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Development Channel

The Development Channel highlights big debates, promising approaches, and new research and thinkers addressing opportunity and exclusion in the global economy.

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Mossack Fonseca law firm sign is pictured in Panama City, April 4, 2016.
Mossack Fonseca law firm sign is pictured in Panama City, April 4, 2016. Carlos Jasso/Reuters

Corruption Brief Series: How Anonymous Shell Companies Finance Insurgents, Criminals, and Dictators

The latest paper in the Corruption Brief series from the Civil Society, Markets, and Democracy program at the Council on Foreign Relations was published this month. In the brief, Dr. Jodi Vittori, senior policy advisor at Global Witness, addresses the myriad problems posed by anonymous shell companies – corporate entities with few or no employees and no substantive business, which offer a convenient way to privately move money through the international financial system.

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Human Rights
Rethinking Accountability at the World Bank
Emerging Voices features contributions from scholars and practitioners highlighting new research, thinking, and approaches to development challenges. This article is by Natalie Bridgeman Fields, Esq., founder and executive director of Accountability Counsel, and Kindra Mohr, Esq., Accountability Counsel’s policy director. Accountability Counsel is a non-profit legal organization that defends the environmental and human rights of communities around the world that are harmed by internationally-financed development projects. The World Bank faces a disconnect between its mission to serve the poor and the effects of its projects, some of which displaced 3.4 million people in the world’s most fragile regions over the past nine years. Last month, World Bank President Jim Yong Kim admitted to known, longstanding problems with the Bank’s resettlement policies and released three internal reviews revealing the Bank’s failure to collect even minimal information on resettlement, such as the number of people displaced and whether they had received remuneration for their displacement. In our own work at Accountability Counsel, we represent people affected by projects funded, designed, or implemented by the Bank. Through their experiences, we have glimpsed how Bank projects not only harm people, but also call the Bank’s legitimacy into question. In response to early resettlement failures, the Bank, in 1993, created an accountability office called the Inspection Panel. The Panel, walled off from Bank management and reporting directly to the Bank’s board of directors, was designed to ensure that projects comply with internal policies protecting human and environmental rights. Since its inception, the Panel has made significant contributions to accountability and transparency, fielding complaints from people harmed by Bank activities and investigating violations of internal policy. However, as recent cases show, the Panel is losing touch with its mission to serve as an impartial check on Bank activities. In one example, the Ethiopian government made use of Bank funding to forcibly evict indigenous people from their land. The Panel’s investigation acknowledged the connection between Bank operations and this displacement. In addition, it found that the Bank did not conduct required project assessments – a flagrant violation of internal policies meant to protect indigenous communities. However, the Panel ultimately failed to find the Bank responsible for the harm, effectively absolving it. Last month, Kim pledged to “do better” and released an action plan outlining steps to “improve the protection of people and businesses that may be resettled as a result of a World Bank-funded development project” and to strengthen accountability. The plan falls short in several ways. It makes no mention of the Inspection Panel and how it can be reformed to realize the Bank’s “renewed” commitment to accountability. The plan was also announced without consultation with the very civil society groups that work on resettlement issues, and thus it does little to quiet lingering distrust of the Bank’s promise to change its ways. A drastic rethink of the Bank’s approach to accountability is necessary. As a start, the Bank should reform the Inspection Panel and make it a robust, independent mechanism to resolve grievances and provide meaningful redress. Specifically, civil society representatives should be involved in the selection of Panel members to safeguard the institution’s independence. Second, to the extent the Panel offers dispute resolution, it must be done by professional mediators adept at dealing with power disparities. Additionally, the Bank must commit to stronger, more comprehensive policies that protect vulnerable communities, taking into account the feedback it has received from civil society groups to ensure that policies better protect human and environmental rights. Finally, the Bank should change the incentive structure for staff. Today, career advancement, in part, depends on quickly completing projects and disbursing money. Going forward, staff should be rewarded based on the benefits that projects bring local communities. These recent failures at the Bank present a legitimacy crisis. To restore its credibility, the Bank needs to rethink its approach to accountability and the reforms needed to achieve it.
Americas
Mexico’s Fight Against Corruption
