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Figuring out the World Bank

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Page context: Home > Transport International Magazine > Issue 22 January 2006 > Figuring out the World Bank

Trade unions hoping to gain influence on World Bank-inspired transport reforms need to understand its language, processes and relationships with government, says Brendan Martin

On July 18 this year, the Board of the World Bank is expected to approve a multi-million dollar project that could lead to big changes in the world’s biggest railway, and might foreshadow similar developments elsewhere.

The ITF was able to give the All India Railwaymen’s Federation early warning of this plan, more than a year before it goes to the World Bank board, thanks to a new research and education project funded by Friedrich Ebert Stiftung.

More about that later, but let’s look first at the World Bank’s Indian plan, because keeping a sharper eye on this sort of development, and helping affiliates to deal more effectively with it, is what the new project is all about.

After leaving Indian Railways alone for the past decade, but now frustrated at its refusal to accept the World Bank’s “reform” agenda, the Washington-based international financial institution has returned to Delhi with an offer that is harder to refuse.

The Bank is offering a US$200 million loan to pay for a “railway capacity and safety enhancement project” with objectives that anyone would welcome. To quote the World Bank’s project information document:

“The development objective is to increase the effective capacity and safety of IR’s (Indian Railways) existing track infrastructure. This will be achieved by:

(a) reducing train headway times and introducing higher capacity wagons;

(b) reducing the risk of signaling failures and the potential for human error;

(c) assisting IR to become more commercially oriented and meet traffic demands on its commercial network.”

If the third of those objectives provides a small clue that there might be more to this deal than enhancing capacity and safety, careful reading of the rest of the project document reveals that it could turn out to be a privatisation project in disguise.

In a section headed “Lessons from previous projects”, the document states that, in the past, the World Bank provided 22 loans worth a total of more than US$2.5 billion to Indian Railways, but that it became dissatisfied with the results.

“The loans increased operational/technical capacity but failed to achieve a more commercial approach or improve substantially financial performance,” states the new project document. “IR management saw no need for reform and, as a consequence, the Bank largely disengaged during the 1990s.”

Now, however, the Bank believes that the Indian government is ready to adopt the kind of reforms the Bank would support, and it is ready to work with the Asian Development Bank (ADB) project to make sure they happen.

The project document shows how changes in other transport sectors have contributed to this new situation, and outlines the mechanics of how the new project will enable the World Bank to influence the future shape of Indian Railways too. It states:

While traffic has continued to grow, capacity expansion, service and safety standard improvement and a more commercial business are needed, if IR is to compete successfully with road transport and liberalised domestic air transport, and provide minimum transport/logistics costs for bulk, low value traffics.

GOI (Government of India) has become increasingly concerned with the financial performance of IR. Both the Ministry of Finance and the Planning Commission understand the basic elements of the reform required, including the re-balancing of the freight and passenger charges, and the concentration of investment on the core commercial network. GOI has reduced its own funding and directed IR to seek funding from the Asian Development Bank (ADB) and World Bank.

The ADB has committed US$ one billion, phased to the implementation of an agreed reform agenda; the first loan of US$ 313 million is now on-going. This proposed project will enable the World Bank to join the dialogue with GOI, IR and ADB to define and implement reform.

In case the meaning is not already clear, the ADB spells it out in explaining the conditions associated with its loan to Indian Railways. In its country assistance plan, the ADB states that its “policy dialogue with the government and IR” has “focused on the restructuring of IR and commercialisation of its operations”. And it adds:

Further policy discussions are being undertaken as part of the proposed Railway Improvement (Sector) Project, addressing inter alia organisational reform including hiving off of non-core activities through privatisation and/or public-private partnerships; rationalisation of the tariff structure; and technology upgrading and modernisation.

Action before it is too late

The “rationalisation of the tariff structure”, like the World Bank’s reference to “rebalancing” of charges, will involve reducing freight rates and increasing passenger fares, because both banks believe that the former are too high and the latter too low.

Perhaps they are right; who am I to say? But dismissing the views of India’s railway workers and their unions is another matter. The aim of the new ITF project is to help them, and ITF affiliates in all the sectors, to develop and argue their cases before it is too late, and to get the best possible deal for their members in any event.

