World bank/NGO review of adjustment - meeting in Oslo 6 March 1997

Statement by Ms. Kari Nordheim-Larsen, Norwegian Minister of Development Cooperation

Oslo 6 March 1997

Introduction

I would first of all like to thank Lyn Squire and his colleges from the World Bank and Douglas Hellinger and Roberto Rubio from the NGO Network for coming to Norway to present the joint World Bank/NGO Structural Adjustment Participatory Review Initiative - SAPRI. I would also like to thank Diakonhjemmets internasjonale senter (DiS) and ForUM for organizing this meeting.

Economic reforms, social development, involvement of NGOs and popular participation are important concerns in Norwegian development cooperation. When we were first introduced to the joint World Bank/NGO review of Structural Adjustment, we felt that this was an initiative that incorporated all these concerns. Furthermore, we were convinced that it could make an important contribution towards improved implementation of reform programs and social development. I am pleased to announce that the Ministry of Foreign Affairs has approved a grant of 10 million Norwegian kroner to the initiative, and thus is a major contributor.

The World Bank has over the past years come to appreciate the importance of taking the social aspects of adjustment into consideration. Economic reform programs have been adjusted accordingly. I take the opportunity this morning to focus on how the Norwegian Government has worked with the World Bank to bring about this change in the Bank's policies. Furthermore, I want to highlight the importance of NGO involvement in the development process, and finally touch upon what I expect will come out of this Review Initiative.

Let me continue with some words on Structural Adjustment Programmes

For almost two decades, the World Bank has been associated with the concept of Structural Adjustment. The debate on Structural Adjustment Programmes has tended to be polarized. On the one end of the scale we have had the so-called "hard core" economists of the World Bank. On the opposite side we have had many of the NGOs. Very often we have found ourselves caught in a situation where the climate for constructive dialogue has been poor. However, there has been a convergence of views in the last couple of years. My hope is that this World Bank/NGO initiative will make it possible for the Bank and the NGOs to develop joint strategies to achieve what is our collective goal; namely economic and social development in the world's poorest countries.

One of the areas subject to public criticism, has been the Bank's reliance on the market and

economic liberalization as the main strategy for development - as reflected in the Bank's Structural Adjustment Programmes. The programmes have been criticized for having negative consequences on the poor - particularly women - and on the environment.

Indeed, the impact of Structural Adjustment lending has been diverse, and there is no doubt that the design and implementation of some programs left a lot to be desired, especially in the early days. Still, it is simplistic to see adjustment policies as the cause of the problems in many developing countries. World Bank critics tend to forget that there were reasons for introducing Adjustment Programmes.

Structural reforms are vital to overall economic success in many countries. We have pointed out that in order to provide favourable conditions for private sector growth and employment, you must enable countries to make critical public sector investments in education and health. It is the poor who suffer from high inflation. In many countries, vast expenditures on state owned enterprises could be better spent on basic social services. In Tanzania, for example, government subsidies to such enterprises equal 72 percent of central government spending on education, and 150 percent of health spending. In such cases, adjustment is the cure for distorted spending priorities, not the disease. Sound macro economic management is a necessary precondition for our work for social development and poverty reduction to succeed.

The Bank has traditionally relied heavily on market mechanisms to promote development. Although few will dispute that market incentives are needed in the development process, it is important to stress that more market is not in itself enough to solve the problems in developing countries. A strategy seeking increased welfare for the population cannot rely solely on the market. The complexity of the problems in the poorest countries show us that development is more than just a matter of getting the policies right. The basic structures necessary to make market-based development work are simply not in place. State intervention is required to counteract market failure.

Norway has for a number of years advocated the need for more emphasis on the social dimension of adjustment in the Bank's policy making bodies. We have followed up our work at policy level with providing finance for selected activities in the Bank. These activities include documentation of the interlinkages between economic reforms and social development. One conclusion has been that economic development in fact depends on social factors. As an example, I can mention that we have supported work in the Bank that shows how Structural Adjustment cannot succeed unless gender aspects are incorporated.

I am pleased to note that Adjustment Programmes over the last few years have changed in response to the needs of the poor. New Structural Adjustment operations places greater emphasis on social spending. In many operations, strict conditionality is attached to sustain adequate social expenditures. I also welcome the increased recognition in the Bank of the role of the government in the development process.

Let me now touch upon the involvement of NGOs in the Initiative

The joint World Bank/NGO review of adjustment indicates a more open World Bank. It expresses a will to take cooperation and partnership with other actors on the development scene seriously. This is a new approach for the World Bank, and the initiative is both experimental and courageous.

Increased cooperation with NGOs is, however, not entirely non-controversial. Governments might perceive this as a way to by-pass government policies and institutions. Concern has been expressed as to whether the NGOs fully represent the interests of the general public. Civil society is obviously more than NGOs, and a participatory approach should imply the inclusion of other groups, such as labor unions and churches. In some developing countries, there is a vast number of different NGOs in operation. The selection process is critical, and must be given due attention. I would underline the importance of involving NGOs in developing countries, as I understand has been done. I also think that the review will benefit from the participation of Northern NGOs from this side of the Atlantic.

Personally, I would like to see Norwegian NGOs and their partners in developing countries getting involved in the initiative. I would urge all of you present here today to take the advantage of this opportunity to get involved in the work that has been initiated, through your association with the NGO Network.

In Conclusion,

I have great expectations to SAPRI as a means to create a more constructive international dialogue on adjustment and development.

I hope that this exercise can give us all a better understanding of the different aspects of Structural Adjustment, and provide us with more reliable documentation on causes of poverty and the impact of adjustment. The task is obviously a large and challenging one - and we should not expect it to give us the ultimate solution to the problems in developing countries. My hope is that we can move away from a dogmatic discussion on whether or not Structural Adjustment Programmes are necessary, and rather concentrate on making sure that reform programs are designed and implemented in such a way that the results will in fact lead to improved welfare for the people.

In order for this exercise to be useful, genuine openness both on the part of the World Bank and the NGOs is required. All parties need to keep an open mind. Furthermore, we should not forget that Structural Adjustment is not an activity that can be done by the World Bank on behalf of a developing country. Effective Structural Adjustment Programmes must be "owned" and driven by the national governments. The challenge for civil society is therefore to work with their governments to make their policies more oriented towards creating equality. The World Bank/NGO review will be a contribution towards improved Structural Adjustment Programmes. In order to really make a difference, the active involvement of governments will be required.

Thank you all for coming here today. I hope you will have a good meeting, and I wish you all the best of luck in the implementation of this important assignment.