investigations, and conducted three investigations simultaneously; 2008 has also been an extremely busy 

year. The existence of the panel has produced project reform and 

also created political space for affected people in developing countries. 

Some of the outcomes have been that claimants have received 

compensation; environmental impacts have been mitigated; project 

information has been released; resettlement packages for people 

have improved; evictions have stopped; and projects have been redesigned and, in some cases, suspended or cancelled. 

Additionally, research on the impacts of the panel on the Bank 

as an institution suggest that risky and potentially damaging Bank 

projects have not made it to the drawing board due to the panel’s 

existence. It has also caused the Bank to rethink how it assesses 

risky projects and implements safeguard policies. 

The cumulative evidence underscores that the panel is doing a 

superb job within its prescribed mandate and powers. However, 

there is still quite a bit of work that needs to be done to ensure 

that the panel process is more user-friendly for the affected people 

and that these people are consulted about the remedies and solutions to their problems and to project improvement. 

The recommendations that we are making today are relatively 

simple reforms to strengthen the panel process without actually 

changing the panel’s governing statute. The first recommendation 

we are making is about claimant access to the panel and the panel 

process. 

The current panel process has important instances where the 

claimant is completely left out of the process, and it is difficult to 

get information or to engage with management or the board. For 

example, the claimants are rarely involved in the remedies and the 

project improvements that are put forward by management. This 

needs to change. Management already has a mandate to involve 

the claimants, but they have not implemented this mandate. 

The claimants also don’t have access to important information 

during the panel process. For example, claimants don’t see the panel’s final report or management’s response until it has already gone 

to the Bank board and the board has made a decision. So then it 

is too late for the claimants to actually influence the outcome. 

The second issue is panel monitoring and follow-up. The panel 

currently has no mandate to follow-up or to monitor compliance for 

improvement after the claim has gone through the cycle. Experience suggests that monitoring compliance is a critical element in 

enforcing the reforms and the remedies that need to be implemented on the ground. Monitoring would also provide the board 

with continued independent information about the project and put 

pressure on management to follow through with the improvements. 

The third area is the selection process for panel members. The 

selection process has grown increasingly nontransparent and secretive over the years. In the early days of the panel, the executive 

board was much more involved and there was much more openness 

to civil society recommendations. Currently, the selection committee has four people, two from management and two from the 

board. In our view, it is a conflict of interest for management to 

31 

be involved in the selection process. We therefore recommend that 

the structure of the selection committee be reformed to include a 

civil society representative, the chair of the inspection panel, and 

two board members. We also recommend that the process be 

opened up more; that it be publicly announced and advertised; and 

that both the panel and civil society be engaged and consulted. 

The fourth area is public outreach. Despite public outreach activities of the panel, the panel is still not well known or understood 

in many developing countries. And the World Bank Board should 

empower the panel to increase its public outreach programs. 

The final one is the budget process. We just hope that Congress 

will monitor this, because some of our recommendations, such as 

follow-up and a more robust outreach panel, would require additional resources for the panel. 

In conclusion, the inspection panel is still an important and effective tool for communities. With these few innovations, the panel 

could become even more accountable and responsible to the people 

who need it most. 

We thank you, Chairman Frank, and we thank all the committee 

members for your leadership and your future action on strengthening the inspection panel process. 

[The prepared statement of Ms. Udall can be found on page 71 

of the appendix.] 

Mr. CLEAVER. [presiding] Thank you very much. 

Chairman Frank will return shortly. 

All of you hit on some things that I think are critically important. 

And I am sorry Mr. Lowery is not here, although I do appreciate 

his candor for the most part. But he mentioned in his testimony 

that the World Bank has moved over the past 10 years toward 

much greater transparency, and I am sure there is some greater 

transparency. But, you know, I raised the question with him about 

the Web site issue, whether that conditionality was on the Web 

site. I guess someone on his staff said ‘‘yes.’’ 

You are saying ‘‘no,’’ Ms. Molina-Gallart, and we were unable to 

find it either. 

So if there is some transparency, greater transparency, perhaps 

it is not as great as we were led to think during his testimony. 

Do any of you believe that there is a need for the World Bank 

to revisit the definition of ownership so that the policies are country-selected rather than Bank-selected in an attempt to make sure 

that government-supported Bank selection is not the predominant 

factor in selections? Anyone? 

