By Jim Lobe
WASHINGTON, Aug 4 (IPS) - After a longer-than-expected meeting Tuesday, the executive board of the World Bank Group (WBG) gave general approval to a management plan to continue investing in oil, gas, and mining projects despite the recommendations of an independent review.
The Extractive Industries Review or EIR, commissioned by the World Bank in 2000, was headed by Emil Salim, the former Indonesian environment minister. It called for an immediate halt to WBG's support for coal projects and a four-year phase-out of its lending for oil projects in poor countries.
The WBG's 24 executive directors, representing the Bank's 184 member-countries, agreed to a management response to the EIR pending a further ''refine(ment)'' of some provisions bearing on several issues, including poverty reduction and local participation in mining and energy-related projects, according to a Bank statement issued after the meeting.
Most important, however, the board backed up the management's determination to continue investing in oil, gas, and mining projects in developing nations while only gradually increasing its portfolio for renewable-energy and energy- efficiency projects which the EIR had recommended be increased by as much as 500 million U.S. dollars a year.
''The harsh reality is that some 1.6 billion people in the developing nations still do not have electricity, and some 2.3 billion people still depend on biomass fuels that are harmful to their health and the environment'', Bank president James Wolfensohn told reporters after the meeting.
''That underscores the need for our continued but selective engagement in oil, gas, and coal investments'', he stressed, noting that the Bank will give greater emphasis in its lending to extractive industries on how these projects can more effectively reduce poverty.
He also announced that the WBG will review with the board on an annual basis progress it is making toward several goals in its extractive-industry portfolio, including poverty reduction, improved governance and increased transparency in host countries.
The World Bank chief promised greater participation by local communities in the design and implementation of future projects, and increases in lending for renewable-energy and energy-efficiency projects by about 20 percent annually over the next five years.
Reaction from non-governmental organisations (NGOs), particularly those that had favoured the original EIR recommendations, are sharply negative.
They hit out at the vagueness with which the management's plan had treated the issue of poverty reduction which is supposed to be the WBG's core mission.
''By largely ignoring the (EIR's) recommendations, the Bank's management has ensured that the poverty pipeline will continue to flow'', Keith Slack, Oxfam's Extractive Industries policy advisor told IPS.
''The Bank's unwillingness to change means that this process will likely result in precious little for the poor communities affected by oil and mining projects around the world. Despite its mandate to reduce poverty, the Bank has been unable to demonstrate that its extractive projects have actually done this,'' he pointed out.
The reaction from environmental groups was much the same.
''The World Bank has ignored the EIR recommendations and endorsed business as usual'', said Jon Sohn of Friends of the Earth (FoE). ''The EIR called for an 'extreme energy makeover,' but the Bank has opted for a cheap pedicure. It has missed a historic opportunity to bring its lending more in line with its mission to alleviate poverty'' (see FOE report).
Launched three years ago, the EIR was designed to address a series of questions about the generally poor record that extractive industries have compiled in many developing countries.
NGOs had also become increasingly concerned about the environmental impacts of such projects both locally and in their contribution to global warming which, according most scientists, is accelerated by emissions from fossil fuels, particularly oil, coal and gas.
The WBG -- which includes the World Bank; its soft-loan affiliate, the International Development Association (IDA), the International Finance Corporation (IFC), which provides loans and other support to the private sector, and the Multilateral Investment Guarantee Agency (MIGA) - has long been a major backer of extractive-industry projects in developing countries.
While it has provided on average only about one billion U.S. dollars a year in lending to that sector over the past decade, its backing for such projects - through co-financing, advisory services, or insurance or other guarantees -- still acts as a powerful magnet for private capital that would otherwise be reluctant to invest.
After three years of wide-ranging consultations with civil society, local communities, extractive-industry executives, governments, and Bank staff, the EIR commission headed by Salim issued an unexpectedly sweeping and critical report that urged the WBG to get out of the coal business, phase out its involvement in oil-related projects by 2008, impose tight social and environmental conditions on mining projects, and increase lending for renewable-energy and energy-efficiency projects manifold.
These recommendations were greeted with enthusiasm by environmental, human rights, and development NGOs, but with undisguised horror from big oil and mining companies, and the private banks that underwrite their projects. Developing-country governments, particularly those that rely on extractive industries as a major source of export earnings, also expressed strong reservations. Responding to the EIR in June, WBG management thanked Salim and his colleagues for their work and rejected the most sweeping proposals. Instead, it said it would pursue a ''more selective'' approach to extractive projects that would put greater emphasis on reducing poverty and promoting project transparency. It was that response that the executive board endorsed Tuesday.
For one EIR consultant who asked to remain anonymous, the WBG's reaction was all too typical of its approach to other outside reviews.
''The Bank has really developed to an art form high-minded ways of saying that the (EIR's) conclusions are misguided; everything is this way for a reason, and much as we all want a better world, we are already doing about as much as can reasonably be expected'', he said, adding that the Bank's past record, particularly in reducing poverty, invited skepticism about its ability to follow through.
''The surprising thing is that while there has been a lot of big talk about how these industries do or don't reduce poverty, the Bank has until very recently done almost nothing to find out the answer, at least in any rigorous or objective way''.
