President Kim Responds to Civil Society’s Concerns on Private Sector Investments

December 9, 2013

WASHINGTON, December 9, 2013 – The World Bank Group President Jim Yong Kim issued the following statement today:

“I am well aware of the concerns expressed recently from civil society groups about several projects involving the World Bank Group. I’d like to respond to those concerns here and also pledge to continue an ongoing dialogue with civil society leaders on issues such as these during my tenure at the World Bank Group.

At the World Bank Group, we are moving aggressively toward aligning our operations with our goals of ending extreme poverty by 2030 and boosting shared prosperity for the bottom 40 percent of populations in developing countries. If we are to have high aspirations for the poor, we will need to raise our ambitions and work with governments, the private sector, and civil society groups to take on transformative projects that can help the poor lift themselves out of poverty. This will be a difficult but necessary process if we are to end extreme poverty and build shared prosperity.

We have years of experience in implementing complex projects. Over the past decades, we have developed this expertise in order to both bring benefits for the poor and help grow economies. This involves a wide range of activities, including planning investments; procuring goods, works and services; protecting and involving indigenous communities; and protecting the environment and the rights of the poor.

We have learned from failure and success. Governments, private corporations, and civil society groups recognize that our experience in complex projects is a core expertise of the World Bank Group. Governments seek to partner with us not only for our financing but also for our technical knowledge and practical experience around the world.  Private companies tell us they want to be involved with IFC, our private sector arm, because of our environmental and social risk management capability -- and also because our performance standards now constitute a global benchmark. IFC’s strong track record in environmental and social risk management has made it a partner of choice. Because we need to attract much more private sector investment in developing countries, IFC’s role ahead will clearly grow in significance.  

An essential aspect of our work in developing countries involves the Inspection Panel and the Office of the Compliance Advisor/Ombudsman (CAO). These independent bodies ensure that our policies are credibly and effectively applied. They open up a channel for people affected by World Bank Group-financed investments and give them an opportunity to be heard.  

One good recent example of giving voice to an affected community occurred in Uganda, where a CAO mediation resulted in an agreement between the Mubende community and agribusiness investors. In a country where large-scale agribusiness projects are a means of attracting foreign investment and creating employment, vulnerable communities also may face resettlement and food insecurity. The CAO mediation process created a platform for the community and private sector to come together and reach agreement on sensitive issues.

The CAO and the Inspection Panel enhance our impact and they help us further improve our effectiveness. Since its creation, the CAO has helped IFC develop a risk-based approach and shape its own procedures and policies. I am proud that these independent bodies – the CAO and the Inspection Panel -- were the first recourse mechanism of their kind among multilateral institutions. I am committed to ensuring that they continue to play that role.

Today, there is renewed attention to IFC projects in both India and Honduras, and renewed focus on IFC’s financial sector investments. I take very seriously the conclusions from the CAO audit reports.  In the two country cases, we will make sure that action plans developed by IFC address the issues identified by the CAO’s reports.  In the case of the Honduras project, for which the CAO report is still being reviewed, IFC’s executive vice president will issue a statement and an action plan in response to CAO’s conclusions. On this case and others, IFC’s executive vice president will periodically report to me on the steps taken to ensure that these action plans are effectively implemented. Separately, CAO will also regularly inform me on IFC’s implementation of these action plans.

In the financial sector, which constitutes a growing share of IFC’s portfolio, we face a challenging task of tracking large volumes of transactions. Our policy is that we will ensure our clients have an environment and social management system to assess and manage these risks, including the application of the IFC Performance Standards.  More generally, I have emphasized the importance of responding directly to the findings of the World Bank Group’s independent accountability mechanisms.

Over the last several months, I have called for taking on bolder, transformative projects and not to be afraid of taking smart risks if these projects represent a way to help countries lift people out of poverty and boost shared prosperity. I also want our safeguards policies to be even more effective. The on-going World Bank’s safeguard review for investment projects provides us an opportunity to achieve this.  But taking smart risks includes managing non-financial risks in order to help us achieve good outcomes for the poor and not compromise the core values of our institution. I believe that the interests of the poor and those of our shareholders are, in fact, aligned and that social progress and environmental protection can be strongly correlated to economic growth and financial profitability.   This is why the World Bank’s safeguards policies and IFC’s performance standards will remain a cornerstone of our business.”