Anti Povertyor Anti Poor?

Focus on the Global South

with generous assistance from

United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP), Bangkok

Produced by:

The Millennium DevelopmentGoals and the eradication ofextreme poverty and hunger

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CONTENTS

Preface 1

The Millennium Development Goals (MDGs) 2and the Eradication of Extreme Poverty and HungerDiscussion Paper

The Millennium Development Goals and the 15Poverty Reduction Strategy Paper: two wrongs don’t make a rightBy Nicola Bullard

Poverty Reduction Strategy Papers: A Poor Package for Poverty Reduction 17By Jenina Joy Chavez Malaluan and Shalmali Guttal

Privatising Human Rights - the impact of globalisation on access to 33adequate housing, water and sanitationBy Miloon Kothari

Missing the Mark, or Deliberately Misleading? 37The World Bank’s Assessments of Absolute Poverty and HungerBy Shalmali Guttal

Subsidizing the Rich or Why the PRSP Will Not Reduce Poverty in Sri Lanka 43By Movement for National Land and Agricultural Reform (MONLAR)

War on Poverty in Thailand: A Political Will and Won’t 50By Chanida Chanyapate Bamford

Statement of the Asia-Pacific Civil Society Forum 53on Millennium Development Goalsand the Eradication of Extreme Poverty and Hunger

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In October, 2003, Focus on the Global South, a regional program for policy research, analysis andaction, in collaboration with the Poverty and Development Division of the United Nations Economicand Social Commission for Asia and the Pacific (UNESCAP), brought together representatives of 20non-government and people’s organizations from 13 countries to discuss Goal 1 of the United NationsMillenium Development Goals (MDGs): Eradicate Extreme Poverty and Hunger. The main purpose ofthis Asia-Pacific Civil Society Forum was to propose recommendations to the Committee on PovertyReduction of the UNESCAP as to how countries of the regions could better achieve the goal.

This dossier contains the discussion paper and the statement that form the output of the Forum. Theshort statement was formally presented to the UNESCAP Committee on Poverty Reduction during thefirst session of its meeting on October 8, 2003 while the longer paper was distributed to the Committeemember on the same day. The rest of the dossier is a compilation of relevant analyses and experiencecontributed by some of the participants as well as others in the regional civil society.

Focus on the Global South and the participants of the Asia-Pacific Civil Society Forum truly appreciatethe effort by the UNESCAP Poverty an Development Division to promote dialogue between policy makersand civil society organizations, which the Division recognized as concerned stake holders on povertyreduction, and the resources it has committed to the Asia-Pacific Civil Society Forum, as well as to theprinting of this dossier.

We sincerely hope that the UNESCAP Committee on Poverty Reduction appreciates the contribution fromour side. After all, governments and civil society do need to work together if the goal of poverty reductionis to be effectively realized in the long run.

Focus on the Global SouthBangkokDecember 2003

PREFACE

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THE MILLENNIUM DEVELOPMENT GOALS (MDGS) AND

THE ERADICATION OF EXTREME POVERTY AND HUNGER

DISCUSSION PAPER

ASIA PACIFIC CIVIL SOCIETY FORUM

BANGKOK, THAILAND

OCTOBER 6-8, 2003

The term “civil society” has been appropriatedby mainstream development agencies. It hasbeen erroneously defined to include non-stateactors such as the business sector. In thisdocument, we use “civil society” to meannon-state, non-business actors such as socialmovements, non-government and peoples’organizations, and most especially, theorganizations of the poor.

I. INTRODUCTION: THE POVERTY PROBLEM

According to the Human Development Report,since the 1980s, the number of people living inextreme poverty has increased by almost 100million while total world income has increasedby an average of 2.5% annually. At least 54countries are poorer now than two decadesago. More than 800 million people suffer frommalnutrition, more than 13 million childrenhave died because of diarrheal diseases and,every year, over half a million women die duringpregnancy or childbirth.

Despite impressive economic growth ratesregistered in some countries, the Asia Pacificregion continues to have a sketchy track recordin reducing poverty and hunger. On one hand,East Asia has been hailed as a paragon in termsof its ability to grow and transform economicallywithin a short period in the 1980s and 1990s.India and China are seen as the newer emergingeconomic powerhouses in Asia. At the same time,the entire region is home to the largest concen-

tration of people living in poverty and hunger,with specific sub-regions serving as pocketsof extreme poverty. South Asia, in particular,remains one of the world’s poorest regions andbecause it is so heavily populated, it is home tothe largest number of poor people in the world.More than one-third of South Asians lack accessto sanitation, one-third are in poverty, one-quarter are hungry, one-fifth of children neverenter primary school, and one out of tenchildren die before they reach age five. Two ofevery five poor people live in South Asia, and onein four are in East Asia and the Pacific. Fortypercent of world’s undernourished people live inSouth Asia, and 24 percent in East Asia and thePacific (Human Development Report 2003).

Increasing poverty is accompanied by anincrease in global inequality. The richest 1percent of the world’s population now receives asmuch income as the poorest 57 percent, and theincome of the richest 25 million Americans isthe equivalent of that of almost two billion of theworld’s poorest people.

The Asia Pacific region is home to stark nationalinequalities in wealth, assets, incomes andopportunities. Inequalities in the quality of lifeand access to opportunities for human develop-ment are generally sharpest between rural andurban areas. In both rural and urban areas,ethnic minority and indigenous peoples’communities, marginal farmers and fishers,forest and upland communities, migrants,workers and women carry a disproportionateshare of the burdens of extreme poverty and

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hunger. More and more workers, especiallywomen, are being forced from the relativelyprotected formal sector to the unprotectedinformal sector. This is accompanied by aconcentration of assets and resources in thehands of traditional elites and the newlyprosperous, who have been able to take advan-tage of the economic opportunities offeredby modernization and globalization.

The geo-political situation in the region also hasparticular bearing on the incidence of povertyand hunger. In their stated bid to ensurenational security, governments are spendingmore on arms and defence, and less on socialsecurity and protection, public distributionsystems and welfare programmes. Today, the“war on terror” has taken precedence overthe war on poverty and hunger, and providesa useful excuse for governmental failure toprioritize national resources for the eradicationof poverty and hunger.

While current conditions and processes ofimpoverishment and hunger must be urgentlyaddressed, poverty and hunger are not “currentconditions”. The poor and hungry are theproducts of historical processes of margina-lization, mal-development, expropriation andexploitation. Addressing poverty and hungerrequires addressing the social, cultural, politicaland economic forces and processes that perpetu-ate vulnerability and marginalization. Failureto do this is the reason why, despite the millionsof dollars that are spent every year on develop-ment and poverty reduction projects, absoluteimpoverishment has not decreased significantly.

In the second half of the 20th century, theinternational community responded to pressingissues of poverty and hunger by means ofpackages. These include post-war reconstruc-tion, development, structural adjustment,growth with equity, and so on. However, thesepackages largely failed to address the core issuesof poverty and hunger. At the close of the 20th

century, the international community (themultilateral institutions, bilateral donors,international financial institutions (IFIs), anddevelopment banks) adopted a new package,that of “poverty reduction”, as their primaryagenda. In 1999, the World Bank and the

International Monetary Fund (IMF) reformu-lated their structural adjustment programmes(SAPs) as the Poverty Reduction Strategy Papers(PRSP) and the Poverty Reduction and GrowthFramework (PRGF) respectively. The PRSP-PRGF are now being used by donors andmultilateral agencies - including the UnitedNations - as guidelines for national develop-ment in all low-income borrowing countries.

In September 2000, the United Nations (UN)General Assembly adopted the MillenniumDeclaration, which updated many of thedevelopment goals originally set (and not met)for the year 2000 and reformulated them for theyear 2015. Some of the goals and targets of theDeclaration were later refined into what are nowknown as the Millennium Development Goals(MDGs). This paper offers a framework for dis-cussion on Goal 1 of the MDGs: Eradicate ExtremePoverty and Hunger. The Goal has two targets:

i. Halve, between 1990-2015, the proportion of peoplewhose income is less than one dollar (US$ 1) a day;

ii. Halve, between 1990-2015, the proportionof people who suffer from hunger.

Focussing on the situation in Asia and thePacific, this paper attempts to provide analternative elaboration of the causes, elementsand dimensions of extreme poverty and hunger,and the various constraints governments,national communities, and the global commu-nity face in addressing them. The paper offerskey themes towards a new perspective for lookingat extreme poverty and hunger, and initial ideas(both conceptual and practical) on the possibleroles of different community, national andinternational actors in tackling the mainchallenges. A number of developments in thepast decade - the financial crisis in Asia, thefragility of consensus in international tradingbodies, the growing realisation that a numberof past policies/programmes implementedthrough international institutions have failed toachieve most of their goals - have been revealedas integral factors in the crises of extremepoverty and hunger. They are vital lessonspointing towards possible solutions and it is achallenge for us to address these appropriatelyin the emerging decade.

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II. CHALLENGING THE WAY WE LOOK ATPOVERTY AND POVERTY REDUCTION

Absolute poverty is the main indicator used toassess progress towards the MDGs. It measuresthe proportion of a population surviving on lessthan a specific level of income per day. This levelis the poverty line, or the level of income neededto meet basic needs for daily survival, and itvaries from country to country. Shifting thepoverty line by just a few units of nationalcurrency can significantly alter the picture weget of poverty in that country in terms of howmany people we consider living in poverty. Forexample, the poverty line applied in Sri Lanka isone-third of the common norm of US$ 1 a day.

To address the problem of comparability, theWorld Bank uses an international (extreme)poverty line of US$ 1. Based on national povertylines from a sample of developing countries,the international poverty line assumes that afteradjusting for cost of living, US$ 1 is the averageminimum consumption required for dailysubsistence in the developing world.

While such an indicator may serve some usefulpurpose in inter-country and inter-regionalcomparisons, it tells us little about how peoplein different countries, regions and conditionsexperience poverty and hunger. But a predomi-nantly income-based definition of povertyis inadequate to tackle different trends anddimensions of poverty in different regions andamong different populations.

THE NATURE, DIMENSIONS AND MANIFESTATIONSOF POVERTY

The actual experiences of farmers, fishers,workers, women, indigenous peoples, minoritycommunities, and consumers, and of non-governmental organisations (NGOs) workingwith a variety of socio-economic and ethnic-cultural groups show that poverty and hungerare manifested and entrenched in a varietyof ways:

1. Access Issues. Access of many communi-ties and groups to essential services suchas housing, water, education, health careand electricity has deteriorated over time.This has serious impacts on peoples’

health, opportunities for human develop-ment, physical and social security,potential for decent work, ability to accesssufficient food, information, etc.

An increasing lack of access to fooddespite improved agricultural productionand distribution systems contributes tothe prevalence of hunger and malnutri-tion (e.g., India).

2. Community Resources and ProcessesUnder Stress. The pressure to produce ona commercial scale, the deregulation andliberalization of the agriculture sector,and the often haphazard implementationof sectoral reform programmes, result inincreased stress on small and family-based agricultural production. Thepressure to produce at “competitive”prices aggravates the downward pressureon incomes due to competition fromcheaper imports. Prices of farm inputs,largely controlled by transnationalsuppliers and large local agribusinessfirms and distributors, continue to riseeven while prices of farm productsstagnate or even fall, leaving producerswith marginal incomes and sometimeseven losses.

The privatization of electricity and watersources has added to these difficulties.Many agricultural producers are heavilyindebted to both private money lendersand government banks or credit agencies,and mortgage their lands in order toobtain more credit to repay old debts, andso on. Particularly burdened are ruralwomen who generally have no or littleaccess to land and other assets, and serveas unpaid family workers in agriculturalproduction. In the midst of decreasingincomes and resources, they are expectedto provide food and other basic familyneeds by working more and doing with less.

In many countries (e.g., Bangladesh, SriLanka and the Lao PDR), there is in-creased pressure by IFIs such as the WorldBank and the Asian Development Bank(ADB) to export natural resources that arecritical to the lives of local communities.

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IFIs claim that these exports are essentialin order to generate revenues to repayoutstanding external public debt andfinance future development programmes.

Such stress has in turn resulted inincreased migration of agriculturalworkers and producers from rural tourban areas and across rural areas insearch of seasonal employment. Thistakes the form of low-quality jobs inthe informal economy, or in the case ofwomen and girls, prostitution or domesticservice. Migration under conditions ofeconomic stress exacerbates food insecu-rity. Many have lost their lands and assetsaltogether to banks, moneylenders, locallandlords, and private agriculturalcompanies. In the direst situations - e.g.,in India, Sri Lanka and South Korea -suicide rates among farmers are on therise. Ironically, while national leveldefaulters on debt benefit from enhancedfacilities to “restructure” debt andcontinue borrowing, the overwhelmingburden of national debt is borne by thepoor: small-scale agricultural producers,workers, migrants and rural communitiesliving in resource rich areas.

3. Decreasing Quality, Quantity andStability of Employment. The closure ofmanufacturing units and the relocationof production facilities due to industrialadjustment are often not mitigated by therise of new industries and opportunities.The resulting unemployment andunderemployment can be huge. Shiftingproduction methods have particularlyimpacted those who have traditionalskills and inadequate opportunities tolearn new skills. At the same time, therehas been tremendous pressure to adjustlabour and social legislation in favour ofshifting industries, resulting in evenlower protection for workers.

Increasing labour flexibility underminesjob security by relying on temporary,contractual and subcontracted work inlabour-intensive, export-oriented andservice industries, and provides lowerwages and less protection than traditional

employment. Displacement from formalemployment as well as the continuinglack of remunerative work leads to thefurther entrenchment and expansionof the informal economy.

4. Indigenous Peoples/Ethnic Minorities.Indigenous peoples/ethnic minorities inthe Asia-Pacific Region are among thepoorest groups in their respective coun-tries/communities. This is despite the factthat regions inhabited by indigenouspeoples/ethnic minorities have served asthe resource base for extractive industriesin the name of “national development.”Wealth generated from indigenousterritories does not trickle down to thepeople who have nurtured these landsand resources since time immemorial.Indigenous peoples are often forcibly(and violently) displaced from theirancestral land/domain to give way tomining, logging, hydroelectric dams, etc.The rights of indigenous peoples/ethnicminorities to their lands, and to self-determination are still not recognized bymost nations in the Asia-Pacific region.

5. Lack of Coping Mechanisms. Copingcapacities among poor rural and urbancommunities are being eroded, makingthem less able to respond to economicand natural crises, and more susceptibleto risk. The erosion of coping strategies isdue to increasing and chronic indebted-ness, landlessness, involuntary migrationand displacement, poor public provisionof essential services, and market basedpricing of food and other essential items.

6. Social and Economic Dislocation.More and more communities are beingdisplaced from traditional lands, forests,watersheds, eco-systems and means oflivelihoods because of privatised propertyregimes, export oriented growth strate-gies, and the destruction of traditionalsafety nets. Migration across rural andurban areas in search of work andlivelihood, and often for sheer survival, isnow a common feature in the Asia-Pacificregion.

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7. Political Dislocation andDisempowerment. Poor people,often due to their poverty and historicalsocio-economic conditions, aremarginalized from political and decision-making processes, and hence from anyrole in shaping national and localdevelopment policies to respond to theirneeds. Those who lose, or do not have theprotection of, citizenship, such as indig-enous peoples, refugees and internallydisplaced peoples are denied even themost basic rights. Examples includeBhutanese refugees in Nepal, Rohingyasin Arakan State in Burma and uplandethnic groups in Thailand.

8. The Nation State. Ruling elites -including bureaucratic actors andpolitical parties - are able to discriminateagainst groups and communities that donot support them. The policies of onecountry can also have impacts oncommunities in another country, e.g.,dam projects that cause flooding inneighbouring countries, national policiesthat result in the creation of refugees, etc.

9. Environmental Degradation andPollution. Rapid industrialization,urbanization and commercializedagriculture have reduced the naturalresources available to poor communitiesin rural areas and directly affect thehealth of both rural and urban poor.High-grade food production land isconverted to resorts, tourism and housingcomplexes, or pass into the hands ofwealthy private entrepreneurs. Communi-ties reliant on such lands are increasinglycompelled to use marginal lands andresources for survival where higherinvestments are needed for lower output).In many countries, the IFIs supportprojects that damage eco-systems andresult in environmental contamination.

10. The Gender Gap. Women are often worseaffected than men in the same circum-stances. The marginalization of womenhas structural roots at the state, commu-nity and family levels. In many societies,men are regarded as the heads of house-

hold and the sole owners of land andother property. Women are deprived ofequal access to credit, education andother development programmes. Womenare not sufficiently represented in deci-sion-making bodies from village councilsto province/state and national legislaturesand executive bodies.

11. Children. Children are the most vulner-able to conditions of poverty and hunger.Lack of food, nutrition, social andphysical security, healthcare and educa-tion, affect both present and futurecapacities of children. Increased stress onfamilies and communities compoundsthe impact on children for years to come.Across the region, there has been littlesignificant decrease in exploitative childlabour, while the trafficking of womenand children is on the rise.

12. Corruption. Graft and corruption ingovernment are a significant causeof continuing poverty and hunger.

13. Human Rights. Poverty and hunger areviolations of human rights. They resultin exclusion, and feelings of hopelessnessand helplessness.

14. War. Poverty, hunger and malnourish-ment, displacement and lost livelihoodsare also a result of wars and conflicts. Atthe same time, economic policies thatprivilege some groups and create depriva-tions and suffering among others canresult in societal tensions, conflicts andwars. Women and children are particu-larly vulnerable in such conditions andhave bear the brunt of the impact.

THE LIMITATIONS OF THE GROWTHRESPONSE

Just as the determination of poverty tends to benarrowly income-based, so does the response.The emphasis has been on rapid economicgrowth at the cost of equity and equality. At thesame time, any direct intervention by govern-ments is criticized and strongly discouraged.

There is a basic contradiction between poverty

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eradication and the narrow application ofgrowth-oriented development strategies. Thisneeds to be thrashed out so that a meaningfuldiscussion of alternatives is possible.

Many studies show a correlation betweeneconomic growth and poverty reduction, andcountries with the fastest growth have registeredhigher levels of poverty reduction. At the sametime, countries with high growth have alsoregistered increases in inequality. The benefits ofgrowth have clearly not been equitably distrib-uted among all sections of society. The prescrip-tion for economic growth has veered away fromthe development of internal capacities andmarkets, and concentrated disproportionatelyon opening up domestic economies to externaleconomic forces and reliance on exogenousfactors - e.g. demand for exports, terms of trade,foreign investment, etc. The diminishedattention given to local endowments andinternal economic capacities affects and oftenhinders the adoption of policies that can addressextreme poverty and hunger. It is also importantto distinguish between economic growth per seand policies that are purported to increaseeconomic growth. Many such policies haveindeed not led to higher growth and have provedto be anti-development. For instance, despiteyears of structural adjustment, Sri Lanka has notachieved the promised growth, let alone benefitsof development.

The narrow focus on economic growth has notonly failed to eliminate poverty. It has alsoresulted in policies that have created new formsof, or aggravated existing conditions of povertyand hunger. For instance, SAPs haveinstitutionalised policies that opened up econo-mies and shrunk governments’ direct responsi-bility for redistribution of assets and benefits.Public support and subsidies were systematicallytorn down, and market-based price systems weremade the primary determinant of allocation anddistribution. With privatisation and the with-drawal of government subsidies for domesticindustry, a significant proportion of the workforce was shunted into the informal sector. Byand large, economic growth has been achievedat the cost of the well being of workers, small-scale agricultural producers and consumers.

One of the problematic areas of structural

adjustment is trade. It is often claimed that tradeliberalisation leads to economic growth andhence poverty reduction. Yet, there is no convinc-ing evidence to prove this. Instead, developingcountries that shed existing protections areunprepared for the difficulties they face in opentrade regimes, and are thus unable to addressthe displacements they experience.

The focus on measures adopted to achieve rapidgrowth has also increased the vulnerabilities ofeconomies and communities. Economic crisestriggered by financial instability and sharpcurrency fluctuations, for instance, have hadhad deleterious impact on both growth andpoverty reduction. The financial crisis thatstarted in East Asia in 1997 and triggered adomino effect of financial crises all over theworld eroded much of the limited gains achievedin poverty reduction in East Asia over theprevious 20 years. The crisis also highlighted thefragility of the sub-region’s financial systems.

Aside from their failure to address the non-economic dimension of the problem, most workon poverty reduction so far is limited to thecalculation of how much growth is necessary toreduce poverty over a given time. However, forextreme poverty, internal policies and publicexpenditures on key social services are crucial.An important issue that has so far been ignoredwhen talking about extreme poverty andextreme hunger is the imperative for directgovernment intervention.

New initiatives, such as the PRSP, are supposedto address direct intervention issues. But PRSPsare in the mould of traditional debt reliefpackages that are tied to specific programmes.An initial scan of existing PRSPs also revealsthat far from being a poverty reduction model,the PRSP is actually a repackaged growth andstructural adjustment model. Most of theelements found in the SAPs of the 1980s andthe 1990s are also found in the PRSP.