Ms. MOLINA-GALLART. Yes. Yes, I guess I can respond to that 

one, because one of my recommendations was precisely to revisit 

the Good Practice Principles. And conditionality, one of them; it is 

ownership the first of them. 

Basically, what has happened all too often with ownership is that 

policies have been designed by the Bank and then sold to the countries, and then the Bank has said they are owned by the country. 

But this is not what we think that an owned policy should be. It 

should be not only country-selected, but it should also be countryled. That is why sometimes we talk about country leadership rathVerDate Aug 31 2005 12:37 Sep 16, 2008 Jkt 044186 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 K:\DOCS\44186.TXT TERRIE
32 

er than country ownership, country leadership over the development process. 

Mr. CLEAVER. Thank you. 

I am going to yield now to the ranking member, Mr. Bachus. 

Mr. BACHUS. Thank you. 

Let me just say to all the panelists, I think your testimony, 

which I have read much of it, and I will read it in its entirety, and 

our staff will, too, has already been very helpful on certain issues, 

such as privatization. 

You know, some of the adverse effects of conditionality or adverse effects of some of the actions of the World Bank, I think particularly, Ms. Udall, it is fascinating how the panel and its very existence has changed, has resulted in some positive outcomes or at 

least avoided negative outcomes, too. 

I am particularly interested at some point in talking about 

China, and if the panel has been able to operate successfully and 

made changes in their policy or in some of the World Bank projects 

there, where, you know, in the past, some have negatively impacted on people. 

I will yield back at this time, but we may at some point followup with you for additional questions about your testimony. 

I appreciate your valuable testimony. 

And I appreciate, Mr. Beckmann, your emphasis on the fact that 

you were for conditional funding or partial funding, I am not sure, 

and that now you advocate full funding. I do believe the World 

Bank has made positive strides, so thank you. 

Mr. CLEAVER. Mr. Bell? 

Mr. BELL. Yes, I would just like to make a point about conditionality. It is absolutely not wrong in and of itself. It depends what 

the conditions relate to. There are countries, I mean take Burundi 

as an example. My organization has been very closely involved in 

efforts to involve coffee growers in the reforms to the coffee sector. 

Currently, that sector is deliberately unaccountable and does not 

deliver benefits equitably to the people who grow coffee. Now, the 

World Bank has a very delicate negotiation with the IMF about 

what kind of approach to take with the Burundian government, 

which currently is—the ruling party is defying its own constitution 

and barring some rebel members of it from sitting in parliament. 

Parliament does not pass laws in the Burundian parliament. So I 

think when considering conditionality, it is essential to look at the 

details of the situation in the country. 

Mr. BACHUS. And I would totally agree. I am not saying conditions are not—you know, they can be good or not good. We call 

them safeguards when they are good, or reforms. You know, they 

sometimes slow the process. Sometimes that is good. And you also 

have issues of sovereignty. But I think your testimony does accurately outline some of the problems that the World Bank has and 

how we need to be careful with conditionality and make sure that 

they benefit the people. 

But thank you. 

Mr. CLEAVER. Thank you, Mr. Bachus. 

One question, and then I will pass this on to others. Our colleagues, Mr. Bachus and Ms. Waters, introduced the Jubilee Act. 

And it was passed, of course, and it deals with the whole issue of 

33 

debt forgiveness. I was one of the sponsors, and I think it was one 

of the better things we have done. If we needed a Jubilee Act 2, 

what would you want to see us include in Jubilee—actually, Jubilee is supposed to be every 8 years. I will have to figure out a way 

to make it make sense with some numbers. But Jubilee 8.2, whatever, what do you think we would need to add? 

Mr. Beckmann? 

Mr. BECKMANN. Well, I think it would be really helpful for the 

committee to look into this current crisis in world hunger. I think 

it is going to last for a long time. People expect these high food 

prices to moderate a little bit but to stay high for at least 5 years. 

Fuel prices aren’t going to go down. So I am concerned. 

I am delighted that the World Bank has already set up and is 

operating this rapid response facility. But the amounts of money 

they are talking about are not close to the needs of the countries, 

as far as I can see. 

