January 31, 2007

The Honourable James Flaherty
Minister of Finance
Department of Finance Canada
140 O’Connor Street
Ottawa, ON K1A 0G5

Re: Annual report to Parliament on the Bretton Woods Institutions

Dear Minister Flaherty:

We would like to thank you for taking the initiative to revise the Annual Report to Parliament on the Bretton Woods Institutions (BWIs), and would ask that you convey our appreciation to the staff of the International Institutions branch of Finance Canada for consulting civil society on this matter. Those who were able to attend the meeting were encouraged by the proposed changes to the content and format of the report.

To help guide Finance Canada in the development of this revised Report, we have provided detailed comments and suggestions on both format and content in an annex to this letter, as well as a short list of potential issues to be covered in the annual report. In addition, we would like to highlight four key areas of concern that we hope will be addressed.

1. A comprehensive, time-bound framework that guides Canadian engagement at the institutions should be provided as an integral part of the report, complete with goals, objectives and results-based indicators against which success is regularly measured and evaluated. The current report includes a section on the general benefits to Canada of our participation in the BWIs and how this accords with our broad foreign policy goals. The report also needs to spell out Canadian goals and priorities at the Institutions, and Canadian objectives with respect to specific Bank and Fund policies and programs. Information regarding Canada’s progress in meeting these objectives is also missing. As a result, Parliamentarians and the general public are largely unaware of the role, influence and impact Canadian participation has had on outcomes at the multilateral institutions, relative to our foreign policy goals and objectives. While Canada may not always win the day with respect to its position on specific issues, the Canadian public should at least be able to determine what priorities the government has been pursuing, and the measures it has taken to advance Canada’s goals.
2. Comparative analysis of year-to-year changes in priorities, concerns and challenges is essential to ensure consistent reporting and clarity regarding variances. This extends to comparisons of financial commitments both year-to-year and over designated periods (i.e. IDA replenishment cycles), as well as risk analysis. The government should be comprehensive in its financial reporting. The government’s proposal to add to the level of detail provided on Canada’s financial relationships with these institutions is welcome in this regard. This is particularly important since it follows directly from requests from Parliamentarians.
3. Issues under consideration at the institutions during the year in review should be clearly characterized, contextualized and analyzed to inform Canadians both on the operations of the institutions during the period under review and Canada’s perspectives on those operations. Particularly contentious issues require additional attention. For these, Multiple views should be set out, as well as the outcomes of debates and discussions. The World Bank and IMF tackle a complex set of issues. Setting the context for issues is therefore incredibly important. Current reports make it very difficult for the reader to determine past developments from current. Canadian perspectives are not always indicated, and where indicated, they are often vague. Debates, alternative perspectives and concerns are never characterized.
4. Policy positions taken by Canadian Executive Directors on broad World Bank and IMF policy initiatives should be reported in a clear and transparent manner as well as Board discussions and decisions. Transparency is an integral part of public accountability. We appreciate that the level of disclosure of Board minutes and discussions is limited by the Institutions’ own internal disclosure policy and the Canadian Access to Information Act. However, according to the “Additional Issues” paper related to the Bank’s disclosure policy (February 2005), “governments of member countries are free to release statements of their positions on matters considered by the Board.” By the time the annual report is released, many Board documents and general discussions are already public. We also note that France, Italy, and the UK all disclose their positions on policy issues in their annual reports.

We trust that the government will make every effort to ensure that many of these concerns are addressed and incorporated into the next annual report to Parliament.

Sincerely,
 

John Mihevc, Chair
Halifax Initiative Coalition

Gerry Barr, President and CEO
Canadian Council for International Co-operation

Tony Breuer, Executive Director
CHF – Partners in Rural Development

Jean-Marc Mangin, Executive Director
CUSO

Duff Conacher,Executive Director
Democracy Watch

Beatrice Olivastri, Executive Director
Friends of the Earth Canada

Joan Kuyek, National Coordinator
MiningWatch Canada

Roy Culpeper, President
North South Institute

Robert Fox, Executive Director
Oxfam Canada

Blaise Salmon, President
RESULTS Canada

Derek MacCuish, Coordinator
Social Justice Committee

 
CC:
Josée Verner, Minister of International Cooperation
Samy Watson, Canadian Executive Director to the World Bank
Jonathan Fried, Canadian Executive Director to the International Monetary Fund

ANNEX I: POTENTIAL ISSUES TO BE COVERED IN THE REPORT

 The World Bank’s anti-corruption and good governance agenda.

1. IMF and World Bank implementation of the Multilateral Debt Relief Initiative, and efforts made by the Canadian government to move beyond the limited MDRI and Heavily Indebted Poor Country initiative.
2. World Bank implementation of the 2005 conditionality review, and the five good practice principles, and Canada’s position on key conditionality issues including privatization and forced liberalization, as well as macro-economic policies.
3. IMF reform (in particular with respect to the quota system, vote and voice), and the Canadian role in promoting these issues.
4. Early repayment by numerous countries (Argentina, Brazil, Uruguay, Indonesia) of their IMF loans, and implications for Canada.
5. World Bank clean energy and development: towards an investment framework.
6. International Finance Corporation adoption of performance standards, sustainability policy, disclosure policy, and Canada’s position on concerns raised around the standards.
7. World Bank’s human rights agenda (in light of two legal opinions put out by the Bank’s legal counsel with respect to the role of the Bank in the area of human rights and its articles of agreement), and efforts made by the Canadian government to mainstream human rights at these institutions in general, and free prior and informed consent more specifically.
8. Selection process for Canadian Executive Directors, and the World Bank President and Director of the International Monetary Fund.
9. Canadian objectives for Bank and Fund Spring and Fall meetings.

