La enseñanza mediante el estímulo de las estrategias de aprendizaje.

adopted in October 1989 (OD 4.00). However, most o f the major Operational Directives relevant to the environment only came in early 1990: such OD 4.01 (Environment Assessment) in October 1991, OD 4.02 (National Environmental Action Plans) in July 1992, and OD4.30 (Involuntary Resettlement) in June

One o f the earliest decisions, Operational Manual Statement (OMS) 2.36 on the Environmental Aspects o f Bank Work, adopted in May 1984, specifically states that: the Bank will not finance projects that contravene any international environmental agreement to which the member country concerned is a party.” (OMS 2.36, para. 9[e].) The statement was reiterated in the Bank’s Operational Policy (OP) on Forest adopted in September 1993, which confirms that: “the Bank does not finance projects that contravene applicable international environmental agreements.” (OP 4.36, para. 298.) No similar internal policy statement is found in the Bank in relation to other international public policy considerations such as human rights. Gradually, the Bank, from this passive obligation" o f not financing certain types o f projects, began to adopt a more active role in participating major MEAs, such as in the ozone regime. For example, at the end o f 1980s, the Bank participated in the discussions leading to the establishment o f the Multilateral Fund o f the Montreal Protocol (Shihata, 1992).

The issues o f financing mechanisms for the environment was raised during the 1989 Development Committee o f the Boards o f Governors o f the IMF and o f the World Bank. At this meeting, the Bank was requested to prepare a report assessing the requirements for additional funding associated with its increased attention to environmental issues and to prepare recommendations o f possible mechanisms for managing such resources.

As previously indicated in the preceding section, the Bank has borrowed the legal concept o f “trust funds” in its operations to take up new mandates without the need to

98 The legal implications o f these internal guidelines o f the Bank on the interaction between the FCCC, an MEA, and the Bank will be subject to detail discussion in Chapter 5.2.2.

99 The term “obligation” here is not in the sense o f a strict “legal” obligation. In practice, there is no way to find out whether this “obligation” has been complied with by the Bank since there are no criteria to be used against which to judge the Bank’s operations. The establishment o f an Inspection Panel might

amend its Articles o f Agreement. The Bank has been hosting more than 1,500 trust funds established by agreements between donors and the Bank (Shihata, 1994b), many for environmental purposes, where resources were mobilised from the donors.

The Bank has acted as trustee and implementing agency to administer their use (Shihata, 1995, chapter 17; Sand, 1995). As the demand for more resources for environmental purposes increased, the management o f the Bank turned to the practice o f hosting trust funds as a response. Among these trust funds, the most publicised was probably the GEF Trust Fund100 established for the purpose o f assisting its developing members to implement MEAs, the FCCC being one o f which. According to its policy statement, the Bank is to identify and to address difficulties that prevent its developing members from participating in or properly implementing MEAs such as the FCCC (World Bank, 1997a). In addition to channelling financial resources to developing countries, the Bank also assists countries in complying with MEAs through its policy dialogue as well as in the design o f economic and sector strategies and investment projects and programmes (World Bank, 1996a).

All these developments have brought about closer link between the World Bank and the MEAs. This closer relationship is reinforced by the tendency o f the more recent MEAs that seek to regulate economic activities o f the parties, over which the BWIs traditionally have competence, which is vividly illustrated in the case o f climate change. It is set down in the FCCC that its parties are to: “cooperate to promote a supportive and open international economic system that would lead to sustainable economic growth and development in all parties ...” (FCCC, Article 3.5.) All parties to the FCCC shall “take

encourage the Bank to respect such “obligation.” Nevertheless, the decisions o f the Panel are advisory in nature and the final decisions lie in the Executive Board. For more discussion, see Chapter 5.2.2.

100 For more discussion on GEF, the GEF Tmst Fund and the implications o f the Bank serving as Tmstee o f the Tmst Fund, see Chapter 4.1 and 4.2.

climate change considerations into account ... in their relevant social, economic and environmental policies and actions” (FCCC Article 4.1[f]) (emphasis added). W ith the unfolding o f these developments, the Bank has grown from its role in project finance to, as one commentator puts it, “adjudicator and financier o f domestic compliance with international environmental norms.” (Nelson, PJ, 1996, p.633.) W hether this shift has genuinely taken place is doubtful since the traditional role o f the World Bank in development projects and programmes finance continues to take up a large part o f the B ank’s portfolio. However, this new role has implications on the traditional operations o f the Bank and the relationship between the Bank and its developing country members, which will be examined throughout the following chapters.