And then the Bank has put in some grant money, but mostly this 

is lending. And the IMF, I think in June, is planning to set up a 

similar facility to lend money to these desperately poor countries 

that are under incredible pressure, not of their own making. But 

that is going to be loan money. 

Mr. CLEAVER. Yes. 

Mr. BECKMANN. So these countries are going to go very rapidly 

into debt. Those low-income governments, those low-income country 

governments have responded to the current crisis before anybody 

realized it was a global crisis, because when the price of their staple went up by 100 percent, they knew that they couldn’t let that 

price go up for their people by a 100 percent. So they are taking 

action, you know, the kind of thing that the IMF shakes its finger 

at. And for most of the poor people in the world, there is no program, no food aid that is going to reach them. It is only the moderation of the prices that is going to help. So those poor country 

governments need to take the hit. And it is going to translate into 

deeper debt for those governments. 

So I would think that the next—we need a Jubilee. And the first 

thing is to help the world figure out—really, everybody is—I think 

people don’t yet realize how serious a problem this is. And it is 

going to mean that the—I think what the IMF and the World Bank 

are doing with these rapid response facilities is the best response 

that is underway. But it is too little, and it is debt rather than 

grants. So that is—I would love the committee to get into that. I 

think we are going to need a Jubilee before we get to the 7th year. 

Mr. CLEAVER. Thank you. 

The CHAIRMAN. If the gentleman would—if I could indulge, because I have a meeting I am going to have to go to, so if I could 

ask my questions now, and then the gentleman from Missouri 

would stay on. 

I appreciate the kind words. 

Let me ask, on conditionality, where I believe it certainly is a 

good sign that we are hearing people now not defend conditionality—let’s make the distinction. I assume we agree that there is 

a kind of conditionality that is important, and that is the anti-corruption, pro-transparency. There is almost a procedural subVerDate Aug 31 2005 12:37 Sep 16, 2008 Jkt 044186 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 K:\DOCS\44186.TXT TERRIE
34 

stantive split. And I think that is a very important point. In our 

amendments on the Jubilee Act, that is very much what we said. 

But on the substantive conditionality, there, again, we want to 

stress that the argument is not necessarily that these things are 

bad, but that they ought to be done locally. 

I also think there are some things—Mr. Beckmann, I appreciate 

what you said about the fertilizer. But in fact, as I recall, it is the 

case that was a kind of a reverse on the part of the Bank. We had 

the example, someone in the New York Times wrote it up, where 

the Bank was objecting to Malawi’s policy of subsidizing fertilizer. 

Would you comment? I mean, this was a reversal. Can we—is 

this something we can sort of take for granted going forward? Do 

they understand the mistake now? 

Mr. BECKMANN. I think that the Bank has tended to be critical 

of big programs of subsidized fertilizer, subsidized seeds. And the 

Bank has pushed over the years to reduce those subsidies, you 

know, on the grounds that in fact they are financially difficult for 

governments to sustain. You know, the subsidies tend—you end up 

with subsidized fertilizers going to certain farmers, often the bigger 

farmers who can pay under the table to get some government official to give them subsidized fertilizer. So the Bank has had a more 

market approach over the years to subsidies in agriculture. They 

have also tried to reduce the price ceilings that many developing 

countries put on agricultural output. 

The CHAIRMAN. Let’s stay with fertilizer. 

Mr. BECKMANN. No, no, the point, Mr. Chairman, is just that in 

this crisis, what I have seen is that the Bank is moving quickly to 

get money to governments to subsidize fertilizer, subsidize seeds 

because that is what is needed now. So it is an example of flexibility. 

The CHAIRMAN. I understand that. But in the first place, if it is 

helpful for growing food, maybe if we had been doing this before, 

we wouldn’t have had quite as much of a crisis. Are you suggesting 

this is just something that is just going to be that way for the crisis, and if and when this crisis ends, they are going to revert to 

opposing these subsidies for fertilizer? 

Mr. BECKMANN. It is a response to the crisis. I don’t know how 

long it is going to go on. But I think the Bank is right to say that 

farmers ought to get a fair price for their food. 

The CHAIRMAN. Mr. Beckmann, I don’t understand why we are 

having trouble here. I am talking about the fertilizer subsidy. I 

don’t understand how subsidizing fertilizer means that they are not 

getting a fair price for their food. Let’s stick with this. Are you saying, then, that once this crisis is over, you would think it okay for 

the Bank to revert to a policy of opposing the subsidy of fertilizer 

and seed? 

