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Africa: World Bank Industry Review
AfricaFocus Bulletin
Apr 13, 2004 (040413)
(Reposted from sources cited below)
Editor's Note
In 1996, in a report on Poverty Reduction in Sub-Saharan Africa,
World Bank researchers wrote that poverty assessments "have done a
reasonably good job of identifying ... options that will assist the
poor ... " They added, however, that "these options, typically, are
not being reflected in the Bank's assistance strategies or
operations." This spring, as the World Bank delays consideration of
the report of its own Extractive Industies Review, there is a
similar disconnect between Bank-fostered proposals for internal
change and ongoing operations.
This issue of AfricaFocus Bulletin highlights the Extractive
Industries Review, a multi-year process examining World Bank
support for oil and mining projects. Civil society groups are
urging the Bank to adopt the proposals of the Review, which
submitted its final report in December. The Bank's official
response has been delayed, however, in the face of strong industry
reactions against proposals to phase out bank funding for the oil
industry, invest more in renewable energy, and enforce higher
standards for consultation, environmental review, and human rights
protection.
For a careful background study (too long to be included here), see
Scott Pegg, Poverty Reduction or Poverty Exacerbation?: World Bank
Group Support for Extractive Industries in Africa, April 2003. This
report is available on-line at:
http://www.environmentaldefense.org/pdf.cfm?ContentID=2737&FileName=2737_PovertyRedux2.pdf
Another AfricaFocus Bulletin sent out today highlights policy
critiques and protests planned for this month's spring meetings of
the World Bank and IMF.
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Striking a Better Balance: the Extractive Industries Review
Executive Summary
[excerpts only: full text of summary and full report are available
on the Review's website at http://www.eireview.org.]
... In Chad, one of the world's poorest countries, a WBG-supported
project [is developing] oil fields in the south and build a
1,070-kilometer pipeline to offshore oil loading facilities on
Cameroon's coast.
Are these projects and others in oil, gas, and mining consistent
with the World Bank Group's overall objective of achieving poverty
alleviation through sustainable development? That is the issue at
the heart of the debate about WBG involvement in extractive
industries.
In June 2000, at the annual meeting in Prague, WBG President James
Wolfensohn responded to criticism from the nongovernmental
community about WBG involvement in extractive industries with a
promise to review the Bank's role in this sector. In July 2001, the
Extractive Industries Review (EIR) was initiated with the
appointment of Dr. Emil Salim, former Minister of the Environment
for Indonesia, as Eminent Person to the review. ...
The basic question addressed throughout this process was, Can
extractive industries projects be compatible with the WBG's goals
of sustainable development and poverty reduction? Based on more
than two years of consultations and research, the answer is yes,
the Extractive Industries Review believes that there is still a
role for the World Bank Group in the oil, gas, and mining sectors
but only if its interventions allow extractive industries to
contribute to poverty alleviation through sustainable development.
And that can only happen when the right conditions are in place.
The three main enabling conditions are:
- pro-poor public and corporate governance, including proactive
planning and management to maximize poverty alleviation through
sustainable development;
- much more effective social and environmental policies; and
- respect for human rights.
In order for the WBG to be able to promote these conditions, the
institution itself needs to implement a number of serious reforms,
including improvements and reinforced implementation of its
Safeguard Policies and changes in WBG staff incentives.
Pro-poor Governance
The first consideration if the WBG is to help countries reduce
poverty while seeking to develop extractive industries is that
programs should be tailored to the specific requirements and needs
of the country and to the existing adequacy of governance ...
The criteria of governance adequacy should be developed
transparently and with the involvement of all stakeholders. It
should include minimum core and sectoral governance criteria, such
as the quality of the rule of law; the absence of armed conflict or
of a high risk of such conflict; respect for labor standards and
human rights; recognition of and willingness to protect the rights
of indigenous peoples; and government capacity to promote
sustainable development through economic diversification. ,,,
Governance should be strengthened until it is able to withstand the
risks of developing major extractions. Once that has happened, the
International Bank for Reconstruction and Development (IBRD) and
the International Development Association (IDA) can add support for
the promotion of a well-governed extractive sector. ...