The various debt relief initiatives have failedto bring about a more comprehensive solutionto the financial situation of poor developingcountries. Most debt relief programmes havebeen tied to specific economic programs, andso limit the options for developing countries.Thus countries availing of debt relief have only

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limited space to initiate and fund what could bemore appropriate internal policies.

The question of whether or not growth leads topoverty reduction remains controversial, and it iswidely accepted that growth alone is insufficientto address poverty. A broader issue that needs tobe discussed is whether the increase in moneyincome and the transformation of informalsubsistence economic activities into the formalmonetarized system actually translate into abetter quality of life, or, indeed whether this is abetter state of being to aspire for. In conven-tional economic and development discourse,poverty is defined in terms of lack of income,housing and other material goods. However, formany communities, such as indigenous peoples,poverty and wealth are linked with land, water,bio-diversity, and other ecological and socio-cultural factors. The US$ 1 a day mark has littlemeaning for them, but the destruction oftraditional environments through mining andlogging has enormous significance for howthese communities can sustain themselves.

THE DYNAMICS OF THE INTERNATIONALTRADE AND FINANCE SYSTEM AND LINKSTO POVERTY

The global trade and finance regimes are highlyunequal and non-transparent, and are dispro-portionately weighted on the side of rich coun-tries. International institutions tend to developagenda of their own with little relevance to therequirements of individual country members.The result is a one-size-fits-all approach that hasfailed time and again.

The global trade and finance regimes haveimpacts at local levels. It is already well docu-mented that fluctuations in world commodityprices can mean survival or destruction formillions of farmers in the region, and thevolatility of capital can likewise result in therapid loss of millions of jobs. Speculative capitalis essentially non-productive and increases theexposure of recipient countries to financial risk.

The present global financial system is nottransparent, (many financial transactions,including those involving speculative activities,highly-leveraged institutions such as hedgefunds and derivatives are non-transparent and

non-accountable); it is not rules-based (there islittle or no regulation over many kinds ofactivities of financial institutions and over themassive international flow of funds; and it isalso not predictable (amply demonstrated by thevolatility, fluctuations and unpredictability ofexchange rates and the sudden inflows andoutflows of funds countries are subjected to).

The lack of regulation and predictability of theglobal financial system has been a source offinancial and economic destabilisation for manydeveloping countries with far-reaching conse-quences on poverty. Countries should thereforedetermine for themselves, without pressure, theappropriate degree, rate and type of financialliberalisation that they should undertake,consistent with the objective of poverty reduction.

Longer term capital flows such as FDI havegenerally been regarded as entirely beneficial todevelopment. Hence transnational corporationshave been arguing for rules that would allowthem unfettered freedom to invest. The reality isthat FDI comes at a price, and the costs must beoutweighed by the benefits in order for FDI toplay a pro-developmental role. Therefore,policies must be in place that seek to maximisethe benefits such as equity-sharing, technologytransfer arrangements and other performancerequirements, and to take account of risks andminimise them, especially potentially largedrains on foreign exchange through highimport content and large profit repatriation.

Complex as it is, the issue of poverty has notbeen fully addressed due to a lack of account-ability and sharing of responsibility for failedpolicies and development approaches/modelsamong governments, donors and internationalinstitutions. There are also constraints offered bythe political dynamics at the national levelbetween governments and civil society, and atthe international level among governments, andbetween governments and the internationaltrade and finance system.

The globalised trade and finance system offersmany challenges that must be met. Lack ofcontrol over a system several layers detachedfrom them leaves the poor at the mercy ofdecision-makers that are equally remote tothem. One of the biggest challenges here is the

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accurate translation of local realities andexperiences into responsive and meaningfulpolicies and programmes at the national andinternational levels.

The challenge for governments is to find ways tointegrate into the global governance system andthe global economy on their own terms, mini-mizing risks and retaining sufficient space forprotective measures. Unfortunately, there isunevenness of capacity among governments toengage with the global system. A concretemanifestation of this is the failure to identifyand develop national development agendas, andthe reliance on international institutions toformulate domestic policies. Small countriescannot hope to intervene meaningfully ininternational bodies without first formulating aninternal, cohesive development agenda of theirown. Cohesive national agendas must be rootedin real political economy and felt needs andlimitations, more than on sophisticated model-ling and number crunching.

SUMMARY

A significant challenge in eradicating povertyand hunger is the inability of past and presentpoverty reduction programmes to address thedistribution of resources, opportunities andimpacts arising from policies and programmes.Policy and governance regimes do not affect allsocio-economic groups, women, men, childrenand the elderly in the same way. Because ofboth historical and current conditions ofmarginalization, people in the same countryand even the same local area may experiencethe results of these regimes differently.Liberalisation and privatisation may offer gainsto those already better off and with the ability toaccess the opportunities that arise from thesetrends. But in far too many instances, it has leftlower-end and primary producers, workers, andcash-poor rural and urban communities muchmore vulnerable than before, since they have tocompete for income, services and opportunitiesin new, unequal and unpredictable markets, butwithout protection against the risks that newconditions bring.

In recent years, some people have even suggestedthat along with a poverty level, societies alsoestablish “wealth levels”, which would indicate

levels of income above which people would beconsidered scandalously rich.On balance, the drive towards modernisation, rapideconomic growth and export-led developmenthas resulted in a net transfer of wealth, resourcesand opportunities from the poor to the rich,from rural to urban areas, from workers tocorporations, and from agricultural producersto agribusiness corporations. Present gains arevalorised over future costs (as is evident in theecological degradation that has resulted fromunregulated investment and resource extractionprojects) even as promises are made that presentday suffering will bring future economic gain (asin past SAPs and current PRSP frameworks). Notonly have market-dominated development strate-gies failed to deliver benefits to all, but they havealso resulted in a perverse redistribution of thewealth of societies, where the poor subsidise therich both within and outside national boundaries.

III. BARRIERS TO TACKLING EXTREMEPOVERTY AND HUNGER

Unless the MDGs can suitably address the corecauses that create and entrench poverty andhunger, they are irrelevant. The main barriers totackling extreme poverty and hunger are notlimited to a lack of resources and finances,although both are critical to redressing thecurrent imbalances of massive wealth andextreme poverty, and of excessive consumptionand hunger. There is enough food in the worldto feed everyone adequately, enough money tocancel the debts of the poor, enough resources tocreate decent jobs for all, and enough wealth toeliminate poverty in a sustained manner. Whatseems to be in short supply is the political willand commitment to tackle the structuralfoundations that create these imbalances.

On the Part of Civil Society/Peoples:

Few possibilities to engage with own governmentsin policy making. The capture of the nationalpolicy space by multilateral and internationalinstitutions limits the space left for citizens toparticipate in determining or shaping nationalpolicy. It is extremely unfortunate that governmentsimplement prescribed policies that are informedmore by ideology than by an appreciation of thehuge distributional impacts of development policies.

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Civil society-government relations are oftencharacterized by a lack of trust. The credibilityand legitimacy of civil society are frequentlyquestioned by governments, who are quick todismiss criticisms of national policies as ‘anti-development.’ Likewise, many civil societygroups do not easily trust governments either.

Narrow base of participation and lack ofcontinuity of engagement in internationalpolicy issues and fora. Participation in suchfora is usually limited to well-resourced NGOsand specific civil society lobby formations. Thevoices of larger civil society, i.e., social move-ments, local workers’ organisations, farmer andfisher groups, women’s movements, migrants,ethnic and indigenous peoples’ groups and rightsnetworks are not given sufficient consideration.

The exclusion of larger civil society many notnecessarily be deliberate or wilful. Many move-ments and networks are unfamiliar and there-fore uncomfortable with the policy languagethat dominates international policy fora. Manyare also unwilling to engage on platforms thatdisplay undue influence by external agencies.In their view, it might be a better use of theirtime and efforts to concentrate on their specificstruggles than participate in processes withuncertain outcomes.

On the part of Governments:

Commitment to neo-liberal developmentapproaches despite emerging evidence oftheir negative impacts. Governments in mostdeveloping countries seem either unable orunwilling to address the structural causes ofextreme poverty and hunger. In general, thereappears to be an uncritical acceptance ofprescribed growth models, and slowness inadjusting to their negative impacts. Part of thereason for this is the policy conditions thataccompany support from donors and officialcreditors. At the same time, governmentsthemselves seem closed to exploring develop-ment models that structurally prioritise theelimination of poverty and hunger over rapideconomic growth.

Access to capital and development financing.For many developing countries, access to financecapital and development financing remain

challenging issues. Most governments raisemoney for development and anti-povertyprogrammes through external finance includingOfficial Development Assistance (ODA), debt,export revenues and financial markets. Thecapacity for domestic resource mobilisation fordevelopment, welfare and poverty reduction ishence diminished. This narrows the policyoptions available to governments to regulatekey economic sectors and re-direct spending inaccordance with local/national priorities if thesepriorities conflict with conditions that facilitateaccess to capital and development financing.

Lack of political will. Governments’ unwilling-ness to listen to their own peoples and nurturealternative models of development and develop-ment financing is accompanied by a failure toaddress the diverse dimensions of poverty and totranslate anti-poverty rhetoric into action.For instance, existing labour laws and laws toprovide social protection, and make governmentagencies and investors accountable are rarelyenforced.

Failure of government and markets todistribute resources, assets and “benefits”of development equally and equitably acrosssocio-economic and cultural groups, genderand regions. Markets have repeatedly provedto be inappropriate and inequitable means ofallocating resources and benefits. Most develop-ing country governments have failed to addressthe deepening inequities that have arisen frommarket-based reforms and structural adjustmentprogrammes. Distributional issues also receiveinsufficient attention in policy making sincepolicy processes are usually dominated by asmall national elite. For many critics, povertyreduction is more an effort to increase localpurchasing power in support of market expan-sion, rather than a genuine effort to addressurgent problems of hunger and deprivation.

Limited efforts by governments and interna-tional bodies to share information about theMDGs and other international policy initia-tives that claim to tackle poverty and hunger.Many civil society networks working at thegrassroots and local levels on poverty andhunger are not familiar with MDGS, theMillenium project and other related interna-tional programmes/initiatives. As a result,

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the wealth of knowledge and experience of suchnetworks does not inform MDG implementationefforts. The MDG targets are also not meaningfulto the poor themselves. The targets do notprovide enough incentive for the poor to par-ticipate since the targets seem too distantto answer the urgent problems of the poor.

ON THE PART OF DONORS, THE IFIS ANDTHE UN:

Inability or unwillingness to address the struc-tural causes of extreme poverty and hunger.For the most part, donors, IFIs and the UN seemunable to move away from the neo-liberalpolicies that characterise the post-developmentera. Varying versions of these policies have beenthe cause of deterioration of living conditionsunder past structural adjustment programmes.But donors and international agencies are eitherunable, or unwilling to critically examine therole of these policies in creating and entrenchingconditions of poverty and hunger.

Lack of accountability to aid and loanrecipient governments and peoples for failedprogrammes and faulty policy advice.

Inability or unwillingness to meet theirobligations to developing countries withoutusing policy conditions as political leverage.For the most part, donors and creditors continueto insist on their preferred policy prescriptionsas conditions attached to aid and loan pro-grammes. They thus undermine sovereigntyand democracy in recipient countries.

Contradictions between the stated goals oferadicating extreme poverty and hunger, andthe development policies promoted by donors,IFIs and the UN. The policies and economicstrategies promoted by the IFIs, regional banks,and bilateral donors/creditors often contradictimportant UN conventions on development andhuman rights, and undermine the UN’s commit-ment to the MDGs. The UN Sub-Commission onHuman Rights has noted that the policy condi-tions attached to World Bank-IMF debt relief andPRSP-PRGF programmes undermine the policysovereignty of developing countries and obstructdeveloping countries from meeting their humanrights obligations to their citizens.

Although UN agencies and programmes playfocal roles in promoting and implementing theMDGs, the global trade and finance regimes arebeyond their control or influence. But ratherthan push for reforms to make these regimessubservient to development and human rightsgoals, the UN system has moved towards reform-ing its own approaches to make them coherentwith IFI policies. For example, UNDP and theWorld Bank have entered into a joint partnershipto implement the MDGs, thus potentially closingoff critical examination of the role of the WorldBank and IMF in creating poverty through theirstructural adjustment programmes.

Lack of awareness and/or acceptance ofalternative approaches to reducing povertyand hunger. A number of local, national andregional groups and networks have engagedwith communities in efforts to reduce povertyand hunger that are successful, sustainable andempowering. But most UN and other donoragencies are not aware of these efforts, and theirown programmes are not informed by the wealthof knowledge and experience generated by theseefforts. For the most part, the UN and otherdonors operate in a world that appears to bedisconnected from some of the most innovativeand instructive initiatives in reducing povertyand ensuring food security and sovereignty.

The “professionalisation” of poverty: In a bidto avoid approaching poverty and hunger aspolitical issues, there are tendencies amonggovernments and donors to address poverty andhunger as technical problems, to be solved bytechnocrats and professional consultants. Infact the business of poverty has proved to beextremely lucrative for the “poverty experts.”Donor agencies tie their aid packages to thepurchase of goods and professional servicesfrom their own countries.

IV. THE CHALLENGE AHEAD: WHAT IS TO BEDONE?

Extreme poverty and hunger cannot be addressedin a sustained long-term manner unless govern-ments and civil society work together. Civilsociety groups have the knowledge, experienceand networks at multiple levels to elaborate andscale-up or replicate alternatives to the currentdevelopment model. Many also have the exper-

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tise to provide feedback to governments aboutthe impacts of policies and programmes.Governments have financial, political andinstitutional resources and the power of policyto make these alternatives a reality. Civil societyand governments need to find ways in whichthey can play mutually critical and complemen-tary roles in efforts to eliminate extreme povertyand hunger, and to build each other’s capacityin this endeavour.

Civil society and governments will play differingroles in any collective endeavour and often,these roles are likely to be conflictive and evenantagonistic. But this is no reason to not goahead. Governments cannot respond to thedevelopment priorities of their countries withoutthe active and informed participation of theirpeoples. Similarly, people need strong govern-ments that can ensure equity, equality, andjustice, and translate their constitutional anduniversal rights into everyday reality throughappropriate policies and programmes.

Following from the above, we put forward thefollowing recommendations:

1. The MDGs sideline the critical and importantissue of human rights. Certain norms areparticularly pertinent in addressing theproblem of poverty, such as effective non-discrimination, the recognition of vulnerablegroups, the right to an adequate standard ofliving, the right to freedom from hunger, theright to economic self-determination and theright to development. The Committee shouldaffirm and operationalize rights basedapproaches to poverty eradication. Civilsociety organisations have already adoptedthis approach in their fight against poverty.

a. Development policies, programmes andgovernance regimes must address thefoundations of marginalisation of specificgroups such as women, ethnic minorityand indigenous communities, and thosewho have been systematically discrimi-nated against on the basis of race, culture,religion or occupation.

b. Special attention must be given to theparticular risks and needs of children.Children, especially girls, are the most

vulnerable to conditions of impoverish-ment, deprivation and hunger.

2. MDG 1 formulates the problem of povertytoo narrowly in terms of vision, scope anddirection. It cannot simply be reduced toa numerical target to be achieved by a certaindate and by technical fixes. Durable andsustainable solutions to poverty will requirethe active involvement of the poor and civilsociety, a more comprehensive understandingof the root causes of poverty and its multidi-mensional and diverse consequences andthe right policies.

3. In this respect, the practice of measuringpoverty in terms of income and consumptionlevels is inadequate. We urge the Committeeto take into consideration political, social,cultural and human rights dimensions,determined by factors like class, gender, race,geography and ethnicity. This broaderdefinition is necessary in designing moresensitive and responsive policies andprograms on poverty.

a. Challenge the international “poverty line”approach to the eradication of extremepoverty and hunger. The US$ 1 a daystandard may be useful for cross-countrycomparisons, but it is an inaccurate andmisleading indicator of how people liveand eat in varying local and nationalconditions.

b. Alternative indicators and benchmarks areneeded that accurately reflect the diversityacross the Asia-Pacific region, includingthose which more accurately capture theextent of women’s poverty and the degreeto which women are poorer than men.

c. Similarly, measures should be institutedthat adequately indicate the povertysituation of other vulnerable groups,including children, older persons, peoplewith HIV/AIDS, displaced peoples andrefugees, migrant workers, retrenchedworkers, workers in the informal economy,indigenous peoples, and residents ofdisaster-prone geographical areas.

4. The participation of people at all levels andfrom all social, cultural and economicbackgrounds is imperative for reducing

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poverty and hunger. However, peoples’participation cannot be restricted toimplementing government or donor ledprogrammes. Instead, the people of a countrymust have sufficient voice and power inshaping the country’s development modeland in deciding how the resources of thecountry will be used. Such crucial decisionsmust not remain the preserve of any selector elite group. Poverty and hunger cannot beeliminated without the democratisation ofpolicy making to the most local level possible.

In order for participation to be meaningfuland genuine, responsibilities and roles in thefight against poverty should not be definedfor civil society and the poor. The currentprocess of formulating and implementingpoverty reduction policies has not beensuccessful in tackling the roots of poverty.This is due to the fact that the poor them-selves are excluded from the entire process.We recommend the following principles asguidelines to be adopted by UNESCAP andevery individual government in the Asia-Pacific region.

a. At the macro level, decisions on povertyreduction policies and projects must seekthe consultation of civil society andorganizations of the poor prior to imple-mentation. The participation process mustbe transparent and accountable.

b. At the micro level, poverty reductionprojects must seek the majority endorse-ment of the poor in the affected areas priorto approval

c. The indicators of these processes shouldbe reflected in annual assessments

5. The MDGs do not provide an in-depthanalytical review of policy reform andinstitutional change. Hence, to link theMDGs with a particular set of policy pres-criptions would be the wrong approach,no matter which policies are prescribed,precisely because there is no single “correct”policy for all societies and circumstances. Inthis respect, externally imposed one-size-fits-all policies such as structural adjustmentprogrammes and the way the current PRSPinitiative of the World Bank and the IMF isbeing practiced are to be rejected by govern-

ments. We demand that the Committee andUNESCAP actively involve and recognise thepoor as rightful participants in any formula-tion of poverty eradication strategies andpolicies.

a. Institute domestic measures that safe-guard national economies from financialand economic crises and debt-repaymentproblems. This could include capitalcontrols, appropriate regulation ofinvestment capital, sufficient and appro-priate protection of domestic markets.Support trade policies that seek tore-examine and restructure tariff andnon-tariff structures to ensure the survivaland progress of local producers.

b. Conduct a public “stock-taking” ofnational development policies andmeasures with emphasis on their distribu-tional impacts; assess which of thesepolicies have resulted in poverty, hungerand survival crises; build an explicitconsensus (based on a clear mode ofparticipation for organizations of thepoor) among the public and governmentabout how to change policies to correctpast distributional impacts, as well asproactively address challenges of povertyand hunger. Such stock-taking should beinstitutionalised as regular monitoringto correct policies that result in skewedeconomic growth, locally and nationally.

6. Successful development efforts requireappropriate policies at domestic, regionaland international levels. However, theinternational economic structure is inequi-table and currently antagonistic to theachievement of the MDGs themselves. Thecommittee should urgently address theramifications of globalisation and facilitatethe formulation of the necessary reforms.

a. Reform/restructure international trade,finance and investment regimes. Thiswould involve rethinking the rules andregulations of these regimes as well as theinstitutions that govern them.

b. Revisit the WTO Doha Work Programme,with a view of recasting it, and refocusefforts towards the review of implementa-tion and impacts of the GATT-UR. Specifi-cally, the review should tie in to the stock-

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taking at the national level and must havethe objective of correcting imbalances andremedying displacements.

7. Attention and financial resources are divertedaway from the priorities of directly addressingpoverty and hunger and instead are allocatedto debt servicing and military spending.There is an urgent need to re-orient govern-ment expenditure. The Committee shouldidentify clearly the resources needed forgovernments in implementing povertyeradication policies and programmes.Moreover, given the multidimensionalaspects of poverty, the Committee must alsoconsider the implementation of conscien-tious poverty-budgeting in all aspects ofgovernment expenditure. Finally, sufficientresources should also be identified andchannelled to facilitate the participation ofcivil society and the poor.

a. Provide higher budgetary allocations foranti-poverty and social developmentprograms, and less for debt service anddefence spending.

b. Institute participatory budget processes,including gender budget initiatives.

