JUNE 1999 · VOLUME 20· NUMBER 6

Korinna Horta, a Multinational Monitor contributing writer, works at the Environmental Defense Fund.

by Korinna Horta

"Governance" is the new buzzword at the World Bank, with the Bank now describing governance as critical to the success of development efforts.

 This approach sounds promising, since it should shine light on how decisions are made and on basic power relations.

 But, does the governance concern signal a break from the Bank's past when coddling dictators of various stripes was unquestioned because "political considerations" were excluded from the development equation? Or is "governance" just the latest fad to help the Bank distance itself from past failures without changes in the institution's underlying approach?

For Africa, the Bank's governance push began a decade ago, with publication of a 1989 landmark report on promoting sustainable and equitable development in Africa.

The report emphasized governance questions and reiterated a lesson suggested by history: that political legitimacy is a pre-condition for a government to successfully promote sustainable development. This conclusion suggests a highly participatory approach which effectively involves local people -- ordinary citizens -- in the decisions that directly affect their lives.

Many African participants in the debates were hopeful that the World Bank would begin dealing frontally with issues of governance in Africa, including styles of government and corruption.

But most of those who harbored such hopes have been sadly disappointed. The case of Cameroon shows why they believe Bank pronouncements on governance are rendered meaningless by its failure to involve affected populations in decisions, the unaccountable nature of the Bank itself and the Bank's continued support for corrupt and authoritarian regimes.

La Crise and the Bank
"La Crise," the common term Cameroonians use to refer to their country's steep economic decline, starting in the mid-1980s, led to an approximately 55 percent decline in per capita GDP between 1986 and 1994. This economic collapse has been one of the most painful that any country has suffered, according to a 1995 World Bank Poverty Report.

According to the Poverty Report, many Cameroonians struggle to eat one meal per day, usually consisting of banana, pepper and palm oil. Physical measurements of school children attending a primary school in Yaounde revealed that the children had become considerably thinner  in recent years -- and these were the children of middle- and high level civil servants. The report extrapolates that the nutritional status of low income children must have deteriorated even more.

The Bank's Poverty Report argues that food security has become such a problem in a country so richly endowed with agricultural land, forests, coastal fisheries and minerals because of an over-emphasis on agro-industrial investments and the promotion of export crops at the expense of the small-holder agricultural sector, which is the main provider of food.

Another World Bank report published in the same year points out that most World Bank loans were for the development of agricultural export crops and the transport infrastructure to go along with it -- the exact strategy that the Poverty Report blames for the current hunger problem.

It turned out that many of the Bank's projects had been based on overly optimistic commodity price projections.

As of 1994, the Bank had loaned Cameroon $1.5 billion to finance 75 operations. All of these loans have contributed to a heavy debt burden, which according to the Economist Intelligence Unit is much more severe than anything faced by Latin American countries in the early 1980s. As of mid-1997, the country's public external debt was equivalent to 80 percent of gross domestic product (GDP) and scheduled debt service represented 50 percent of export proceeds and 75 percent of budgetary receipts.

The World Bank's response to Cameroon's burgeoning debt was to impose structural adjustment programs in the late 1980s and early 1990s. The recessionary policies promoted by the Bank led to a 30 percent decrease in GDP and a 60 percent reduction in civil service salaries. A 1995 World Bank report acknowledged that the programs had major negative impacts in social terms: unemployment soared, farm incomes fell 40 to 65 percent depending on the crop, and the reduction in public spending, particularly in health and education, had terrible impacts on the most vulnerable population groups.

In an adjustment completion report, Bank staff placed blame for the economic disaster primarily on the government's lack of political will to follow through on the Bank's harsh policy prescriptions.

But the report also conceded that the design of the structural adjustment program itself was flawed because it aimed at reestablishing the competitiveness of the economy through deflationary policies alone.

To mitigate some of these impacts, the World Bank approved a "Social Dimensions of Adjustment" credit for Cameroon in 1991, but that project failed and the loan was canceled three years prior to completion. Again the Bank staff blamed the government for a lack of political will to combat poverty. But again they also recognized that the design of the project was flawed -- it was too complex for the implementation capacity of the government, they concluded, and the Bank had made too few resources available for adequate project appraisal and supervision.

These ill-designed projects contribute to the country's external debt, the burden of which is borne by the majority of poor Cameroonians in the form of reduced public expenditures for health, education and basic services.

The Bank, on the other hand, does not pay any penalty for its failures. Unlike commercial banks, which have to take losses on ill-conceived investments, the Bank's status as a preferred creditor allows it to function outside of the rigors of the market. In other words, its loans are likely to be repaid irrespective of whether funded projects succeeded or failed.

