Dgpo-infidrountable-enhancing Democratic Accountability & Parliamentary Oversight Of The Ifis

Enhancing Democratic Accountability and Parliamentary Oversight of the International Financial Institutions James V. Riker, Ph.D. New Rules for Global Finance Coalition Washington, DC, USA Presentation to the Policy Round Table on “Financially Unaccountable International Financial Institutions,” INFID, Jakarta, Indonesia, 13 June 2006 1

The IMF and World Bank: What is there to smile about? • “Singapore Prepares Four Million Smiles Welcome for IMF,” The Strait Times, 12 June 2006, page 1. Singapore’s Prime Minister Lee Hsien Loong called on all four million citizens to greet delegates of the upcoming IMF and World Bank Annual Meeting in September 2006 “with four million smiles” by submitting their photos at the Four Million Smiles campaign web site at: www.smilesS2006.com 2

The IMF and World Bank: What is there to smile about? Major Accountability Issues Remain: • Presently, there is no democratically accountable and open selection process for the leadership of the World Bank or the IMF. Should future leaders be chosen in a open and transparent process based on merit rather than on nationality? • What progress has been made to increase the “base votes” and voice of the least developed countries in the IMF? •Will European countries continue to hold 8 to 10 of the 24 IMF board chairs, or will new democratic principles for representation guide political formulas for reforming IMF governance? 3

Overview 1. Setting the Context: The Fundamental Issue for Developing Countries Is IFI Accountability – This means going beyond financial accountability to understand the democratic, ecological, political, and social accountability of the international financial institutions (IFIs) as well. 2. What Are the Possibilities for Enhancing the Democratic Accountability of the IFIs? • The International Parliamentary Petition (IPP) initiative • The Democratic Governance and Parliamentary Oversight (DGPO) Project 3. A Shared Agenda for Advocacy focused on the Singapore 2006 Annual Meetings and beyond. 4

Setting the Context: The Need for Enhancing the Democratic Accountability of the IFIs (1) A growing consensus is emerging that the international financial institutions (IFIs) face fundamental democratic legitimacy crises due to the multi-dimensional issues of accountability, transparency, representation, decisionmaking, and effectiveness. • •

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The recent undemocratic leadership selection processes for the heads of both the IMF and World Bank have put into question the democratic legitimacy of these institutions (Kapur & Naim 2005). In terms of representation, the United Nations issued a report in early 2005 publicly criticizing the International Monetary Fund (IMF) and World Bank for failing “to keep promises to increase the voice of developing countries” in those institutions, issuing an appeal for “fundamental reform” to address these governance issues. In the aftermath of the Asian and Argentine financial crises, civil society organizations and parliaments in both the North and South have pressed for more transparent and accountable processes and practices at the IMF and the World Bank. 5

Setting the Context: The Need for Enhancing the Democratic Accountability of the IFIs (2) Over the past 60 years, the IMF and World Bank have exerted increasing control over developing countries in their decisionmaking about national economic policies and the terms of international development finance. •

Shift in Decision-Making Away from Developing Countries: A key democratic deficit has emerged where the locus of decision-making over national economic policy has been transferred from national representatives “into the hands of less representative international bureaucrats” (Sikkink 2002: 310-311).

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Parliament Bypassed: A country’s Executive Director is often required to report only to the Ministry of Finance, thus circumventing democratic accountability to elected members of parliament.

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Setting the Context: The Need for Enhancing the Democratic Accountability of the IFIs (3) •

No Official Commitment to Parliamentary Processes: Despite the IMF’s and World Bank’s professed adherence to the principles of “good governance,” decision-making over key economic policy choices and binding loan agreements is too often made without the formal participation, review, public debate, or ratification of national parliaments.

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“Local Ownership” Requires Parliamentary Engagement: If borrower governments are expected to exhibit “local ownership” of these policies and to embrace democratic processes in pursuit of their national economic development, parliamentarians need to be fully engaged in these processes, if they are to be viewed as legitimate, especially in terms of exercising their voice in the review, consent or dissent of the economic policy prescriptions and the binding loan agreements of the IMF and World Bank.

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What Are the Possibilities for Enhancing the Democratic Accountability of the IFIs? • First, there is a critical need to understand the possibilities for systemic reforms and to develop effective strategies for enhancing the democratic accountability of the international financial institutions. • Second, a collaborative approach involving civil society organizations, members of parliament, and parliamentary networks, and developing country governments is required to hold the IFIs accountable. 8

International Parliamentary Petition (IPP) One positive step to address this situation is a petition initiative to guarantee the right for effective parliamentary oversight of national economic policy-making by borrower countries in their relations with the international financial institutions. •

To date, the International Parliamentary Petition (IPP) has received the support of over 1,400 members of parliament worldwide, over 400 members of whom are from the developing world and represent over 50 countries. A group of parliamentarians formally presented this petition to IMF and World Bank officials at the spring 2005 meetings.

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While the IPP initiative represents an important vehicle for facilitating parliamentary attention on the IFIs, a longer-term multi-dimensional strategy is needed to enhance the accountability, transparency, representation and decision-making of these institutions, and to coordinate efforts and support capacity-building for effective parliamentary oversight of the international financial institutions at the national, regional, and global levels. 9

International Parliamentary Petition (IPP) Proposes specific democratic reforms: “that the democratically elected representatives of recipient nations are the final arbiters of all economic policies in their countries… [and] that national parliaments in recipient nations have the right and obligation to be fully involved in the development and scrutiny of all measures associated with BWI activities within their borders, and hold the final power of ratification.” Source: International Parliamentarians’ Petition for Democratic Oversight of IMF and World Bank Policies, web site at: www.ipp-info.net.

