World Bank says it is misrepresented by environmental NGOs

The World Bank has defended itself against accusations of funding oil, gas and mining projects in developing countries to the detriment of the environment and the developing world's poorest people.

Mark Constantine, manager of external relations at the International Finance Corporation (IFC), a member of the World Bank Group, told edie that the World Bank’s primary role in funding oil, gas and mining projects in the developing world is to ensure environmental and social sustainability.

Constantine’s comments came after two environmental campaigners locked themselves underneath a truck outside the World Bank’s New York HQ earlier this week and demanded that the Bank begins to phase out its funding for oil, gas and mining projects.

Constantine said that, in the long term, the Bank will become increasingly selective in choosing oil, gas and mining projects, but must work with NGOs to set up alternative energy projects.

Constantine rejected environmentalists descriptions of the Bank as an instrument of international business, saying the Bank has always been keen to engage in dialogue with civil society and to learn from its mistakes.

The protest by Friends of the Earth (FoE) US Executive Director Brent Blackwelder and Ozone Action Executive Director John Passacantando, came as a huge network of NGOs finalise their plans to stage a rally in Washington DC on April 16 during the International Monetary Fund (IMF) and the World Bank’s spring meeting. The NGOs criticise these institutions for lending money to governments with debt and credit problems, but only, the NGOs claim, on the understanding that such countries allow corporations free access to their national resources and labour.

Blackwelder and Passacantando said the World Bank Group should establish an immediate ban on new exploration in frontier ecosystems (see related story) and called on the World Bank Group to develop a plan for a complete phase out of financing oil, gas and mining projects.

Since massive protests derailed the WTO’s Ministerial Conference in Seattle last year, international trade and finance negotiators have begun to recognise the need for the global institutions to include environmental and social considerations in future negotiations (see related story).

The two protesters were representing a coalition of NGOs, made up of 200 groups from 41 nations, who have signed a ‘platform’ document against the World Bank’s financial activities. The document claims that oil, gas, and mining projects often push the poor off their land, leading to further human rights abuses and forcing them to live in areas contaminated by pollution. The documents adds that drilling and mining projects accelerate deforestation.

The document argues that there is no reason for the World Bank Group to continue to finance the oil, gas and mining sectors. The document says the World Bank Group devotes a large share of its portfolio to extractive sectors (in 1999, the IFC and Multilateral Investment Guarantee Agency (MIGA) lent 16% and the World Bank lent 3.8% of its portfolio for oil, gas and mining projects).

The NGOs add that the transition away from the oil, gas and mining sectors should be developed in a participatory manner, be based on renewable energy-based systems and ensure the livelihoods of local communities.

But Constantine argues that the NGOs are misrepresenting the role of the World Bank. “For oil, gas and mining projects we see our role in the first instance as one of seeking to ensure environmental and social sustainability. Second, our purpose in financing these projects – which we do on a highly selective basis – is to help alleviate country risk perceptions – this explains why 90% of IFC investments in private sector oil, gas and mining projects are now done in the poorest developing countries where risks are highest.”

Constantine said the phasing out of financing for oil, gas and mining projects is not one of the World Bank’s short term of objectives. But, he added, “we would assume a scaling back over the next few years driven more by a higher degree of selectivity on our part – that is discreet investments where we can add substantial value by being involved.

“It is not realistic to assume that if a country has an oil or gas resource it won’t or shouldn’t exploit it. This having been said, we certainly do not disagree that the past history regarding oil and gas projects in developing countries leaves a lot to be desired – whether from an environmental standpoint or in terms of the squandering of revenues derived from oil production. But this is where governance issues become central.”

Constantine cites work on the Chad-Cameroon Oil and Pipeline Project as an example of how the World Bank can alleviate poverty in the developing world. The World Bank has proposed a $115 IBRD loan to the governments of Chad and Cameroon and a $250 IFC loan to a consortium led by ExxonMobil. But NGOs say the project, which involves drilling 300 oil wells in the southern part of Chad and a 650-mile pipeline from Chad through Cameroon to the Atlantic Coast, poses numerous environmental and human rights risks.

Constantine claims the World Bank Group has played an instrumental role in worked with both the Chad’s and Cameroon’s governments and Exxon to achieve developmental objectives. These include a revenue management plan – drawn up with the co-operation of representatives of civil society – to ensure royalties received by the Chadian government are put to use in the social sectors; a re-routing of the pipeline to avoid ecologically sensitive forest; and various social safeguards.

“Does this make the undertaking risk free?” asks Constantine. “Absolutely not but it remains worth doing in our view because of the immense benfits it can bring to Chad, one of the poorest countries in the world, and a country with comparatively little else in the way of alternative prospects which would allow it to invest significantly in its people – in health and education in particular.

“This is not either/or in terms of also ramping up our support for alternative sources of energy including wind, solar etc. We are absolutely open to financing these projects if they can sustain themselves on market or near market terms. There is an intersection of interests in this area and further collaboration is not an option but a requirement – particularly with NGOs active at the operational level who can help us identify suitable investment opportunities.

“We need practical, deliverable, on the ground solutions at this point – something the advocates here in town this week holding press conferences are more than a little short on.”

Meanwhile, Constantine maintains the Bank Group is keen to engage in dialogue and reform. “There are a more than a few ironies in the context of the noise outside this particular week,” he says. “The Bank Group is about fighting poverty and dealing with environmental issues. We may not always get it right but that is where the dialogue and feedback and learning from past mistakes comes in. The institution that would appear to be the focus of attention if one reads the placards and rhetoric is a mirage, it is not what we are about or what we do every day.”

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