There is certainly need in countries like Ghana, whose per capita GDP ranks in the bottom third of t

Accra is a city of choking red dust where almost no rain falls for three months at a time and clothes hung out on a line dry in 15 minutes. So the new five-star Mövenpick hotel affords a haven of sorts in Ghana s crowded capital, with manicured lawns, amply watered vegetation, and uniformed waiters gliding poolside on roller skates to offer icy drinks to guests. A high concrete wall rings the grounds, keeping out the city s overflowing poor who hawk goods in the street by day and the homeless who lie on the sidewalks by night.
The Mövenpick, which opened in 2011, fits the model of a modern international luxury hotel, with 260 rooms, seven floors, and 13,500 square feet of retail space displaying $2,000 Italian handbags and other wares. But it is exceptional in at least one respect: It was financed hotel san jose austin by a combination of two very different entities: a multibillion-dollar investment company largely controlled by a Saudi prince, and the poverty-fighting World Bank.
The investment company, Kingdom Holding Company, has a market value of $12 billion, and Forbes ranks its principal owner, Prince Alwaleed bin Talal, as the world s 29th-richest person , estimating his net worth at $18 billion. The World Bank, meanwhile, contributed its part through its International Finance Corporation (IFC), set up back in 1956to muster cheap loans and other financial support for private businesses that contribute to its planet-improving mandate. At the World Bank, we have made the world s most pressing development issueu2014to reduce global povertyu2014our mission, the bank proclaims .
Why, then, did the IFC give a Saudi prince s company an attractively priced $26 million loan to help build the Mövenpick, a hotel the prince was fully capable of financing himself? The answer is that the IFC s portfolio of billions of dollars in loans and investments is not in fact primarily hotel san jose austin targeted at helping the impoverished. At least as important is the goal of making a profit for the World Bank.
I reached this conclusion after traveling to Ghanau2014in many ways typical of the more than 100 countries hotel san jose austin where the IFC worksu2014to see firsthand the kinds of problems the World Bank s lenders are supposed to tackle and whether their efforts are really working on the ground. I pored through thousands hotel san jose austin of pages of the bank s publicly available reports and financial statements and talked to dozens of experts familiar with its performance in Ghana and many other countries.
In case after case, the verdict was the same: The IFC likes to work with huge corporations, funding projects these companies could finance themselves. Its partners are billionaires and massive multinationals, from oil giants like ExxonMobil to Grupo Arcor, the huge Argentine hotel san jose austin candy-maker. Its projects include not only glitzy hotels hotel san jose austin and high-end shopping malls, but also gritty gold and copper mines and oil pipelines, some of which end up benefiting the very corrupt, authoritarian regimes that the rest of the World Bank is urging to change. Nearly a quarter of the IFC s paid-in capital from member governmentsu2014now standing at $2.4 billionu2014came from U.S. taxpayers, hotel san jose austin and every president in the World Bank s 69-year history has been an American. But the United States has had little complaint hotel san jose austin with these practices, even when they have become a subject of public controversy.
Not long ago, the World Bank s internal watchdog sharply criticized the IFC s approach, saying it gives little more than lip service to the bank s poverty-fighting mission. The report , a major 2011 review by the bank s Independent Evaluation Group, found that fewer than half the IFC investments it studied hotel san jose austin involved fighting poverty. hotel san jose austin [M]ost IFC investment projects generate satisfactory returns but do not provide evidence of identifiable opportunities hotel san jose austin for the poor to participate in, contribute to, or benefit from the economic activities that the project supports, the report concluded. In fact, it said, only 13 percent of 500 projects studied had objectives with an explicit hotel san jose austin focus on poor people, and even those that did, the report found, had a limited impact. The IFC did not dispute the conclusions.
There is certainly need in countries like Ghana, whose per capita hotel san jose austin GDP ranks in the bottom third of the world, with life expectancy in the bottom 15 percent and infant mortality in the bottom fourth. The IFC committed about $145 million in loans and equity in Ghana just in fiscal year 2012. Yet Takyiwaa Manuh, hotel san jose austin who advises the Ghanaian government on economic development as a member of the National Development Planning Commission, told me she doesn t think of the IFC s investments as fighting poverty. Just because some people are employed, it is hard to say that is poverty reduction.