In May 1987, the World Bank President, at the time, Barber Conable stated that the Bank would address environmental aspects o f development projects (Joannides, 1989). Since that time, the Bank has gone beyond addressing the environmental aspect o f its traditional development projects and has established various mechanisms for the purpose o f assisting its developing members to implement MEAs. This development has taken the relationship between the World Bank and their developing country members into a new dimension. The new relationship shows that the World Bank somehow needs to come to terms with the concept o f sustainable development and recognises the need o f its developing country members whose lack o f resources have hampered their abilities to implement obligations under the MEAs to which they are parties. This new relationship also seeks to address some o f the discontent o f the developing countries as the new mechanisms have adopted novel governance structures'01. W hether these new mechanisms have any impact on the relationship between the World Bank and its

developing countries and enable the Bank to assist the implementation o f the FCCC will be investigated in the succeeding chapters.

In this chapter, we recalled the flexibility o f the BWIs at adapting themselves to changing external socio-economic environment and internal demand from member states. W e have also examined the governance structure and the operations o f the BWIs, which have been perceived by developing countries as asymmetrical in the context o f heavier obligations for developing country members as well as the ways in which these obligations are drawn up and imposed through the existing mechanisms o f the BWIs. After the emergence o f sustainable development, overlap between the MEAs such as the FCCC and the operations o f the BWIs has increased in areas o f competence. The World Bank has established innovative mechanisms as a response and has assumed a new role in assisting the implementation o f the MEAs in the developing countries. The BWIs employ both the existing and the innovative mechanisms to influence the developing countries, and legal and quasi-legal instruments are used in these mechanisms to enable the BWIs to play their roles more effectively. The next chapter will first examine the operations and effectiveness o f the existing mechanism, the SAPs, o f the BWIs and the implications o f the relationship with the developing countries on these matters.

C H A P T E R 3: STRU CTU RA L A D JU STM EN T PR O G R A M M ES

This chapter will focus on the existing mechanism, the structural adjustment programmes (SAPs), that the BWIs employ to influence policy changes in developing countries. The SAP, with the application o f its legal and quasi-legal instruments, has been an important part o f the BW Is’ operations in developing countries since the early 1980s. After a brief introduction on the concept o f structural adjustment, this chapter will examine the operational and legal aspects o f the structural adjustment lending, including its leverage over member states o f the BWIs. Programme and policy-based lending and the application o f conditionality are arguably the most powerful legal and quasi-legal instruments associated with the SAPs employed by the BWIs to influence policy changes in the developing countries and will be analysed respectively in more detail. However, these instruments have been subject to controversial debate and their effectiveness in influencing developing countries attracts no less attention. By drawing on the existing literature from the BWIs and other academic institutions evaluating the operations o f the SAPs, this chapter will attempt to infer what makes the SAPs more effective at producing policy changes (an outcome) than achieving the desirable results (an impact) envisaged by the programmes. This chapter will conclude by looking at the implications the operations o f the SAPs have on the relationship between the BWIs and their developing country members.

3.1 Structural adjustment: stabilisation and growth

Structural adjustment refers to a shift o f the economic policies o f a country in order to ameliorate specific economic difficulties, such as balance o f payments problems1. It is defined by the World Bank as “reforms o f policies and institutions covering microeconomic, macroeconomic and institutional interventions; these changes are designed to improve resource allocation, increase economic efficiency, expand growth potential, and increase resilience to shocks.” (World Bank, 1990.)

The roots o f the concept o f structural adjustment are the global economic events o f the 1970s (Reed, 1992). The sharp increase in petroleum prices in the 1970s brought huge export earnings for oil-exporting countries, most o f which had deposited large sums o f so-called “petrodollars” in private commercial banks. The sudden influx o f cash compelled the private commercial banks to recycle “petrodollars”, which made external borrowing from private sources relatively easy and attractive2 for developing countries in the 1970s. When the export earnings o f most o f the non-oil-exporting developing countries began to deteriorate because o f the falling prices o f primary commodities other than oil, commercial loans started to dry up (Kolko, 1988) and debt-servicing became more and more difficult to maintain. Under these circumstances, the debt crisis o f the 1980s began when Mexico first announced, in 1982, that it would cease to pay its debt3.

1 The process o f adjustment actually involves two types o f policy response. The first is “stabilisation”,