Controversial extractives review nears endgame

11 September 2003

Emil Salim, the ‘Eminent Person’ in charge of the Bank’s Extractive Industry Review (EIR), has angered stakeholders with his August letter stating that “the inputs and ideas [to the review] have indicated a desire to expect the World Bank Group to promote extractive industries pro-actively in poverty alleviation through sustainable development”. Geoff Nettleton of Philippines Indigenous Peoples Links, who has campaigned on the World Bank and mining for many years, commented: “statements in the draft report seem increasingly and disturbingly detached from the evidence submitted”. Many organisations submitted to the review that they felt the Bank should cease supporting oil, gas and mining altogether. Civil society groups, including those serving on an advisory panel for the review which met in Washington on 4 and 5 September, have raised these concerns with the Review secretariat, but also welcomed some findings and recommendartions in the report. The Review draft has also caused concern inside the Bank, however and some Bank managers are arguing against some of its current recommendations.

The EIR was initiated two years ago following an NGO campaign. The review has received many written and oral submissions setting out the varied and serious reasons why many groups demand the Bank should withdraw its support for the extractive industries. There is no consensus that Bank involvement in these industries contributes to poverty alleviation or sustainable development. Far from withdrawing from the extractive industries, however, the Bank is actively funding extractives and promoting mining code reform in a range of countries, including many undemocratic, corrupt or unstable ones, such as the Democratic Republic of Congo, Georgia and Chad.

The draft review recommendations appear to take account of some of these NGO concerns, for example on lessening temptation for corruption and creating a culture of good governance. But many are either very loosely worded or appear naive about the likelihood that they will be implemented. The report suggests introducing the principle of prior informed consent for indigenous communities in mineral areas, and says that the Bank should phase out funding for coal and oil projects and do much more to invest in natural gas and renewable energies. It says the Bank should stop funding projects in areas of armed conflict, and mines which involve the disposal of waste at sea. Many civil society groups are concerned that the Bank will be either unwilling or unable to implement such recommendations, based on their experience with the Bank to date. When there is a clash with other priorities such as maximising investment, the idealised role the Review envisages for the Bank may well remain only on paper.

on many issues extractive industry associations are more progressive and forward thinking than the World Bank Group

Currently, the review draft finds, “the World Bank Group’s pro-privatization, liberalization and deregulation policy agenda, which has helped increase the foreign direct investment by large, primarily OECD based mining, oil and gas transnational corporations in developing countries, with or without direct Bank involvement, has often left local communities and the environment very vulnerable”. It states that “while the World Bank Group supports Core Labor Standards as an overall policy commitment, it often undermines labor rights through its advice at the WB country policy level”.

The review recognises that the Bank’s efforts to monitor projects or pressure companies or governments often go little further than issuing “politically correct rhetoric”. But it then jumps to the conclusion “that the Bank Group does posses the economic, intellectual and political capacity to influence and lead” the extractives industry to internalise its social and environmental costs and distribute benefits fairly.

Among the specific steps it suggests are that Bank management enter into binding agreements with the governments, communities and companies involved in extractives projects and that the Bank should “fully take on board internationally ratified conventions, for example on indigenous peoples, ILO core labour standards and the Transboundary Movement of Hazardous Wastes”. It says the Bank should help strengthen civil society and community capacity. Nettleton rejects this, however, saying: “it is difficult to think of any institution with less experience or a more unconvincing record of being able to do this than the Bank. Clearly, to many, the Bank is not welcome or trusted in this role”.

The draft review rejects the Bank’s frequent argument that its standards may be or may become too high, deterring potential corporate clients. It says “on many issues extractive industry associations are more progressive and forward thinking than the World Bank Group is in its safeguard policies, for example on human rights”. It urges the Bank to address gaps and inconsistencies in its guidelines and policies. Proposed measures include an integrated assessment approach and more new approaches to security and human rights, consultation and disclosure, safety of dams, mine closure, gas flaring and transportation of oil. The review also says the Bank should require upstream social and environmental analysis for structural reform programs and should make its Natural Habitats policy more specific.

It partly accepts the logic of a Bank internal evaluation that for countries with weak macro and sectoral governance, the Bank’s primary focus should be on strengthening governance, for example by making contracts transparent, strengthening revenue management capacities, increasing stakeholder engagement and improving the performance of environment ministries. It says many governments need training and advice to improve the ability to negotiate deals which would capture maximum benefits for the country and its citizens.

There will be two further meetings where stakeholders will be able to comment on the draft report, including one in Istanbul starting on 17 November. The final report will be presented to the Bank on 9 and 10 December and the Bank will then have three months to prepare its response.