To help ensure that local communities receive benefits from
extractive industry projects, the WBG should:
- require companies to engage in consent processes with communities
and groups directly affected by projects in order to obtain their
free prior and informed consent,
- require revenue sharing with local communities,
- mandate the use of poverty indicators that are monitored
systematically, encourage the incorporation of public health
components in all extractive industry projects,
- urge NGOs to build the capacities of affected communities, and
- help set up independent grievance mechanisms.
...
Environmental and Social Components of WBG Interventions
The second enabling condition that will allow extractive industries
to contribute to poverty alleviation through sustainable
development involves a strengthening of the environmental and
social components of WBG interventions in this sector. In some
cases, this will entail revisions in current WBG policies; in other
cases, new requirements or guidelines are called for.
+ Require Integrated Environmental and Social Impact Assessments.
The WBG should take a holistic, multidimensional approach to
assessments, identifying cumulative impacts of projects and
socioeconomic linkages to environmental issues. Social impacts
should be fully identified, including health impacts and projects'
effects on vulnerable groups. And a strategy for impact prevention,
minimization, and mitigation is needed. Extractive industry
projects should be classified as Category A projects likely to have
significant adverse environmental impacts unless there are
compelling reasons to the contrary. ...
+ Address the Legacy of the Past.
IBRD and IDA should make a strong commitment to helping governments
tackle the legacy of extractive industry projects. Compensation
funds should be established for people affected by past
developments. In cooperation with other funding agencies and in
partnership with all the stakeholders, the WBG should establish a
targeted program aimed at restoring degraded lands, improving the
life of the poor who are affected by previous project closures, and
generating employment and skills training.
Human Rights
The third key EIR recommendation regarding WBG involvement in
extractive industries is to respect human rights. ... The WBG
should ensure that it does not undermine the ability of its member
countries to faithfully fulfill their international obligations or
that it facilitates or assists violation of those obligations. It
should systematically incorporate experienced, independent, and
reputable third parties to verify the status of human rights in all
relevant projects.
...
Institutional Priorities
At the moment, the WBG is not set up to effectively facilitate and
promote poverty alleviation through sustainable development in
extractive industries in the countries it assists. So if it is to
make any progress on the key elements of its involvement in
extractive industries - pro-poor governance, more effective social
and environmental policies, and respect for human rights - it must
take certain steps to rebalance its institutional priorities.
In terms of staff and budget allocation, the WBG does not appear to
be as committed to the social and environmental aspects of
sustainable development as it is to the economic aspects of
development. Success indicators for career development need to be
improved: instead of putting an emphasis on quantitative lending
targets, staff should be rewarded for contributions to ensuring
compliance with Safeguard Policies and maximizing poverty
alleviation impacts.
...
In addition to these institutional changes, WBG priorities within
the energy sector need to be rebalanced. IBRD and IDA should
position themselves to help governments adopt sustainable energy
strategies that address the energy needs of the poor and that
minimize climate change, which will disproportionately affect the
poor. Countries should be helped to remove subsidies from
carbon-based fuels. And WBG lending should concentrate on promoting
the transition to renewable energy and endorsing natural gas as a
bridging fuel building new pipelines and renovating leaking ones.
On this basis, the WBG should phase out investments in oil
production by 2008 and devote its scarce resources to investments
in renewable energy resource development, emissions-reducing
projects, clean energy technology, energy efficiency and
conservation, and other efforts that delink energy use from
greenhouse gas emissions. ...
The WBG should aggressively increase investments in renewable
energies by about 20 percent annually, thereby moving toward a
better balance between support for fossil fuel projects, currently
94 percent of the energy portfolio, and support for renewables
projects, currently just 6 percent. ...