8. Adopt strategies that address the root causesof extreme poverty and hunger.

a. Genuine agrarian reform, which recog-nizes the rights of women and indigenouspeoples to land and other productiveresources;

b. Policies that ensure the redistribution ofwealth and resources through progressivetaxation, caps and special taxes on certaintypes of incomes, etc.;

c. A halt to all privatisation programmes,and subject them to evaluations throughdemocratic and representative fora such asParliaments and Assemblies; seek alterna-tive solutions to the problems thatprivatisation programmes claim to address(e.g., efficiency of service delivery, debtrepayment, etc.);

d. Policies that ensure fair wages andcompensation to workers, and fair pricesto agricultural producers;

e. Policies that prioritise the rights of workersand agricultural producers over those ofinvestors and agribusiness companies;

f. The acknowledgement of food as afundamental human right; food must notbe used as a “weapon” or left to themarket for distribution;

g. A halt to projects that induce displace-ment; seek constitutional protection forthe rights of communities to commonresources and assets;

h. Policies that protect the rights of commu-nities to water, land, forests, other naturalresources, biodiversity and indigenousknowledge;

i. Policies that ensure peoples’ access to allservices essential to their development,especially among the poor and historicallymarginalized; this includes education,social security and insurance, healthcare,information, etc.; access must be equitableand the quality of services must not varyaccording to socio-economic or genderbackgrounds;

j. Policies that recognize, support andprotect the increasing numbers of workersin the informal economy;

k. Integration of gender concerns in anti-poverty strategies.

9. Reject the TINA (There Is No Alternative)defence offered by governments and interna-tional agencies as an excuse to cling toeconomic models that have proven bad trackrecords. Governments should take a strongerrole and responsibility in providing for theneeds of the poor. Support and promotealternative models of development that arebeing successfully practised by communitiesacross the region.

We challenge the Committee to adopt a morecomprehensive understanding of poverty andhunger and urgently intensify its work towardspoverty eradication.

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In April 2003, the World Bank and the UnitedNations Development Group issued a memoran-dum outlining the “relationship” between theMillennium Development Goals (MDG) andnational Poverty Reduction Strategy Papers(PRSP), stating that the PRSPs “provide a keyopportunity to moblise national actors toachieve the Millenium Development Goals”. (1)

Seventy countries are planning, preparing orreviewing PRSPs. This is the formal requirementfor countries seeking assistance through theHighly Indebted Poor Countries (HIPC) initiativeor access to World Bank concessional lending.PRSPs must be approved by the Board ofDirectors of the World Bank and the Interna-tional Monetary Fund. Increasingly, PRSPs arethe main framework for all donor lending andhave become the dominant methodology forshaping national development strategies withthe ostensible aim of “poverty reduction.”Linking the Millennium Development Goals tothe PRSP signals a further consolidation ofdevelopment thinking and risks underminingany potential gains of the participatory andcountry-led process envisaged by the PRSPs.

There are several reasons to be concerned aboutthe marriage between the PRSPs and the MDGs.

First, the already limited scope for PRSPs togenerate good country-level poverty reductionpolicies may be further limited by adopting theMDGs as the overriding target. In theory, PRSPsare participatory and have the potential to elicitthe voices and the priorities of the poor them-selves. Yet, by adopting the MDG targets, thePRSP’s scope to generate more ambitious, oreven different, targets will be limited. Forexample, food security may be a key demand ofurban and rural poor, yet the MDG’s secondtarget simplifies this to “reducing hunger by

half”. Furthermore, by concentrating on theMDGs, the PRSP automatically limits policychoices and focuses evaluation and data collec-tion on measuring progress towards achievingthe MDGs rather than developing methodologieswhich provide an accurate picture of theeffectiveness of different and innovative policyinterventions and their micro distributionaleffects. That is, the PRSPs will focus on measur-ing national progress towards the MDGs ratherthan trying new and innovative policies reflect-ing the priorities of the poors and developingevaluation tools to measure the disaggregatedimpact of these policies.

Second, achieving the MDGs, or even makingprogress towards the MDGs, does not necessarilyreflect structural change or even poverty reduc-tion. Indeed, statistical “achievement” of theMDGs could be a purely conjunctural phenom-enon, reflecting something as arbitrary as amassive devaluation in the US dollar, a cam-paign to keep children in school by a populistgovernment, or the grim reality that half theadult population has died from AIDS-relateddiseases, rather than any underlying structuralchange or sustainable poverty reduction.Therefore, to use the MDGs as a measure of thesuccess of a “poverty reduction” is flawed by theimplicit assumption that the 18 targets indicatedeeper structural change rather than merestatistics. What’s more, their very simplicitydisguises the complexity of poverty and thereality of power.

Third, the MDGs are externally imposed andtherefore contrary to one of the çinnovativeéaspects of the PRSPs: that is, the Bank’s and theFund’s proclaimed desire to nurture country-ledprocesses that are participatory and inclusive.Pre-ordaining that the MDG country reports willbecome the “key instrument to inform public

THE MILLENNIUM DEVELOPMENT GOALS

AND THE POVERTY REDUCTION STRATEGY

PAPER: TWO WRONGS DON’T MAKE A RIGHTBY NICOLA BULLARD

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debate for setting national targets” automati-cally shapes the agenda and scope of action inmuch the same way that the PRSPs pre-deter-mine the macro-economic framework withinwhich “poverty reduction” policies are designed.(2)

Fourth, the UNDP and the Bank envisage thatthe PRSP will “constitute the primary strategicand implementation vehicle to reach theMDGs”. (3) Regardless of whether the MDGs haveanything to do with poverty reduction, the factthat they will be “implemented” through thePRSP prism and, therefore, that all bilateral andmultilateral funding to support the MDGs willalso flow through the PRSP, is problematic. Themacro-economic pre-conditions of the PRSP(budget austerity, trade and financialliberalisation, etc.) ensure that the MDGs will bepursued through a narrow set of economicpolicy choices. Therefore, we will never know ifthere are other, more effective, paths of achiev-ing (or, as seems more likely, not achieving) theMDGs, regardless of their usefulness.

Fifth, target 15 aims to “deal comprehensivelywith the debt problems of the developingcountries.” The PRSP is a precondition for debtcancellation and rescheduling through the HIPCinitiative, yet HIPC has proved to be a poorpolicy tool for dealing with debt, because thelevel of debt cancellation is far too low and the

economic projections of growth and hence debt-GDP ratios were based on unrealistic growthrates and export earnings. The general view isthat HIPC is not an effective way of ensuringsustainable debt reduction, yet HIPC is theraison d’étre for the PRSP and the PRSP is nowthe main vehicle to implement the MDG targeton debt.

In summary, tying the MDGs to the PRSP is abad combination of externally imposed “povertyreduction” targets operating within an exter-nally imposed macroeconomic framework, tiedto an ineffective debt reduction mechanism andsubject to the approval of the World Bank andIMF directors. It signals an important conver-gence of ideology and power of the internationaldevelopment agencies and financial institutions,but it is not necessarily the most effective way,and certainly not the only way, to eliminatepoverty and the structural causes of poverty inthe South.

(1) “How do the Millennium Development Goalsrelate to the Poverty Reduction StrategyPaper?”, World Bank and UN DevelopmentGroup, April 2003.

(2) Ibid.(3) Ibid.

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POVERTY REDUCTION STRATEGY PAPERS:A POOR PACKAGE FOR POVERTY REDUCTIONBY JENINA JOY CHAVEZ MALALUAN AND SHALMALI GUTTAL

THE PRSP PACKAGE

The World Bank and the International MonetaryFund (IMF) claim that the Poverty ReductionStrategy Papers (PRSPs) signal a new approachto tackling the challenges of poverty alleviationand economic development among their low-income clients. Launched in September 1999,the PRSP has replaced the old tripartite PolicyFramework Paper (PFP) drawn up between theIMF, World Bank and a country government forconcessional loans.1 Both the IMF and theWorld Bank are expected to align their respectivelending programmes to a country’s PRSP: in thecase of the IMF, the Poverty Reduction GrowthFacility (PRGF)—the old Enhanced StructuralAdjustment Facility (ESAF)—and the FinancialProgramming Framework are expected to derivefrom the PRSP; with the World Bank, theCountry Assistance Strategy (CAS) and all loansand grants must be based on the PRSP.

In this paper, we contend that little has changedin the substance, form and process of WorldBank and IMF programmes. “Poverty” is usedas window dressing to peddle more or less thesame Structural Adjustment Programmes (SAPs)to low income countries that led them into astate of chronic economic crisis to begin with.Stringent policy conditionalities still rulesupreme in Bank-Fund operations, the latestof which include an assortment of prescriptionsloosely categorised as “good governance.”Major international donors, however, appear tohave blindly acquiesced to the Bank-Fund modelof development, which is encapsulated in thePRSP and which has clearly failed over the pasttwenty years in numerous countries across Asia,Africa and Latin America. Countries as diverseas Kenya, Ghana, Ethiopia, Bolivia, the RussianFederation, Sri Lanka, Bangladesh and Indone-sia were all forced to apply the Bank-Fund

development model at one time or another,and all have suffered from deep and shatteringeconomic crises as a result of Bank-Fund policyprescriptions. And yet today, the same policiescontinue to be supported even more ardentlythan before by donors, in a new package calledthe PRSP.

The PRSP framework was originally conceivedas a condition of the Heavily Indebted PoorCountry (HIPC) initiative. Countries seekingdebt relief through the HIPC programme wererequired to prepare a PRSP to show how moneyfreed up from debt servicing would be used toalleviate poverty. Since then, however, PRSPshave enlarged in scope and have become thecentrepiece for policy dialogue and negotiationsin all countries that receive financing from theWorld Bank’s International DevelopmentAssociation (IDA).2 Countries that urgentlyrequire Bank-Fund credits or debt relief cansubmit an Interim PRSP (IPRSP) for consider-ation by the Bank-Fund Boards on the conditionthat that the countries will prepare a full PRSPwithin a timeline agreeable to the Boards.3

Over 70 countries were initially identified by theWorld Bank and the IMF as required to developPRSPs. To date, 45 IPRSPs and 22 full PRSPshave been completed and submitted to the Bank-Fund Boards.4 However, the Bank and the Fundhave yet to undertake independent, comprehen-sive and publicly accessible assessments of theimpacts of past SAPs.

In theory, a PRSP is intended to be a documentprepared by a country government - under thesupervision of Bank-Fund teams - that identifiesthe incidence and causes of poverty, who thepoor are, and strategies for overcoming poverty,including policy and expenditure targets. It issupposed to be “locally generated and owned”,

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developed through “wide participatory dia-logue”, and focused at both the micro andmacro policy-making levels. Further, the PRSPframework is expected to “encourage theaccountability of governments to their ownpeople and domestic constituencies rather thanto external funders”, whereby, “the poor becomeactive participants not just passive recipients”.5

Experiences thus far from Asia, Africa and LatinAmerica indicate, however, that in reality,country governments have little control over thestructure, content and policy prescriptions intheir respective PRSPs, thus making a mockeryof Bank-Fund claims of national ownership,public accountability and broad based participa-tion. Despite the rhetoric of “nationally driven”development, the PRSP-PRGF frameworkscontinue to conflict with local and nationalpriorities of reducing poverty, fostering domesti-cally meaningful economic development,promoting equality and equity, and encouragingpopular participation in the design of nationaldevelopment policies.6

CHALLENGING SOVEREIGNTY

Because of the central roles that the Bank andFund have in global policy making and gover-nance, PRSPs have a leveraging role beyonddebt relief and concessional credits. They havebecome the key policy instruments throughwhich the world’s major donors relate with low-income countries, countries undergoing eco-nomic crises and those emerging from pro-tracted periods of conflict. Without a Bank-Fundapproved PRSP, a low-income country can bevirtually cut off from international aid, tradeand finance. The United States (US), EuropeanUnion (EU) and other OECD members havefully endorsed the PRSP framework and agreedto base their respective official aid programmesto low income and crisis ridden countries on thePRSP. Many have also agreed to co-financepoverty reduction credits, grants and technicalassistance in conjunction with PRGF and CASloan packages. The Netherlands and Japan havecontributed US $20 million towards the estab-lishment of a special multi-donor trust fund tobuild the capacity of countries to prepare PRSPsin accordance with World Bank principles.Additional contributions are expected from other

donors as well. The Bank administers the trustfund and final approval for country proposalsrests in the hands of Bank, UN and externaldonors.

Twinned with the HIPC initiative, PRSP prescrip-tions have grave implications for the economicsovereignty of low income and crisis-riddencountries. As in previous SAPs, PRSPs bindborrowing governments to implement Bank-Fund directed policies as conditions for receivingcredits and other support from the Bank, Fundand bilateral donors. Experience shows thatBank-Fund conditions often prove to be morepowerful than national laws since deeplyindebted and cash strapped governments do notusually have access to alternative sources ofdevelopment finance. Crucial national policiesrelated to trade, investment, assets ownership,natural resources, fiscal management, banking,public administration, social development andeven judicial systems are determined more byBank, Fund and donor pressures than bydomestic priorities and aspirations. In anumber of countries, Bank-Fund policy require-ments for debt relief and credits have resulted indeep cleavages among civil society, governmentinstitutions and national parliaments, and havedeepened social unrest and conflict.

In Zambia, the IMF has informed the govern-ment that unless it sells the State owned ZambiaNational Commercial Bank (ZNCB), Zambiawill not be eligible for one billion US dollars indebt relief under the HIPC programme. Toobtain relief under the HIPC initiative, Zambiamust comply with a number of requirements,including the sale of state assets. The Zambianpublic, the parliament and PresidentMwanawasa have vehemently opposed the saleof the ZNCB on the grounds that the ZNCB is asuccessful enterprise and one of the few sourcesof credit for Zambian people. Selling the ZNCBwould result in the loss of thousands of jobs andcompromise the interests of the Zambian people,as has already been the case with past Bank-Fund led privatisation programmes in thecountry.7

In Nicaragua, the Bank and Fund have demandedthat the country privatise its water resources-including its hydroelectric dams-as a condition

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to further loans.8 The condition comes in thewake of legislation passed by the NicaraguanNational Assembly in August 2002, suspendingall water privatisation plans until a nationaldebate on the issue takes place. By insisting onsuch conditionality, the Fund is disregardingand undermining national democratic processin Nicaragua.

In Pakistan, a range of actors which includesNon Government Organisations (NGOs),consumer rights groups, research institutes,unions, peasant and fisher-folk organisations,political parties, journalists and the PakistanHuman Rights Commission have formallyrejected the structure, content and process of thePRSP in Pakistan. In an open letter to theMinistry of Finance, they have pointed out thatthe PRSP reinforces a previously tried and failedparadigm of development, undermines demo-cratic process and threatens the sovereigntyof the state. They object to the imposition ofprivatisation, liberalisation, deregulation andregressive taxation through the PRSP and theundue influence of International FinancialInstitution (IFIs)-the World Bank, IMF and theAsian Development Bank-on the Pakistani state.9

In the Solomon Islands, the IMF, supported bybilateral donors, refused to provide funds for thecountry’s National Economic Recovery Planunless the country first agreed to reduce govern-ment spending and implement severe job cuts.The retrenchment will result in 1300 job losses-about 30 percent of an already downsized publicsector work force-and along with other IMFprescribed austerity measures, will compoundthe country’s already severe economic and socialcrisis.10

Evidently, not much has changed in the modusoperandi of the Bank and the Fund, despitetheir promises that borrowing countries willhave greater say in determining economicprogrammes under the PRSP framework. TheBank-Fund use of the carrot-stick tactic under-mines publicly accountable institutions ofgovernance such as Parliaments and popularpublic debate, and weakens the positions ofnational policy making bodies that have to facethe Bank and the Fund. Nor have the BrettonWoods Twins moved away from the Washington

Consensus. In country after country, theycontinue to withhold crucial financial resourcesunless their deadlocked clients agree to imposetheir pet policies: trade and investmentliberalisation, privatisation, deregulation,reducing government expenditure, restructuringof public services and sectors, low inflation,rapid economic growth, and so on.

BLIND TO STRUCTURAL ADJUSTMENT

In the 1980s, nearly 70 countries implementedstructural adjustment programs under theauspices of the IMF and the World Bank. Thefirst 40 countries that qualified under the HIPCInitiative all underwent various forms of SAPs.Now that the PRSP approach is being imple-mented in these 40 and most of the original SAPcountries, it should not be too much to expectthat both the IMF and the World Bank shouldhave done an ex ante assessment of the impactof SAPs in these countries. Yet, in their ownwords,

“(t)he limitation to the analysis of poverty is theabsence of an explicit link between the diagnosisand the success (or failure) of past interventions,and implications for the selection of the prioritypolicy areas for the future.”11

In June 2001, the World Bank released a reporton the two decades of structural adjustmentlending.12 SAPs were originally designed to helpcountries out of short-term balance-of-paymentsdifficulties. They eventually evolved to coversocial, structural and sectoral reforms. Accordingto the World Bank retrospective, the 191 adjust-ment operations in 64 countries approved in the1980s had mixed performance records.13 Themajor finding extracted from this retrospectiveand subsequent other research was that “suchreforms can be effective only when they are‘owned’ by the country itself”.14

In July 2001, the World Bank concluded a five-year tripartite review (with government and civilsociety groups) of its SAPs in an exercise knownas the Structural Adjustment Review Initiative(SAPRI). While the World Bank would notopenly declare the SAPs as a major mistake, itdid come close to acknowledging the SAPs’

20

major weaknesses in the early 1990s. Unfortu-nately the World Bank’s participation in therecently concluded SAPRI failed to elaboratethese weaknesses or produce more nuancedpolicy learnings.

The tripartite review of SAPs was done in sevencountries: Bangladesh, Hungary, Ghana,Uganda, Zimbabwe, Ecuador and El Salvador.The civil society group within the SAPRI also didcitizen’s assessments (without World Bank andgovernment participation) in two countries, thePhilippines and Mexico. After a process thatlasted almost five years, the World Bank cameout with a report where it offered three lessons:15

1) adjustment is a difficult process; 2) to besuccessful, adjustment has to be ‘owned’; and 3)institutions, approach, and safety nets areessential in the adjustment process.

The Bank’s conclusions on the impacts of SAPsdiverged significantly from those of the civilsociety component of the SAPRI, which gave amuch sharper and more comprehensive critique.Overall, the Bank failed to grasp or to evenacknowledge the depth and breadth of problemsthat need to be addressed in its policy basedlending. The assessment conducted by the bythe Structural Adjustment Participatory ReviewInternational Network (SAPRIN) finds that SAPscreated and entrenched continuing cycles ofimpoverishment and inequality, and that theanticipated gains in efficiency, competitiveness,revenues and savings from Bank-Fund pre-scribed macroeconomic policy prescriptions didnot materialise.16 What is more disturbing,though, is the limited extent these learningshave been absorbed by the Bank itself, or sharedamong its client governments.

The recently completed World Bank report onthe Status of Implementation of HIPC (3September 2002) shows that the Bank-Fundstrategy of countries exporting themselves out ofdebt through exports of primary commoditieshas not worked. Debt indicators have particu-larly worsened for those countries dependant onthe exports of cotton, cashew, fish and copper.

HIPC architects appear to have forgotten that itwas the failure of two decades of structuraladjustment, debt servicing and an export driven

economic growth strategy that precipitated thehumanitarian crises that called for urgent debtrelief measures for highly indebted poor coun-tries. Yet, the very same structural adjustmentconditionalities and macroeconomic strategiescontinue to be at the core of HIPC program-ming, thereby entrenching chronic poverty inthe HIPC programme countries.

OWNERSHIP, PARTICIPATION AND QUALITY:SHAKY GROUND

The PRSP framework is supposed to result in along term, comprehensive, results-oriented,country-driven and participatory strategy toreduce poverty. However, experience to dateshows that the “quality” of a national povertyreduction strategy acceptable to the World Bankand the IMF is incongruous with the mainpillars of the PRSP framework: national owner-ship, participation and public accountability.

NATIONAL OWNERSHIPFor the World Bank and the IMF, countryownership of a PRSP means the commitment ofa country to implement a strategy that the Bankand Fund approve, come what may. It has littleto do with authentically home-grown andnationally relevant strategies based on the socio-economic, historic and geographic particulari-ties of different countries. Experiences acrossAsia, Africa and Latin America bear this out.

When advising governments on how to prepare aPRSP, Bank-Fund missions have come preparedwith their perspectives on the country’s povertysituation, their analysis of the country’s obstaclesto economic growth, their menu of policyoptions, and their views on how to mobiliseresources for the PRSP, including external donorassistance. These perspectives form the basis ofall discussion between Bank-Fund missions andborrowing governments about the structure andcontent of PRSPs. And despite claims thatçcauses and solutions of poverty are country-specific”,17 all PRSPs are expected to contain“core elements” that the Bank and the Fundconsider essential to poverty reduction. Theseinclude: rapid economic growth, private sectordevelopment and expansion, good governance(largely oriented towards facilitating

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privatisation regimes), deregulation, trade andinvestment liberalisation, fiscal stability, macro-economic management, public expendituremanagement and consultations with selectedNGOs.

