Sustainability: Lenders know Best: A Practitioner’s View

Abstract

<p>The recent formation of the Asian Infrastructure Investment Bank (AIIB) has once again brought into focus issues of governance within the international lending institutions as well as the conditions imposed on borrowers i.e. national governments. This paper will explore whether the drive for effectiveness and efficiency of operations imposed by the lenders are imposing conditions that are in effect impacting on the long term sustainability of local communities. Lending institutions may impose a philosophy that is contrary to the best interests of the citizens and the social fabric of society. This was clearly the case with the IMF and the Asian Financial Crisis of 1997-1998 and its impact on countries such as Thailand and Indonesia. Lessons have been learnt but is the mix right. International lending institutions are more and trying to force governments to comply with a neo-liberal agenda before they will grant a loan. The solutions may be inappropriate or too extensive. Governments often accept the conditions to obtain the loan. Whilst it is critical that governments have the appropriate fiscal and contract management skills in place the imposition of a neo-liberal agenda is another story. The agenda essentially implies that services should be outsourced wherever possible. Such an agenda may be efficient but it can have devastating effects on the local communities. </p> <p>Rather than imposition of the external agenda for wholesale change the institution undergoing change needs to be fully committed and systematic institutional diagnostics should be undertaken jointly before a decision is made on the areas and direction of change. A medium-term strategy for capacity building should be developed, providing the framework for continuous assistance with interim milestones. Without such an approach sustainability is likely to be a pipe dream. There are plenty of examples to prove it.</p> <p>This paper will explore the issues from a practitioner’s perspective and seek to show that there are alternatives to the approach imposed by international lenders.</p>