Letter from Chad Civil Society Organizations
Source (for this and other background documents on the EIR):
http://www.bicusa.org/bicusa/issues/energy_and_extractive_industries/index.php
N'Djamena, February 7, 2004
His Excellence
Callisto Madavo
Vice President
Africa Region
World Bank Information Center
Re: Final Report of the Extractive Industries Review
Your Excellence, Mr. Vice President,
On January 31, 2004, the secretariat responsible for the EIR
process, under the leadership of Dr. Emil Salim, officially
presented the Final EIR Report to the President of the World Bank
Group. The Report endorses the outcomes of a two-year consultation
between different actors, including the World Bank, multinational
corporations, governments, civil society organizations and
populations affected by oil, mining and gas projects.
We congratulate the WBG for this initiative, which generated
important recommendations regarding pro-poor governance, the rights
of project-affected people, and norms and policies of environmental
protection.
The findings and conclusions of this report constitute for Chadian
civil society organizations who participated fully in different
stages of the EIR process, a fundamental experience for the World
Bank, an institution committed to poverty reduction.
Your Excellence, Mr. Vice President
The participation of Chadian civil society in the EIR process is a
reflection of our hope that the recommendations of the Final Report
will be implemented in the Chad oil project, which has been cited
as a "model project" in all of the consultations-despite the widely
divergent perspectives that punctuated debates between civil
society representatives on the one hand, and governments, the World
Bank and multinationals, on the other.
Very often, reality puts an end to any such hope. We are exposed to
such a risk with regard to the governance of the Chad-Cameroon
project, which your institution designated as sustainable human
development.
However, Mr. Vice President, as the World Bank's Board of Directors
prepares to discuss the Report, we appeal to you to act as our
spokesperson to your colleagues, as the voice of all developing
countries, so that all of the relevant recommendations contained in
the Final Report as well as the suggestions contained in the
annexes be adopted. Because, recalling the moving speech of Dr.
Emil Salim when he presented the report in Lisbon in December 2003,
this report "is the voice of all of our consciences; a report in
favor of the poor; a report for future generations."
Mr. Vice President, the adoption and implementation of the
recommendations in this report present a historic opportunity for
the World Bank to carry out the reforms that are required if it is
to become a true Development Bank in the service of the poorest.
For Chadian civil society, these reforms should begin already with:
* the WBG's adherence to and participation in the "Publish What You
Pay" initiative
- no financing for extractive industry projects in countries where
minimal conditions of good governance and respect for human rights
are not guaranteed
- the integration of human rights and ILO labor standards into the
safeguard policies of the entire World Bank Group
- the evaluation of the cumulative environmental impacts of
projects financed by the World Bank so as to require multinationals
to take these externalities into account.
Your Excellence, Mr. Vice President, civil society organizations in
Chad and throughout Africa and other continents, are convinced that
the men and women who work at the World Bank Group, without having
themselves experienced the suffering of people affected by the
disastrous impacts of extractive industries projects, will
nevertheless, at least once in their lives, listen to the voice of
their consciences and subscribe fully to the recommendations of the
Final EIR Report. Therein lays our hope that you will act as the
spokesperson for the poor in whose name we make this appeal to you.
Your Excellence, Mr. Vice President, please accept our most sincere
appreciation for your consideration of these concerns.
For the Commission Permanent Petrole
Mr. Boukinebe Peugonba Garka
Pour le GRAMPTC
Mr. Maoundonodji Gilbert
[For additional background on the pipeline project in Chad and
related issues, see
http://www.africaaction.org/docs03/oil0306.htm and
http://www.africaaction.org/docs01/pipe0103.htm]
Sign-on Letter initiated by
Sustainable Energy and Economy Network
http://www.seen.org
[Note: This is one of many letters and statements by civil society
groups, members of parliament, and others, available at the civil
society website on the Extractive Industries Review -
http://www.eireview.info]
February 12, 2004
Mr. James Wolfensohn
President
World Bank Group
1818 H Street NW
Washington, DC 20433
Dear Mr. Wolfensohn:
We write to you today in good faith and with genuine hopes for
meaningful action towards our mutual goals of poverty alleviation
and sustainable development. As you know, Dr. Emil Salim has just
completed the Final Report of the Extractive Industries Review
(EIR). We want to thank you for initiating this historic process in
Prague more than three years ago, and for devoting significant
World Bank Group (WBG) staff time and financial resources to the
review over the last several years.