Claims of national ownership and alignmentwith national plans are further confounded bythe involvement of Bank-Fund staff in variousstages of the preparation of a PRSP. In additionto providing “policy advice” on fiscal manage-ment, structural, institutional and sectoralreforms, budgetary targets and expenditurepriorities, Bank-Fund staff are also involved injoint staff assessments (JSAs) to ensure that thefinal product can be presented to their Boards forapproval. Staffs are instructed to considerwhether the document provides a “credibleframework within which the Bank and Fund areprepared to design their programmes ofconcessional assistance”,18 and to “...discuss withthe Authorities any modifications to the strategythat might be considered necessary to allowmanagements to recommend to the Boards thatthe PRSP be endorsed...”19

The primary criteria for judging the quality andacceptability of a PRSP relate to a government’smacroeconomic framework, structural reformpolicies and strategies for rapid economicgrowth. Whether this formula reduces poverty inany qualitative and sustained sense appears to berelatively unimportant. Apparently, IMF lawyershave advised Fund staff that their documentsmust talk about economic growth wheneverpoverty reduction is mentioned, since the Fund’smandate does not include poverty reduction as agoal.20

According to a senior Fund official, threedimensions that the Fund considers essential inorder to approve a PRSP are: broad-basedconsultation; faster, pro-poor growth, and;maintaining macroeconomic stability-i.e.keeping inflation and exchange rate volatilitydown. In practice, however, broad basedconsultation does not appear to include apply tothe latter two dimensions.21

Given the high degree of involvement of Bank-Fund staff in the formulation of most PRSPs, itis difficult to believe that the papers would besignificantly different if they were written

entirely by the staff themselves. Also, countriesthat have been through past structural adjust-ment regimes and are now preparing PRSPsknow what the Bank and the Fund want to see insuch documents. Senior government officials inMinistries of Finance-who usually lead the PRSPprocess-are often groomed by the Bank andFund, and have little trouble in reproducing theformula that will trigger the required financing.Although early Bank-Fund documents claimthat there is no blueprint for PRSPs and thatexperimentation in the form of the PRSP mustbe encouraged, most PRSPs come out lookingremarkably similar in both their poverty analy-ses and policy prescriptions that would purport-edly result in poverty alleviation.

The World Bank determines how much moneyeach of its low income clients will get based onthree types of ratings: 1) the Country Policy andInstitutional Assessment (CPIA); 2) the portfolioperformance rating, and 3) the governancerating-including rapid government procure-ment. Of these, the CPIA counts for 80 percentof a country’s overall rating and describes inBank terms how the country has performed intwenty criteria grouped in four categories:Economic Management, Structural Policies,Policies for Social Inclusion and Public SectorManagement, and Institutions. The higher acountry’s overall rating, the more money the IDAis authorised to lend to it. Taken together, theCPIA criteria, portfolio performances andgovernance ratings describe a slightlymodernised version of a classic Bank-Fund SAP.A PRSP then is already pre-conditioned towardsstructural adjustment by the Bank’s own lendingcriteria.

The CPIA score, in particular, militates againstgenuine public participation in the formulationof meaningful poverty reduction strategies andnational ownership of domestic developmentpolicies. Although the CPIA measures the pastperformance of a borrowing country in what theBank and Fund consider “good policies” (e.g.liberalisation, privatisation, fiscal discipline inpublic expenditure, removal of price controls,etc.), the rating criteria direct the nature of acountry’s relationship with the Bank and theFund. If the country rates poorly on key criteria,the Bank offers the country an adjustment loan

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to “correct” the problems. At the same time,borrowing governments find themselves in abind if their citizens choose a path towardspoverty reduction that does correspond to theBank-Fund roster of preferred “good” policies.22

The PRSP is supposed to be firmly grounded onexisting national plans. However, it has a pre-prepared format and is accompanied by amassive, thousand-page source book that spellsout how a PRSP should be prepared. If agovernment insists that existing national plansbecome the country’s PRSP, it is the nationalplans that adjust to the PRSP requirements andnot the other way around. In a documentattached to an internal memo of the WorldBank, it is clear that the PRSP and relateddocuments such as those pertaining to PovertyReduction Support Credit (PRSC) take primacyover a country’s own national medium-termplans. To quote: “The Medium-Term Programsupported by a PRSC may be based on an I-PRSP, when the I-PRSP describes a nationallyowned broadly framed poverty reduction strategyconsidered adequate in the Joint Staff Assess-ment. In this case, the Medium-Term Programwill likely be revised in the full PRSP, and thedesign of the series of PRSCs will also be re-viewed and adjusted as appropriate.”23

In Cambodia, the Lao PDR, Vietnam andUganda-among others-PRSPs have conflictedwith national, medium-term plans for povertyreduction and economic and social develop-ment, which are passed through NationalAssemblies and Parliaments. But since PRSPsare backed by the financial and political cloutof the Bank and Fund, capital-hungry govern-ments are both unable and unwilling to putup a fight.24

PARTICIPATION

Participation is one of the main buzzwords ofthe PRSP strategy. However, the World Bankexposes its complete lack of understanding ofparticipation when it holds up the documentVoices of the Poor as a landmark exercise inparticipation. As long as people are allowed tospeak about their hardships, this is consideredparticipation in the eyes of the Bank. What theBank fails to acknowledge is that given a

reasonable degree of political security, peoplewill always be capable of discussing their ownsituations and of describing the poverty theyexperience. The interpretation of these perspec-tives, however, remains a value-laden exercise,and the translation of these perspectives to policyactions remains beyond the reach of mostmembers of society, especially the poor them-selves.

PRSP processes have been extremely narrow inboth their substance and participation. Partici-pation has by and large been limited to invitingprominent and well-resourced NGOs to offertheir perspectives on pre-prepared documents.Unions, workers’ organisations, farmer andfisher groups, women’s groups, indigenouspeoples, medical associations and even academ-ics have not been included in the process. MostPRSP consultations have yet to involve localpopulations in devising strategies for nationallymeaningful development plans, or in monitor-ing the impacts of past policy reforms andprogrammes. Moreover, participation has notextended to financial programmes and macro-economic planning. Bank-Fund claims ofcapacity constraints among civil society in theseareas hold little water given the range of civilsociety expertise and skills in most countries,and the low levels of competence displayed bythe Bank and Fund in monitoring their ownprogrammes. The issue, according to CharlesAbugre of ISODEC, appears to be more ofexclusion than of capacity.25

In a number of countries, initial drafts of theI-PRSP and PRSP were not translated into locallanguages until the final stages, thus excludinglocal input into the formulation process. Thetime allotted to the general public for readingand absorbing the content of draft documentsonce completed was also limited, making itdifficult for even those fluent in English andpolicy vocabulary to provide substantial com-ments. As a result, remarkably few people, bothwithin and outside the governments, actuallyread the IPRSP and PRSP documents in theirentirety.

The nature of civil society participation in PRSPprocesses also allows for the manipulation ofcivil society by the Bank, Fund and bilateral

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donors. Bank staff claim that they are helping toopen up space for civil society to be involved innational development processes and to interactwith bilateral donors. While it is true that civilsociety participation in the formulation ofnational development policies is limited inmany countries, the Bank’s self-assumedmediating role in the national arena has seriousimplications for national and localdemocratisation. The insertion of foreign donorsand creditors between civil society and capitaldeficit governments weakens the influence ofnational-local civil society in setting nationalpriorities, and governments become less ac-countable to their own citizens than to interna-tional creditors and donors. It is also entirelyinappropriate for external donors and creditorsto be involved in shaping national priorities inthird countries that they themselves would fund.

Given the rhetoric of national ownership andparticipation in the PRSP framework, a questionthat the Bank and Fund have yet to address ishow they assess participation and ownershipwhen formal domestic capacity in nationalpolicy formulation is indeed weak. Capacityand political space are significant concerns incountries where modern civil society formationshave not taken root as rapidly as moderndevelopment structures and practices. Thepresence of active civic bodies and the existenceof sufficient political space provide the groundfor meaningful public participation, and serve aschecks to possible abuse by creditors, govern-ments, donors, investors and other internationalinstitutions.

International donors and creditors have oftenflagged the “absence of civil society” in low-income countries as a major obstacle to develop-ment. What they usually mean is the absence ofNGOs who are already familiar with, or can betaught the formal vocabulary of moderndevelopment, such as participation, planning,poverty reduction, sustainability, stakeholderanalysis, good governance, etc. The response ofthe Bank and donors to such capacity con-straints has usually been to design “capacitybuilding” programs for governments in order tofacilitate dialogue between civil society andgovernment. But here again, a question thatbegs attention is whether “improvement” in the

nature of dialogue between government andcivil society is a role that donors and creditorsshould appropriate upon themselves.

Past experience shows that the involvement ofthe Bank and Fund in countries with vibrantand active civil societies has usually hinderedmeaningful civil society-government relation-ships. Where civil society formations haveachieved a certain degree of maturity, theiradvocacy traverses a wide spectrum of issues,including the advocacy of policies that directlychallenge those prescribed by the Bank and theFund. And where governments must complywith policy conditions-as in SAPs and PRSPs-thecombined political and economic power of theBretton Woods Institutions (BWIs) pre-empts theability of civil society to negotiate nationallyrelevant policies with their governments.

As yet, the Bank and Fund do not have clearstandards to evaluate the quality of participationin the PRSPs. This is just as well since the Bankand Fund do not have the required expertise inthis area. They have yet to comprehend thatthat genuine participation is a deeply politicalprocess of representation, negotiation andaccountability. Instead, by focusing on “capacitybuilding” and “institutional strengthening,” theBank, Fund and international donors areattempting to reform decision-making processesin their low-income country clients. The widerthe gap between policy-making structures andprocesses and their impacts on ordinary people,the easier it is for the BWIs to push theirprogrammes.

DODGING ACCOUNTABILITY

Although SAPs, the PRSP and PRGF are Bank-Fund programmes, they are financially andpolitically backed by rich and powerful donors.In the name of “untying aid” and “donorcoordination,” the G-7 and other OECD mem-bers are linking much of their respective OfficialDevelopment Assistance (ODA) programmesthrough the PRSP-PRGF. However, given theserious flaws in the very fundamentals of thePRSP, it is not an appropriate framework forcoordinating international aid.

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Coordinating international aid to low-incomecountries through the PRSP frameworkresembles the formation of a massive, powerfuland unaccountable aid cartel, whose house rulesare based on a development model alreadyproven to be destructive to recipient countries.By channelling their resources through thePRSP, donors ensure that recipient governmentsare unable to find alternative policy advice andfinancing for national development. A PRSPdominated cartel will close off much-neededdebate about, and support for alternatives tothe Washington Consensus.

Donor coordination, while important, also raisesquestions of responsibility and accountabilityamong aid providers. The policy coherencedemanded by the PRSP framework is substantiveand not simply logistical. If bilateral donors putall their eggs in the PRSP basket, they must thentake equal responsibility for the impacts of badpolicy advice, faulty assessments and failedprogrammes. Experience thus far shows thatinternational donors are unwilling to take suchresponsibility. More likely, the continued failureof PRSPs in alleviating poverty will once againbe attributed to weak capacity, poor governanceand “entrenched structural weaknesses” amongrecipient countries.

If donors are genuinely committed to povertyreduction and national development in low-income countries, they must critically examinethe impacts of the Bank-Fund imposed develop-ment model. Given their track record, the Bankand Fund cannot claim competence in alleviat-ing poverty, promoting sustainable developmentor even fostering economic growth. Their policyadvice to developing countries must be chal-lenged. Equally important, donors must ensurethat there is a publicly accountable system ofchecks and balances in the international aidindustry, with sufficient avenues for redress forbad decisions, harmful policies and faultyprogrammes. The World Bank, IMF and donorsmust be accountable to the populations in clientcountries, who bear the brunt of the impacts ofthese policies and programmes. Without a widersystem of accountability, donor coordination willbecome akin to countries with money gangingup against countries without money.

Similar flaws are evident in Bank-Fund defini-tions of good governance, which have becomethe newest conditions to be imposed on clientcountries through PRSPs. The Bank’s frame-work for good governance recommends creatingan enabling environment for the private sectorand for protecting the rights of corporate,usually foreign, investors. While corruption,collusion, and misuse of public funds arerampant in many low-income countries, theyare not absent in donor and creditor agencies,multinational corporate investors and theconsulting companies that win lucrativecontracts from the Bank and donors. However,the Bank’s governance framework provides nolegally binding regulations under which foreigninvestors, financiers, consultants and aidproviders can be held accountable for wrongdoing.

The Bank’s governance framework does notpromote the rights of local and national popula-tions to development and self-determination.Instead, the Bank and the Fund generally bypass international human rights conventionsaltogether. During the deliberations of the 25thmeeting of the UN Sub-Commission on HumanRights, the IMF claimed that it did not have toabide by human rights standards and is notbound to human rights declarations andconventions and since human rights are notmentioned in its Articles of Agreement.

Studies commissioned by the Sub-Commissionshow that in both, the HIPC and PRSPprogrammes, the lack of borrower countryparticipation amounts to a breach of humanrights of self-determination and public partici-pation. A report by UN special rapporteurs JosephOloka-Onyango and Deepika Udagama criticisesthe Bank and Fund’s emphasis on free marketreforms and conditionalities, saying that itdeprives communities of the rights to health,education and basic welfare. Challenging theIMF’s assertions, the report also finds thatmultilateral institutions are not above interna-tional law, including human rights law, and thatconditionality requirements breach the humanrights obligations of multilateral institutions, aswell as compel States to breach their ownhuman rights commitments.26

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At the conclusion of its 25th meeting, the UNSub-Commission on the Promotion and Protec-tion of Human Rights resolved that the WorldBank and IMF are bound by obligations en-shrined in international human rights cov-enants, and must incorporate human rightsconsiderations in the formulation and review ofPRSPs. The Sub-Commission also recommendedthat governments ensure the realisation ofhuman rights in the implementation of PRSPs.It remains to be seen whether the Bank andFund are capable of and willing to recognisemoral/ethical authority standards higher thantheir own economic imperatives.

A DOCTRINAIRE APPROACH TO POLICYREFORM: THE POLICY MATRIX

IPRSPs and PRSPs are accompanied by opera-tional documents in the form of policy matrices.These matrices specify the concrete policy andlegislative reforms the country must undertake,including the timelines for when these changesmust take place. The policy matrix is translatedinto a loan document and is in effect, a set ofconditionalities for borrowing countries.27

Despite a shared historical past-especially onemarked by competing colonial powers and deeppolitical conflicts- Cambodia, the Lao PDR andVietnam face widely differing present-dayrealities. Yet, the sets of policy matrices forthe Lao PDR, Cambodia and Vietnam convergein most major aspects. More remarkably, otherpolicy matrices attached to PRSPs completedin Africa and Latin America share the samecommon elements.

The striking commonality among policymatrices approved with the IPRSPs and PRSPsis reminiscent of the one-size-fits-all approachto SAPs in the 1980s. As already mentioned,SAPs produced a series of problems and no clearsuccesses. The various financial crises experi-enced the world over, most notably in East Asiain the second half of the 1990s, also unravelledmany of the issues associated with indiscrimi-nate adoption of liberalisation measures inmany economies that proved ill prepared forthem. Unfortunately, these lessons have notbeen integrated in the PRSP approach.

The PRSP upholds market-oriented policiesto the exclusion of alternative approaches. Itpromotes open trade, investment and financialregimes, and seeks to rollback the government’sdirect role in the economy by seeking to abolishstate-owned enterprises. Further, its response tocritical socio-cultural issues such as access toland and water is narrowly economistic, andreforms in crucial areas such as health andeducation are oriented to serve the needs of themarket. And all this is done in pursuit of fasteconomic growth.

THE GROWTH TRAP

High economic growth is what the PRSP isabout. Growth rates are the most clearly definedtargets in the IPRSP and PRSP documents,while poverty reduction projections are not quiteso clear. In the transitioning Southeast Asianeconomies, the projection is to achieve a growthrate of 7 percent by the end of the first PRSPperiod in 2003. In Africa and Latin America,policy matrices are also particular about growthtargets. Table 1 (next page) shows the growthtargets for countries with full PRSPs. Some ofthese targets have already been scaled downfrom those put down in the IPRSPs.

Achieving the highest possible growth is notnecessarily the same as achieving the highestpossible poverty reduction. If a purely income-based definition of poverty were used, povertyindicators would have a high sensitivity toeconomic growth. Yet while economic growthcan make possible palpable improvements insocial indicators, it does not automaticallyaddress the issue of equity. Growth data do notsay anything about distribution, or who benefitor do not benefit from growth. The fixation ongrowth is based on the concept of the trickledown effect, or the belief that if an economygrows fast enough and for a long enough periodof time, economic activity will be so stimulatedthat even the farthest detached will be broughtinto economic activity to benefit from thecreation of income.

Such reliance on the trickle down effect reducesthe direct role of socio-economic institutions inreaching the poor, and renders the poor passive

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TABLE 1MEDIUM-TERM GROWTH TARGETS

IN COUNTRIES WITH FULL PRSPS

COUNTRY DATE OF FULL PRSP GROWTH (% Real GDP)

Albania November 2001 7-8%

Bolivia 31 March 2001 5-5.5%

Burkina Faso 25 May 2000 4-5%

Ethiopia 31 July 2002 7.1%

The Gambia 30 April 2002 6.2%

Guinea 31 January 2002 5.2%

Guyana 23 may 2002 5%

Honduras 31 August 2001 5.1%

Kyrgyz Republic 9 December 2002 5.2%

Malawi April 2002 5.3%

Mauritania 31 March 2002 6.1%

Mozambique 30 April 2001 9.3%

Nicaragua 31 July 2001 5%

Niger 1 January 2002 4.3%

Rwanda 30 June 2002 6.2%

Senegal 31 May 2002 6.5-8%

Tajikistan June 2002 6%

Tanzania 14 August 2001 6%

Uganda 24 March 2000 7%

Vietnam 31 May 2002 7-7.5%

Yemen 31 March 2002 4.7% average 6.3% for non-oil

Zambia 31 March 2002 4%

participants in the growth process. The growthfocus is an inadequate response to poverty, whicheven PRSP documents acknowledge is a multi-faceted phenomenon.

A deeper understanding of the nature of povertyand deprivation is required to appreciate theneed for more directed interventions on the partof the state and other institutions to effectivelyaddress specific problems associated with poverty.More than by safety nets and social insurance,growth must be managed alongside thestrengthening of economic institutions andgovernance structures. The East Asian crisisrevealed the vulnerabilities of economies thatrelied on rapid liberalisation to achieve highgrowth rates throughout the decade before theirfinancial collapse. As a result, much of thepoverty gains of past rapid growth were erodeddue to the economic shock.

The PRSP approach does not fully address theills that may come with rapid growth, e.g.,problems related to urban congestion, ruralmigration, environmental degradation, and theoverall limits to the carrying capacity of theearth’s natural and human resources. Economicgrowth is an important component of develop-ment planning. However, it need not be themajor focus of development. A more sensiblepoverty reduction strategy would prioritisepolicies that foster equity and address social,economic and political imbalances over growthtargets. It is important to formulate anti-povertyand equity enhancing programs first and ensurethat they are appropriately funded and imple-mented. And for whatever growth that is pro-duced in this period to be accepted as the limitfor this period and stage of the overall povertyreduction program.

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LIBERALISING TRADE AND FOREIGN INVESTMENT

Without fail, the PRSP approach calls for tradeprograms that focus on market access andliberalisation. There is heavy reliance onexports, especially of cash crops and minerals,as means of increasing incomes.

The optimism with trade is evident in the lackof discussion of the two-way character of trade.Being able to export also means that thesecountries will be compelled to allow importsfrom other countries. Past experience shows thatthis is likely to have negative consequences forcountries with weak domestic markets, negli-gible support for domestic producers and wherea significant portion of the population isengaged in subsistence production. The PRSPsmake no mention of this, and do not outlinepolicies by which these countries can betterdeal with the influx of imports because ofliberalisation.

There is also little mention of the challengesfaced by these countries in terms of marketaccess. Developing country exports, especiallyof agriculture, fisheries and light manufactures,will face obstacles in developed countries thathave yet to shed their protectionist tendencies.The excessive use of sanitary and phytosanitarystandards, for instance, will limit developingcountries’ access to the markets of rich nations.At the same time, producers in low-incomecountries will find it difficult to compete withrich country producers in their own and othermarkets. Rich country producers enjoy a rangeof subsidies and domestic support from theirgovernments, allowing them essentially to dumpin developing country markets.

In November 1996, the General Council of theWorld Trade Organisation (WTO) adopted adecision approving the proposed agreementsbetween the WTO and the IMF, and between theWTO and the World Bank.28 These agreementswere finally signed in December 1996 andin April 1997, respectively. The agreementsoperationalise the mandate for greater coher-ence between the WTO and the Bank and Fund.The agreements give observer status to the Bankand Fund, on the one hand, and the WTO, onthe other, in each other’s official processes. The

Bank and the Fund are given observer status inthe WTO’s Ministerial Conferences, committeemeetings, and the General Council meetings.In turn, the WTO may attend the World Bank’sBoard of Governors and other meetings, andExecutive Board meetings of the IMF when tradeissues are being discussed.29

The policy coherence across the BWIs effectivelyseals off any opening for alternative policies forBank-Fund client governments when it comes totrade. It sends a clear signal that the Bank andFund will not assent to policy pronouncementsin trade that will retard or in any way threatenthe advance of the global trading system. Tradepolicies approved must be “in accordance withWTO regulations”, and other trading arrange-ments, regional and bilateral.

