China project shakes Bank

11 August 2000

The campaign by pro-Tibetan and other groups to press the World Bank to drop the China Western Poverty Project caused a major political battle at the institution during June. Bank President Wolfensohn continued to back the project despite the ruling by the Bank’s Inspection Panel that Bank staff had broken seven Bank directives during project appraisal. This prompted an outcry from NGOs, and opposition to the loan from the US, Japanese and Dutch governments. US Executive Director (ED) to the Bank, Jan Piercy, said the Bank needed to take responsibility for “delivering on its own commitments to credible internal controls and faithful execution of agreed policies and procedures”. China’s ED, Zhu Xian countered that the Bank was being politicised. The Bank has agreed to review these issues in September.

The $40 million loan was intended to move some 60,000 poor farmers living on eroded land into another area of Qinghai Province 300 miles farther west. Their planned new home is part of the traditional territory of Tibetans and the birthplace of the Dalai Lama. The Bank was accused by pro-Tibet groups of endorsing the Chinese Government policy of population transfers into Tibetan areas and going ahead without enabling local people to speak out freely. There were also doubts about the project’s technical merits. A protest camp outside the World Bank’s headquarters and a speech by the Dalai Lama in Washington in the week before the Board meeting drove these messages home.

Yet Wolfensohn did not want to jeopardise the Bank’s relationship with the government of its largest borrower, China, and proposed a compromise: doing further studies and giving the Board another chance to discuss the project in a year’s time. Gabriel Lafitte, the Australian Tibet expert arrested by Chinese authorities last year while conducting interviews in the project area dismissed this as “a rash plan to please everyone by throwing more money and yet more words at a fatally flawed project.” China, however, eventually withdrew the project from the Bank arguing that it would fund it from China’s own resources.

Lafitte wrote an angry open letter to the Bank “I have read the history of how bank management in past Inspection Panel cases has smothered, fudged, obscured and muddied findings, twisting them to institutional ends. But this time the Inspection Panel had been called in at the start. This time it was not grass-roots demands but Bank management who had called in the Inspection Panel, a shrewd move which would have allowed everyone, including the Chinese government to gracefully withdraw without loss of face”.

Some Bank-watchers were overjoyed at China’s withdrawal of the project, but Lafitte commented that: “far from this being a triumphant victory, the World Bank’s ham-fisted interventions in Tibet have seriously compromised Tibetan diplomacy”.




A new report from Bank Information Centre detailing all past Inspection Panel claims, the Panel’s response and World Bank’s follow-up can be found on: www.bicusa.org/inspectionpanel.htm