We also want to thank Dr. Salim for his adherence to the principle
that "genuine development requires partnership not only with
governments and companies, but with civil society as well." Dr.
Salim's commitment in this regard allows us to endorse his
recommendations to you, and to encourage you to adopt all of them
without exception or reservation.
The EIR correctly concluded that if the WBG intends to pursue its
mandate of poverty alleviation, then it should not support
extractive industries unless the broad set of enabling conditions
outlined in the Report's recommendations are in place. Furthermore,
the EIR found that support for certain types of extractive
activities does not represent the best use of the WBG's money to
promote and support sustainable development, and thus that the WBG
should phase-out its financing for these types of projects and
reallocate its funds to other activities.
We will not view as sufficient the adoption of only a certain
percentage of the EIR's recommendations. The failure to meet any
one of them can lead and has indeed led to a failure to contribute
to poverty alleviation or sustainable development.
At your insistence, the EIR integrated World Bank Group staff at
nearly every level, and the process and the Final Report were
clearly richer for it. We certainly hope and expect that this
integration of Bank staff and perspectives now translates smoothly
into implementation of all the Report's recommendations. This was,
after all, the premise upon which it was argued that Bank staff
should be deeply involved in the EIR.
Those of us who have previously engaged in the Structural
Adjustment Participatory Review Initiative and the World Commission
on Dams review already have great reason to be skeptical and that
skepticism would only harden if the World Bank Group were to pick
and choose only those recommendations from the EIR Report that are
least challenging. In the intervening time that it may take to
fully adopt the EIR recommendations, we feel that a good faith
gesture would be for you to instruct staff and management to
immediately freeze any further action on policies or projects that
are potentially affected by EIR recommendations.
We congratulate the EIR for recognizing climate change to be a
profound threat to sustainable development and poverty alleviation
and we strongly endorse the recommendation for the World Bank to
immediately end its support for coal mining and to phase-out
financing for oil projects by 2008. By shifting financial support
from fossil fuels to new renewable energy, the Bank could play an
important catalytic role toward new renewable energy development in
the South, in turn leveraging significant global benefits.
We would like to also highlight the EIR's endorsement of the right
of free, prior and informed consent for indigenous peoples and the
importance of securing a "social license" from affected communities
to operate before projects proceed. While this right is already
recognized for indigenous people under international law, other
communities often have very little influence over project decisions
despite the significant impacts that extractive industry operations
have on their livelihoods and on the environments on which they
depend. Empowering communities is not only the right thing to do,
it will also spare the Bank and project sponsors considerable
reputational risk and added cost.
Recognition of and respect for human rights is one of the core
elements of sustainable development. Despite your best efforts to
date, which we recognize and applaud, the World Bank is far behind
many other intergovernmental organizations in accepting its human
rights responsibilities, including the rights of workers, and in
integrating these and other human rights- related issues into its
operations and programs. As the EIR correctly concludes, this is
not a matter of discretion but rather it is a matter of compliance
with international law that is binding on the Bank; it is also
sound development practice. We are aware that you have expressed an
interest in human rights and have promoted rights-related issues
within the Bank. We hope that now you will use all of your
influence to demonstrate that commitment by adopting all of the
EIR's recommendations.
We are confident the EIR will be remembered as one of the most
important initiatives of your tenure, and one of the cornerstones
of your legacy as World Bank President. We would submit to you that
the true test of the World Bank Group's willingness to place
poverty alleviation and sustainable development above bureaucracy,
corporate interests, corruption, and institutional barriers to
change will be in your willingness to push to redefine the Bank and
the way in which it approaches development. The upcoming
formulation and adoption of a concrete and specific EIR action plan
will prove to what extent the World Bank is serious about ensuring
that the twin goals of poverty alleviation and sustainable
development are strongly upheld.
Sincerely,
[over 300 organizations; list of signatories available on
http://www.eireview.info]
AfricaFocus Bulletin is an independent electronic publication
providing reposted commentary and analysis on African issues, with
a particular focus on U.S. and international policies. AfricaFocus
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