The Global Transparency Initiative:
Bringing International Financial Institutions to Account

In a speech made in May 2006, World Bank President Paul Wolfowitz outlined plans to shift the emphasis of the Bank’s work towards assisting developing countries to combating corruption by supporting them to develop and reform institutions that hold governments accountable. The speech came at a time of growing disillusionment among developing countries with the lending practices of the Bank and its sister body, the International Monetary Fund (IMF), which were blamed for the series of economic meltdowns that culminated in the 1997-98 Asian financial crisis.

Almost a decade on since the Asian crisis, many developing countries have turned their backs on both the Bank and the Fund and have sought loans and funding elsewhere. Both the Bank and the Fund, along with a host of other regional donor and international financial institutions (IFIs), such as the United Nations Development Programme and the Asian Development Bank, have now had to take a long hard look at their lending policies and strategies. One area in particular in which there has been increasing calls for reform is in improving their operational transparency. For decades, international financial institutions (IFIs) had been negotiating loan agreements and projects exclusively with recipient governments, while elected parliaments and the public were entirely excluded from these processes. On many occasions, agreements have been made with governments who have a dubious governance record, where funds have often been siphoned off into the pockets of corrupt leaders. The most extreme example being the regime of Indonesian President Suharto, who, during his three decade rule from the mid-sixties to the mid-nineties, had allegedly skimmed off one out of every three dollars lent by the World Bank.

A new focus on more accountable funding to help countries attain the Millennium Development Goals has led some of the major donor organisations to revise disclosure policies as a means to combat graft and improve their lending credibility. However, many of these policies remain deficient in a number of ways. The deficiencies mean that stories still abound of donor-funded projects that have either served no public purpose or required the uprooting of local populations who have had no say over the design, tendering and implementation processes for such projects.

Most significantly, in September, a group of freedom of information advocates, the Global Transparency Initiative, launched its Transparency Charter for IFIs to coincide with the annual Bank and Fund meetings in Singapore. The Charter, based on international law and best practice freedom of information laws and policies, sets out standards of transparency that IFIs such as the World Bank, IMF, World Trade Organisation and other similar organisations should conform to.

The Charter comprises nine principles, similar to best practice freedom of information principles adopted by national governments. The one crucial principle of the Charter concerns the need to provide access to decision-making processes. The provision requires organisations to disseminate information that facilitates informed public participation in decision-making in a timely fashion, including draft documents, and that it is done in a manner to assist affected and interested stakeholders to effectively access and understand the information. By providing a mechanism to involve public participation in decisions, the Charter will help to ensure that decisions are taken as much as possible with the aim of benefiting the public and, in particular, giving a voice to those whose livelihoods are affected by development strategies and infrastructure projects, such as the building of dams and highways. The Charter also provides a means to prevent corruption by governments that previously were able to siphon off funding for projects in the safe knowledge that the decisions and execution of these projects or strategies would remain out of public view.

The Global Transparency Initiative is now seeking endorsements for its Charter from NGOs, civil society groups, academics and even the IFIs themselves. In this way it hopes to raise awareness of the significant influence that IFIs and donors have over the livelihoods of people the world over, and increase the pressure on IFIs and donor organisations to adopt the best practice principles set out in the Charter. It is hoped that the Charter may finally attract the attention of Wolfowitz and his peers among the donor and IFI community and help them to realise that adopting the Charter’s principles of transparency and accountability can provide a crucial opportunity to reverse public disillusionment with their organisations.

(This article is based on the paper ‘Promoting Public Accountability in Overseas Development Assistance, written by Ms Charmaine Rodrigues, April 2006.)