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Down to Earth IFIs Factsheet Series

No 20, January 2002



IFIs in Indonesia

This series of monthly factsheets on International Financial Institutions (IFIs) will include information on the World Bank Group, the International Monetary Fund (IMF) and the Asian Development Bank (ADB), focussing on their involvement in Indonesia.


The World Bank Group's Extractive Industries Review (EIR)

Part 1 of 2

In response to criticism of the World Bank Group's involvement in the oil, mining, and gas sectors, during the Bank's Annual Meeting 2000 World Bank President Wolfensohn agreed that the Bank would review its activities in those sectors and look into the best role of the Bank in the extractive industries. This will feed into the Rio+10 Meeting in September 2002. Dr. Emil Salim, former Indonesian Minister of Environment, has been appointed to lead the review process. While civil society groups applauded the Bank's willingness to conduct the review, the process and independence of the review have been highly criticised. A number of NGOs are calling for the ongoing process to be revised and improved so that these concerns are adequately addressed.

Background

A number of World Bank Group activities in the oil, mining, and gas sectors have generated controversy and criticism on issues around environmental and social sustainability, revenue sharing, the protection of human rights and the effects of development projects on local communities. The World Bank Group funds oil, mining, and gas projects; promotes policies and institutional changes through IBRD and IFC; and provides political risk guarantees for companies operating in these sectors through MIGA. While the Bank's support to these sectors may yield short-term economic benefits for host-countries and significant profits to companies involved, in many cases it does not incorporate social and environmental considerations adequately. In most cases, these investments lack social and environmental protection measures or plans for mitigation of adverse impacts.

The World Bank decided in mid-2001 to appoint Dr. Emil Salim, former Indonesian Minister of Environment, to be the Eminent Person to conduct a review called the Extractive Industries Review (EIR). Dr. Salim is equipped with a Secretariat located at the IFC office in Washington, DC.

Note: the World Bank Operations Evaluation Department (OED) and Operation Evaluation Group (OEG) are conducting ongoing reviews on these sectors. Their reviews will be completed at the end of June 2003, though a draft Report will be available in 2002.

The Process

In October 29-30, 2001 a planning workshop on the EIR in Brussels, Belgium, was attended by 49 participants representing stakeholders from the business sector, governments, World Bank Group, and civil society groups. According to the planning workshop and the EIR website, the review process consists of the following activities:

  1. Planning: completed in Brussels, October 2001
  2. Regional consultations: four consultations will be conducted for Asia, Eastern Europe and Central Asia, Africa, and Latin America regions.
  3. Focused research: three to six research efforts will be identified. At this point, the EIR team is calling for research proposals.
  4. Field visits. Dr. Salim and his advisors/expert team will visit selected project locations and meet with local stakeholders.
  5. Outcomes from the regional workshops, focused research, field visits, draft OED/OEG report and other unsolicited contributions and comments will be discussed in a Final Workshop, scheduled tentatively for September 2002.
  6. Based on the discussion in the Final Workshop, Dr. Salim will develop the Eminent Person's Report.
  7. Dr. Salim will submit the Eminent Person's Report to President Wolfensohn and use it for the Rio+10 Meeting in September 2002.
  8. Based on the Eminent Person's Report and the OED/OEG draft report, President Wolfensohn will submit Senior Management Recommendations to the Bank Board of Directors.
  9. The Bank Board will receive the Senior Management Recommendations and the final report of OED/OEG Review.

Flowchart of the Proposed Process (as of 14 January 2002)



The EIR Team has scheduled the Final Report to be submitted by the end of October 2002 and the entire process to be completed around the end of the year (see the agenda below). Civil society groups have raised concerns about the timeframe, being too short for a meaningful, comprehensive review. To date, the EIR Team has not officially revised the schedule as requested.

Proposed Agenda of Activities:
September 2001 Launch of the Extractive Industries Review Consultation Process; opening of the website, Background Paper of the World Bank Group available on website
October 29-30, 2001 Planning Workshop in Brussels
February 12-15, 2002 Regional Consultation Workshop I Asia/Pacific Region, Lombok Indonesia
March, 2002 Regional Consultation Workshop II Latin America and Caribbean Region
April, 2002 Regional Consultation Workshop III Africa and Middle East Region, Cote d'Ivoire
May 2002 Regional Consultation Workshop IV Eastern Europe and Central Asia Region, Romania
By May 30, 2002 Interim closing of consultations for report writing
By July 30, 2002 Draft Consultation Report posted on the Web and widely distributed for comments
Early September, 2002 Final Consultation Workshop
October 30, 2002 Final Consultation Report presented by Dr. Emil Salim to World Bank Group President
Within 3 months of presentation of final report Management Recommendation to WBG Board of Directors on "Extractive Industries"
Source: EIR website. Information downloaded 13 January 2002


The EIR Team

Dr. Salim, based in Jakarta, is leading a four-person Secretariat based in the IFC office in Washington, DC with staff chosen by the World Bank. He is equipped with a personal assistant based in Jakarta. He will set up an Expert Group and Regional Advisory Panels. As of mid-January 2002, these Expert Groups and Regional Advisory Panels have not yet been identified and appointed.

In the meantime, Dr. Salim will also be heading the Management PrepCom for Rio+10. This raises concerns about his workload and the possibility of overlapping agendas between his assignments in the EIR and in the Rio+10.

Funding

The World Bank Group, Norway Trust Fund, and Germany Trust Fund are providing a total of USD 3 million for the EIR.


Lack of Independence, Flawed Proposed Process

Initially, the public cautiously applauded the EIR initiative. However, fundamental problems were later found in terms of independence and the proposed process. Civil society groups from northern and southern countries have called on the EIR Team to ensure that it improves its independence from the Bank and revises the process in order for the EIR to be credible. In detail, the concerns are:

In the next IFIs Factsheet: update on the reforms of the Secretariat, review process, revised TOR, establishment of the Expert Group and Regional Advisory Panel, and updated agenda of events.

Sources:
EIR website www.eireview.org
Report on the Extractive Industries Consultative Review (EIR) Planning Workshop, Brussels, Belgium, October 29-30, 2001.
Oxfam America: Extractive Sectors and the Poor, October 2001
Forest Peoples Programme: The World Bank's Extractive Industries Review: A Credible and independent Review of World Bank Engagement in the Mining, Oil, and Gas Sectors? An NGO Report on the Planning Workshop of the Extractive Industries Review of the World Bank held in Brussels between 28-30th October 2001.
Draft Sign-on letter to Dr. Emil Salim by a number of civil society groups, tentatively dated January 17, 2002. This letter was not sent to Dr. Salim as concerns raised in the letter were being addressed.


This IFI factsheet is published by Down to Earth, the International Campaign for Ecological Justice in Indonesia.

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