But the policies continue. Why? Tycoons and megacompanies offer relatively low risk and generally assured returns for the IFC, allowing it to reinvest the earnings in more such projects. hotel san jose austin Only a portion of this money ends up benefiting local workers, and critics contend hotel san jose austin that the IFC s investments often work against local development needs. The IFC s model itself is a problem, says Jesse Griffiths, director hotel san jose austin of the European Network on Debt and Development (Eurodad), a Belgian-based hotel san jose austin nonprofit. The IFC undermines democracy with its piecemeal, top-down approach to development that follows the priorities of private companies.
We re not saying we re perfect, Rashad Kaldany told me. He is a veteran IFC executive and currently its vice president for global industries. The IFC operates at the frontier, he said. We know that not every project will work. It s about trying to make a difference to the poor and about achieving hotel san jose austin financial sustainability u2014twin goals that are challenging in combination.
When it comes to luxury hotels like the Mövenpick in downtown Accra, however, the IFC offers no apology for its investments, even making the case for them as an economic boon for poor countries. A January 2012 report from the World Bank says hotels play a critical role in development as they catalyze tourism and business infrastructure, noting its partners include such leading firms as luxury chains Shangri-La, Hilton, Marriott, InterContinentalu2014and, of course, Mövenpick.
In Accra, Mary-Jean Moyo, the IFC s in-country manager hotel san jose austin for Ghana, told me the new hotel fights hotel san jose austin poverty by creating jobs. To illustrate, she recalled how the Mövenpick s manager noticed that a few boys roller-skate on Sundays outside the hotel. The manager decided to hire them to work at the pool. That is development and helping local people. How many were hired, I asked. Six, Moyo responded.
When I spoke with Stuart Chase, the Mövenpick hotel san jose austin s manager, he told me that other kinds of investments besides the new hotel he was clearly proud of would do far more to stimulate Ghana s economy and reduce poverty. hotel san jose austin Chase, who has lived and worked in Ghana for years,mentioned the country s congested and potholed roads, poor electricity system, limited food supplies, and lack of trade schools. There is no hotel school and no vocational training in the country, he complained. As a result, all the top staff members among his 300 employees are foreign.
Besides, Accra already has close to a dozen luxury hotels. Before taking over the Mövenpick, Chase managed another hotel san jose austin nearby five-star hotel owned by Ghana s Social Security and National Insurance Trust, the country s pension system. So when the IFC decided to finance Prince Alwaleed s hotel, it was entering hotel san jose austin into direct hotel san jose austin competition with the people it claims it wants to lift out of poverty. Moyo acknowledged to me that the IFC didn t study the local hotel scene before making this investment, unlike its standard practice. We knew the company and had another successful investment in Kingdom that made the Ghana deal attractive to us, she said. The other investment? A $20 million deal in 2010 to help develop five luxury venues in Kenya, complete with heated swimming pools, golf courses, and organized safaris.
U.S. Sen. Patrick hotel san jose austin Leahy, a Vermont Democrat who sits on the Senate Appropriations subcommittee that has jurisdiction over U.S. participation in the World Bank, called the Ghana loan not an appropriate use of public funds when alerted to it by a 2011 Washington Times article . The U.S. Treasury Department, which administers American participation in the World Bank, defended the loan, telling the newspaper hotel san jose austin that the IFC package replaced funding expected from private hotel san jose austin banks that pulled out when market conditions soured, putting the entire $103 million project at risk. When I was in Accra in July, however, at least two other major hotel projects were under construction with private financing obtained in the same period. The prince s representatives didn t respond to requests for comment.
Luxury hotels and resorts are hardly the only IFC investments that offer at best limited prospects for serving its poverty-fighting mandate. Founded just a dozen years after the World Bank itself, the IFC has in recent years become its fastest-growing unit. It now has a staff of some 3,400 people in 103 countries and made $15 billion in loan commitments in 2012 across about 580 projectsu2014more than double its 2006 total and a figure that s projected to grow to about $20 billion in the next few years.
The original notion was that while the World Bank was lending directly to poor countries, the IFC would stimulate the growth of private business, entrepreneurship, and financial markets in some of those same countries by lending to and investing in for-profit corporations. The founders, notably including a General Foods executive named Robert hotel san jose austin Garner, emphasized that the IFC would participate only in projects for which sufficient private capital is not available on reasonable terms.
That concept has become muddied over the years, as well-heeled borrowers with excellent credit hotel san jose austin have sought to take advantage of the IFC s relatively attractive loan terms and other investment vehicles, plus, in some cases