Mr. BECKMANN. Yes. I think there are better ways to use money 

to support farmers than subsidizing fertilizer. 

The CHAIRMAN. What would they be? 

Mr. BECKMANN. Invest in rural roads that all farmers can use, 

and need. 

The CHAIRMAN. But you do support the subsidy of fertilizer and 

seed now because there is a food crisis. 

Mr. BECKMANN. Right. 

35 

The CHAIRMAN. Do you anticipate that is going to go away anytime soon? 

Mr. BECKMANN. I don’t anticipate it. I don’t know what I think 

about a year from now, or 2 years from now. 

The CHAIRMAN. But as long as there is a food shortage, you 

would be in favor, if they chose to subsidize fertilizer and seed. 

Mr. BECKMANN. Right now the price of fertilizer has gone up so 

quickly that poor farmers cannot respond to higher food prices by 

planting. 

The CHAIRMAN. As long as we have this food crisis—I mean, you 

talk about the World Bank’s policy on farms. What do you think 

the World Bank’s evaluation of the American agriculture bill would 

be? 

Mr. BECKMANN. I think they have been clear about it, that tradedistorting, protectionist subsidies are bad for global development. 

The CHAIRMAN. So the standard by which the World Bank has 

been critical of some of the developing countries, if, in fact, that 

were applied to the United States, it would be against our agricultural policy. 

Mr. BECKMANN. Yes. And they would be right. 

The CHAIRMAN. I think that is something that people ought to 

consider. I suppose you can be in favor of either side, but it is hard 

to understand how people could advocate both. 

I thank the gentleman. 

I will yield back. 

Mr. CLEAVER. Thank you. We will now call on the gentlelady 

from California Ms. Waters. 

Ms. WATERS. Thank you very much. 

I would like to thank the members of the panel for being here 

today. I am sorry I am late. We had a markup in another committee. But I really needed to be here when the Honorable Clay 

Lowery, the Assistant Secretary for International Affairs of the 

United States Department of the Treasury, was here because I basically needed to talk about the global food crisis and suspension 

of debt payments, and, of course, I wanted to ask some very pointed questions about Haiti. I suspect that our witnesses here today 

are all of similar opinions about what is happening with this global 

food crisis. 

Let me just say that last month, this committee held a hearing 

on the global food crisis, and while the crisis has several causes, 

it was clear from the testimony that of the causes was the policies 

of the World Bank. Since the early 1990’s, the World Bank has promoted a free-market approach to agriculture in developing countries. Developing countries were instructed to eliminate government agriculture programs such as grain marketing boards, food 

storage and distribution services, and subsidies for seeds and fertilizer. I think I heard some reference to that a moment ago. 

Developing countries were simultaneously pressured to liberalize 

their trade policy, allowing food to be imported. Farms in developing countries were forced to compete with imports from the 

United States and the European Union, where agricultural production continued to be heavily subsidized. Theoretically these policies 

were supposed to improve efficiency and create opportunities in the 

36 

private sector. Instead they contributed to the decline of agriculture. 

According to the testimony of Rob Patel of the Institute for Food 

and Development Policy, import surges became common. Import 

surges occurred when a developing country lowered import tariffs 

on agricultural goods and then was flooded with these goods. The 

result was often a decline in domestic production. It is interesting. 

In Senegal, tariff reduction caused an import surge in tomato 

paste, and local production was cut in half. In Chile, an import 

surge in vegetable oil caused local production to be cut in half. In 

Ghana, local rice production fell from over 80 percent of domestic 

consumption in 1998 to less than 20 percent in 2003. 

Rob Patel also testified that the World Bank continues to condition loans to developing countries on free-market agricultural policies despite past failures. In the World Bank’s most recent round 

of poverty-reduction support credits, Tanzania was required to prepare four crop boards for sale. Benin was required to privatize its 

cotton sector. And Moldova was required to liberalize agricultural 

support programs. 

