Do-Good Bank Can't Please All

When the president of the World Bank, James Wolfensohn, visited Indonesia earlier this month, he expected to offer $600 million in loans to help fight poverty there.

What he didn't expect was a dressing down at a meeting with opposition leaders and activists. They chastised the bank for lending billions to their government despite rampant corruption, human rights abuses, and a lack of democratic development. Bank support for the regime of Indonesian President Suharto, several said, contributed to the country's economic meltdown.

"I was proud of what we've done," Mr. Wolfensohn told reporters afterward, "but no doubt we didn't get everything right."

The tense meeting underscores the controversial reputation of the bank in the very countries it was created to help - despite a reform campaign, led by Wolfensohn, promising to listen more carefully to ordinary people.

Founded in 1944 with the task of improving life for the world's poor, the Washington-based development bank has since loaned hundreds of billions of dollars to governments in developing countries. Its low-interest loans have funded the construction of dams, highways, airports, schools, hospitals, and factories.

But the bank has more than its share of critics, from conservative economists - who think the market would do the job better - to environmentalists and human rights activists, who say its projects support the rich at the expense of the environment, indigenous people, and the poor. Depending on whom you talk to, the world's largest development bank is a "bastion of socialism," "a tool of the imperialist West," or simply "the Death Star" - a reference to its huge $314 million headquarters in Washington.

But the bank has been responding to its critics. Under Wolfensohn, it has undertaken reforms to improve its efficiency, avoid catastrophic project failures, and ensure that its loans help reduce poverty while protecting the environment. Bank officials say that thinking and priorities at the institution have changed so much it's not the same bank anymore.

"Wolfensohn came in here and started asking very pointed questions, like 'Why don't you listen to the nongovernmental organizations when they say there are problems with a given project?' " says Mark Baird, the bank's vice president for strategy. "One of the good things about bureaucracies is that they learn pretty quickly which way the wind is blowing. The signals from the top changed, and the institution is changing. It just takes time."

By its own admission, the bank has made mistakes during its 53-year history. Enormous dam projects have forced tribal people from their homes, often into destitution. Agricultural programs sometimes increased hunger by supporting the creation of large plantations that pushed subsistence farmers off the land and into urban slums. Highways were built in inappropriate locations, and bungled loans pushed poor countries deeply into debt.

The bank funded Indonesia's Transmigration Program, which aimed to resettle millions of Javanese to less crowded islands, where they cleared valuable rain forests for what turned out to be infertile farmland. The error was repeated in Brazil, where the bank underwrote a government road-and-colonization program that is behind the destruction of the Amazon rain forests.

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