Civil Society Newsletter
The IMF And Civil Society Organizations
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Civil Society Newsletter
Civil Society-IMF Dialogue:
The work of international institutions with civil society organizations (CSOs) often seems to focus on nongovernmental organizations. Indeed, the Fund staff who interact with CSOs—the country teams, the policy researchers, and external relations staff—devote considerable time to the essential exchange of views with NGOs. But other interlocutors are also important: elected representatives, religious organizations, and labor unions. This issue of the Civil Society Newsletter focuses on some of our ongoing activities with two of these groups. We offer an overview of a recently released IMF Executive Board study of the Fund's growing outreach to parliamentarians. In addition, we offer an article on our continuing dialogue with the World Council of Churches; an article on the first such meeting was published in the April 2003 issue of the Civil Society Newsletter.
We would also like to draw your attention to a new source of information on IMF perspectives on policies and country programs. In January, we posted on the Fund's external website (www.imf.org) a new feature called Questions in the News that provides the Fund response to questions raised by journalists and others about IMF policies and operations. At present, most of the material is drawn from press conferences, and, to broaden its coverage, readers of the Civil Society Newsletter are encouraged to send questions to firstname.lastname@example.org.
As always, we welcome your comments and questions about the Newsletter. It is intended not just to offer the Fund's perspective on issues of interest to civil society, but to provide balance of views by presenting the criticisms we face in our outreach—to which we are attempting to respond constructively.
In an effort to enhance its dialogue with legislators, the IMF is inviting public comment on the report of the Working Group of IMF Executive Directors on Enhancing Communication with National Legislators.
The Working Group was set up in May 2003 to examine how the IMF could enhance its dialogue with legislators. The report summarizes the Fund's past outreach to legislators, and the discussions and recommendations by the Working Group on future outreach.
The Working Group report stresses that IMF outreach should be a two-way dialogue and that it is important for the Fund to listen to legislators. Such dialogue is important to the Fund particularly because legislators in most countries have the constitutional responsibility to oversee national budgets and approve legislation on economic reforms. It provides the IMF with an opportunity to listen to the concerns of legislators—and thus the citizens they represent—and to improve the Fund's understanding of the political and social context in which economic policy decisions are taken. The Working Group, therefore, encouraged Executive Directors and staff to continue their outreach efforts.
The Working Group agreed that greater interaction between legislators and the Fund would be particularly beneficial to the IMF because it would help build understanding of economic reforms and IMF programs. It could also provide a useful avenue for informing and receiving comments from legislators about the work of the Fund and its role in the international financial system in general.
The Working Group's report invites comments on its recommendations to learn how the IMF can enhance its dialogue with legislators. The comments will be reviewed and will provide input via a weblink for the IMF's evolving outreach to national legislators.
IMF's Outreach to Legislators
The IMF's dialogue with national legislators, which has expanded in recent years, takes a number of forms:
World Council of Churches (WCC) representatives visited Washington last October for the second meeting with IMF and World Bank staff in the past year. The encounter was part of a dialogue that was launched in Geneva in February 2003 (see Civil Society Newsletter, April 2003) and aimed at finding common ground on crucial global issues. It also is aimed at clearing the way for a high-level meeting, tentatively planned for later this year. The gathering covered four topics that emerged from the Geneva discussion: institutional governance and accountability; participation of civil society in development; the respective roles of the public and private sectors in poverty reduction; and the challenges of globalization.
The meeting provided an opportunity to exchange views. Although some of the
discussion was contentious, it also revealed considerable common ground among
the three institutions, particularly on the objectives of policy. WCC team
members voiced their perception that the World Bank and IMF are strongly influenced
by the "neo-liberal paradigm" and dominated by major shareholders.
Voting power should be reallocated, they said, to ensure that the institutions
represent the interests of the whole membership. IMF staff responded that both
institutions reflect much greater diversity and pragmatism than this perception
The WCC also argued that the Bretton Woods Institutions (BWIs) do not pay adequate attention to the economic and social consequences of their policy advice in poor member countries and questioned how seriously the institutions view the agenda regarding the participation and engagement of civil society in the development process. Bank and Fund staff said that the Poverty Reduction Strategy Paper (PRSP) process, which is central to the BWIs' involvement in low-income countries, involves substantial participation by civil society and aims to directly address these concerns about engagement. WCC staff suggested that the PRSPs could help promote democratic practices in countries.