One country that decided to ignore the World Bank’s advice was 

Malawi. Following a disastrous corn harvest and a resulting famine 

in 2005, the government reinstated fertilizer subsidies. The result 

was record-breaking corn harvests in 2006 and 2007. Acute childhood hunger has fallen considerably, and Malawi was able to export corn to Zimbabwe and sell excess corn to the World Food Program last year. 

Despite the fact that all of us are so supportive of debt relief and 

some of the other things that we do, I think that we are not very 

effective in dealing with some of these issues. I suspect and I know 

it is long past time for the World Bank to change its approach to 

agricultural development. 

Do you have any advice for us about how we can be more effective in getting the World Bank—and tell me what some of the programs and organizations are doing to try and offer advice and pressure to the World Bank to change its approach to agricultural development. Any enlightenment that you can do, that would be helpful to us. Anybody? 

Mr. BELL. My first piece of advice is not to cut off your nose to 

spite your face. There is a great difference between emergency agricultural relief, such as Mr. Beckmann has talked about, and longterm IDA projects to try to transform the operating environment in 

which poor people are trying to grow food and an income. 

The two countries that I have spent considerable time in the last 

2 years, Nepal and Burundi, both of these countries, the vast majority of the poorest grow food for themselves. They are not really 

affected by the surge of imports because they are not able to earn 

an income to be able to buy food. 

There are multiple factors locally that affect the ability of people 

to feed themselves. I think that to ignore the governance issues, 

the fact that subsidies on fuel may only—by cutting them, you may 

only be affecting the very rich or the people who are able to be rich. 

So I think that it is absolutely essential to focus on how the bank 

takes its decisions rather than ‘‘X’’ or ‘‘Y’’ policy, per se, is wrong. 

37 

Ms. WATERS. Any other comments? If not, I would like to move 

to—you probably have had some discussion on this maybe today— 

suspension of debt payments for decision point countries. My question is: Would you support an immediate suspension of debt service 

payments by all of the HIPC decision point countries while they 

continue to implement debt relief conditions and food prices remain 

high? Anyone? 

Mr. BECKMANN. What I think we are going to need is additional 

debt relief. We are going to need concession to these rapid response 

facilities—it is mainly, as I understand it—I mean, on the impact 

of the hunger crisis, we really don’t know a lot yet, but I think it 

is a slightly different group of countries. It is the low-income countries that import food and fuel where people are going to die and 

where the governments are going to go broke. So there needs to be 

some additional funding through debt relief, additional concessional 

funding. 

There needs to be a response. I am not sure whether it should 

be just what you are suggesting as you take all those HIPC countries. Maybe it is not exactly that set of countries, but the basic 

idea is right, that we need to provide additional funding for a lot 

of low-income countries that have suddenly been put in a much 

worse situation and are likely to be there for the foreseeable future. 

Ms. WATERS. The decision point countries, there are 10: Afghanistan; Burundi; Central Africa Republic; Chad; Democratic Republic 

of Congo; Republic of Congo; Guinea; Guinea-Bissau; Haiti; and Liberia. 

I have been really disturbed by the food riots in Haiti, and I 

don’t understand why—I sent a letter to Treasury Secretary 

Paulson urging him to use his influence to expedite the cancellation of Haiti’s debts and to immediately suspend all further debt 

payments from Haiti. Fifty-four Members of the House signed the 

letter, including Chairman Frank and Ranking Member Bachus. 

Unfortunately, I received a disappointing response to my letter. 

Treasury informed me that Haiti is not expected to receive complete debt cancellation at the present time, but Haiti is receiving 

other forms of aid. While I appreciate that the international financial institutions and the United States are providing loans and 

grants to Haiti, this is simply, of course, not enough while Haitians 

are starving. I, once again, will call on Treasury Secretary Paulson 

to do everything in his power to provide immediate debt cancellation for Haiti because I don’t see how we can in good conscience 

accept payments from Haiti at this time of desperate need. 

Haiti owes over $1 billion to multilateral financial institutions, 

and Haiti is scheduled to pay more than $48 million in debt service 

this year. This is money that could be spent to develop Haiti’s economy, rebuild crumbling infrastructure, and expand agriculture. It 

could be spent on food for hungry people. Instead, it is being used 

to service Haiti’s debts. 

How loud is the outcry from organizations such as Bread for the 

World and Bread for the World Institute and other organizations 

about what we are watching and what we are saying in this food 

crisis in particular in Haiti? What are people saying? 