Corruption allegations and revelations cover Mexico’s front pages. Public officials’ penchant for expensive watches, use of government helicopters for personal errands, and a string of expensive houses facilitated by preferred private contractors have incensed not only Mexico’s chattering classes but also the broader public. 2014 opinion polls conducted by the Pew Research Center show corruption ranks second only to crime in citizen concerns. The challenge of corruption goes beyond just a few bad seeds. A 2013 survey found that one third of Mexicans paid a bribe for a public service. Think tank Mexico ¿cómo vamos? estimates corruption reduces gross domestic product by 2 percent. Due to rampant corruption among judges and police (as well as weak investigation and adjudication systems), the World Justice Project’s international rule of law index ranks Mexico seventy-ninth out of ninety-nine countries, comparable to Egypt and Russia. Things may be poised to finally begin changing. After dragging its feet for nearly three years (anti-corruption promises were part of the original Pact for Mexico signed in December 2012), Congress recently passed constitutional reforms that will provide stronger tools to prevent, investigate, and sanction government corruption. The new National Anti-Corruption System targets the political system, requiring more public officials to report their assets and any potential conflicts of interest, strengthening the hand of federal auditors, expanding asset forfeiture laws, and creating a new independent anti-corruption prosecutor. Transparency International’s Mexico chapter has welcomed the reform, and others, including local think tank Instituto Mexicano para la Competitividad, see it as a step in the right direction. Shifts are already underway at the local level, led by Mexico City. Current mayor Miguel Angel Mancera announced an anti-corruption plan in early 2013 with five main aims: (1) professionalize public servants through training and evaluation; (2) strengthen internal controls; (3) simplify administrative processes; (4) engage citizens; and (5) create an anti-corruption website. Since then, the capital has appointed hundreds of new auditors and nearly doubled the number of investigations. It has suspended over 900 public officials and recovered roughly $9 million in illicit funds. The 21 million person megalopolis now has a citizen advisory council to supervise anti-corruption efforts, made up of business and non-profit executives, academics, and lawyers. And it “names and shames” sanctioned officials and disqualified suppliers through publicly available lists. In New York last week, Mancera signed on with the NGO Open Contracting Partnership (OCP) to become their first city partner to create an online portal opening up the capital city’s public contracts to citizen scrutiny. In their infancy, these reforms have yet to prove themselves, and if they can change the status quo. Mexico City’s nascent trial shows some promise. If Mancera can show visible anti-graft results in the capital city, it could prove a savvy political platform for the 2018 presidential election. This blog has been reposted from CFR’s Latin America’s Moment blog.
Wars and Conflict
Helping Afghan Women Help Themselves
Progress toward women’s rights and empowerment cannot be made without actors on the ground willing to fight for it. This is particularly true in Afghanistan as the United States begins to transition out of its on-the-ground presence and the Afghan government takes on more responsibility for security and stability. Local women’s rights movements will be more important than ever in ensuring Afghan women and girls maintain the strides they have made since the fall of the Taliban. Yet if those willing to stand up for the rights of women are not protected by the government, security forces, and justice system, progress cannot be made. In December 2013, the UN General Assembly passed a resolution to this effect. The document calls on states to protect women’s human rights defenders, acknowledging that “women of all ages who engage in the promotion and protection of all human rights and fundamental freedoms and all people who engage in the defense of the rights of women and gender equality, individually and in association with others, play an important role, at the local, national, regional, and international levels, in the promotion and protection of human rights.” According to a recent Amnesty International report, these protections for Afghan women’s human rights defenders are not strong enough to deter attacks. Consider the story of Rohgul Khairkhwah, a female senator for the Nimroz province in southern Afghanistan: On August 4, 2013, the Taliban attacked Senator Khairkhwah’s vehicle, killing her seven-year-old daughter and brother. The senator was shot nine times, sustaining wounds to her liver, lung, and leg, and necessitating a two-month hospital stay. Though she has kept the National Directorate of Security (NDS) informed of the threats against her, little has been done. “When the threats began, the NDS told her that they were merely ‘designed to create a climate of fear’... Two years later, Senator Khairkhwah still has no answer as to who is responsible for the murder of her daughter and brother.” To improve the status of Afghan women and ensure their ability to participate in public life, such attacks cannot go under-investigated and unpunished. As I’ve continually noted, the best support the United States and other international allies can provide to Afghan women—and ultimately to Afghanistan—is to support these local defenders of women’s human rights. Through projects such as USAID’s Promote, the United States can help to strengthen women’s rights organizations so that Afghan women can continue to advocate for themselves.
  • Wars and Conflict
    India as Regional Power: Promoting Women’s Rights in Afghanistan