The greatest headway in dialogue and understanding appeared to be achieved during the debate over the roles of the public and private sectors. The WCC speakers said that the BWIs too often advocate privatization and market mechanisms without adequate consideration of justice, equity, and the welfare of the poor. But there was broad agreement among the three organizations that social services are a basic human right and therefore a responsibility of the state. There was disagreement, however, over how these services should be provided, with World Bank and IMF staff urging an appropriate balance between public and private sectors to ensure the effective delivery of better services.
WCC, IMF and World Bank staff agreed that economic globalization has not benefited all people equally and has produced both winners and losers. IMF staff said that particularly in the opening of financial markets countries should take a gradual approach, and that policies were needed to help those who "lose out". WCC staff questioned links between poverty reduction, economic growth, and trade expansion. They argued for giving greater prominence to human rights issues in trade, as well as for a more disaggregated approach that would highlight the negative impact of trade expansion on specific countries and groups of people.
At the end of the two-day meeting, the three delegations agreed to focus at the next meeting (planned for May 2004) on PRSP case studies and on planning issues for the high level meeting, tentatively planned for late 2004.
Klaus Enders, Assistant Director of the IMF Offices in Europe, participated in a seminar and a televised debate organized by the Bridge Initiative on Globalization on the margins of the European Social Forum (ESF), which took place November 12-15 in Paris.
It was the third time that IMF staff have participated in a dialogue moderated by the Bridge Initiative, an effort initiated in 2000 by independent media producers in Europe and North America to help stakeholders with conflicting perspectives on globalization issues find agreement on substantive changes in policy that make the process more equitable. The group has hosted a series of seminars and televised debates between well-known CSO, business, and IFI leaders.
The Bridge seminar on November 11 and 12 discussed the future of multilateralism and the global effort to reduce poverty. Participants included representatives from a range of NGOs, French government officials, and representative from the UN, World Bank, OECD and the EU. Given the broad nature of the issues, the meeting was largely confined to broad statements and did not identify concrete actions, as the organizers had hoped to do. Most of the NGOs focused on proposals for radically changing the present "system" as opposed to ideas for incremental reform. Many rejected IMF-supported policies and saw no change in what they described as the Fund's failed dogma of "neo-liberal" economic development policies.
Despite the fundamental differences, the discussions were cordial and well coordinated. There was recognition that mankind faces urgent threats, such as poverty, and that meetings like those organized by the Bridge Initiative were useful to allow each side to take a look at issues from a less familiar perspective. As one civil society participant put it, "it is quite useful to spend up to ten percent of one's time talking to the other side."
The public debate on November 13 was organized as part of the ESF's "tables of controversy," the first time that the IMF was invited to the gathering. In addition to Enders, the panel consisted of Susan George (ATTAC), Jose Bove (French farmer and unionist), Njoki Njoroge Njehu (50 Years Is Enough Network) and Mats Karlsson (World Bank), and had an audience of 200 as well as a heavy media presence. The debate covered similar ground as the seminar. In addition, Bove argued that northern and southern small farmers have a common interest in preserving national agriculture; he called for a moratorium for multilateral liberalization in this area. Enders countered that such a moratorium is a disservice to farmers in developing countries for whom market opening in rich countries is an important vehicle to develop and to overcome poverty, especially when combined with reforms to strengthen governance in their own countries.
The tone of the debate was civil, with the audience clearly favoring the positions of CSO representatives. Regardless of their differing views, several participants expressed appreciation that the IMF and the World Bank had sent staff to participate.
Oxfam UK Director Barbara Stocking and IMF Managing Director Horst Köhler met in December for the second time, resuming their discussion on how to improve the work of the Fund in low-income countries (LICs). Ms. Stocking and Mr. Köhler differed on a number of issues, but their lively meetings show a common concern for the issues at stake. As during their first meeting in December 2001, a major topic of discussion was trade, where there was an agreement on the need to open up the markets of rich countries and substantially reduce their subsidies of agricultural products.
