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China Withdraws Request for WB Resettlement Loans
A World Bank project, which would lend China money to resettle about 60,000 poor farmers in its northwestern Qinghai Province, ended in tatters on Friday after China refused to accept further conditions the United States wanted to attach.
The failure to push the loan through saw World Bank President James Wolfensohn's leadership coming under bruising criticism from its largest shareholder, the United States.
China, a member of the World Bank, lashed out at the way shareholders were politicizing the institution.
The loan was approved last year despite US opposition, but was placed on hold while an independent report was prepared on the bank's conduct in assessing the loan.
In recent days, Wolfensohn had tried to broker a deal whereby additional environmental and social assessments and studies would take place before any cash was disbursed.
Wolfensohn's proposal included a caveat that the board would not have a further opportunity to vote on the loan, a position which was supported by China.
But sources inside the bank said the United States, backed by Japan and other donor nations, had pushed for a further board vote on the loan 15 months from now, after those new studies were completed.
That split the board on the need for a further vote. With consensus untenable and the bank precluded from cancelling the loan outright, China withdrew its request for the cash on the grounds that new conditions were unacceptable.
"It is unacceptable to (Chinese) authorities that other bank shareholders would insist on imposing additional conditions on management's recommendations -- namely coming back to the board for approval again for a project that was already approved last year," China's Executive Director at the World Bank Zhu Xian said in a statement.
Zhu's strongly worded statement accused other nations of politicizing the bank. "The bank's mission -- particularly its development effectiveness -- has been jeopardised. We call for discussion on this as soon as possible."
Sources familiar with the debate described the sentiment as "semi-chaotic," with board members unsure of what the outcome was going to be.
One source said Wolfensohn, as chairman of the board, had failed in his key responsibility -- to quietly broker a consensus deal before the board's meeting began.
"The question is why did Wolfensohn bring this to the board without a vote count," the source said.
The US Treasury Department also issued a strongly worded statement: "We and numerous other World Bank shareholders were not prepared to support this project because we do not believe it was in compliance with World Bank policies."
But perhaps most damning for Wolfensohn, who holds what is in effect a US appointment, Treasury said the China loan debacle left US confidence in the bank depleted.
"The World Bank needs to develop specific proposals to give the shareholders a greater sense of confidence that the bank has the internal capacity to apply its established policies fully and consistently," the statement said.
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