Contentious projects

1. The Botnia pulp and paper mill in Fray Bentos, Uruguay
2. Chad Cameroon pipeline
3. Ahafo gold mine in Ghana
4. Dikulushi Copper-silver mine in Congo, and the CAO review
5. Glamis Gold Marlin mine in Guatemala

ANNEX II: SPECIFIC FORMAT AND CONTENT RECOMMENDATIONS
The recommendations below are based on similar recommendations made in our April 2005 and June 2006 Report Cards on the Annual Report to Parliament. They are supplemented by examples of best practice among other donor countries.

Canada’s Goals, Objectives and their Achievement

1. Clearly articulated strategic goals and objectives for Canada for each institution for the year or any other time-bound framework.
2. An articulation of the relationship between Canada’s development and foreign policy goals and objectives as they relate to the Bretton Woods Institutions, and to existing or new policies, programmes and initiatives at the institutions.
3. Benchmarks to evaluate established goals and objectives, including the extent and result of Canada’s participation (progress made).

Since 2000, the UK Department for International Development (DfID) produces every three years an institutional strategy paper (ISP) for the World Bank (as well as other multilaterals), which reviews its success in achieving the objectives of the previous ISP, outlines the short and medium –term objectives for the next three years, and highlights indicators to measure success for realizing these objectives. Public consultations are held on the strategy. At the same time, DfID has committed to conducting annual progress reviews on reaching these objectives, and publicly reporting on the outcomes (but it has yet to do so).

Position Taking, Policy Analysis and Context

1. A declaration of Canada’s positions on key issues under consideration as well as their resolution and follow-up.
2. An articulation of how the final Board ‘consensus’ decision-making outcomes reflected Canadian interests or furthered Canadian objectives. With only very brief minutes made public, it is impossible to determine how decisions evolved and how successful Canada is at advancing its strategic objectives at the institutions.
3. For particularly contentious issues, an analysis of critical issues and controversial policies under debate at either institution during the reporting period.
4. Canada’s positions and actions at the Bank or the IMF with regard to policy conditionality for countries that are aid priorities for Canada.
5. A characterization of internal critiques of Bank policies, programmes and projects, and of critical debates outside the bank made by stakeholders.
6. An assessment of continuity and movement on key priority policy or programmatic areas and “Challenges Ahead” from year to year.

Sweden outlines its priorities at the Bank and Fund in its annual report. France and Italy present the government’s position on a selection of subjects in their annual reports. Germany, Sweden and the UK present summaries to Parliament of government positions prior to Bank and Fund Spring and Fall meetings. In their annual report on the IMF, the UK Treasury sets out the government’s approach to IMF issues over the previous year and highlights key objectives and priorities. It also highlights the general position the UK has taken in votes by the Board of Governors, and on discussions of IMF surveillance, programs and major policy issues. The Department for International Development, in its annual report on the World Bank, includes a discussion of key policies and projects, the Bank’s internal accountability mechanisms, government objectives for the World Bank, outcomes of International Development Committee hearings.

Constituency Level Decision-Making

1. A reflection of the positions and perspectives of Canadian constituency members and their relationship to Canadian positions.
2. An analysis of how Canada reconciles differences in positions between constituency members. The ‘Canadian’ constituencies at the World Bank and IMF bring together up to thirteen countries reflecting the potentially conflicting interests of developed and developing countries as well as North America and the EU.

The Halifax Initiative coalition has insufficient data with respect to what other countries are doing in this regard. This includes for Canada.

Financial and Economic Implications

1. Figures to situate Canada’s multilateral financial contributions in the context of its Official Development Assistance (ODA).
2. A comparison of bilateral and multilateral financial allocations to situate the level of commitment to the institutions within Canada’s ODA strategy.
3. Financial information noting where Canada’s aid program is directly collaborating with the Bank (and other donors) in budget support programs in which the Bank is a major investor and/or lead organization. 
4. An analysis of critical financial issues at both the Bank and Fund, and the impact on the institutions and on changing Canadian priorities. For example, in 2007, this might include an analysis of the early repayments to the Fund on the financial health of the institution.
5. An analysis of the financial implications and risks posed to both the institutions and their member countries, including Canada, from continued substantial lending to countries in significant excess of their quota or in significant arrears.
6. Prior to International Development Association (IDA) replenishment negotiations, an identification of the priorities of channeling funds through the BWIs against other multilateral channels, and of how the policies of the BWIs are consistent or not with Canada’s ODA priorities and strategies.
7. An accounting for Canada’s financial contribution to IMF special funds or World Bank administered trust funds. While this money may be managed by other departments and involve additional agencies, it falls under operations of the Bretton Woods institutions and should be clearly reported and summarized. Financial accountability involves clear, complete, accurate and timely reporting on the use of resources entrusted to government as well as a description of how their use met government objectives.
8. An analysis of the impact of BWI participation on the Canadian private sector. There needs to be more analysis of the benefits to the Canadian private sector and how it supports Canada’s principles, goals and priorities for international cooperation.

The United Kingdom provides detailed information on its financial contribution to the World Bank Group. It also now makes public its contribution to World Bank Trust Funds.