A key problem with this policy coherence is thelack of appreciation of the political economyoperating inside countries, and the skewed powerdynamics in the global trading system. Take forinstance the case of Vietnam. The section ontrade policy in Vietnam’s PRSP policy matrixcarries a provision that reads:

“Make active preparation to take part in com-mitted bilateral and multi-lateral cooperationmechanisms. Carry out the bilateral agreementwith the United States, paving the way foraccession to the World Trade Organization.”30

Any which way one looks at it, the provision isloaded. In late 2001, barely weeks after the U.S.-Vietnam bilateral trade agreement was clinched,a law was passed by U.S. Congress disallowingthe use of the name “catfish” for catfish otherthan those grown and caught in the U.S. Thishas greatly marginalised Vietnamese catfishfarmers who export around 70 percent of theirproduce to the U.S., for use mostly by Vietnameserestaurants there. Since the law was passed,Vietnamese catfish has come to be known as“pacific dory.”31

In tandem with trade liberalisation, the policymatrix lists the liberalisation of the foreigninvestment regime as another major reformarea. This is supposedly in response to the dearthof capital in developing countries. Yet the almostobsessive focus on export processing zones

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(EPZs) as a strategy to attract foreign invest-ments betrays a limited understanding of thebehaviour of foreign investments.

EPZs are supposed to capitalise on the locationalcomparative advantage generated by PRSPcountries either as markets or sources of rawmaterials and other inputs (e.g. labour).Experiences in Southeast Asia and elsewhere,however, show that EPZs have limited success interms of job creation and technology transfer.Basic infrastructure alone is not enough toguarantee the build-up of local productivecapacity to enable domestic firms to movebeyond their current roles as sub-contractors toforeign firms. EPZs are likewise notorious forlong-term, negative social, environmental andhuman impacts, such as the exploitation oflabour, women and youth, and environmentaldegradation.

ROLLING BACK THE STATE SECTOR

PRSP policy matrices list a range ofprivatisation processes. These include:corporatisation, or the transformation of a state-owned enterprise (SOE) in line with a corporateset-up; equitisation, or the transformation ofgovernment ownership into “shares” that canbe sold to the private sector; liquidation, or theabolition of an SOE, and; sale, lease, divestitureand contracting out.

Concerns over the restructuring of state sectorsare not limited to employment, althoughimpacts on employment are particularly visible.The motivations behind such restructuring areto recast the state’s role in the economy andreconfigure control over national resources.Such restructuring is also always accompaniedby other policies that seek to prioritise thefunctioning of ‘markets’ above all else.

The main drawback of privatisation processes isnot only that public assets will be turned over toprivate hands. It is the unnecessary abandon-ment of the state as an “inefficient” allocator ofresources and implementer of plans. However, anumber of examples (most notable are the EastAsian dragon economies of South Korea, HongKong, Taiwan and Singapore, and more recently,Malaysia and Thailand) point to the promise of

the state as an efficient and necessary moverin industrial and development policy, and inensuring equitable access to crucial assetsand opportunities.

“PRIVATE SECTOR FUNDAMENTALISM”32

“Creating a level playing field” is the buzz-phrase for the private sector development part ofthe policy matrix. The target is to enact, revise orimplement a code of commerce (called theBusiness Law in the Lao PDR, the Law onEnterprises in Vietnam, the Commercial Codein Cambodia, or the Securities Law in Guyana).Changes to Foreign Investment Laws are alsotargeted, along with new mechanisms to allowprivate sector participation in the financing ofpublic infrastructure, like the Build-Operate-Transfer (BOT) laws and their many variants.

Bank-Fund led reforms are geared towardscreating hospitable environments for foreignprivate investment, and not necessarily towardsexpanding a responsible and publicly account-able domestic private sector. However, sincemuch of this foreign investment is in publicutilities in which a number of foreign corpora-tions from donor countries are interested, andgiven the fact that privatisation is a de factocondition of PRSPs, the true motivations behindsuch reforms are questionable.

There have been experiences in more developedcountries in Asia where the privatisation processhas been marred by scandals, controversies, andovertly questionable provisions (as in the case ofprivatisation that requires legislative changes).Yet donors have not raised questions, givingrise to the suspicion that it is not efficiency thatis important for them. The bottom-line inprivatisation programmes is for the privatesector to take over from government, no matterwhat.

Deregulation: Setting Free Key Economic Sectors

Policy matrices for Asian, African and LatinAmerican client countries dictate varying levelsof wide-ranging reforms in the regulatory set-upof key economic sectors. From agriculture tofinance, water to power, transport to telecommu-nications, all the major sectors are covered.

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While some reforms in the governance ofeconomic sectors are necessary to do away withproblems of corruption and abuse of privilege,poor countries are often not able to overseeeconomic reforms since they have relativelyweak regulatory and institutional mechanismsthat can address emerging problems. A moreserious concern, however, is the abrogation ofpreferential access or treatment for unprotecteddomestic constituencies, as in the case of smalldomestic producers and users of credit whendevelopment banking is recast in favour offinancial sector reform.

Social Policies via the Market

Land and water are perhaps two types ofresources that income-poor people have thestrongest affinity with. Land and water representmultiple values for local populations and largernational and commercial interests.

The PRSP tackles the controversial issues of landrights and access to natural resources throughchanges in the legal framework for access, use,ownership and transfer of lands and water.Specifically, land titling, tradability and market-ability are made possible with the view towardsostensibly reducing uncertainty in land marketsand increasing incentives for investments onland. This is the focus for the land resourcemanagement in Cambodia and the Lao PDR. InBenin, Ethiopia, Madagascar, Mali, and Uganda,the policy matrices opt for “appropriate pricingpolicy” for water use either through “costsharing”, “cost recovery” or “significant users’financial participation”.

User fees and cost recovery, reminiscent of SAPs,are also resurrected in other social services. Inhealth services, they are being reintroduced inBurkina Faso, Ethiopia, Guyana, Madagascar,Malawi, Mauritania, Chad, Tanzania, andUganda.33

Conditionality, Flexibility and the LegislativeRoute

The policy matrix enumerates wide-rangingreforms a PRSP country should implementwithin a given timeline. Many of these reformsrequire legislative action and a few would even

require tinkering with national Constitutions.A number of structural reforms are integratedinto the PRGF and the Structural AdjustmentCredits as conditions.

Policy conditions that require use of the legisla-tive process are highly inappropriate, especiallyin light of broader advocacy for stronger na-tional institutions and the principle of sover-eignty. When a senior IMF staff was asked ina forum in Manila about this, he respondedthat this is indeed not an easy task, and that“dictatorships are easier to deal with...butpeople and institutions must be part of thepolicy-formulation process.”34

The Fund staff’s comment may be seen as over-eagerness, or it may be seen as arrogance. Whatis clear, however, is that the Fund has missed thepoint. There are only so many roles any institu-tion can appropriate for itself. The IMF, forinstance, should at the very least, stick to its coreexpertise. Structural reforms such as trade andinvestment liberalisation measures should notbe within its jurisdiction. The Fund’s views onmicro and structural issues should at best beregarded as recommendatory.

The cross-conditionality aspect of the IMF-WorldBank relationship is well documented. The IMFis supposed to take on the macroeconomic andshort-term stabilisation measures, while theBank takes care of the longer-term structuralmeasures, all within a twin package supportedby both institutions. Over the years, the Bankand Fund have consolidated their policy advicetowards market orientation, to the exclusionof alternative policies. They have thus failed toconsider varied options for structural reforms.For instance, the fiscal burden of public utilities(at once a macro and a micro concern) canbe addressed in many ways. Yet it is onlyprivatisation in one form or another that isalways promoted.

No matter how crowded the world of develop-ment policy becomes, real options should alwaysbe offered and sustained, and alternatives beallowed to flourish. Otherwise, multilateralinstitutions such as the World Bank and theIMF will continue to dominate national policyenvironments by imposing conditions, especially

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structural reforms. Lobbying by governmentin the national legislature for the passage offar-reaching structural reforms does not benefitthe legislative process. More often than not, itleads to horse-trading and jockeying betweenelected representatives and appointed stateactors. Nor does the national environmentfor policy debate improve when it is clear thatreforms are conditions that must be met. Andmost important, such policy conditions defeateven the rhetoric in PRSPs about nationalownership and participation.

A TIME FOR NEW IMAGINATION

The neo-liberal paradigm that the BWIs repre-sent started to unravel in the latter half of the1990s. The myriad critiques against them sincethen have culminated in a global backlashagainst the arrogance of policy imposition inthe face of many failed experiments.

Structural adjustment was supposed to be theanswer to the woes of a developing world thatwas crippled by a debilitating debt crisis. It wasthe start of the systematic rollback of what usedto be ‘state’ or ‘public’, and was the start ofmarket openness, private sector developmentand deregulation of key economic sectors. Yetafter two decades, SAPs had little to show forthem. The Third World was more indebted, andin more ways, than before. Yet unlike the start ofthe debt crisis, Third World states lost most oftheir assets to the private sector and relinquishedgovernance and control over crucial sectors tothe market. Worse, they were made vulnerableto newer types of financial crises that hit eventhe more prosperous countries.

The strong reaction against the policy mistakesof the past was perhaps the biggest motivationfor the neo-liberal establishment to reinventitself. Now, “poverty reduction” has becomea shield to dodge fundamental criticisms aboutthe economic model that the establishmentis unable to move away from. And in theirdesperation to latch on to a new paradigm,the rest of the development world has alsobought into the poverty reduction rhetoric.

But no amount of makeover can hide the

imminent collapse of a system that will notsurvive another decade. Studies conducted byNGOs, independent researchers and the UNCommission on Human Rights find that PRSP-PRGF policy frameworks mirror SAPs, and thatthe Bank and Fund are unable to show conclu-sively how these policies will reduce poverty.Particularly egregious is the PRGF, which is sosteeped in fiscal reforms, privatisation, austeritymeasures and restricting the welfare role of theState, that its connection with poverty reductionis not even illusory. It is this inflexibility, thisblind attempt to cling on to a model that did notand will not work, that makes the PRSP a losingproposition.

The HIPC initiative, which parented the PRSP,is not only inadequate, but also misconceived,misdirected and based on faulty advice. Theexcessive conditions attached to HIPC haveextracted a high price from the populations ofdebtor countries. Countries are paying more ondebt servicing than before, not only in money,but also in their future economic potential.Countries cannot export their way out of the debttrap when they have no control over the marketsfor their exports, terms of trade, or over theirdomestic conditions of production. The com-modity crises of the past few years show this onlytoo well. The debt sustainability criteria centralto the HIPC are meaningless and inaccurate.Countries that have been through protractedperiods of structural adjustment and debtservicing have such massive backlogs of eco-nomic, social, technological and institutionalcapacity that a little extra cash in hand is notgoing to address their urgent development needs.

The vulnerability created by indiscriminateliberalisation, the corruption of the privatecorporate world, the hypocrisy of the multilateraltrading system governed by the World TradeOrganisation, and the continued capture ofstate power by irresponsible elites despite wide-ranging reforms, all highlight the inabilityof the neoliberal paradigm to address the realproblems of the developing world.

The most crucial weakness of the paradigm hasbeen the continued marginalization of thegreater mass of the world’s population. Thecreation of poverty is often accompanied by

31

a parallel and simultaneous creation of wealth.Some groups and interests certainly havebenefited from the various versions of SAPsand HIPC, and will continue to benefit fromthe transfer of public wealth to private coffers.These beneficiaries, however, do not includesmall-scale producers who lose their productiveassets because of mounting debts, seasonalmigrants who cannot keep their children inschool, workers who are forced to work forbottom-end wages under “labour flexibilisation”programmes, women in low-income familieswhose burden of family care increases becauseof increased impoverishment, or a growingnumber of poor families who cannot affordthe rising costs of food and healthcare.

It is this marginalization, this exclusion thatis the most damning censure of the structuraladjustment era resurrected in the PRSP. Despiteits claim of national ownership and participa-tion, underlying the PRSP is a paradigm thatis as inflexible and as rigid as it is outdated.

Outdated models are meant to be cast aside andreplaced, or at the very least subject to the samecompetition that they preach. There is suchdiversity in peoples and cultures, and multiplic-ity in systems and practice, that it does the worlda disservice to constrict it to rigid policy regimeslike those prescribed in the PRSP.

*The authors are with Focus on the GlobalSouth, and may be reached atj.chavez@focusweb.org ands.guttal@focusweb.org, respectively.

Endnotes This paper is based on and is an expansion of

an earlier work, Structural Adjustmentin the Name of the Poor: The PRSPExperience in the Lao PDR, Cambodiaand Vietnam, January 2002.

1 Concessional loans or assistance refers to WorldBank financing through its InternationalDevelopment Association (IDA). IDAprovides long term loans with minimalor zero interest to the poorest developingcountries; the loan packages, however,come with policy conditionalities that theborrowing country must adhere to in orderto qualify for concessional financing.

2 For a comprehensive critique of the PRSPand PRGF, see: Still Sapping the Poor:A critique of IMF Poverty ReductionStrategies, Charles Abugre, ISODEC,June 2000.

3 See the World Bank website:http://www.worldbank.org/poverty/strategies/overview.htm

4 Ibid.; see also the IMF website: http://www.imf.org/external/np/prsp/prsp.asp

5 Participation in Poverty Reduction Papers,Caroline M. Robb, Africa Department,International Monetary Fund, August 2000.

6 See, for example:- The World Bank and the PRSP: Flawed

Thinking and Failing Experiences.Jubilee South, Focus on the Global South,AWEPON, Centro de EstudiosInternacionales. November 16, 2002.

- PRSP-Politics, Power and Poverty: A CivilSociety Perspective. Economic PolicyEmpowerment Programme, EuropeanNetwork on Debt and Development(EURODAD).

- Lessons from the Analysis of the First FiveFull PRSPs, PRSP: New Name or NewBeginning? Miriam Walther. WEEDWorking Paper, Bonn/Berlin. May 2002.

7 MPs Stop Zambia National CommercialBank Privatisation. December 5, 2002.The Post, Lusaka; Opposition MPs AgainstZNCB Sale. December 6, 2002. The Timesof Zambia; I Don’t Support Any FurtherPrivatisation, Declares Levy. December 6,2002. The Post, Lusaka.

8 IMF Strong-Arming Debtors Despite NewLending Guidelines. Emad Mekay, InterPress Service (IPS), December 10, 2002.

9 Letter to Ministry of Finance. AdvocacyProgramme, Sustainable DevelopmentPolicy Institute, No. 3 UN Boulevard,Diplomatic Enclave 1, G-5 Islamabad,Pakistan. December 20, 2002

10 Solomon Islands begins implementing IMFdemand for severe job cuts. Peter Byrne,World Socialist. November 21, 2002

11 Joint (IMF and IDA) Staff Assessment ofBolivia’s Poverty Reduction Strategy Paper,May 2001.

12 Adjustment Lending Retrospective. WorldBank Operations Policy and CountryServices, June 15, 2001.

13 Ibid.

32

14 From Adjustment Lending to DevelopmentPolicy Support Lending: Key Issues in theUpdate of World Bank Policy, World Bank,Operations Policy and Country Services.June 6, 2002.

15 Adjustment from Within: Lessons from theStructural Adjustment ParticipatoryReview Initiative. The World Bank, July 2001.

16 The Policy Roots of Economic Crisis andPoverty: A Multi-Country ParticipatoryAssessment of Structural Adjustment.SAPRIN, 2000. www.saprin.org/global_rpt.htm.

17 Poverty Reduction Strategy Paper-Opera-tional Issues, IMF-World Bank, December10, 1999.

18 Guidelines for Joint Staff Assessment ofPoverty Reduction Strategy Paper,IMF-World Bank, April 18, 2001.

19 Poverty Reduction Strategy Paper-Opera-tional Issues, IMF-World Bank, December10, 1999.

20 An Independent Guide to PRSP. EURODAD,2000.

21 For example, see:- Abugre, op cit;- Poverty Reduction Strategies andCoherency of Loan Conditions: Do theNew World Bank and IMF loans supportcountries’ poverty reduction goals?Warren Nyamugasira, Uganda NationalNGO Forum, Kampala, and Rick Rowden,RESULTS Educational Fund, WashingtonDC. April 2002.

22 News and Notices for IMF and World BankWatchers. Volume 2, Number 6, Spring2002. Citizens’ Network on EssentialServices, U.S.A.

23 Poverty Reduction Support Credits, WorldBank Operations Policy and CountryServices, May 11, 2001, as attached inOperational Memorandum from JoanneSalop, Vice President, Operations Policyand Country Services, dated May 21, 2001.

24 See, for example:- Structural Adjustment in the Name of thePoor: the PRSP Experience in the LaoPDR, Cambodia and Vietnam. JeninaChavez Malaluan and Shalmali Guttal.January, 2002;

- The website of the NGO Forum on Cambo-dia at: http: www.ngoforum.org.kh

- Poverty Reduction Strategies and Coher-ency of Loan Conditions: Do the new

World Bank and IMF loans supportcountries’ poverty reduction goals?Warren Nyamugasira, Uganda NationalNGO Forum, Kampala, and Rick Rowden,RESULTS Educational Fund, WashingtonDC. April 2002;

- The World Bank and the PRSP: FlawedThinking and Failing Experiences. JubileeSouth, Focus on the Global South,AWEPON, Centro de EstudiosInternacionales. November 16, 2002.

25 Abugre, op cit.26 The Sub-Commission on Human Rights

Resolution 2001/5 and Progress Report byJoseph Oloka-Onyango and DeepikaUdagama can be found at the UN Sub-Commission on Human Rights website.

27 For a detailed discussion of how the policymatrices found their way into official loandocuments in Asia, see Malaluan andGuttal, Structural Adjustment in the Nameof the Poor, January 2002.

28 WTO document WT/L/194, dated 18 November1996 (96-4878).

29 WTO News: Press Releases 9 December 1996and 28 April 1997.

30 Socialist Republic of Vietnam, The Compre-hensive Poverty Reduction and GrowthStrategy (CPRGS), May 2002.

31 See, The Missisippi-Mekong Catfish Wars.Shalmali Guttal, Focus on the GlobalSouth, September 14, 2002, and; What dothe catfish farmers say? Report of aninteraction with catfish farmers in theMekong Delta of Vietnam. Action AidVietnam. Hanoi, August 2002.

32 The phrase was first used by NepomucenoMalaluan in “The Philippine ElectricPower Industry Reform: A Tragedy ofADB and World Bank Private SectorFundamentalism and UnaccountableGovernment,” a paper presented at aworkshop on Power Sector Privatisation inBangkok, Thailand, October 7-10, 2002.

33 Policies to Roll-back the State and Privatise?Poverty Reduction Strategy PapersInvestigated. World Development Move-ment. April 2001.

34 Quoted from Jack Boorman, Special Advisor tothe Managing Director of the IMF, duringan open session in forum The IMF’s Role inthe Asia Pacific Region, July 11-12, 2002,Asian Institute of Management, Makati City,Philippines.

33

The human rights of people and communitiesto housing, water and sanitation - guaranteedunder international law and commitments ofdevelopment targets made at global summitsincluding the Millennium Summit and theWorld Summit on Sustainable Development -continue to erode as the process of privatisationdeepens and accelerates.

By ratifying a number of international humanrights instruments, 2 such as the InternationalCovenant on Economic, Social and CulturalRights, States have voluntarily accepted theobligations to progressively realise human rightsto food, health, adequate housing, water andsanitation, which are essential for the well beingof their citizens.

Globalisation and the process of increasingeconomic integration have limited the capacityof States to provide adequate resources forfulfilling the economic, social and culturalrights of their citizens. Several macroeconomicfactors influence the availability of resourcesfor social spending, including:

a. Small or even negative returns from tradeliberalisation;

b. Financial volatility following deregulationof capital flows coupled with interest rate hikeswhich affect access to credit and mortgages;

c. Increased land speculation, which often forcesout low-income residents to less desirablelocations with poor service availability;

d. Heavy burden of debt servicing;

e. Fiscal constraints and austerity measuresimposed by the IMF and the World Bank which

PRIVATISING HUMAN RIGHTS - THE IMPACT OF

GLOBALISATION ON ACCESS TO ADEQUATE

HOUSING, WATER AND SANITATION1

BY MILOON KOTHARI

invariably lead to reductions in financialallocations to social sectors; and

f. Public sector reform, particularly throughdecentralisation and privatisation.

Increased competition among cities to attractcapital and businesses for generating employ-ment and sources of tax revenues has led towidening inequalities between cities, withconsequent discrepancies in the level of essen-tial services provided to citizens. In the urbanhousing sector, reliance on market mechanismshas tended to result in neglect of the poor.

Notwithstanding the constraints and difficultiesplaced upon them, governments still have animportant role to play in reconciling macroeco-nomic policies with social objectives, keepingin mind the primacy of their human rightsobligations. Governments have the responsibilityto make targeted interventions in order to ensureuniversal access to public services, includingwater and sanitation, on a fair and equitablebasis; this is fundamental for the fulfilmentof the right to adequate housing.