    Last month’s decision by President Obama to extend the U.S. military presence in Afghanistan is an important step in securing the substantial American investment there. This extension—which is and should be temporary—is crucial to allow the Afghan government and security forces to build their capacity to maintain stability on the ground. As I have written before, security and stability in Afghanistan is critical for Afghan women and girls to expand upon the gains they have made since the fall of the Taliban. The United States should continue its support of Afghan women through agencies like the U.S. State Department and USAID, in addition to security assistance. However, other regional support for Afghanistan would also be beneficial in promoting Afghanistan’s security, development, and economic growth—therefore ensuring that Afghan women and girls can maintain and build upon the gains they’ve made In a recent CFR Policy Innovation Memorandum, Senior Fellow Alyssa Ayres argues that India could be a useful partner in promoting Afghan stability. Already, “India is the fifth-largest bilateral donor to Afghanistan with over $2 billion in pledged support,” she writes, “India constructed the Afghan parliament building, part of the interprovince Ring Road, electrical lines, and the Salma Dam, among others. India has also trained Afghan civil servants in Indian academies. The Confederation of Indian Industry has trained more than one thousand Afghans in carpentry, plumbing, and welding. The Self-Employed Women’s Association of India—a women’s trade union—has educated more than three thousand Afghan women in microenterprise.” For more on India’s capabilities to advance security, stability, and growth in Afghanistan, read “Why the United States Should Work With India to Stabilize Afghanistan.”
  • Wars and Conflict
    Mr. Ghani Goes to Washington
    This week, during the Afghan President Ashraf Ghani’s White House visit, U.S. President Barack Obama announced that he will delay the schedule for U.S. troop withdrawal from Afghanistan and current troop levels will be maintained through the end of 2015. While I have reservations about the use of U.S. military power abroad more generally, a brief extension of the American military presence in Afghanistan makes sense to secure the substantial U.S. investment there. Obama’s announcement should allay Ghani’s concerns over Afghanistan’s ability to manage the security transition. As the Afghan president said in a CFR meeting on Thursday, “2015 is going to be a very difficult security year… We have demonstrated our capability and will, but we are going to be tested.” Yet in his address to Congress, Ghani maintained an emphasis on Afghan self-reliance. “I know American people are asking the same question as the Afghan people. Will we have the resources to provide a sustained basis for our operation? And the answer is: within this decade, we will.” However, for now, Afghanistan’s own security forces have limited airlift capability—a serious shortcoming in light of Afghanistan’s mountainous terrain. Afghanistan also currently lacks the high-end intelligence-collecting technology that American forces possess and have used to secure Afghanistan against insurgents. While the United States cannot and should not remain in Afghanistan indefinitely, Obama’s decision reflects the realization that the transition envisioned by both the U.S. and Afghan governments cannot happen overnight. Slowing the pace of U.S. withdrawal will allow Afghanistan time to build up their self-reliance and capacity without fear of collapse. As I have written before, the success or failure of the security transition has implications for women’s rights in Afghanistan. Afghan women have made incredible strides since the fall of the Taliban in 2001—especially in education and health care, as Ghani reminded Congress. And the Afghan president has plans to continue increasing women’s rights and opportunities in Afghanistan. In his address to U.S. lawmakers, Ghani described the three pillars of his approach to empowering women: education, economic opportunity, and a “mental and cultural revolution… over the treatment of women.” Empowering Afghan women and girls is critical to their own dignity and wellbeing first and foremost, but it also has benefits for Afghanistan’s prosperity and stability more broadly. Yet without a foundation of security, none of these reforms will be possible; women and girls have been under attack on their way to work and school, and female politicians have been threatened. A short extension of the U.S. presence in Afghanistan—to provide more time for the Afghans to strengthen their own security apparatus—is critical for the development of Afghanistan’s programs for women. Of course, there are good reasons to be wary of the extension of the U.S. military presence—given that it is reportedly in part geared toward bolstering capacity for U.S. secret drone strikes from United States military bases. Cross-border CIA drone strikes in Pakistan’s tribal areas have caused resentment against the United States, are troubling from a legal standpoint, and set a worrisome precedent for other governments to use drones strikes against American citizens and potentially against political dissidents and other disfavored groups. I am also generally cautious about the use of American military power and wary of the trend toward militarizing women’s human rights, when diplomacy and soft power may be more effective and sustainable, less costly, and more protective of American and Afghan lives. Plus, military interventions can undermine—rather than support—local women’s rights efforts. However, in the short term, maintaining U.S. troops in Afghanistan is a practical step, and since their mission is advisory, not combat, the dangers of exercising U.S. power is reduced. Plus, whether through U.S. Army female engagement teams or USAID and State Department programs, the U.S. strategy in Afghanistan has actually supported and worked in partnership with community-based women’s organizations. Supporting such local capacity continues to be the right and smart thing to do. In an ideal world, military power would never be necessary to create conditions of gender equality. Yet given Afghanistan’s history—including the allegations of fraud in last year’s election that delayed the political transition and Ghani’s ability to stand up a new government quickly—the United States would be remiss if it did not extend support to Afghanistan while it regains its security footing.