Anybody? Yes. 

38 

Mr. BECKMANN. Mr. Lowery—when you weren’t here—said that, 

in fact, they have arranged cancellation of virtually all of Haiti’s 

debt by early next year from the multilateral institutions. He is not 

here, but I think what I heard was he must have gotten your letter 

and paid attention to it. 

Ms. WATERS. He didn’t pay attention to it if he said they will do 

it by next year. I am talking about immediately. 

Mr. BECKMANN. The question you addressed on Bread for the 

World, we are being just as loud as we can be about—I think the 

right word for it is a hunger crisis. It is not just food, it is fuel. 

And the issue is not only—I mean, it is that high food prices are 

what is making people hungry, but the crisis is that people—most 

of the world’s poorest people are getting poorer, and people who are 

just out of poverty, maybe 100 million people, have been driven 

into extreme poverty, we think. So the crisis is the hungry people, 

and there is no relief in sight. 

The policy response to date, the supplemental appropriation that 

Congress is considering, the rapid-response facilities of the Bank 

and the Fund, the extra money that has been collected for the 

World Food Programme are a drop in the bucket compared to the 

crisis. 

So it is not only in Haiti. In Ethiopia, right now, we have starving babies again. Ethiopia has made wonderful progress. In 1990, 

30 percent of the kids were in school. Now 90 percent of the kids 

are in school. There is lower child mortality. So they have done a 

lot. But over the last few years they have been struggling with 

these high food and fuel costs. Now they have drought. So we are 

seeing starving babies. 

I think in a number of the fragile states, countries like Liberia, 

where political solidity just isn’t there, then if you take the staple 

crop, the thing that people eat, and you double the price of that, 

some of those governments are going to fall. So I think we are 

going to see a string of humanitarian crises and we are going to 

see a string of political crises. In my judgment, none of us yet has 

really picked up on how big a setback in the world’s development 

we are experiencing, so Bread for the World is trying to sound the 

alarm. 

Ms. WATERS. What should we be doing? 

Mr. BECKMANN. I liked the idea of a Jubilee II. You held a hearing on the food crisis just a month ago, but I think that idea, to 

look at what is the Bank doing, what is the Fund doing, what the 

institutions under your jurisdiction, how are they responding, and 

what more could be done, because my guess is that—I think actually the Bank and the Fund, what they are doing to help the lowincome country governments, and in some cases they do have welfare systems, so they need to strengthen those systems of welfare, 

of assistance to—humanitarian assistance to poor people. They 

have food shops, ration shops. 

So some of this money from the Bank and the Fund is supporting 

that, some of it is subsidizing fertilizer and seed so that farmers 

can plant for the next harvest. I think what they are doing is about 

the best thing that the world is doing, but it is not nearly on the 

right scale, and it is mostly loan money. It can’t be loan money. 

These countries are broke. 

39 

I think the committee could accelerate the process of getting the 

U.S. Treasury, the Bank, the Fund, and the other multilateral 

banks to focus on this. Ask the African Development Bank what 

they are doing. It would just help to move the whole thing forward. 

In fact, none of us has full knowledge; nobody knows how many 

people—for example, I am guessing it is 800 million people—have 

taken a hit of 10 to 50 percent in their real income. I said that to 

the director of the agriculture department at the World Bank, and 

I said, ‘‘Does that strike you as crazy?’’ He said, ‘‘No. We are trying 

to get the numbers together, but that strikes me as plausible.’’ 

What is striking is that nobody knows the full scale of this problem, so the committee could really help just by asking about it and 

then pushing for more vigorous response. 

Ms. WATERS. Thank you very much. 

Yes? 

Ms. MOLINA-GALLART. I would like to add another point, because 

I think that we have been focusing our responses on what needs 

to be done in the context of emergency, but I think it is important 

to think of long term as well. And to think of longer term, we have 

to assess the mistakes of the past. I think that, quoting the testimony that was here a few days ago, you have mentioned a number 

of them. 