Such responsibility places an obligation onStates to regulate, keeping in mind the humanrights of the most vulnerable parts of theirpopulations, the role of private actors. On thecontrary, the past two decades have demon-strated that States are not capable of reining inthe power of private actors such as Corporations.In many cases States are, in fact, encouragingthe entry of Corporations into areas that haveprimarily been the purview of public interven-tions. Corporate globalisation, and its clearexpression of privatisation of services, is one ofthe greatest threats to universal access to potable

34

drinking water and sanitation. By turninga social good and scarce resource into aneconomic commodity, the world’s economicand policy planners claim that existing waterresources can be managed and consumedefficiently in accordance with competitivemarket principles. However the reality on theground indicates that this is far from the truth.There are, therefore, many important reasonsfor opposing privatisation.

From a human rights perspective, three primarylessons can be drawn from experience with theprivatisation of water services:

- Private businesses put too much empha-sis on profits and cost recovery. Privatisationoften leads to rate increases [and] job losses.

- Services to vulnerable groups areinadequate and of poor quality. Many of thepoor end up paying up to twenty times morethan the rich for water.3

- Privatisation can reduce accountabilityand local control. Multinational corporationsare accountable to their shareholders, not tothe citizens in the countries where they operate.

The consequences of having inadequate or noaccess to water are devastating-especially forwomen and children.4 When water is not readilyavailable it is particularly the women andchildren who have to spend a large amountof time fetching water back to their houses. Thishas detrimental impact on their health, securityand education.

In many countries women and men do notenjoy equal access to basic resources andservices. Female-headed households haveless access than males, and if the services areprivatised then the problem increases. Greaterattention needs to be paid to the discriminationwomen face and to policies and measuresadopted to alleviate it. There is also a need forlaws and policies that regulate or define thehabitability of housing to take into consider-ation the special needs of women.5

The Millennium Declaration adopted by theGeneral Assembly recognised “solidarity” and“shared responsibilities”6. Such fundamentalvalues are necessary for the essential taskof evolving strategies for distributive justice,including land reform and increases in socialspending on areas critical to the realisation ofthe right to adequate housing, such as accessto potable water and sanitation. Such a reallo-cation or redistribution needs to be supportedby international cooperation including ‘joint’and ‘separate action’ by States, as called for bythe general obligations to international humanrights instruments.

In achieving these objectives, it is critical torecognise the obligations on States implicit inthe legal provisions on international coopera-tion,7 given the current global reality of growingincome disparities and attendant increases inpoverty and marginalisation. Serious attentionmust be paid to the need to assist developingcountries in their efforts to improve the housingand living conditions of the poor and inad-equately housed, through “joint and separateaction” including by ensuring that States’international policies evolved at multilateralfora and institutions, are formulated so as torespect the full realisation of economic, socialand cultural rights for all.

The solidarity and fraternity dimensions ofinternational cooperation under internationalhuman rights instruments create the imperativethat no action may be taken nor global socialpolicies adopted which could inhibit States’abilities to implement the commitments theyhave to their people stemming from theirobligations under these instruments. Mostrecently, in General Comment No. 15 on theright to water, the CESCR [Committee onEconomic, Social and Cultural Rights] stated:“Steps should be taken by States parties toprevent their own citizens and companies fromviolating the right to water of individuals andcommunities of other countries.”

States also need to examine policies - those oftheir own and of others - towards international

35

institutions and international agreements, toensure they are consistent with covenantedobligations on the right to adequate housing,including access to basic social services. Suchreviews should include the human rights im-plications of World Trade Organisation tradeagreements, particularly the General Agreementon Trade in Services (GATS) and the Agreementon Trade-Related Aspects of Intellectual PropertyRights (TRIPS), country assistance agreementsand agreements with the World Bank and IMF,as well as poverty reduction strategies such asthe Poverty Reduction Strategy Papers (PRSPs).

Numerous UN human rights bodies have urgedcaution in the face of the existing internationalthrust on trade in services.8 The human rightsobligations9 both at the national and interna-tional levels give a clear warning to the negotia-tors of trade agreements to step back from theexpansion of any agreements, such as GATS, thatleads to the privatisation of social services andthe entry of corporations into the arena ofproviding social goods such as water. Such a stepwould, given the experience thus far, effectnegatively on the realization of human rights.Human rights obligations, in fact, provide legalinstruments for conscientious states to argueagainst the expansion of global trade andinvestment agreements into the sphere ofrecognised human rights.

In assessing whether privatisation is the correctoption and in monitoring the privatisationof essential social services, it is important toemploy a human rights approach. Such anapproach would:

- be aimed at achieving sustainabledevelopment and poverty reduction10;- take into account gender perspectives11

and empower people by ensuring their participa-tion; it would ensure that subsidies are guaran-teed for those who cannot afford to pay.- lead to the development of humanrights-based indicators and benchmarks to assistin the implementation of the human rights (andthe MDGs) relevant to these issues,12

- ensure the rigorous implementation ofhuman rights principles and instruments toensure that national and international trade,investment and debt policies and agreementsare designed with respect to the rights of indi-viduals and communities.- lead to the implementation of valuable,but underused, provisions of internationalcooperation as found in the internationalhuman rights instruments13.

In achieving the above outlined imperativesand in ensuring a human rights thrust to theimplementation of the MDG’s and other strate-gies for poverty reduction it is critical that civilsociety engages more vigorously with the UNsystem. One such avenue is the monitoringwork for the realisation of economic, social andcultural rights, of the UN treaty bodies andSpecial Rapporteur, aimed at ensuring consis-tency of the MDG implementation process withthe existing State obligations from the humanrights treaties they have ratified.14 It is alsoimportant to engage with the parts of the UNthat are charged with monitoring and cam-paigning for the implementation of the MDGs,including the Millennium Project and theMillennium Campaign.15

The principles that guide neo-liberal approacheson the privatisation and commodification ofhousing, water and sanitation, such as “costrecovery” and “unbundling”, can be challengedby the human rights principles of “non-dis-crimination and equality”, “progressiverealisation” and “accountability”. Failure tograsp the enormous potential that human rightshave for sustaining environment and develop-ment and ensuring social justice will only leadto a world where we will witness dispossessionand homelessness on an even larger scale.

Miloon Kothari is United Nations Special

Rapporteur on Adequate Housing, UN

Commission on Human Rights. He lives

in New Delhi, India.

36

End notes1 Revised and abridged version of article with the

same title in Social Watch 2003. The Poor

and the Market, Third World Institute2 See www.unhchr.ch for full texts of the instru-

ments. For documents related to housingsee www.unhchr.ch/housing

3 “WSSCC and UN-Habitat Call for Urgent Actionto Address Water and Sanitation crisis”,Water Supply and Sanitation CollaborativeCouncil and UN-Habitat Press Release, 29January 2002.

4 An estimated 2.2 million people in developingcountries, most of them children, die everyyear from diseases associated with lack ofaccess to safe drinking water, inadequatesanitation and poor hygiene. Seewww.unicef.org

5 The impact of privatisation on Women’s accessto housing, land and civic services will beincluded in the forthcoming report (2005)on Women and Housing by the SpecialRapporteur on adequate housing to the UNCommission on Human Rights. For detailson how civil society can contribute to thisreport see: www.unhchr.ch/housing.

6 This critical recognition in the MillenniumDeclaration is sought to be operationalisedthrough MDG 8 to ‘Develop a globalpartnership for development’.

7 Article 28 of the Universal Declaration ofHuman Rights proclaims that everyone isentitled to a social and international orderin which the rights and freedoms containedin the Declaration can be realised, andarticles 2.1, 11, 15, 22 and 23 of theInternational Covenant on Economic,Social and Cultural Rights build upon thefoundation for international cooperationin Articles 55 and 56 of the Charter of theUnited Nations, and the obligation for statesto recognise the essential role of interna-tional cooperation and to reaffirm theircommitment to take joint and separateaction.

8 See, for example, Report of the High Commis-sioner for Human Rights, “Liberalisationof Trade in Services and Human Rights”, E/CN.4/Sub.2/2002/9 and Resolution 2002/11of the UN Sub-Commission on the Promo-tion and Protection of Human Rights.

9 General Comment No. 15, for example, citesas a violation of State commitments to theCovenant of Economic, Social and CulturalRights if there is “failure of a State to takeinto account its international obligationsregarding the right to water when enteringinto agreements with other States or withinternational obligations”.

10 For a path breaking approach to povertyreduction See Draft Guidelines: A HumanRights Approach to Poverty Reduction,Office of the High Commissioner forHuman Rights, 2002 at www.unhchr.ch/development/povertyfinal.html

11 The MDG 3 to ‘promote gender equality andempower women’ needs to be integratedinto all the MDG’s. Implementation of StateObligations to the human rights instru-ments would ensure such integration.

12 See, for example, the reports of the SpecialRapporteur on Adequate Housing to the UNCommission on Human Rights (E/CN.4/2003/5) and the Report of the SpecialRapporteur on the Right to Health, Mr. PaulHunt, to the UN General Assembly (A/58/427), 10 October 2003.

13 Universal Declaration op. cit. 714 See ‘The Millennium Development Goals and

Economic, Social and Cultural Rights’ JointStatement by the UN Committee on Eco-nomic, Social and Cultural Rights and theUN Commission on Human Rights’ SpecialRapporteur on Economic, Social andCultural Rights. 29 November 2002. Seewww.unhchr.ch/housing/MDG.doc

15 See www.unmillenniumproject.org

37

Goal 1 of the Millennium Development Goals(MDGs)—Eradicate Extreme Poverty andHunger—is already set up for failure by virtueof the Bank’s fingerprints on its two targets:1. Halve, between 1990-2015, the proportion ofpeople whose income is less than one dollar(US$ 1) a day;2. Halve, between 1990-2015, the proportion ofpeople who suffer from hunger.

Although it is conceivable that the proportionof people whose income is less than US$ 1 a daycan be halved by 2015, this does not imply thatextreme poverty and hunger will be reduced bya significant or even proportionate measure.US$ 1 a day is not indicative of locally ornationally conceived notions of poverty in anysociety, and raising incomes above the US$ 1mark does not automatically imbue peoplewith benefits that they did not have when theirincomes were below the US$ 1 mark.

Since 1990, the World Bank has used its WorldDevelopment Reports (WDR) 1990 and 2000/2001 to establish itself as the global authorityon locating and describing the world’s poor andhungry. Given the vast resources at its disposal,and the political and institutional backing itenjoys from OECD Governments and academia,the Bank is currently the sole producer of globalpoverty estimates and has become extremelyinfluential in constructing the picture of worldpoverty and hunger for policy makers and laypersons alike. However, this picture is inaccurateat best and deliberately misleading at worst.

Studies by independent researchers show thatWorld Bank inferences on world poverty cannothold up to academic scrutiny since they arebased on shaky extrapolations from limited

MISSING THE MARK, OR DELIBERATELY

MISLEADING?THE WORLD BANK’S ASSESSMENTS OF ABSOLUTE POVERTY AND HUNGER

BY SHALMALI GUTTAL

and questionable data sets. Critics familiar withthe micro dimensions of poverty and hungerpoint out that World Bank poverty assessmentsare blind to non-income forms of poverty, andthat Bank policies systematically marginalizedevelopment approaches that deviate from itsown narrow, per-capita income and economicgrowth based strategies. And even if we were toaccept the World Bank’s obsession with incomesand economic growth as valid to povertyreduction, a growing body of knowledge showsthat World Bank-International Monetary Fund(IMF) policies have not in fact resulted in thepromised growth; on the contrary, in manydeveloping countries, Bank-Fund StructuralAdjustment Programmes (SAPs) have createdand entrenched “policy induced poverty” thatcannot be alleviated by increasing the incomesof the very poor and hungry by a few extradollars.

The estimates of global poverty calculatedand publicized by the World Bank areconceptually and methodologically flawed.The international poverty line (US 1 $a day) used by the World Bank is arbitraryand not grounded in any clear conceptionof poverty.

In a recent examination of the Bank’s methodol-ogy in coming up with poverty figures, Reddyand Pogge1 show that the Bank’s estimates of theextent, distribution and trend of global incomepoverty are not meaningful or reliable, andshould not be accepted:

These estimates are flawed due to three relatedbut distinct types of significant conceptualerrors, which make it impossible to use themto identify with any reasonable accuracy the

38

level, distribution or trend of global poverty. Thefirst type of error involves the failure to definea global poverty line that corresponds to a clearunderlying conception of poverty, so as to allowidentification of the commodities that mustbe commanded in order to avoid being poor.The second type of error involves the failureto employ purchasing power parity factors thatpermit meaningful and accurate identificationof the national currency equivalents of theglobal poverty line, and of changes in their valuethrough time. The third type of error involvesincorrect extrapolation from limited data,creating an appearance of precision and mask-ing the high probable error of the estimatesbeing generated.2

The authors argue that the above errors togetherlead to the likelihood of substantial distortionsin estimates of global poverty and may haveresulted in false claims about downward trendsin global income poverty. In particular, growthin incomes of the non-poor across the worldmay have led to the mistaken conclusion thatglobal poverty has fallen.

The World Bank’s international poverty line isderived from calculations of purchasing powerparities (PPPs) for a reference bundle of com-modities that are ostensibly needed for well-being. However, Reddy and Pogge point out,available PPPs used by the Bank are not onlyvague in the commodities that they refer to, butalso refer to the wrong set of commodities fromthe standpoint of poverty assessment. Existingmethods of calculating PPPs involve aggregat-ing information about quantities of a varietyof commodities in different countries that areexchanged at different prices. PPPs derived fromthese methods reflect quantities and prices thathave no relevance for assessing absolute poverty.

The Bank’s assessment of increase or decreasein poverty is based by and large on an averageincrease or decrease in levels of private con-sumption, without taking into consideration thedistribution of both incomes and consumption.Thus, growth in average incomes and consump-tion automatically implies - for the Bank -a decrease in poverty. But they tell us little about

whose incomes and consumption have actuallyincreased. Further, estimates of increasedconsumption are based on increased purchasesof goods and services, which provide no indica-tion that the poor are actually gaining fromthese purchases, or are better off than before.Reddy and Pogge point out that different incomegroups pay different prices for the same goods orcommodities and that these differences in pricesare higher in the poorest regions. There isevidence to show that the poor actually paymore for the same commodities or goods thanthe non-poor because of their physical location(for e.g., in distant or remote areas which haveless competitive market structures), the quanti-ties they buy (i.e., they buy in small amountsbecause of cash, credit and storage limitations)and because of their class and social positioning(social marginalization can lead to discrimina-tion in retail markets). Such realities areignored in the Bank’s poverty assessments andcertainly do not find their way into its povertyalleviation strategies.

An income based definition of povertyprovides an extremely limited pictureof poverty, and masks the increasingdeprivation arising out of national andinternational inequalities.

Although household and family incomes areindicators of financial well-being, they do notprovide an accurate picture of the incidence ofpoverty and hunger in a society, let alone theworld. An increase in average incomes in asociety masks the fact that even as incomes risefor one segment of society, they may decreasefor other segments in the same society. Also, therelationship between economic growth and theincome of the poor is not as unidirectional asBank experts seek to project:

The extent to which the poor - or even themajority of the population - share in the gainsfrom economic growth can vary considerablyover time and as a result of policy changes. As itturns out, there are plenty of instances in whichthe poor, and the majority of the populationhave been left behind in the era of globalization- even where per capita income has grown.3

39

A growing body of data suggests that incomeinequalities are on the rise across countries,within countries and even among those countedas poor.4 Furthermore, income estimates do notreveal the costs that poor and lower to middleincome segments have to pay for food, water,housing, healthcare, education and otherservices that are essential to strengthen eco-nomic and social capacities. Nor do they providean indication of increasing or decreasingvulnerability based on gender, age, rural-urbanlocation, employment, ethnicity, caste, race,religion or social status.

Income disparities further compound disparitiesin social indicators such as nutrition, maternalmortality, child mortality and education. Higherincomes for some often mean that the majoritymay have to pay higher prices for basic goodsand services, as markets tilt to favour the biggerspenders. Groups for which improvements insocial indicators has been fastest seldom repre-sent the disadvantaged people. Although severalcountries may show average improvementsin a number of social indicators, the situationfor disadvantaged groups is stagnant ordeteriorating.5

Rural poor communities are likely to meettheir food needs through means that arenot captured by the World Bank’s numeri-cal definitions of poverty and hunger.

Majority of those living in rural areas tend tomeet their food needs through daily and sea-sonal subsistence, as opposed to purchasingfood in markets or through cash transactions.Agricultural communities generally feedthemselves by growing their own food (staples,livestock, vegetables and fruit) and throughforaging/gathering, hunting and fishing innearby fields, forests and water bodies. In timesof scarcity and hardship, trading labour for foodwithin and across communities is commonpractice. In urban areas, on the other hand,the poor and low income communities aredependant on markets to meet their food needs.

Although many rural communities may beincome-poor and lack access to health, educa-

tion and other basic services, they may not behungry. Deterioration of the natural environ-ment and reduced access to environmentalresources because of changes in resource tenuresystems, infrastructure and resource extractionprojects, and market oriented agriculture anddevelopment have been shown to increasehunger and deepen poverty. However, the WorldBank’s assessments of poverty are blind to ruralrealities and diversities, and to the failings ofmarket based food systems to alleviate hungeramong the rural poor.

The policy “advice” provided by the WorldBank and the IMF has not resulted in thepromised gains of economic growth andbetter living standards for all in theirborrowing countries. Instead, they haveentrenched forms of poverty and depriva-tion that can only be overcome throughdrastic policy changes, includinga complete rejection of Bank-Fundpolicy packages.

Although it is difficult to separate out the causalrelationships between the policy prescriptionsimposed by the Bank and Fund and theirimpacts at local-national levels, economicgrowth over the past twenty odd years—theperiod during which these policies were put intoplace—has been dramatically reduced in mostBank-Fund borrowing countries. Not only haveBank-Fund policies not enhanced economicgrowth, but also they have deepened andentrenched poverty in almost every developingcountry that they have touched.

Since the mid-nineties, the IMF and its alliedcreditors have made serious policy errors thathave reduced cumulative economic growth forhundreds of millions of people.6 During theAsian financial crisis, the Fund’s drastically tightmonetary policies and fiscal austerity measuresdeepened recession and threw tens of millionsof people into poverty. Similar stories have beenrepeated in country after country, from Russiaand the transition countries of Eastern Europeto Turkey and Argentina. According to Weisbrotet al, all of these errors are part of a pattern ofmacroeconomic policies that have a pronounced

40

contractionary bias. Getting rid of a currentaccount deficit by shrinking the domesticeconomy, for example, is a Fund strategy thathas been deployed for decades. While “fiscaldiscipline” and policies to contain inflation maybe helpful in some instances, they have provento be lethal when prescribed inappropriately orin excessive doses, as has usually been the case.

Perhaps the most exhaustive-and damaging-documentation of the impacts of Bank-Fundpolicies on developing countries is the SAPRIN(Structural Adjustment Participatory ReviewInternational Network) study report released inApril, 2003, The Policy Roots of Economic Crisisand Poverty.7 Originally launched by World BankPresident James Wolfensohn in 1997, SAPRI(Structural Adjustment Participatory ReviewInitiative) - as it was known then - initiated amulti-constituency study of the impacts of Bank-Fund imposed economic policies and StructuralAdjustment Programmes (SAPs) in countriesacross Latin America, Africa and Asia.8

The study finds that:❏ indiscriminate trade and financialsector liberalization devastated local industry,especially small and medium enterprises thatprovided the bulk of national employment;❏ agriculture and mining sector reformsundermined the viability of small farms andagricultural producers, weakened food securityand damaged the natural environment;❏ a combination of privatisation, civilservice reforms and labour sector reformsresulted in the shrinking of labour-intensiveindustries, increasing unemployment and moreprecarious terms of employment-i.e., loweredwages, fewer rights for workers and worseningterms of employment;❏ privatisation of public enterprises andutilities, the application of user fees in healthand education, and sharp cuts in public socialspending reduced the access of the poor toessential social services;❏ macro level problems accompanied thelocal level failures of adjustment programmes;the promised gains of efficiency, competition,savings and revenues from SAPs did not materi-alize; instead, countries saw a deterioration of

real wages, increased inequities in incomedistribution, the displacement of local, small-scale food producers, and increased impoverish-ment in both rural and urban areas;❏ the burden of adjustment was borneby those most vulnerable to market forces andpolicy changes in societies; increased impover-ishment because of adjustment programmesaffected women and children more than menand adults in the same economic class; asdistinct economic and social groups, indigenouspeoples, small farmers and farmers sufferedthe most;❏ the greatest beneficiaries of Bank-Fundadjustment programmes were local and nationalelites, large private producers, distributors andtraders, and trans-national corporations;

SAPs hit hard at the capacities of both peopleand governments to address and overcomeadversity, scarcity and hardships, leaving themvulnerable to deep and long-lasting economicand social crises. Many of these crises alsohad political dimensions as in some countriesgovernments fell and in others, populationscontinue to face a decrease in democratic space,and civil and political rights.

