International Development Assistance

Introduction• International Development Law (IDL) involves the re-distribution of

resources against the arbitrary and unfair distribution of world resources• IDL covers numerous spheres of law and is important to the Int’l

community for the following reasons:1. The welfare component of IEL is IDL, thus there is a relationship between poverty elimination, international peace and security and the overall welfare of the international community.2. Operating in a global economy means that the origin of some of the processes that facilitate development provokes international concern3. Development concerns are set in justice

• The evolution from colonialism (selfishness) to the New International Economic Order, has led today to the increased focus on elimination of poverty at the practical level and the realization of fundamental human freedoms and international distributive justice at an ideological level

• IDL however suffers from the lack of a proper constitutional and institutional framework in the international sphere.

Cont…• Institutionally though, development financing exists in the context of the

World Bank Group . Numerous references have referred to the WB as the premier development institutions. This is replicated at the regional level by development banks.

• Other institutions & programs involved in global development initiatives as defined by the Millennium Development Goals (MDG’s) include the United Nations Development Group (UNDG) i.e. UNDP, UNICEF, UNESCO, ITU, etc

• In understanding IDL certain things need to be kept in mind: It’s a branch of IEL that can be politicised and polarised into the developed and developing states (hasn’t it already?) So we should read and listen to people from all levels of economic development (but really isn’t it speakers and writers from developed States who write and speak authoritatively on these issues?)

• In 2000 the UN set MDG’s at the millennium summit to address: poverty, hunger, diseases, illiteracy, environmental degradation and gender discrimination

IDA & World Bank Group• WBG made up of five institutions: IBRD, IFC, IDA, ICSID & MIGA.• International development assistance can take the forms of : aids, loans

debt relief, loan guarantees, conflict resolution mechanisms & technical assistance.

• Sources of such assistance are: States giving bilateral aid, WBG, IMF, regional development banks, UN agencies ad private enterprise.

• The object of development can be the State or the private sector• Assistance can be given from a single or multilateral institutions. The

assistance can be directed at an economy as a whole or a specific sector or indeed a specific project.

• The complexity of Int’l development led to the Monterrey Consensus (in Mexico 2002) which was chiefly aimed at:1.Progressing the MDG’s2. Develop consensus on financial resource mobilisation3. Conditions for development and reception of development resources

• The leading actions that were adopted at the MC were:

Cont…• 1. Mobilising domestic financial resources (coherent macro-eco nomic

policies, good governance, fighting corruption, national infrastructure)2. Mobilising international resources (investment protection, avoidance of double taxation, fair competition, corporate responsibility, introduction of new private & public sector financing mechanisms,)3. International Trade as an engine for development (promotion of a rule based, open, non-discriminatory & equitable trading system along with the implementation of the Doha agenda, 4. Increasing international financial & technical cooperation for development (official development assistance, national ownership of development plans & good governance, 5. External Debt (sustainable debt financing, sound macro-economic policies,

• The MC coordinates assistance through the WBG

Functions of WBG• Functions the IBRD include:

-Assist in the reconstruction & development of territories of members, reconstruction of economies disrupted by war,-Promote long run balanced growth of international trade & maintenance of equilibrium in balance of payments

• These functions are achieved through:-Facilitation of capital investment-encourage private investment by means of guarantees, loan participation,-Supplement private investment through Banks own funds-Encourage international investment

• The IFC, MIGA and ICSID are geared more towards assisting the private sector

• IFC’s purpose is to encourage productivity of private enterprise & thus supplement the IBRD. IFC does this through the following:-finance the establishment and growth of productive private enterprises-Consolidating investment opportunities; foreign & domestic capital-Create conditions for investment flow in member States

Cont…• MIGA’s objectives are to encourage the flow of private investments for

productive purposes in developing countries through:-Issuing guarantees against non-commercial risks for investments;-providing complementary activities to encourage the flow of investments

• ICSID provides facilities for conciliation & arbitration of investment disputes btw contracting States & nationals of other contracting States

Institutional Organization of the WB1. Membership is near universal & is linked to the membership of the IMF &

IBRD. IBRD membership ceases when IMF membership ceases. Membership of IFC & IDA ceases when IBRD membership ceases. The MIGA doesn’t have any such cessation rules however participation thereon is linked to IBRD membership. ICSID has no cessation provisions

2. IBRD, IFC, IDA & MIGA have a board of Governors, Executive Board & President. ICSID has an Administrative Council & a Chairman.