Since we are speaking about conditionality today, we have to be 

aware and learn from the past and the conditions that undermine 

the agriculture in a number of countries. I do agree with other testimonies that have mentioned there is no single response to what 

should be done in the agriculture sector to secure that these don’t 

take place again. But what is very important is that these conditions and policy advice on agricultural development, it is not biased 

simply or uniquely to the market, strictly market model, but rather 

that since we are talking about low-income countries with little capacity to devise and design different policy scenarios, what international institutions have to do is not provide one single response, 

but help to draft different policy scenarios on different policy 

choices and what could be the impact of each of these in terms of 

poverty reduction. This is the way that they can assist countries 

to take better-informed policy decisions. 

Ms. WATERS. Thank you very much for your generosity. 

Let me say, Mr. Chairman, I have this old-fashioned belief that 

to the degree countries can grow their own food, and particularly 

their basic crops, such as rice and wheat, then they will not be 

hungry. 

Mr. CLEAVER. We thank the gentlelady from California. Her Jubilee Act is consistent with what she is saying now, and the more 

I hear today, the more I am thinking that we do need Jubilee II. 

I will now call on the gentlelady from Wisconsin Ms. Moore. 

Ms. MOORE OF WISCONSIN. Thank you so much, Mr. Chairman. 

This has been a fantastic panel. Thank you for your patience. 

I have listened very carefully to all of your testimony, and it occurs to me—unless I am hearing things wrong—that while we have 

made great progress in bringing some accountability to the World 

Bank’s lending practices, its transparency, you mentioned the 15- 

year anniversary, Ms. Udall, of the inspection panel, and some of 

the problems associated with that, that claimants don’t really have 

40 

access to the panel. They are rarely involved in remedies. When we 

do have problems—I guess I want to associate myself with the 

opening remarks of Congresswoman Waters. I think she very aptly 

described some of the problems that we have heard about when 

there are—for example, in Ghana, where we recently visited, this 

committee, where cheap imports of rice undermined the local production of rice in that country. 

I also am hearing very clearly what Mr. Beckmann is saying 

about hunger really being the canary in the coal mine of other 

kinds of problems. Certainly Ms. Molina-Gallart’s testimony has 

been very important in terms of identifying the continued conditionality, bad conditionality, because there are good conditionalities 

that ought to be expected of anyone, but bad conditionality continuing to pressure these low-income communities. 

I want to start out by asking Mr. Bell a question. You mentioned 

something in your testimony about how we need to shift the minds 

of the World Bank. You also talked about the organizational structure and culture and a reassessment, I believe, of underwriting criteria and looking at the administrative budgets involved. I reiterate, plucking out certain comments that you made, tying them to 

a comment that Mr. Lowery made about the complex international 

aid architecture, and I renew a question that I made to Mr. Lowery 

about whether or not what we are seeing is the development of 

very complex and sophisticated world trade policies, economic policies, the OECD, the WTO, subsidies in this country, farm subsidies 

in this country, and then, on the other hand, not allowing subsidies 

in other countries, conditionality that prevents other countries from 

raising tariffs so that they empower European and the United 

States exports and products. 

Are we at a point that we really need to look worldwide at an 

organizational structure and culture of lending where you have 

these—you always have winners and losers, but where you have 

some people being thrust into deep, extreme poverty, and others 

being wealthy? Are we at that point, Mr. Bell? 

Mr. BELL. That is an amazingly complex question. It goes beyond 

the entanglement of institutions to different units and teams and 

groups within institutions having corresponding interlocutors in 

different groups and units of international institutions. So everything is interlinked. 

To take the example of how the OECD is a collection of bilateral 

donors, and the Development Assistance Committee works very 

closely with the World Bank and the United Nations Development 

Program to develop principles for more effective engagement in 

fragile states, or more globally, the Paris Declaration on Aid Effectiveness, I think there are definitely strong efforts within these institutions to harmonize the efforts and achieve coherence in their 

policies, but there are enormous competing priorities, I couldn’t 

agree more. 

It comes back to my point about how you pay attention to the 

detail and your ability to pay attention to the detail, because the 

places that I have worked in the last 2 years, a lot of the reasons 

for hunger relate to the decision of local people that they want to 

be associated with a higher income bracket and eat rice rather 

than millet or barley that they can grow more easily locally. 

41 

The ownership point is exactly right. I think we have to segregate and say, ownership by whom? An illegitimate or oppressive 

or ineffective government can be more of a problem than the actual 

capacities of local people to deal with the problem. It is a balance. 

