World Bank Challenged by a Small Town Mayor from the Philippines

Provincial officials in developing countries rarely challenge the World Bank. When they do, as happened on August 31 when a Filipino mayor brought a grievance to Bank headquarters in Washington, D.C., the encounter can be a stormy one.

Aquilino Pimentel is the mayor of Cagayan de Oro, a city of 228,000 people on the island of Mindanao. Since 1978, the city has been the site of a "slum improvement and rehabilitation" project designed and partially financed by the World Bank.

Shortly after being elected in March, 1981, Pimentel set out to investigate the project. What he found disturbed him.

"The project is ill-understood by the people," Pimentel wrote in a letter dated August 27 which he hand-delivered to Bank officials. "We would like to try other less expensive ways of tackling the housing and urban improvement problems of the city."

The "rehabilitation" plan was expected to provide better housing for 3,000 to 5,000 slum dwellers, who would then rent the "upgraded" shelters at a higher rental fee. The ostensible beneficiaries, however, did not realize "that they would have to pay for the lots to be assigned to them," Pimentel wrote. "They thought the lots would be for free."

Actually, the housing would cost residents between $15 and $19 a month. The "beneficiaries" are currently paying between $0.65 and $2.60 a month for lodging, and "even at that level, a sizeable number default on their payments," Pimentel said in his letter.

"If the project is implemented, I am very sure that soon after lots are awarded, people would start being evicted," Pimentel told World Bank officials in a private meeting, transcripts of which were obtained by Multinational Monitor. "I do not want to be responsible for kicking out poor people for lots they could not pay for."

Affordability to the "beneficiaries" was not Pimental's only concern. He also was worried about the project's affordability to the city itself.

Pimentel told Bank officials that the project's total cost amounts to about $14.5 million, out of which the city would have to shoulder $7.7 million. "There's no way we can pay that amount," he told officials, noting that the annual budget for the city comes to only $3.35 million.

Because of these problems, Pimentel asked the World Bank to "relieve Cagayan do Oro of the burden of the project." This request did not go over well at the Bank.

Officials first responded by claiming that the dispute really did not involve the World Bank at all-that it was merely a disagreement between the Philippine government housing authority, which is directing the project, and the city of Cagayan de Oro. "We view this as a government project, not our project," said Inder Sud, division chief for East Asia and Pacific projects at the World Bank. "We are neither inclined, nor in a position, to get into the political questions."

When Pimentel insisted that the World Bank should try to alter the project, Sud warned that "This may have an effect on future projects for the city." Shot back Pimentel: "We can't be quiet on this just because (future projects) will be threatened."

World Bank officials did admit to Pimentel, however, that they may have underestimated costs by as much as 100 percent. "There is a definite increase in costs, because of delays and inflation," Amin Ramadin, loan officer for East Asia and Pacific programs at the Bank, told Pimentel. This confession led to the only commitment from the Bank: "technical consultations" with the National Housing Authority over cost estimates.

Cost reviews, however, may not alter the project. "If the government says it will fight this come hell or high water, we might see that as a less desirable outcome, but we have to deal with the government," Stephen O'Brien, division chief of the World Bank's East Asia and Pacific programs, informed the mayor.

All the hemming and hawing frustrated Pimentel, who promised legal battles to stop the project. He also warned that grave consequences might result unless the project was changed. "Let me underline the problem of affordability for beneficiaries," Pimentel told O'Brien. "In all likelihood, they will be roaming around the city, and will create a source for great social disintegration."

Though elected by 75% of the citizens of Cagayan de Oro, Pimentel has but a tenuous hold on political power. One of only two elected mayors in the Philippines, he was suspended from office by the national government's Commission on Elections in July, for "illegally" changing political parties. After 10,000 citizens of Cagayan de Oro demonstrated in support of Pimentel, President Ferdinand Marcos reversed the election commission's ruling and reinstated him.

The World Bank controversy may further jeopardize Pimentel's tenure as mayor, as he himself recognized in his letter to the Bank on behalf of city officials. "Under present day realities in the Philippines we are placing our positions as the duly elected officials of the City of Cagayan de Oro on the line," he noted. "But we would rather lose our off-ices than keep silent and betray the trust which our people have reposed upon us when they elected us."