World Bank safeguards under scrutiny

2 October 2012

With the World Bank’s safeguards review due to be launched, indigenous groups and civil society organisations (CSOs) called for it to be rigorous and extensive. Meanwhile, the environmental and social track record of the Bank and its private sector arm, the International Finance Corporation (IFC), has come under scrutiny in India, Ethiopia, Colombia and Brazil.

After a long delay (see Update 79), the World Bank’s safeguard policies review was expected to be launched in October. The Bank estimates that the process will take two years to complete. An August approach paper, outlining the rationale and process for the review, was discussed by the Bank’s Committee on Development Effectiveness (CODE) in late September. The paper anticipated that the process “will lead to a new integrated framework” to “enhance policy alignment with internal and external changes, and provide a solid foundation for a renewed and strengthened partnership with the Bank’s borrowers”.

Titi Soentoro of Indonesian NGO Aksi said: “This review is timely, robust safeguards and due diligence are essential for protecting people and their environment. But we are concerned that it will only serve the needs of borrowers to create a venue to weaken the existing standards. We would like the World Bank president to publicly confirm that the review won’t lead to dilution of existing safeguards.”

In anticipation of the launch, an April letter to then Bank president Robert Zoellick, signed by 46 CSOs, including Relufa in Cameroon and Both ENDS in the Netherlands, raised concerns about the lack of data on involuntary resettlement prompted by Bank-financed programmes. The letter requests the Bank to disclose “available data on the resettlement impacts of Bank projects” and calls on the Bank to “conduct an evaluation of implementation” of the Bank safeguard on involuntary resettlement. Zoellick responded that the Bank has completed a first phase of data collection, to be followed by a second phase including initial findings, in 2013. Furthermore, 101 organisations and individuals, including the Lebanese Physical Handicapped Union and the United Kingdom Disabled People’s Council, wrote to president Zoellick in March asking for the mandatory inclusion of disability into the Bank’s operations.

Concerns have also been raised about the links to the Bank’s ongoing investment lending reform (see Update 82), which proposes to eliminate or reduce critical requirements related to Bank supervision, appraisal and cost-benefit analysis. In an early September letter, 39 CSOs, including Argentinian Centro de Derechos Humanos y Ambiente and US-based Accountability Counsel, wrote to Bank president Jim Yong Kim to raise concerns that the reform could effectively undermine the safeguards review. Furthermore, it highlighted a broader concern about “transparency, environmental and social standards” in the Bank’s other lending policies, including Program-for-Results (see Update 79) and increased lending through financial intermediaries. The letter argued that the IL reforms are being undertaken “by way of an unacceptably non-transparent and weak consultation process”, and calls for the safeguards review consultations to be “systematic, transparent and informed”. The recommendations also included a call for “current trends at the Bank Group to lend through programmes, intermediaries and pooled funds” to receive “at least the same level of public transparency and attention to social and environmental concerns as lending directly to borrowers and clients.”

Some of these calls were reiterated in a September letter from five Scandinavian NGOs, including the Norwegian Forum for Environment and Development, to Anna Brandt, the Nordic-Baltic executive director of the Bank and chair of CODE. The letter also argued that the new safeguards should “be elaborated within a framework which explicitly recognises the [Bank’s] human rights’ obligations” and called for “upward harmonisation” with other institutions and policies. It also called for the review process to examine “how emerging areas can be included in a new safeguards framework with binding requirements”, with particular emphasis on human rights and climate change.

People’s rights on the line?

Further controversy over the Bank’s lending to large scale hydro dams vindicates concerns about the Bank’s track record in safeguarding local communities from negative impacts (see Update 81, 77). In early August, the Inspection Panel (IP, the Bank’s accountability mechanism) registered a request for inspection of the Vishnugad Pipalkoti hydroelectric project in Uttarkhand, India, raised by local residents (see Update 77). The request outlines several social, cultural and environmental concerns, such as water quality and access, including for religious rituals. It also raises concerns about the lack of transparency and consultations and argues that studies have not adequately analysed the expected impact on stakeholders, including local communities. The IP is expecting a response from the Bank by late October.