Ms. Stocking said she recognized Mr. Köhler's genuine commitment to LICs, and that there have been some real changes in IMF policies. However, she felt the gap between policies and actual practice is large, and although the Fund is becoming more poverty focused, it is moving very slowly. Other concerns also remain, she noted, presenting the findings of the Oxfam paper "The IMF and the Millennium Development Goals: Failing to deliver for low income countries." She focused on two issues: the lack of fiscal flexibility in IMF-supported programs and the concern about what the paper terms "aid pessimism". She encouraged the Fund to be more positive about aid, where appropriate. She also said Fund assessments should take into account more than just macroeconomic stability; that they should include long-term plans for poverty reduction as well as the short term macroeconomic conditions.
Mr. Köhler said he appreciated the acknowledgment of the IMF's enhanced efforts to improve its role in LICs. He explained that the strategy is based on three elements: 1) the Millennium Development Goals; 2) the Monterrey consensus and the two-pillar approach (country-owned domestic frameworks and policies, and an enabling international environment); and 3) the constant refinement of the PRSP/PRGF process (presently under IEO review) and the PSIA approach.
He added that the IMF must have a firm line on macroeconomic stability, but that expressing concerns about macroeconomic instability that might arise from possible increases of aid inflows does not mean that the IMF is opposed to increasing development assistance. He added that the truth is that rich countries are not moving fast enough to change policies that would have a positive effect on poor countries. At the same time, poor countries are still not implementing policies that would promote poverty reduction.
Phnom Penh - The Second East Asia and Pacific Conference on Poverty Reduction Strategies took place on October 16-18, with representatives of 11 low-income countries participating. The conference was cosponsored by the IMF, the World Bank, the United Nations Development Program and the Asian Development Bank. As with past conferences involving countries that have prepared a Poverty Reduction Strategy Paper (PRSP), the most valuable aspect was the exchange of experiences and ideas among the representatives of low-income countries, with the mix of government officials, CSO representatives, and donors enriching the dialogue.
While there was broad acceptance of sound macroeconomic frameworks as a prerequisite for growth and poverty reduction, there were repeated calls for more fiscal flexibility to implement PRSPs and for more aid. There was also an emphasis on the need to deal with economic shocks. The session on the forthcoming LIC paper turned out to be largely informative for the delegates, particularly local representatives of various donors. Several speakers asked about the need for continued Fund engagement in LICs, questioning how it is decided that engagement continues. The issue of dialogue on macroeconomic issues in the PRSP was also raised, with delegates favoring a less secretive approach on the part of the Fund.
The countries participating in the conference were Cambodia, Indonesia, Lao People's Democratic Republic, Mongolia, Timor Leste, and Vietnam; as well as five observer countries—Bangladesh, Bhutan, Nepal, Papua New Guinea, and Sri Lanka.
A Meeting with CSO Representatives on the IEO Work Program
On January 8, 2004 the Director of the Independent Evaluation Office (IEO), Montek Singh Ahluwalia, and IEO senior staff met representatives from CSOs to discuss the IEO work program for the IMF's financial year beginning May 1 and progress with the evaluation of the PRSP and PRGF initiatives. Among the organizations participating were Friends of the Earth, ICFTU/Global Unions, New Rules for Global Finance, International Budget Project, Religious Working Group on the World Bank and IMF, and World Vision International.
Mr. Ahluwalia presented the IEO's current thinking on the projects in the work program and sought to gather CSOs' views in order to form a final judgment on how to sequence the IEO's evaluation efforts. CSOs represent an important part of the IEO's audience, as its terms of reference state that one of its responsibilities is to create a better understanding of Fund activities among a broader group of stakeholders. While the CSO representatives at the meeting said that all of the projects were opportune and valuable, they gave particular support to those related to structural conditionality, capital account liberalization, and the experience with Fund program involvement in crises that did not involve the capital account. Questions were raised regarding the IEO's operations and mandate, and the limitations the office faces evaluating Fund policy formulation in current program cases. (The work program was posted on the IEO website for public comments in October 2003.)
The discussion of the IEO evaluation of the PRSP and PRGF initiatives included the nature and timing of the project and messages that the evaluation had started to distill. Meeting participants were briefed on an outreach/consultation event scheduled to take place in mid-January in Addis Ababa. That session was intended to receive feedback from various stakeholders (both government and civil society) primarily representing countries that are included in the evaluation as case studies. Questions and comments included issues of PSIA, PRGF linkage to PRSP, opening of the policy space to alternative options, and PRSP principles and political processes. (The issues paper for the PRSP/PRGF evaluation, available on the IEO website, gives the list of the countries for which case studies are being undertaken.)