The narrow and unchanging view ofpoverty advanced by the World Bankserves its own institutional needs andthe needs of its sponsors, and not thoseof the poor, or even majority populationsin its borrowing countries.

Despite growing evidence of its failures, theWorld Bank and IMF continue to promote their“Washington Consensus” package of policyprescriptions; once called a Structural Adjust-ment Programme, the package is now called thePRSP-PRGF.9 Bank-Fund assessments of worldpoverty, hunger and financial health areoriented towards justifying strategies for rapideconomic growth—no matter their social,environmental, political and economic costs—ostensibly to boost incomes and thus reducepoverty. However, it is clear from past experiencethat Bank-Fund policy packages and strategiesdo not boost the incomes of the poor, reduceinequalities, poverty and hunger, or even

41

enhance economic growth. What then is theimpulse for the blind ideological applicationof a failed formula?

Clearly, IMF and World Bank economists do notknow enough about the specific conditions ineach country to be giving the policy “advice”they do and to be making some of the decisionsthat they do. Many visit the countries undertheir charge for such short durations, and havesuch limited exposure to rural and urban lifethat it is difficult to accept their authoritativeassessments of in-country conditions; Bank-Fund officials “on mission” rarely stray far fromtheir hotel rooms and the offices of a few keyministries, and their contact with local popula-tions is similarly limited.

Weisbrot et al also point out that other interestsare at play in the decisions of the World Bankand the IMF, and “they may have multipleobjectives that do not necessarily coincide withthe interests of borrowing countries”.10 Forexample, it is now widely recognized that theopening of financial markets in East Asia, whichwas the primary cause of the Asian financialcrisis, was promoted by the IMF and its patron,the US Treasury Department. The two institu-tions even sought to amend the Fund’s charterso that it could exert authority over the capitalof its member countries. The push for capitalaccount liberalization had more to do with thesearch by US mutual funds for investmentopportunities than the needs of borrowingcountries.

Similarly, the sectoral reforms, unilateralliberalisation, privatisation, and regulatoryregimes demanded of developing countries bythe World Bank and IMF have far more to dowith opening up the markets of these countriesfor increased profit-making by foreign, usuallytransnational corporations, than with enhanc-ing national incomes or reducing poverty. OECDdonors have unfailingly backed the Bank-FundPRSP-PRGF programmes, and with good reason.It is their private companies, industries, busi-nesses and experts that gain the most fromBank-Fund style poverty and hunger alleviationprogrammes in developing countries. And yes,

the economic growth brought about by Bank-Fund policies does provide gains to nationalpopulations who are in already advantagedpositions, and also encourage class mobilityof a specific type. This is no accident; Bank-Fund policies are designed to serve these classes,and not the poor and hungry.

It’s about increasing consumption,not about reducing poverty or hunger.

The World Bank and the IMF do not exhortgovernments to spend more on social servicesor protection for the poor and vulnerable,strengthen public distribution systems for food,provide support for domestic producers andtraders, defend the rights of communities tonatural resources, or build and strengthen localand domestic economies. On the contrary, theyinsist that governments step back from theirtraditional welfare and developmental roles andinstead take on roles of “facilitators” for privatesector expansion into the production anddistribution of even the most basic goods andservices. So clearly, reducing poverty andhunger is not top on the minds of the Bankand the Fund, no matter what they claim

For the World Bank, populations who live onless than US$ 1 a day, or are not yet integratedinto the monetised economy are of little use aseconomic beings since they are not likely toconsume the goods and services produced by theglobal corporations. In order for transnationaland global corporations to flourish, the consum-ing capacity of these populations must beincreased. And the Bank has found an effectiveway to do this by framing its actions andstrategies in poverty reduction language, andby setting itself up as the expert on the poorand hungry.

* The author is a Senior Associate at Focus

on the Global South. She can be reached at

s.guttal@focusweb.org

42

Endnotes1 Reddy, Sanjay G. and Thomas W. Pogge. How

Not to Count the Poor. Columbia University.March 26, 2003.

2 Ibid. pp: 4.3 Weisbrot, Mark, Dean Baker, Robert Naiman,

and Gila Neta. Growth May Be Good for the

Poor - But are IMF and World Bank Policies

Good for Growth? A Closer Look at the World

Bank’s Recent Defence of Its Policies. May11, 2001

4 For example, UNCTAD (1997), UNDP (1999)and Milanovic (1999).

5 Vandermoortele, Jan. Are the MDGs Feasible?

Bureau for Development Policy, UNDP. July,2002.

6 Weisbrot, Mark, et al, op cit7 For the full report, visit the SAPRIN website:

www.saprin.org8 By 2001, the World Bank withdrew from SAPRI

and produced its own report: Adjustment

from Within, Lessons from the Structural

Adjustment Participatory Review Initiative.

World Bank, July 30-31, 2001. The findingsof this report are strikingly different from thoseof the SAPRIN study released in April, 2003.

9 PRSP stands for Poverty Reduction StrategyPapers; PRGF stands for Poverty Reductionand Growth Facility. Both programmes arede rigueur for countries seeking concessionalassistance from the Bank and the Fund.

10 Weisbrot, Mark, et al, op cit

43

SUBSIDIZING THE RICH1 OR WHY THE PRSP

WILL NOT REDUCE POVERTY IN SRI LANKABY MOVEMENT FOR NATIONAL LAND AND AGRICULTURAL REFORM (MONLAR)

In June 2002 the Government of Sri Lankadiscussed a package of policies for economicreforms with the World Bank. These proposalshave been endorsed by both the World Bankand the International Monetary Fund (IMF)as “Connecting to Growth: Sri Lanka’s Poverty

Reduction Strategy (PRSP)”. Comprising 108projects, Sri Lanka’s PRSP carried an originalUS$ 6.095 billion price tag, “downgraded” inMarch 2003 by the World Bank to “around US$3 billion”. For 2003-04, the World Bank esti-mated total external assistance (in loans andgrants) to reach US$ 2.870 billion. In April 2003the Sri Lankan Government secured the first of aseries of loan packages from the internationalcommunity - a US$ 320 million Poverty Reduc-tion and Growth Facility (PRGF) from the IMF.

Notwithstanding the new name, the PRSP isnothing but a package of economic reformsdesigned to carry forward the structural adjust-ment that Sri Lanka has been implementing inthe last two and a half decades. The economicpolicies adopted during the last two decades havebeen oriented towards accelerating “growth”through liberalization, export orientation andprivatization, with the assumption that growthwould trickle down and reduce poverty. The pushfor the same policies is a puzzle since the PRSPdocument itself admits that neither growth norpoverty reduction was achieved during thisperiod2. The strategy in fact compelled the poorto bear a much heavier burden and to sacrificesocial security and social development, andreversed human and democratic rights wonthrough political struggle in previous decades.

MORE OF THE SAME...AND SOME THINGS WORSE

It is unfortunate that the authors of the PRSPdid not bother to look at the contributions of

past efforts to social and economic stability,democracy and political stability. The narrowfocus on growth and accumulation missesa big part of Sri Lanka’s history that needs to bestressed. Since independence, the governmenthas attempted to implement social nurturingpolicies. But these policies have been systemati-cally dismantled in favor of structural adjust-ment since the mid-1970s. The results leavemuch to be desired.

Sri Lanka had lower rural poverty and incomedisparities prior to 1977 than in the present. In1992, according to the IFAD study on “State ofWorld Rural Poverty” Sri Lanka has had thesharpest increase in rural poverty among 114countries studied for the period 1965 to 1988. In1965 rural poverty was about 13%. By 1988 ithas increased to about 46 %. Until 1977 incomedisparities were low and declining, but policiesfor faster economic growth introduced sincethen have sharply increased disparities. In 1993,according to the WB’s World DevelopmentReport, Sri Lanka had among the sharpestincome disparities, behind only Brazil.

The PRSP document itself admitted that neitherconsiderable economic growth nor substantialincome redistribution took place during the1990s. It said that “...neither the GDP growthrate nor its distributive effects were sufficientto bring out a marked reduction in poverty levelin this country, in other words the benefitsof economic growth have not trickled downautomatically to the poor.”

The insistence then on the same old policiesis a big puzzle.

On June 5, 2002, the Sri Lankan Prime Ministersaid in an address that the biggest problemfacing the country was debt, which had reached(Sri Lankan Rupees) Rs.

44

83,000 per capita. Yet the PRSP is a debt-creating strategy that pushes the same projectsthat created the current debt in the first place -huge infrastructure such as super highways,road networks, airports, harbors, communica-tion facilities, and the like. New introductionsinclude equally dubious projects like watermarketing infrastructure and mechanismsfor land titling.

Infrastructure Development. A long list ofproposed infrastructure projects will mean newforeign loans of about US$ 1.265 billion. It wasearlier promised that the private sector would beinvited to undertake many of these projectsunder various build-operate-transfer (BOT)schemes. But the private sector has not beenvery keen in such infrastructure and indebted-ness is always the comfortable fallback.

The large projects including the expansion ofthe Katunayake Airport, the construction of theKatunayake-Colombo, Matara-Colombo and theKandy-Colombo Highways continue to meetprotests from communities who face threats ofdisplacement. The threats faced by communitiesrange from physical dislocation to destructionof their sources of livelihood. Fish workers fromWattala are being displaced due to the heavypumping of sand from the coast (for theKatunayake-Colombo Highway), and large scaledigging for the Matara-Colombo Highway hasbeen depleting water sources for the community.It is not clear what the plans are for thesecommunities, and their protests have oftenbeen met with violence.

Infrastructure development is seen as the futureof poverty reduction. It is said to be the centralattraction for foreign investments and will setthe stage for export development. But despitethe huge debts incurred for the infrastructuredevelopment in the last 25 years, very little of thevaunted merits of these projects ever came to be.Hardly any export agriculture was developed,except for the traditional tea, tobacco andrubber, and attempts at introducing newexport crops failed badly.

The massive infrastructure projects are done toattract and please a fickle foreign private sectorset that flees the country at the slightest sign ofinsecurity. The rhetoric about “connectivity”,or connecting the poor in the village to thenational and international markets, remainsa sorry rhetoric and not an honest statementof objective. Infrastructure development alonewill never be enough to pull the ultras poor andthe ultra-unprotected out of poverty. It is for thisreason that infrastructure development remainsand will remain a failure in terms of povertyreduction. It only succeeds in ballooning thedebt burden of the country, and consequentlyof the country’s poor.

Land Titling. In 1996, WB experts Robert Huntand Douglas Lister authored the documentsNon Plantation Sector Policy Alternatives. Thedocument claims that the fact that the pooroccupy much of the land in the rural agricul-tural sector, and that they are neither interestednor capable of producing the type of high valueexport crops that would lead to growth, is thebiggest fetter to growth. The solution, therefore,is for the government to intervene and immedi-ately create a “free land market” by grantingfreehold titles to all occupants of such small-holdings who are currently living on landgranted by the State without freehold titles.

It will be remembered that the policy of notgranting freehold titles was a conscious decisionin Sri Lanka since the time of the Land Develop-ment Ordinance in 1927, to prevent the poorfrom losing their land due to poverty andindebtedness. The PRSP targets the issuance of“freehold titles” to 1.2 million families in 2003.Considering the numbers, the timeframe itselfappears “rushed” and will only result in thesesmall-scale farmers having to sell their landdue to desperation, indebtedness, and poverty.

The idea behind the land titling program is tomove the poor out of the rural areas and intothe more attractive urban industry and servicesareas. Similar to the case of infrastructuredevelopment, there is no existing plan on how toassist those ready to make the transition. Thereis not even a comprehensive assessment of how

45

the supposedly modern sectors will be able toabsorb the new entrants. The only clear thing isthat, with the freehold titles, many farmers willbe kicked out of their lands quite soon, thusensuring the reproduction of poverty.

Rural to Urban Migration. In some twisted formof logic, the rural poor are being encouragedin the PRSP to migrate to the cities as a way ofpoverty reduction. Because 90 percent of thepoor are in the rural areas, moving them outwill reduce poverty? The encouragement isactually a censure on the failure of past pro-grammes to produce wide-ranging growth,limited as it is to the Western Province only.

What is not being said, but is nevertheless knownto the poor, is that the strategy will make themeven poorer and even more indebted than theyalready are.

Privatization. In most countries, includingsome of those in the global North, health andeducation have been regarded as essentialservices that should not be left entirely to themarket. There is wide acceptance that govern-ment policies that ensured that health andeducation was available to all, including thepoorest in the most remote villages, made a bigcontribution to the remarkable achievementsthat Sri Lanka has made in social development.The PRSP proposals for public-private sectorparticipation in these services will lead toincreased costs for the provision of the servicesas it has happened in other countries with theintroduction of user fees. The poorest sectionsof society will likely lose access to these services.The entry of the private sector is always accom-panied by a parallel process of cutting downon government services, which has the biggestimpact on access.

The proposals suggest closing down someschools in remote rural areas, thereby creatinga situation where the poorest children whocannot go to the larger schools away from theirvillages may drop out early. There is neitherinstitutional nor financial support for teachertraining, thereby further marginalizing“voluntary teachers” from being recruitedinto regular employment.

Lack of fund allocations and facilities to thegovernment hospitals that provide free serviceshave had a similar impact on the health servicesto the poorest people. Privatization in healthservices and medicine, including liberalizedand uncontrolled importation of medicines hasresulted in an extremely high increase in thecost of medicine and caused serious problemsin ensuring the quality and safety of medicine.

Education and health in Sri Lanka have beenservices provided by the State. Those employedin such services had considered these as “noble”professions. The conscious weakening of stateservices has resulted in a serious deteriorationof the ethical values in these professions, whichare now simply seen as opportunities for makinga lot of money.

Privatization has been the encroaching specterin most state corporations and services frombanking to transport. The state being one of thebiggest employers in Sri Lanka, privatizationresults in the reduction of employment and lossof employment security while improvements inservices and costs have been suspect. The saddestthing about the move to privatize most of thestate corporations is the lack of appreciation forwhat these corporations are able to contribute,and the absence of proper exit programmes foremployees.

Water. Heavy borrowings, attracting the privatesector, public-private partnership, cost recovery,full cost pricing - these are the terms that gowith water and water infrastructure in the PRSP.According to the PRSP Rs. 60 billion is theneeded investment in the sector in the firstdecade of this century. Eighteen (18) such waterinfrastructure projects are slated for externalassistance. This would be a subsidy given toforeign water companies invited to sell (our)water to (our) people using infrastructure builtwith our (borrowed) money.

The first proposal to privatize water was madeby the WB in March 1996 in the “Non Plan-tation Sector policy alternatives” document.Privatization should be done to discourage thesmall farmers from cultivating paddy, a low-

46

value crop. It said that as long as irrigation wasgiven free, these farmers would not shift outof paddy farming to high value (export) crops.Thus, it was recommended that irrigationshould not be “free”, but should be marketedthrough the private sector.

Since then, a new “National Water ResourcesPolicy” has been drafted. The prevention offuture water crises became the biggest claimof the new policy. Yet, interspersed betweenpronouncements of better water management,conservation and prevention of pollution anderosion etc., the intention of “water pricing” and“marketing” was clear. It intended diversion ofmore water into sectors other than irrigation andagriculture. “Bulk water entitlements” were tobe issued to urban water suppliers, industrialsector users and for other uses such as produc-tion of electricity and those for entertainment,tourism etc. Infrastructure for measured supplyof water to not only urban users but also to therural agricultural users, such as construction ofcemented channels, setting up water measuringmechanisms, etc. are being done.

But can water marketing really prevent futurecrises. And what are the real motivations behindthese proposals?

It is most unacceptable that there is totaldisregard for the historical experience in SriLanka of ecological water management. SriLankans look at water as a common right ofall people and all living beings, and not asa commodity for profit making. The conflictarising from the basic difference between theprivatization motive and the community logicis potentially big and requires more than a well-oiled PR machine to manage.

WIDE-RANGING RESISTANCE

The PRSP is big and expensive, but it is alsoin a hurry and undemocratic. The mannerby which the government presented the fullpackage of legislative reforms to complete theeconomic reform agenda envisioned in thePRSP had been extremely rapid and undemo-

cratic. As a result, a broad alliance of all sectionsof society, demanding a more democraticparticipatory process of planning and decision-making, was formed. The Alliance for Protectionof National Resources and Human Rights(ANRHR) is an unprecedented, broad coalitionof major trade unions and other civil societyorganizations representing industrial workers,farmers, fish workers, plantation workers,environmental organizations, women’s organi-zations, rural communities, people affected bythe process of privatization of state enterprises,those opposed to he privatization and sale ofnational assets, groups advocating labor rightsand democratic rights, peace organizations,intellectuals, and religious leaders. The Alliancecurrently counts 125 organizations as members.

There was no meaningful people participationin the formulation of the PRSP, much lessparticipation of the poor themselves. Most ofthe participants are government officials andrepresentatives of the business associations andfrom the international financial institutions.It is not hard to see how they are supportiveof the current PRSP for reasons other than itspotential to reduce poverty.

Neither the government nor the World Bankseems to have been very interested in obtainingthe views of the people. Not even a summary ofthe PRSP proposals had been made availableto the general public, through public media,during the four years of its formulation. Thedocument was made available only in August2002 and only on the Internet in English. TheSri Lanka Country Director of the WB informedus that printed documents in English, Sinhala,and Tamil were available only about a weekbefore the Executive Directors of the WB dis-cussed it in Washington, at the end of March2003.

In March 2003, even the World Bank admittedto the weaknesses of the consultation process, yetsaid that they would endorse the document justthe same. The PRSP is purported to be a “livingdocument” that will be further modifiedthrough broader consultation as it is imple-mented. Such claim, however, is not acceptable

47

and attacks the very basis of the vaunted“participation” and “ownership” of the PRSP.

Accessibility of the PRSP and PRSP-relateddocuments, and the general consultationprocess, becomes even more significant in viewof the more fundamental concerns on thestrategy espoused in the PRSP. The protestsmeeting the PRSP are products of a longexperience with failed structural adjustment andthe negative consequences it brought to the poor.

In October 2002, a major protest led by ANRHRhad over 15,000 people from all sectors of societyparticipating. Similar protests were launched inSeptember to November 2003 in Anuradhapura,Kandy, Negambo, and several other regionaltowns. In March 2003 there were over 5000people in Eppawela, who protested against theproposed privatization of water using a tradi-tional cultural expression titled “KadawaraPujawa”. This was part of an ongoing campaignto protect the ancient irrigation systems andresources that people of Sri Lanka had built andsustained for centuries, from being handed overto private companies.

OF VESTED INTERESTS AND WEAKGOVERNMENT OWNERSHIP

Several general elections and a presidentialelection were held during the four-year periodthat the PRSP was being prepared. Despite thetremendous impact the PRSP has on policy-making, however, none of the major politicalparties made any reference to it in their electioncampaigns. It did not figure at all in theirElection Manifestos. If ownership means thereadiness of the government to stand by thePRSP as a strategy and platform of policy, itsnon-prominence speaks little about how awareat least the government is of its ramifications.

It is difficult to assess how “owned” a process ora document is when that process or document isalien to something a government aspires for, e.g.financial assistance. In public events, the WBand the IMF kept harping on the claim that thePRSP is government produced and therefore

they will endorse it. Yet, many governmentofficials in not a few fora would distancethemselves from the PRSP, and even openlyoppose specific policies it contains. In a TVdebate on March 20, 2003, the Minister ofAgriculture when confronted stated that he didnot agree with the WB proposals on agricultureincluding those in the PRSP and that he wouldfollow a different policy. Earlier on March 6 thePrime Minister stated that he disagreed with theWater Resources Policy that had been drafted,which was recommended by the WB. PresidentChandrika Bandaranayake and her party whowere in control during the major part of the fouryears when this PRSP was formulated nowopenly disagree with the privatization policiesin the PRSP, particularly the privatization of thestate enterprises. Even considering politicalposturings, there is still a big question aboutwho in fact “owns” these proposals.

The most recent experience is a submission bya delegation representing about 200 women’sorganizations from all sectors of society, includ-ing some of the larger national level women’sorganizations as well as grassroots women fromfarms, fisheries, plantations and the industrialsector. The delegation met the WB’s CountryDirector on May 6, 2003 to state that theyopposed the entire PRSP package and demandedthat opportunities be made available for organi-zations of the people to make alternativeproposals. The Country Director said that it wasthe government of Sri Lanka who is responsiblefor the PRSP, and stressed the importance ofpeople’s organizations to put up the pressureon the government to make changes.

It is not difficult to understand that govern-ments, though elected, have to comply andagree to whatever the WB wants, including theapproval of experts in the government planningprocesses. This is because the governments andthe local elite classes that they represent drawtremendous benefits from such plans and theycan always give the excuse that they “cannot doanything since this is the only way to secure WBloans”. In the 25 years of structural adjustmentin Sri Lanka, a very small group of very richpeople has emerged. It is this group that has

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become the most influential and powerful groupthat decides the nature of government and whatthe government should do. This is anotherserious flaw in the World Bank’s argumentabout country ownership.

