Academic journal article Proceedings of the Annual Meeting-American Society of International Law

Regulating the Impacts of International Project Financing

Academic journal article Proceedings of the Annual Meeting-American Society of International Law

Regulating the Impacts of International Project Financing

Article excerpt

This panel was convened at 12:30 pm, Friday, April 5, by its moderator, Edith Brown Weiss of Georgetown University Law Center, who introduced the panelists: Jessica Evans of Human Rights Watch; Peter Lallas of the World Bank Inspection Panel; and Cynthia Williams of Osgoode Hall Law School, York University, Toronto.


We now have more than 190 countries and 7 billion people in the world, all of whom need a decent living, respect, and a sustainable human environment. To meet this need, the public and private sectors have engaged in project financing on a large scale. Much of this investment has focused on infrastructure, though increasingly investments have been directed to strengthening institutions and building capacity within countries to implement policy. This panel will focus on international public investments. Many groups of actors are involved, from the multilateral development banks to bilateral governmental projects, to investment by private banks. The investments have raised concerns about their environmental, social, economic, and cultural impacts. The rules governing these investments have changed over the last two decades, and are in some cases, under review again.

The amount of money for development financing is very significant. The World Bank Group, the largest of the multilateral development institutions, provided $52.6 billion in fiscal year 2012 in loans, grants, equity investments and guarantees, and $54.7 billion in the previous fiscal year. Of this amount in 2012, the IBRD loaned $20.6 billion, the International Development Association provided $14.7 further to low-income countries, and the International Finance Corporation devoted $15 billion to private-sector investments. The policies of these institutions can and do have important impacts in the countries in which they operate.

Since 1947 to 2012, the World Bank engaged in 11,690 projects in 172 countries. More than four decades ago, the World Bank instituted a process for environmental review of projects, and more than two decades ago adopted an operational policy on environmental impact assessment, which required the Bank to assess the environmental impacts of projects for which it provided financing. Subsequently, the World Bank enacted a series of eight so-called safeguard policies to guard against harmful impacts of its investments. The safeguard policies cover natural habitats, pest management, cultural property, involuntary resettlement, indigenous peoples, safety of dams, projects on international waterways, and projects in disputed areas. The World Bank is now reviewing these safeguard policies in the light of a new preference for relying more on a country's own policies.

The World Bank's financing related to projects has also changed. Over the last two decades, the proportion of funds that go for structural adjustment, or in the last decade development policy loans, and most recently, ' 'program for results operations," has increased dramatically. These funds provide direct budget support for certain sectors and policy and institutional reforms. They do not support projects directly, although sometimes projects are included within a development policy loan. An empirical analysis of forest reform projects in Africa, for example, revealed that some were processed as projects and some as components of development policy loans. The significance of the turn to financing that does not go directly for projects is that the regulatory policies that govern projects do not apply in the same way. The requirements are fewer, and the process for scrutinizing impacts much faster and less detailed. The International Finance Corporation, which handles private-sector financing, has also adopted policies to regulate environmental and social effects, and these, too, have changed over time. The policies have been in many respects similar to those of the World Bank, but with distinct differences, such as an explicit reference to human rights. …

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