Ms. MOORE OF WISCONSIN. So, with your permission, Mr. Chairman, my time seems to have expired, can I just follow up with the 

other panelists? 

The CHAIRMAN. Yes. 

Ms. MOORE OF WISCONSIN. Given this, I guess I would ask Mr. 

Beckmann or Ms. Molina-Gallart or Ms. Udall, any of you who 

would like to chime in to my remaining time, do you think while 

there is a lot of demonization of the World Bank, and, of course, 

the only reason we know of their failings is because they have been 

more transparent, they have published what they have done, and 

they are critical in terms of helping the world, but do you think 

that the World Bank really has its hands tied in terms of trying 

to render assistance to low-income communities, to countries, to 

communities that are postconflict, because, in fact, they are coming 

under intense pressure from all these other financial institutions to 

create a favorable environment for the private sector, to create a 

favorable environment for European and donor countries’ exports? 

Do you think that the World Bank does not have the kind of 

independence that it needs to get away from conditionality? Do you 

think—this is sort of a backdoor approach to the same question I 

asked Mr. Bell—that in terms of a major reform, we have to look 

at all of the competing interests in the rest of these financial institutional structures, the culture, as it were? 

Mr. Beckmann? 

Mr. BECKMANN. I really don’t think that the World Bank is hostage to the commercial interests in the industrialized countries. I 

think it is doing a pretty decent job on the issues that the other 

panelists talk about. There is an understanding that— 

Mr. MOORE. If not the World Bank—you talk about food. What 

about commodities; I mean, food and trade conditions? 

Mr. BECKMANN. I think in terms of restructuring the international architecture for development, some of the reform needs to 

happen in the U.S. Government. We have 36 institutions within 

the U.S. Government that provide development assistance in developing countries. In fact, the World Bank does a pretty decent job 

of trying to coordinate the development efforts of many donor governments, but it doesn’t help that the United States Government 

has 36 different agencies of its own going to developing countries, 

going to poor countries to try to run little development programs. 

In the area of trade, part of the problem is in agricultural trade 

that our policies undercut the capacity of African farmers, have for 

30 years undercut the capacity of African farmers to produce. It is 

that rice that I think you mentioned; subsidized rice is being produced in Georgia and Arkansas and Texas, and it is subsidized because of the U.S. farm bill. We just passed a farm bill that maintains those subsidies. 

So, in my judgment, in agriculture, before this hunger crisis is 

over, we are going to need a new Doha Round, we are going to 

need—developing countries want us to reduce our protectionism in 

agriculture, and that can be part of a process; not a strictly ideologVerDate Aug 31 2005 12:37 Sep 16, 2008 Jkt 044186 PO 00000 Frm 00045 Fmt 6633 Sfmt 6633 K:\DOCS\44186.TXT TERRIE
42 

ical process, but broadly we need an agriculture that is less protectionist, less clunky, more market-oriented, more responsive to 

changing needs, and because poor countries in general have comparative advantage in agriculture, a more open, global market in 

agriculture will help people get out of poverty. 

Ms. MOLINA-GALLART. Going back to the World Bank, definitely 

it will require that position, as the previous speaker was saying, 

change at the donor level by the governments who sit at the Executive Board and at the Governing Board of the World Bank. But obviously the institution is fragmented, as any other big institution, 

and it will require as well changes in management and staff. So 

basically, if the executive board improved good practice principles 

and conditionality, as they did in 2005, but an improved set, and 

monitoring and performance assessment mechanisms were set to 

monitor progress at the level of the staff and the management, 

probably in 2 years’ time from now we could take another step forward, as we did from 2005 until now. 

Mr. CLEAVER. Thank you. 

Are there any other panelists who would like to respond? If not, 

we want to thank all of you very much for your testimony. I think 

your testimony balanced quite well the testimony of Mr. Lowery, 

and we appreciate the suggestions and the recommendations that 

you brought forward. 

There may be some additional questions for this panel which 

members may wish to submit in writing. Without objection, the 

hearing record will remain open for 30 days for members to submit 

written questions to these witnesses and to place their responses 

on the record. 

The hearing is adjourned. 

[Whereupon, at 12:32 p.m., the hearing was adjourned.] 

(43) 

A P P E N D I X 

June 18, 2008 

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