It is not the poor who violate the principles of“good governance”, but the governing whosemain interest is to stay in power.

REGAINING THE POOR’S ROLE IN POVERTYREDUCTION

Past efforts failed, and the new PRSP initiative isfull of rhetoric violated at every turn. The biggestgap in existing poverty reduction strategy is theabsence of the poor themselves. Poverty is anexperience most understood by the poor, hence,they have the most to contribute in terms ofinsights. They are also the ones best to imple-ment poverty reduction strategies.

The World Bank’s definition of Poverty is “nothaving food when hungry, not having medicinewhen sick, not having proper shelter, not havingthe right to participate in decisions and nothaving human dignity”. If we are looking atways of reducing this poverty, to begin with,there are very simple and easy ways in which thepoor themselves can use the resources that theyhave to reduce their poverty considerably.

Majority of the people in Sri Lanka still live inthe villages and they depend on land as theirmain source of livelihood. This makes theNational Land Use Policy which proposes thatthe “dependence on land for livelihoods andemployment should be minimized” a strangeproposal. It not only ignores the reality ofagricultural Sri Lanka, but also undermines thepotential of agricultural development for povertyreduction. It is essential that people’s secureaccess to land and other natural resources isnot denied. But in Sri Lanka, as in many othercountries, the accumulation of land and othernatural resources in the hands of a few fails toprotect the poor’s last means of survival.

The potential of the poor people themselvesparticipating actively to reduce their povertyshould be encouraged to a much greater extent.Strategies for poverty reduction must then beaimed at removing the existing obstacles thatpeople face in utilizing the resources availableto them, using the creative potential of suchpeople to meet their most essential needs.

In ancient history land and natural resourceswere not privately owned. In addition, there werearrangements and regulations to ensure thatthese resources were used sustainably. These arevalid considerations even today. In Mahawansa,the oldest written history of Sri Lanka, it is saidthat Arihath Mahinda who brought Buddhismto Sri Lanka preached to the King, Devanam-piyatissa, who was then hunting deer thus:“King, this forest belongs to the birds of the air,and the animals that roam the forest, as muchas it belongs to you. You are only the care-takerand not the owner”.

The judiciary in Sri Lanka used this statementwhen the government was given a verdictagainst selling the Eppawela phosphate depositsto a US company, since this resource and thesurrounding environment belong to the peopleand not to the government to sell it off fordestructive exploitation. The government, thecaretaker, has the responsibility to see thatneither human nor animals and other livingbeings are deprived of the right to use the livingresources, given to them by nature for free. Useof these essential resources for profit deprives thepoor and the other living beings of access, andgoes against their natural rights.

Sustainability was possible in the ancientirrigation systems and in the traditional agricul-ture practices since achieving this was consid-ered the joint responsibility of all. The poorpeople who are pushed out of the economicoperations within the globalised market areplaced in a similar position where they have todepend on these collective efforts for survival.They also cannot acquire the “destructive”technological capacities and aspire to reachdestructive consumption capacities that the

49

world needs to eliminate if it is to survive.Therefore, all these factors could be seen not asdisadvantages but as factors that provide them“comparative advantages” in becoming creatorsof a “better world” for themselves and the others,not only for humans but for all other life forms.

The proposal of “connecting to growth” shouldbe seen with its benefits as well as costs. Thosewho succeed in connecting to growth should notbe prevented from doing so, and indeed mustbe encouraged. But the poor should not besacrificed so that a small few can make thatconnection. The alternatives are largely for thepoor to develop their own agenda and strategyto directly use their potential and capacities toovercome their situation of poverty. The poordoing poverty reduction themselves will evenbe a big contribution towards “overall growth”.Susan George said that “the market todayexcludes two thirds of the worlds population.They cannot enter the market and they are nolonger needed in the market, so the systemexpects them to disappear. But, 2/3 of the worldpopulation will not simply agree to disappear,so they will create a world where they can live.This is where the hope for the future of the worldlies.”

There are actually existing alternatives andexperiments that alleviate the situation of poorcommunities. There are small scale strategiesthat prove to be helpful in a big way at a fraction

of the cost entailed by huge infrastructureprojects. They need only be recognized, encour-aged and promoted. If people will be indebtedanyway, they should at least have a say on whatthey should be indebted for. No poverty reductionattempt will ever succeed if the poor is continu-ously regarded as passive actors in its implemen-tation.

Sri Lanka, a country making a tremendouseffort to “regain” peace after decades of war andviolence could face a worse situation of reemer-gence of war, violence and political repression.This is pushed by poverty, and more specificallyby the increasing burden placed on the poor tosubsidize the rich.

Endnotes1 This article is an excerpt from Regaining Sri

Lanka and the PRSP: Compelling the Poor toSubsidized the Rich prepared by Mr. SarathFernando of MONLAR on behalf of the Alliancefor Protection of National Resources andHuman Rights (ANRHR) in May 2003.The full paper may be downloaded fromwww.geocities.com/monlarslk. The authormay be reached at monlar@sltnet.lk.

2 Connecting to Growth: Sri Lanka’s PovertyReduction Strategy: June 2002, page 10.Sri Lanka’s Poverty Reduction Strategy Paper(PRSP): Compelling the poor to subsidize therich

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People who have criticised the MDGs for beinguninspiring at best would marvel at the ThaiPrime Minister’s recent announcement thatThailand will wipe out poverty in Thailandwithin 6 years. People who are familiar withthe Prime Minister’s triumphalist style wouldassume that this announcement is a directchallenge to the MDGs’ 2015 target by halvingthe timeframe. No one would put it past himto try to beat the UN at its own game, and theWorld Bank and IMF, who were all clamberingon the same poverty reduction bandwagon. Forthose scoffing about the lack of political will,here is an ardent example that is looking forworld-wide recognition.

Poverty incidence in Thailand had been decreas-ing in the 80’s and early 90’s as Thailandenjoyed a boom in the export-oriented manufac-turing and services industries. Millions of youngpeople moved out of unpaid work in family-based agricultural production into the factoriesand other urban businesses where they could atleast try to bargain for a legally establishedminimum wage. The financial crash of 1997,however, set the record back by about a decade;instead of the of a 1997 poverty ratio of 10.8 %which trends had predicted, Thailand ended upwith 12.9 % or 7.9 million poor people in 1998.The number increased further to 9.9 million in1999. This figure has purportedly declined sincethen, since Thailand’s GDP has been growingagain after the huge contraction of almost 10%in 1998.

The National Economic and Social DevelopmentBoard (NESDB) set the income poverty lineat about 800-900 baht per person per monthdepending on locality. At least this was calcu-lated on the basis of minimum calorie intakerequirements at local prices, a much morecredible measurement than the artificial $1

dollar a day commonly used by the World Bank.Alas, however, at the current exchange rate, thisis only $0.65-0.75 per day.

Applying this measurement to income statisticscompiled at the subdistrict and district levels, theNESDB announced a couple of years ago thatthey had located the poorest villages in PuaDistrict in the hills of the Northern province ofNan. To their amazement, the villagers met thisnews with great consternation. The villagerswere reported in the press as insisting that theyled healthy and peaceful lives surrounded by stillplentiful natural forest resources and dismissedthe label by simply saying “We’re not poor”.The quest to find the poor by these meansseemed to have come up empty-handed andthe matter was dropped from the previousgovernment’s agenda.

The fact that the poor have been difficult toidentify in conveniently big numbers may haveprompted Prime Minister Thaksin Shinawatrato launch the “war on poverty” with a planto invite them to register themselves with theauthorities. A pilot project is being carried outin 8 provinces to register poor people underseven different categories: landless farmers,the homeless, people engaged in undergroundbusinesses, workers who fell victim to overseasjob scams, needy students, people facing bank-ruptcy and low-income earners in need ofhousing. The latest count after a week ofregistration was 50,000.

Meanwhile, the tens of thousands of villagersfrom various corners of the country, whogathered in front of the government house for99 days in 1997-98 under the banner “Assemblyof the Poor”, have not been recognised as asuitable target for government poverty reductionprogrammes. These people were the real life

WAR ON POVERTY IN THAILAND: A POLITICAL

WILL AND WON’TBY CHANIDA CHANYAPATE BAMFORD

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representations of the reverse of fortune thatwould befall the Pua villagers if the governmenthad their way in bringing “development” tothe poor regions of the country. They were allvictims of large development projects, mainlyhydro dams and reforestation projects, that haddeprived them or were threatening to deprivethem of their primary means of livelihood, i.e.land, forests, rivers and sea.

Vanida Tantiwithayaphithak, Advisor to theAssembly of the Poor, pointed out that wealth forthe rural population does not lie in the accumu-lation of worldly goods but in nature. Naturalwealth has been a sure means of poverty preven-tion for the rural people. Since the wholepopulation is supported by the same naturalresource base, then when urban people, who aremore engaged in the market economy, utilisemore and more resources to create materialwealth for themselves, there will be more andmore poor people in rural areas. Some of themwould turn into the urban poor as the ruralcommunities became too resource-stressed tooffer a living. Her plea was that the rich mustnot shun the poor because they themselves wereparty to the cause of poverty.

The present government under the leadershipof billionaire Thaksin Shinawatra, beingcomposed of mostly self-made business entrepre-neurs, could hardly be expected to understandthe community self-sufficiency and sustaina-bility aspirations that characterised the demandsof the Assembly of the Poor. Since the urbanbusiness class needs energy, the coal-fired powerplants that were bitterly opposed by localcommunities have only been delayed until realneeds become more urgent, while the Thai-Malaysian gas pipeline went ahead after thebrutal suppression of local protesters. Calls forland redistribution fell on deaf ears and thou-sands of landless families that were farmingunused tracts of land acquired by speculatorsthrough dubious means were violently evictedand arrested. It soon became obvious that whilethe government openly embraces povertyeradication as a cause, it is not on the side ofthe poor, but rather of the class that competeswith the poor for use of natural resources. Anti-poverty, for the government, means being anti-poor.

Thaksin’s newly-established nationalist ThaiRak Thai party won a landslide in the 2001election on the promise of 3 popular program-mes: universal health care at 30 baht per visit;a one million baht revolving fund for eachvillage; and a debt moratorium for farmers.A government advisor described these as mecha-nisms for a transfer payment from the rich to thepoor, though it was apparent to anyone that onlythe first programme fitted the bill. Other micro-finance schemes soon followed: people’sbanks; the one-tambon-one-product (OTOP)programme; the assets-to-capital conversionprogramme. The purpose was to turn as manypeople as possible into small entrepreneurs whowould need loans to produce goods and servicesfor the market. When the supply side stimulusdid not produce a fast enough effect on theeconomy, a direct sale strategy was also imple-mented in the form of ‘uea athon’ low-costhousing, computers and insurance sales.

Within the 2 years of ‘pro-poor’ dole-outs fromthe public purse, with state-owned banksspurring consumption growth, the economypicked up steam again. The government stageda triumphal celebration as the IMF debt waspaid back in full before the due date. Bigbusinesses in real estate, construction andtelecommunication are expanding. Thailandis firmly back on the growth path; Mr. Thaksinconfidently predicts 8% growth in 2004 and aneven better 10% in 2005.

What happened to the poor so far? VeeraponSopa, rural activist advisor to the Assembly of thePoor, reported that only 30% of the one millionbaht revolving funds were used for productiveactivities, and among these activities, only 60%are expected to be successful enough to repaythe loans. While the government might countincreased consumption of mobile phones andmotorcycles as well as refinancing old debts aslegitimate activities under the economic stimu-lus programme, many were concerned aboutsuch schemes that would likely entrap peopledeeper into indebtedness.

Chang Noi, a columnist in the Nation newspa-per, noting that the Thai companies thatsurvived the financial crash needed ‘a risinghome market” to prosper as “the export

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economy was all taken over by foreigners”,labelled the government’s rural policies “capital-in-crisis”. They are “actually designed to helpthe rich by appearing to help the poor. Insteadof trickle-down these are gush-up” (The Nation,5 August 2002).

The 30-baht-per-case health scheme has beena boon to human security to the poor, but thedamage to the public health service is only nowbecoming apparent. With dwindling financialresources to pay for growing queues for treat-ment, state hospitals have had to engage is somesavage cost-cutting measures. The slashingof overtime payments for government doctorsstarted a trickle of resignations into the morelucrative private sector that now seems to havepassed the tipping point. As more leave, thepressure on those remaining becomes intoler-able.

The rural debt situation has shown no sign ofimprovement. According to the latest report bythe Thailand Development Research Institute(TDRI), an independent think-tank, thosecurrently living below poverty line have a debtburden of 9.8 to 19.8 times their income, andthe lower the income, the higher the debt ratio.Even with an official counter report by theNESDB that household debts were not that bad,only 13 times household income, the future doesnot look so rosy for the poor, especially chroni-cally indebted farmers who constitute more thanhalf the impoverished population.

Deputy Prime Minister Somkid Jatusripitakassured government critics that the governmenthas in fact “opened the door” for people; “ifthey’re not allowed to create debts (invest), theycan never pay off debts”, he said (Bangkok Post,3 December 2003).

According to Veerapon, this kind of talk neglectsthe fact that market mechanisms favour largercapital. Thai farmers have been borrowing toinvest in crop production every year since theBank of Agriculture and Agriculture Cooperatives

(BAAC) was set up decades ago. The result hasbeen ever deeper debt without any prospect ofgetting out of the vicious debt cycle. Most optednot to join the three year debt moratoriumsimply because they need to borrow anew toinvest every year as there was never any savingsleft after paying back their debts. One solutionfor farmers’ poverty would lie in ensuring thatfarmers, instead of just a few hundreds oftraders, actually receive the government-guaranteed prices of produce in the domesticmarket.

Veerapon, like many farmers, questionedgovernment economic policies that open thedomestic market for exploitation by large-scalecapital in the name of efficiency and promotewealth accumulation instead of distribution dueto low rate of direct taxation. In fact, personalincome tax rates in Thailand are among thelowest in Asia. It is not surprising, therefore,that income disparity in Thailand has been thehighest in East Asia, higher than Malaysia andthe Philippines, and has been increasing whileneighbouring countries with similar economieshave seen a trend to greater equity. Instead ofpoverty reduction, why don’t we talk aboutwealth reduction and redistribution, Veeraponproposed to the Asia Pacific Civil Society Forumon Achieving the MDGs.

Any such re-thinking by the current governmentis unlikely as long as it continues to believe thatit knows best what is good for the poor, ratherthan asking the poor themselves. Ironically, thisis just what the UNDP did in its 2003 HumanDevelopment Report for Thailand. The Reportquotes an elegant explanation from one villager,a member of the Assembly of the Poor, whoselivelihood disappeared when the Pak Mun damwantonly destroyed the fisheries on which wholecommunities relied.

“We know that the thing which has made uspoor is not that we’re idle and don’t want towork. We’re poor because of ‘development’.”

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We the representatives of non-governmentand people’s organisations, gathered here inBangkok from 14 countries in the Asia Pacificregion, for the Asia Pacific Civil Society Forum,6-8 October 2003 to give inputs into the inaugu-ral meeting of the Committee on PovertyReduction.

We have the following concerns and recommen-dations to make:

• The MDGs sideline the critical and impor-tant issue of human rights. Certain normsare particularly pertinent in addressing theproblem of poverty, such as effective non-discrimination, the recognition of vulner-able groups, the right to an adequatestandard of living, the right to to freedomfrom hunger, the right to economic self-determination and the right to develop-ment. The Committee should affirm andoperationalize rights based approachesto poverty eradication. Civil societyorganisations have already adopted thisapproach in their fight against poverty.

• The MDG itself formulates the problem ofpoverty too narrowly in terms of vision,scope and direction. It cannot simplybe reduced to a numerical target to beachieved by a certain date and by technicalfixes. Durable and sustainable solutions topoverty will require the active involvementof the poor and civil society, a more com-prehensive understanding of the root causesof poverty and its multidimensional anddiverse consequences and the right policies.

• In this respect, the practice of measuringpoverty in terms of income and consump-tion levels is inadequate. We urgethe Committee to take into considerationpolitical, social, cultural and human rightsdimensions, determined by factors likeclass, gender, race, geography and ethnicity.This broader definition is necessary indesigning more sensitive and responsivepolicies and programs on poverty. We haveoffered a preliminary conceptualisationof this in our “working paper.”

• In order for participation to be meaningfuland genuine, responsibilities and roles inthe fight against poverty should not bedefined for civil society and the poor.The current process of formulating andimplementing poverty reduction policieshas not been successful in tackling the rootsof poverty. This is due to the fact that thepoor themselves are excluded in the wholeprocess. We recommend the followingprinciple guidelines to be adopted byUNESCAP and every individual governmentin the Asia-Pacific region.

- At the macro level, decisions on povertyreduction policies and projects mustseek the consultation of the civil societyand organization of the poor prior tothe implementation. The participationprocess must be transparent andaccountable.

- At the micro level, poverty reductionproject must seek the majority endorse-ment of the poor in the affected areasprior to approval

STATEMENT OF THE ASIA-PACIFIC CIVILSOCIETY FORUM ON MILLENNIUMDEVELOPMENT GOALS AND THEERADICATION OF EXTREME POVERTY ANDHUNGER6-8 October 2003BANGKOK, THAILAND

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- The indicators of these processes shouldbe reflected in annual assessments

• The MDG does not provide an in-depthanalytical review of policy reform andinstitutional change. Hence, to link theMDGs with a particular set of policyprescriptions would be the wrong approach,no matter which policies are prescribed,precisely because there is no single“correct” policy for all societies andcircumstances. In this respect, externallyimposed one-size-fits-all policies such asthe way the current PRSP initiative of theWorld Bank and the IMF is being practicedare to be rejected. We demand that theCommittee and UNESCAP actively involveand recognise the poor as rightful partici-pants in any formulation of povertyeradication strategies and policies.

• Successful development efforts requireappropriate policies at domestic, regionaland international levels. However, theinternational economic structure is in-equitable and currently antagonistic to theachievement of the MDGs themselves. Thecommittee should urgently address theramifications of globalisation and tofacilitate the formulation of the necessaryreforms.

• Attention and financial resources arediverted away from the priorities of directlyaddressing poverty and hunger and insteadare allocated to debt servicing and militaryspending. There is an urgent need tore-orient government expenditure. TheCommittee should identify clearly theresources needed for governments inimplementing poverty eradication policiesand programmes. Moreover, given themultidimensional aspects of poverty, theCommittee must also consider the imple-mentation of conscientious poverty-budgeting in all aspects of governmentexpenditure. Finally, sufficient resourcesshould also be identified and channelledto facilitate the participation of civil societyand the poor.

We challenge the Committee to adopt a morecomprehensive understanding of poverty andhunger and intensify its work towards povertyeradication urgently.

Signed by:

★ The Asia-Pacific Civil Society Forum, 6-8October 2003

★ Asian Forum for Human Rights and Develop-ment (Forum Asia), Regional

★ ActionAid Bangladesh★ LOKOJ, Bangladesh★ The Womyn’s Agenda for Change Project-

Oxfam Hong Kong, Cambodia★ ECREA, Fiji★ Center for Organisation Research and

Education (CORE), India★ Solidaritas Perempuan, Indonesia★ Institute of Global Justice, Indonesia★ Federation of Indonesian Peasants Unions

(FSPI), Indonesia★ Third World Network, Malaysia★ Rural Reconstruction Nepal/South Asia

Poverty Eradication Network, Nepal★ Partners With Melanesians Inc., Papua New

Guinea★ Tebtebba Foundation, Philippines★ HomeNet Philippines★ Movement for National Land and Agricul-

tural Reform (MONLAR), Sri Lanka★ Shan Women’s Action Network (SWAN)★ Asia-Pacific Forum on Women, Law and

Development (APWLD), Regional★ La’o Hamutuk/Institute for Reconstruction

Monitoring and Analysis, Timor Leste★ CARE International, Vietnam★ Assembly of the Poor, Thailand★ NGO Coordinating Committee on Develop-

ment, Thailand★ Focus on the Global South, Regional

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ContentsPreface 1

The Millennium Development Goals (MDGs) 2and the Eradication of Extreme Poverty and HungerDiscussion Paper

The Millennium Development Goals and the 15Poverty Reduction Strategy Paper: two wrongs don’t make a rightBy Nicola Bullard

Poverty Reduction Strategy Papers: A Poor Package for Poverty Reduction 17By Jenina Joy Chavez Malaluan and Shalmali Guttal

Privatising Human Rights - the impact of globalisation on access to 33adequate housing, water and sanitationBy Miloon Kothari

Missing the Mark, or Deliberately Misleading? 37The World Bank’s Assessments of Absolute Poverty and HungerBy Shalmali Guttal

Subsidizing the Rich1 Or Why the PRSP Will Not Reduce Poverty in Sri Lanka 43By Movement for National Land and Agricultural Reform (MONLAR)

War on Poverty in Thailand: A Political Will and Won’t 50By Chanida Chanyapate Bamford

Statement of the Asia-Pacific Civil Society Forum 53on Millennium Development Goalsand the Eradication of Extreme Poverty and Hunger

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