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Democratic Governance & Parliamentary Oversight (DGPO) Project Overall Project Research Agenda: • What are the guiding principles for effective democratic governance of the IFIs? (i.e., standards for transparency, accountability mechanisms, basis for representation, legitimate decision-making processes). • What role can civil society play in developing and/or strengthening appropriate accountability mechanisms at the national, regional, and global levels for enhancing democratic governance and parliamentary oversight of the IFIs? 11

ENHANCING DEMOCRATIC ACCOUNTABILITY & PARLIAMENTARY OVERSIGHT OF THE IFIs LEVEL OF ENHANCE ACCOUNTABILITY ACTION OF THE IFIs Strengthen Civil Society Capacity on IFI NATIONAL •Accountability Issues •Provide Outreach to Parliament to Strengthen Oversight of the IFIs •Strengthen Government Position in its Relations with the IFIs

TARGETS OF ADVOCACY •National Parliaments (Brazil, Ghana, India) •Sub-national Parliaments (India)

REGIONAL

•Strengthen Regional Civil Society Network on IFI Accountability Issues •Provide Outreach to Regional Parliamentary Network •Target Governments Advocacy toward Regional Development Banks

•Asian Development Bank (ADB) •Inter-American Development Bank (IDB) •Committee of Parliaments of the Americas (COPA)

GLOBAL

•Strengthen Global Civil Society Network on IFI Accountability •Provide Outreach to Global Parliamentary Networks •Target Governments Advocacy toward the IFIs

•IMF •World Bank •Parliamentary Network on the World Bank 12 (PNoWB)

The Role of Parliamentary Oversight What oversight role should parliamentarians play in ensuring effective democratic governance of the IFIs? – –

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The Basis for Representation: What role should members of parliament play in enhancing the voice and vote of developing countries in the governance of IFIs? Legitimate Decision-Making Processes: How should members of parliament be engaged in the process for review and final approval of IFI loans and projects, both those directly affecting their respective countries and those that impinge on global standards or public goods? Accountability Mechanisms: What forms of accountability are appropriate for parliamentarians to hold Executive Directors (EDs) for decisions taken at Board meetings? Standards for Transparency: How can parliamentarians and the public acquire relevant information regarding Board discussions and decisions? 13

DGPO Project: Main Research Activities (1) 1. Case Studies of 3-4 Key Countries: Each civil society country partner will share what they have learned about what works, what does not, and what is still needed to expand civil society collaboration with national parliaments. The initial civil society country partners include: – Rede Brasil in Brazil; – ISODEC in Ghana; – Intercultural Resources in India; and – INFID in Indonesia (pending approval).

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DGPO Project: Main Research Activities (1) Country partners will explore: • (a) How to expand and to enhance outreach to their own national parliaments? (e.g., literacy training and materials; budget monitoring); and • (b) How to reinvigorate national civic processes that enhance parliamentary oversight of the IFIs? This means identifying a range of relevant activities, such as strategic planning, capacitybuilding, public education and training, outreach to parliaments and other key actors (e.g., media, political parties, trade unions, etc.). 15

DGPO Project: Main Research Activities (2) 2. Conduct a Global Inventory of Relevant Initiatives: Develop a broad catalogue of civil society initiatives to hold the IFIs accountable and engage with their national parliaments on a range of policy issues. • The project will catalogue the civil society groups that are engaged in some aspect of IFI democracy, including developing a matrix of key governance objectives and specific actions planned. This also means conducting an inventory (i.e., both of initiatives and groups) of what is currently happening to enhance parliamentary oversight of the IFIs.

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DGPO Project: Main Research Activities (3) 3. Develop a Data Base of Members of Parliament and Groups of Parliamentarians: The project is coordinating the development of a database and forming a network of elected officials and groups of parliamentarians interested in two levels of action: • National: Increasing oversight and accountability for IFI projects within their respective countries; & • Global: Increasing oversight and accountability for the actions and decisions of Executive Directors (EDs) representing their countries. 17

DGPO Project: Main Research Activities (4) 4. Design and Disseminate Educational and Policy Tools to Elected Officials: A range of materials (e.g., primer/handbook, policy briefs, etc.) will be developed for members of parliament (MPs) to: • a) Enhance economic and political literacy of IFI issues; and • b) Share effective policy strategies, processes and practices for enhancing the democratic accountability of IFIs and their operations at the national, regional, and global levels. 18

A Shared Agenda for Advocacy 1. Enact and implement legislation requiring that the national parliaments of developing countries are engaged in the formal participation, review, public debate and ratification process over the economic policy prescriptions and loan agreements of the international financial institutions (IFIs) and regional development banks. (i.e., International Parliamentary Petition) 19

A Shared Agenda for Advocacy 2. Enhance national parliamentarians’ oversight of the economic priorities, policies and lending practices of the international financial institutions (i.e., IMF, World Bank) and regional development banks. (e.g., Parliamentary Network on the World Bank – PNoWB; Committee of Parliaments of the Americas – COPA; Inter-American Federation of Parliamentarians - FIPA) 20

A Shared Agenda for Advocacy 3. Reform the IFIs by making them more accountable to broader publics. Some strategies include: • Opening these institutions to civil society representatives and parliamentarians; • Ensuring access to essential information; • Fostering broader representation of developing countries and non-state actors; and • Altering the power distribution of these institutions by strengthening the voting rights of developing countries. 21