The project has the catchy title Developing trade union policy and alternatives to neo-liberal transport restructuring, and is addressing these questions:

- What are the roles, objectives and methods of international financial and trade institutions in driving transport restructuring, and particularly privatisation and liberalisation?

- How are these policies affecting transport workers, and employment and social justice more generally?

- What alternative policies can ITF and transport unions develop, and what alliances can be forged in support of them?

- How can unions intervene in the process of restructuring and privatisation to protect jobs, employment rights and services?

It is a three year project. I began work on it at ITF headquarters last year and will continue this year and next – but it is part-time, so we need to be realistic about what can be achieved.

In Year One, most of my focus was on building up a clearer picture of what the World Bank has been doing in transport, and understanding the project cycle through which it does it.

This has brought important insights. For example, because so many World Bank projects have gone wrong, the Bank has been trying to figure out new ways of pushing forward its privatisation and commercialisation agendas.

The Bank brackets all the transport sectors and utility services such as electricity and water under its “infrastructure” vice-presidency, and the recently appointed vice-president for infrastructure, Kathy Sierra, has admitted that much of what was done in the 1990s was dogmatic.

In 2004, the Bank adopted a new Infrastructure Action Plan (IAP), and last year it followed up with operational guidelines for the transport sector, which are designed to explain to Bank officials how the IAP should be applied.

Inside Story

The need for dialogue with trade unions is now accepted in principle by the World Bank. More>>

Opportunities to engage

The guidelines show that unions could urge the Bank and governments to justify their policies against some key criteria that, according to the guidelines, should apply before privatisation takes place. These include the stipulations that transport access and affordability for the poor are maintained or improved; environmental and other safeguards are met; there is a suitable “institutional environment”; and that “value for money” improvements should be sustainable.

Even so, and while acknowledging the importance of taking national circumstances into account, the guidelines also show that the Bank remains committed to various types of privatisation in all transport sectors.

In the case of the maritime sector, for example, the guidance suggests that while “navigation infrastructure” is a public sector responsibility, there is scope for contracting-out particular functions. It says the “landlord model” should be applied to larger ports, meaning that stevedoring and other functions would be privatised while the ownership of the port would remain public. Finally it indicates that World Bank support for publicly employed stevedoring services would be conditional on commercialising the operation in preparation for privatisation.

There are equally specific guidelines for each sub-sector in the rail, roads and aviation sectors. A briefing outlining them can be found on the ITF website There are also briefings outlining the different forms of privatisation in transport, and providing some basic information about the World Bank and, especially, about its project cycle.

Gaining influence early on

Understanding its project cycle is particularly important if affiliates want to try to influence policy in countries that borrow from the World Bank. Often, unions only find out about World Bank projects when they have already been approved by the World Bank board, when it is often too late to do anything about them.

It is much better to get early warning by studying (and preferably having some input into drafting) the document that underpins particular projects. Called a ‘Country Assistance Strategy’ (CAS), it is usually revised every three years or so and flags up which sectors are likely to be the focus of new Bank projects, and what kind of policies are likely to be applied to them.

On the basis of the CAS, particular projects are then planned and the earliest written warning of them comes in a Project Information Document (PID), such as the one quoted in respect of the Indian Railways project earlier in this article.

We are hoping to keep you up-to-date with what the World Bank and other international institutions are doing to restructure transport, but it will be just as important for you to keep us informed. It is, after all, an education project. The aim is that by improving our information sharing and sharpening up our analytical capacities, we will be able to learn collectively how to protect and promote the rights, jobs and livelihoods of our members and the people they serve.

For further information about the project, or if you have information that you think could help, please contact

Section home:
Issue 22 January 2006

Other pages for Issue 22 January 2006:
Agreements deliver | Comment | When will trade deliver? | Damned if they do... | New dawn for decency? | HIV/AIDS enters the mainstream | Tense times as Kenya railways takes new direction | Reflections: On border liberalisation | Transport for all? | Women take the wheel | Working life

Other pages for Figuring out the World Bank:
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