CSO participants expressed interest in IEO outreach activities. IEO staff said that several events have already been conducted, and outreach efforts were expected to intensify as more evaluation projects reach completion in the near future. A variety of venues in different countries have been used to disseminate the messages that have emerged from completed projects, and to present progress and seek feedback with on-going evaluations.
Mr. Ahluwalia emphasized the IEO's interest in receiving suggestions from CSOs on possible future evaluation on a more continuous basis and also in receiving substantive inputs relevant to ongoing evaluations. It was noted that contributions had been received from several CSOs for the PRSP/PRGF study.
In Belarus, the economy remains predominantly state-owned, with only about 20 percent of GDP produced in the private sector. To understand the economic situation outside Minsk, and especially conditions under which the private sector in Belarus operates, our office undertook—together with the senior officials of the National Bank of Belarus (the most reform-minded state institution)—several regional trips.
In the early 2003, we visited the Brest region. We met the officials from the Brest branch of the National Bank and local government, the Free Economic Zone (FEZ) "Brest," Priorbank (one of the largest private banks in Belarus), and entrepreneurs outside of the FEZ. I was hoping to hear about some of the obstacles to private sector development, and also to visit enterprises that prosper regardless. We heard from the entrepreneurs about the obstacles only informally, when the government officials were absent. Excessive state intervention, cumbersome licensing procedures, complicated taxation, an unstable legal framework and limited access to credit were the most common concerns. Regarding prosperous enterprises, we were impressed by the joint Belarusian-German enterprise Santa Bremor operating in the FEZ Brest, which processes and sells fish products. It has substantial foreign investment, covers more than half of the Belarus fish market, and exports to several countries, including Russia, Ukraine, Germany, and Netherlands. Representatives of the Association of Entrepreneurs in Minsk (who usually are critical) are convinced that this enterprise is not under an official "umbrella," but prospers due to the use of modern technology and good management practices. For a number of years now this enterprise has been considered a "success case."
At the end of 2003, we visited three private enterprises in Vitebsk. Two of them (a shoe producer and a farm, both with majority Belarusian private ownership) were operating outside of the FEZ, while one enterprise (a wholly-owned German chocolate producer) was in the FEZ. From discussions with managers as well as with the representatives of the NBB Vitebsk and the local state committee, it became clear that enterprises operating outside of the FEZ are under very close state inspection. Unsurprisingly, their managers listed excessive state interventions and cumbersome licensing procedures as the main obstacles to their activities. For example, the manager/owner of the farm (employing about 50 people) explained that he is obliged to sell the unprocessed milk to state enterprises at a very low price (set by the state) because he cannot obtain a license to process the milk. The enterprise in the FEZ was also recently subject to ad hoc state intervention: the government tried to suggest that Russia (the main export country for this enterprise) is not a foreign territory and hence the company should search for other markets or to pay taxes. Still, the issue has been resolved and the enterprise continues to export to Russia under the FEZ tax privileges.
Edited by Leonardo Cardemil, Advisor, Western Hemisphere Department
In the context of a staff visit, last December the Chilean team met representatives of labor unions in Santiago, Chile. The union representatives expressed concern that recent labor flexibility law initiatives, including those in the government's Pro-Growth Agenda, had gone too far - that they represent only business interests and limit the contractual basis for employment. While acknowledging that poverty had declined over the past decade or so, they observed that income inequality remains high.
During 2003, staff had the opportunity to meet several representatives of CSOs in Honduras. These meetings were useful to assess advances in the National Dialogue and the Fiscal Responsibility Pact (two instruments linked to the PRSP participatory process through which the government pursued a broad dialogue on national issues), and to exchange views with different segments of society. Staff was able to listen to the views of teachers' unions, workers' unions, religious leaders, businessmen, farmers, women CSOs, among others. These groups were very appreciative of the Fund's efforts to meet with them and listen to their concerns. Moreover, they largely agreed with the Fund on the need for sound fiscal policies and a stable macroeconomic environment. Moreover, they were vocal about the limited success in reducing poverty and stressed that to avoid social disruption, the needed adjustment should be gradual and the burden should be shared by all members of society. The authorities anchored their fiscal program on the results of the Fiscal Responsibility Pact.
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_ The IMF-World Bank Spring Meetings will take place on April 24-25, 2004. We will keep you posted on CSO-related activities during the week before the Spring Meetings.