The problems with other forms of Bank lending were highlighted in a complaint submitted to the IP in September by indigenous people from Ethiopia’s Gambella region. The submission claims that they have been severely harmed by a Bank project providing budget support for the Ethiopian government that “is directly and substantially contributing to a programme of forced villagisation”. David Pred of US-based NGO Inclusive Development International said that this process “is violently uprooting tens of thousands of indigenous people from their ancestral lands“, which “Bank funds are helping to make possible”.

Indigenous peoples have repeatedly raised concerns about the safeguards review process (see Update 81, 79). An August response to a June letter to president Kim from 141 indigenous groups and supporting civil society organisations outlines the Bank’s plan to recruit a “senior indigenous peoples specialist” and that it is contemplating establishing an “Indigenous Peoples Advisory Council”, with further details to be announced in the autumn. Indigenous and civil society groups welcomed the response in a September letter in which they also reiterated an earlier call for the indigenous peoples policy to remain a stand alone policy including the inclusion of the right to free prior and informed consent (FPIC), absent in the current safeguards.

FPIC was included in the updated performance standards of the IFC, which came into effect in 2012. However, CSOs, such as UK-based Forest Peoples Programme, have warned about the weakened language in the final version (see Update 77). The triggering of FPIC in IFC’s operations has come under scrutiny in relation to its recently approved $27 million equity investment in PetroNova “to support the expansion of the company’s oil and gas exploration programme in Colombia”. The IFC has acknowledged that all its performance standards, including on indigenous peoples, apply but has classified the project as ‘category B’, i.e. of limited adverse social and environmental impact, rather than the more stringent ‘category A’. Lance Crist, global head of IFC oil and gas, argued that the lower classification is due to the investment only supporting “early stage exploration activities” with “a limited footprint” and without “significant adverse impacts”. Crist added “IFC’s appraisal concluded that indigenous peoples would not be significantly impacted as a result of the proposed investment in exploration activities and therefore FPIC was not required”, however, he confirmed that “if the locations of future exploration wells or oil production activities have the potential to impact indigenous peoples” FPIC will apply.

Crist claimed that “the company has engaged in consultation with indigenous peoples so that they are aware of the exploration activities and the potential for future development”, however, this is questioned by Colombian NGO Instituto Latinoamericano para una Sociedad y un derecho Alternativos (ILSA). A July statement with over 50 signatories, including indigenous associations and local governors, called for a dialogue with authorities to address “the difficult economic, political, social and environmental situation of the indigenous peoples in the region”, including concerns about private sector involvement: “When there are strong economic interests that vie for control of our territories for the exploitation of natural resources, mining and hydrocarbons, we are left without tools to effectively defend the territory and deny us the right to freely decide the use we want according to our vision as indigenous peoples.” Knud Voecking of German NGO Urgewald urges that the classification of the project should be changed to ‘category A’: “If gas and/or oil are found, oil wells, pipelines and other facilities will be built and the interference will be permanent. These long-term consequences have to be considered in this exploration project from the start.”

The IFC has also been linked to the construction of the Teles Pires dam in the Brazilian Amazon, which indigenous peoples are fighting because the reservoir will flood an area deemed sacred. In 2011, the IFC approved a $50 million partial risk guarantee to “longstanding” client and construction company Construtora Norberto Odebrecht “to support the development of infrastructure in Brazil and other Latin American countries”, including the Teles Pires hydropower project.  João Kayabi, chief of one of the affected villages, told press agency IPS News: “It’s a sacred area. … It will be left underwater, and will only be a memory. We are trying to keep that from happening.” Indigenous rights lawyer Juliana de Paula Batista added “The natural resources that are indispensable for indigenous people to sustain their lifestyle and culture are being plundered”.