The World Bank's own official history makes reference to the fact that borrowing countries are often angry at the perceived double standards of "accountability" being applied by the donor community. The borrowers are told to institute changes which are very often risky both personally for the leaders and for the economies of their countries and all the while are lectured on accountability and good governance, the history notes. "Meanwhile the advisers making those demands faced no personal risk, and the institutions they represented were subject to little accountability, at either the institutional or the personal level," the official history recounts.

Paving the Forests
Since the late 1980s, the World Bank has been involved in a dialogue with the government of Cameroon to improve the management of the country's forests. Increased transparency in the allocation of concessions (logging contracts) and improved revenue collection for the public treasury lie at the core of the governance reforms promoted by the World Bank.

After a long period of arm-twisting, the government of Cameroon adopted a new Forestry Code in 1994 and then promulgated an implementation decree for the code. To the credit of the World Bank, the new Forestry Law contains a provision for the establishment of community forests.

While the state remains the legal owner of the forests, this provision offers local communities for the first time the right to manage their traditional forestlands.

Despite stated good intentions, however, there has been practically no implementation of the forestry code. Logging has increased by an estimated 30 percent following the 50 percent devaluation of the local currency in 1994. In some of the latest developments, the government had granted new logging concessions in the Campo Reserve -- even though the Bank-administered Global Environment Facility (GEF) is funding a project to protect this area.

Bank money continues to flow to Cameroon in part to promote elusive reforms in the forestry sector.

But well-intentioned forestry reforms have taken a backseat to assisting the government of Cameroon in a vigorous export promotion campaign with the goal of ensuring repayment of its foreign debt. The export promotion effort is overwhelming forest protection measures -- last year, timber for the first time became Cameroon's largest export commodity, surpassing oil.

The Oil Debacle
The Bank appears set to promote oil exports, too, with the Chad-Cameroon Oil and Pipeline project set for approval later this year [see "Fueling Strife in Chad and Cameroon: The Exxon-Shell-ELF-World Bank Plans for Central Africa," Multinational Monitor, May 1997]. The $3.5 billion project is being promoted by three of the world's largest oil companies, Exxon, Shell and ELF. The companies claim that they will not go forward with the project without World Bank co-financing as a way to obtain political risk insurance and facilitate cheaper access to other capital.

The Chad-Cameroon pipeline is a typical large resource extraction project. It will have few linkages with the rest of the economy. While the project has the potential to restart a full-scale civil war in Chad, its potential environmental implications for Cameroon are devastating. Given existing problems of corruption and authoritarian rule, there is little or no likelihood of any benefits trickling down to local communities affected by the project.

Local communities and environmentalists ask aloud: Who will be held accountable if the coastline in Cameroon and with it local livelihoods from fisheries and small-scale tourism are destroyed?

A recent study by the University of Warwick in the UK calculates that the value of the renewable resources of the coastal area which will be directly affected by the pipelines is nearly $1.5 billion annually, or about $104 per capital per annum. This figure compares with the purported benefits of the pipeline, which are estimated at $4 per capita over the pipeline's projected 30-year period of operation. A pipeline leak or oil spill could create a large net loss for Cameroon as a whole from the "development" project.

Somehow the Bank's governance interest does not seem to inhibit its willingness to fund projects whose benefits seem almost certain to flow to a narrow class of elites in or closely tied to a corrupt, authoritarian government, as well as to foreign corporations.

Accountability Gap
The World Bank's own evaluation reports show that in Cameroon the Bank has routinely failed to implement its mandatory policy guidelines (e.g. environmental assessments) and ignored the findings of its own social policy reports (food security).

In order to be credible on "governance," the Bank would have to examine its own role in increasing poverty and environmental degradation, and consider compensating local people for the flawed project designs which inflict pain on average citizens.

A 1992 Bank report, which revealed a systemic failure within the Bank to monitor the implementation of its own projects, suggests some reasons for the failure to translate concerns with "governance" into meaningful practice.

The Wapenhans report, named after then-World Bank Vice President Willi Wapenhans, criticized the institution's "culture of loan approval." The quantity of money lent is still the most important indicator of Bank staffer career success.

Attention to internal social and environmental policy guidelines slows the lending process. Consultations with affected populations entails further delay. Refusing to make loans to corrupt or dictatorial governments is bad for business at the Bank.

Failing to accept these restraints certainly leads to a higher rate of project failures, but it is failure to loan, not the failure of loan projects, that slows career advancement at the Bank.

But it would be a mistake to view the case of Cameroon only as illustrating how the Bank fails to prioritize or even take seriously governance issues in loan decisions. For the Cameroon example equally illustrates the absence of any internal accountability measures at the Bank.

The World Bank's governance crusade might do well by beginning to shine light on its own internal structures and processes -- a prerequisite to shedding the technocratic and depoliticized approach to development which continues to put people and the environment at risk.