The WB, “policy reforms” and PPPs -- Maximising Finance for Maldevelopment?

Posted on 13 October 2018

Despite today’s rising concerns on the inequalities linked to the further consolidation of corporate power, the Maximising Finance for Development threatens to precisely entrench corporations’ hold within the development agenda. The MFD is being piloted in nine countries. Five of these are from Asia (Indonesia, Vietnam, Nepal, Iraq, Jordan) and four from Africa (Kenya, Cameroon, Cote d'Ivoire, Egypt). The WB also notes the supposed success of the MFD approach in Colombia, Madagascar, Afghanistan, Turkey, the Solomon Islands and West Africa (Figure 1). The WB also sees Peru as an example for the prospects of the MFD approach. The WB has been also propping up their prior work in these countries as examples for what MFD could look like.

Indonesia: More power to the “private sector”

Over a 60-year period of “partnership” between the Indonesian government and the World Bank, the latter’s work has been focused on the economic sectors most favourable for foreign investment: mining, electricity, gas, water supply, transport, storage and communication. These sectors combined account for 36 per cent of total foreign investments in Indonesia. [i]

“Sustainable energy” is among the priorities in the 2016-2020 Country Partnership Framework between the WB and the government of Indonesia. [ii] Within the MFD approach for Indonesia, there remains a focus on the energy sector. A total of USD 650 million of public funds is reported for use in exploring geothermal power – USD 150 of which from government, USD 175 million from concessional climate finance and USD 325 million from the World Bank loan. Through the loan, the Indonesian government is to use the funds to “unlock private sector investments,” in this case expected to be worth USD 4 billion. [iii]

The more comprehensive approach to enable the private sector agenda is seen in the roles taken on by the IBRD and the IFC. The latter, the private sector arm of the WBG tasked to create markets, is also working to provide the government “critical advice” towards using the credit “ to align with the needs of the private sector” (emphasis added). The premise is that they will be allowed to take over financing and therefore profiting from the supposed geothermal plants after “the high-risk exploration phase.” 

Despite its shift since 2013 for “sustainable energy” within the same private sector-led model, [iv] the World Bank has continued to fund big coal-powered plants in Indonesia. This includes the USD 4 billion-worth Central Java Coal Power Plant in Batang, supported with a USD 33.9 billion guarantee from the IFC-created Indonesia Infrastructure Guarantee Fund (IIGF) [v]  and set to begin operations in 2020. [vi] IIGF projects had been mandated to promote PPPs. [vii]  The Batang coal project was awarded to Bhimasena Power Indonesia, made up of Indonesia’s second largest coal company and two Japanese corporations. [viii] WBG support has been criticised due to issues of corruption, lack of transparency and involvement of affected sectors, environmental risks and large-scale land-grabbing of communities’ lands despite their staunch opposition. [ix]

PPPs in Kenya under MFD

Under the recent World Bank Country Partnership Strategy 2014-2018 for Kenya, which

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