EIC renews doubts on World Bank's “PforR” plan
EIC President, Michel Démarre, has called upon the European Executive Directors at the World Bank to carefully evaluate the potential risks connceted with the proposed “Program-for-Results” (PforR) before making a final decision in January 2012.
In May 2011, EIC co-signed a letter of a coalition of U.S. business associations to World Bank President Zoellick in which the U.S. and the European private sector expressed their specific concerns with respect to the "Program-for-results" ("PforR") concept and mentioned that additional safeguards were required to ensure that this proposed Bank’s lending program will preserve vitally important internationally accepted standards relating to procurement, transparency and accountability.
The new trait of the PforR is that it would provide Bank funding for programs initiated by borrower governments. But while projects financed by the World Bank under the so-called "Investment Lending" currently need to comply with international procurement standards as well as with social and environmental safeguard policies, the new PforR loans would rely on borrower nations’ own systems for procurement, environmental and social risk management and enforcement.
In order to reinforce the doubts of the European construction industry, EIC has closely collaborated with the European industry umbrella organisation “BUSINESSEUROPE” in drafting a specific Position Paper on this subject matter which highlights the most important concerns of the European industry. In letters dated 9th December 2011, EIC President Michel Démarre has drawn the attention of all European Executive Directors to the position of the European industry and has specifically raised the following issues:
- In the light of the various forms of “Programmatic Investment Lending” – such as SWAps, APL, OBA, CCT, RBFH, etc. – the "PforR" Concept Paper does not demonstrate sufficiently the actual need for another programmatic lending instrument;
- The thresholds for excluding high-risk activities are, in our view, much too high for all the sectors, but in particular with respect to construction works (50 million US$!);
- EIC is missing an adequate Bank oversight and control mechanism in connection with the Program-for-Results operations given that Borrowers are asked to identify their own performance indicators (Disbursement-linked indicators);
- EIC further believes that the provisions relating to Fraud & Corruption need to be tightened and that the Bank should not allow for a “self-investigation” by Borrowers as the preferred option for analysing potentially unethical behaviour, as such mechanism, in our opinion, would not be reconcilable with the Bank’s INT requirements.
It is expected that the World Bank Board will discuss and possibly decide on this important matter in January 2012.