3. There is a weighted system of voting at the IBRD, IDA, IFC & MIGA. Voting in ICSID is one vote per member.

4. The Board of Directors is responsible for the daily management of the functions of their respective institutions incl. loan approval & operational policy.

5. The interpretation mechanisms of the IBRD, IFC, IDA & MIGA are similar to the IMF in that questions of interpretation can be raised with the BoD and onwards to the BoG whose decision is final.

6. The respective constitutions of the WBG institutions contain provisions for amendment & special voting majorities for certain types of amendments.

Cont…7. The Articles of Agreement for IBRD, IDA & IFC don’t contain specific

dispute resolution mechanisms though MIGA has a specific dispute resolution procedure.-Disputes are generally settled through negotiation failure to which arbitration is pursued.

8. All the individual institutions enjoy separate international legal personality with the accompanying privileges and immunities.

9. The WBG is categorised as a specialised agency of the UN. The WBG co-operates with related international economic organisations.-the WBG’s closes competitor is the IMF with the chief distinction being that the WBG has a long term resource allocation & economic development stand, while IMF has a short term economic focus.

10. Each member has to subscribe to a certain number of shares or subscribe funds; In the case of ICSID they have to make payments to meet ICSID expenses. The contributory amounts are determined by the respective institutions

Cont…10. -In the Banks case only a small portion of the capital is actually paid up at

the time of subscription the rest remaining callable.-Expense contributions to ICSID are in proportion to the capital stock of the Bank

11. The WBG is serviced by an Independent Evaluation Group (IEG) which is responsible for the assessment of the relevance, efficacy & efficiency of the WBG operational programmes, and its contribution to development effectiveness.

Technical & Financial Operations• The WBG financial operations are two fold: revenue raising operations

and financial assistance to Members. Assistance by WBG is either to States or Individuals

• The IBRD and the IDA focus mainly in giving financial assistance through loans, loan facilitation and giving guarantees to Member States.

• The IBRD in lending to an individual requires the Member State in whose territory the loan is being made to guarantee the repayment of the principal loan & interest.

• In the IDA’s case financing of private individuals may also require a governmental repayment guarantee though is extremely unlikely in view of the length of the loans (upto 40years) & the highly concessional terms granted.

• IBRD loans are granted to middle-income countries especially where they cannot obtain similar assistance on reasonable terms. However as their credit worthiness improves they become ineligible to use IBRD resources.

• IDA clients are confined to lesser developed countries.

Cont…• The loans by IBRD and Ida are generally intended to finance development

or reconstruction projects. These could include hard (dams and roads) or soft (education, family planning) projects.

• The lending process involves: project identification, appraisal, negotiation & approval, implementation & supervision, and post evaluation.

• Loans can be granted under special circumstances with the prior approval of the Executive Board e.g. Structural Adjustment Loans & Sectoral Adjustment Loans.

• The Bank also grants hybrid loans combining sectoral & structural focus• As of 2004 the IBRD & IDA grants loans/credit facilities mainly in two

areas; Investment Loans & Development Policy Loans• Loans can either be direct (A) loans or facilitate lending through private

sector institutions (B loans) (loan syndication programme)• General loan conditions are set out in the Articles of Agreement of the

IBRD and the IDA

Cont…• Any financing (loan or guarantee) to a member State is an international

agreement governed by international law, whereas a loan to a private party under a by the member country in question is not an international agreement governed by international law though it is international in character.

• Some of the key considerations for grant of loan include:-financing is for reconstructive and development purposes;-Loans cannot exceed 100% of banks subscribed capital, reserves, surplus;-IBRD must act prudently, both in interests of borrower and membership;-IBRD terms and conditions must be reasonable & suitable;-Financing for projects rejected by a member shall not be provided;-Financing to be given only upon recommendation by the loan committee;-Agreement to contain a negative pledge clause preventing a member from giving other creditors priority over Banks interest;-