Make Use of World Bank's `Identity Crisis'

THE World Bank is taking the plunge. After years of keeping critics at arm's length, this powerful, secretive organization will shortly name three members to an inspection panel that will hear complaints about its projects.

The move was forced on the Bank by the US Congress, which threatened to withhold the US contribution to the Bank's soft-loan arm, the International Development Association (IDA), unless the Bank began talking to those affected by its lending. With their feet to the fire, many Bank officials view the panel with resentment, not enthusiasm. They predict it will feed foes with a stream of ammunition.

This may be true; but the panel also presents an opportunity. It could help the Bank build a constituency with ordinary people instead of government treasuries, and also become more transparent in its decisionmaking. Both are essential if the World Bank is to follow though on its pledge to promote a new model of sustainable development that addresses human needs as well as economic growth.

The Bank loaned $20 billion last year; it touches millions of lives. But it has lately lost much luster by supporting a string of disastrous projects in Brazil, Indonesia, West Africa, and India, which have destroyed rain forest and displaced villagers.

Stung by criticism, the Bank introduced several directives that the new panel will use in assessing complaints. One directive requires compensation for those evicted by a Bank project; another calls for indigenous people to be consulted in advance of a project. Environmental impact assessments are yet another. The Bank has made a commitment to ``good governance.''

The World Bank has not become a human rights champion, however. The Bank's charter bars it from political involvement. It is packed with hard-nosed economists who look for an economic return, and who are under pressure to lend. World Bank careers are not advanced by blocking projects; many officials are embarrassed the Bank took back $1.5 billion more in repayments and interest from developing countries last year than it loaned.

Even ``good governance'' is an ambiguous term. Human rights groups advocate judicial reform in the hope of preventing torture and other abuses. But the World Bank has funded judicial reform in Venezuela, Argentina, Tanzania, and Bangladesh in order to ensure accountability and prevent corruption - obstacles to growth.

The tension between the Bank's social responsibilities and its economic calling has emerged starkly over the controversial Sardar Sarovar project in Northwest India. India is a huge country with a hunger for energy; in 1985 the Bank agreed to commit $450 million to a massive irrigation and power project on the Narmada river.

The project became a nightmare. Some 40,000 villagers (called ``oustees'') have been displaced; the figure could top 200,000. Last year an independent review found the Bank's own guidelines had been routinely ignored and recommended withdrawal. On March 30 it was announced that the Bank was pulling out, with $170 million of the loan unspent.

There was less publicity for another Bank decision, taken around the same time, under which India was promised a massive sectoral loan of around $3 billion from the Bank's IDA. This undercut the impact of the Narmada withdrawal. Not only could some of the IDA money find its way to the controversial dam, but it would come without any of the conditions attached to the Narmada loan. While the Indian government is vindicated, eviction of oustees continues - with the Bank watching from the sidelines.

THE Narmada debacle prompted Congress to call for the inspection panel. But Narmada is symptomatic of an identity crisis that has dogged the Bank since its creation in 1945.

The World Bank has not been able to decide if it is a moneymaking bank - or a development association. Nor is it clear how to reconcile the two approaches.

The current strategy is known as ``sustainable development.'' This is an elusive term that essentially means a nation's economic well being is enhanced, not hurt, by addressing the needs of women, rural farmers, and by protecting nonrenewable resources and seeking larger participation.

This won't be easy; the Bank deals in mega-projects and works through government treasuries. But it is happening. Some 31 percent of Bank projects last year involved nongovernmental organizations. There is growing evidence that ``the poor'' can be a sound investment. A rural bank in Bangladesh, for example, lends small amounts to 1.7 million Bangladeshis. All are poor; 94 percent are women. Remarkably, 98 percent of the loans are repaid.

The Bank has announced a $2 million grant to the Grameen, showing it is willing to listen and experiment. It should view the new inspection panel in the same light. The Bank badly needs to start a dialogue with the nongovernmental community and build a grass-roots constituency, like UNICEF, instead of waiting - aloof and defensive - for the next Narmada.

This is also true for Bank critics. Having exposed the problem, they can now help solve it. If this means talking the language of economists, so be it. They started a small revolution in the Bank by pointing out that deforestation is a recipe for long-term bankruptcy. The Bank listened and agreed that such policies affect a country's credit rating - and its chances of securing a Bank loan. Indonesia, once the scourge of the rain forest, has responded by protecting large tracts of forest.

If it pays to invest in the environment, why not grass-roots democracy? This is not so hard to justify. Communism in Eastern Europe took a toll on economies as well as the human spirit. Repression and dictatorship turned the drought into famine in Ethiopia, Somalia, and Sudan.

With forbearance and understanding, it would not be hard for both sides to use the new panel and move beyond the complaints to the World Bank's real agenda. The Opinion/Essay Page welcomes manuscripts. Authors of articles we accept will be notified by telephone. Authors of articles not accepted will be notified by postcard. Send manuscripts by mail to Opinions/Essays, One Norway Street, Boston, MA 02115, by fax to 617 -450-2317, or by Internet E-mail to OPED@RACHEL.CSPS.COM.