Versi Bahasa

Down to Earth IFIs Factsheet Series

No 21, February 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 2 of 2

In response to requests to improve the Extractive Industries Review (EIR) process, the Eminent Person, Dr. Emil Salim, and the World Bank President who elected Dr. Salim to lead the review, have agreed to a significant change. The EIR terms of reference have been revised and made public on the EIR website. However, the fundamental question on where the review will go from here has yet to be addressed by both the World Bank and the EIR team.

Concern over the Lack of Independence and Flawed Proposed Process

Since the EIR planning workshop in Brussels, October 2001, concerns have been expressed over a number of constraints that could sacrifice the quality of the review. This includes inadequate time to carry out the review process with integrity and credibility, the lack of genuine independence from the World Bank Group, and problems in gaining full trust and co-operation from major stakeholders. (For a complete list of the constraints, see Factsheet 20, January 2002)

Dr. Salim found that, as a result, the EIR process had not been able to move ahead as intended. He also had to deal with accusations of being driven and controlled by the World Bank Group in this process.

World Bank President Agrees on Certain Changes to the EIR

On January 2, 2002 Dr. Salim sent a letter to World Bank President Wolfensohn detailing the proposed changes in the process and logistical arrangements. President Wolfensohn responded on January 17, 2002. Below are the changes requested by Dr. Salim and agreed to by President Wolfensohn:

Timeframe of the Review
Concerns were raised that the proposed timeframe for completion—by September 2002—is too short to allow four regional consultations with field visits in Asia, Latin America, Africa, and Central Asia. In addition, within the initial timeframe, there would not be enough time if these consultations and field visits were to be combined with dialogue and meetings with stakeholders without sacrificing the quality of the work. It is also important for the EIR team to take into consideration the findings of the World Bank Operation Evaluation Department (OED) and Operation Evaluation Group (OEG) internal reviews. The OED/OEG Phase I Interim Report, due at the end of June 2002, will contain the bulk of statistical analysis covering all Bank/IFC projects. The Phase II report, which will mainly consist of six country case studies, is expected to be completed by the end of 2002. The OED/OEG final report is scheduled for completion by May 2003.

President Wolfensohn has agreed that the timeframe of the review should be prolonged until June 2003. This new timeframe will allow the EIR team and stakeholders involved in the process to also review:

In June 2003, the final EIR report will be submitted to President Wolfensohn and the public.

In the previous arrangement, the Secretariat, seconded by the Eminent Person, did not have the ability to disburse funds upon the request of the Eminent Person. Budgets had to be negotiated between the Eminent Person's team and the Oil, Gas and Mining Departments of the World Bank Group. Furthermore, half of the budget of USD 3.1 million was already pre-allocated for World Bank staff to attend meetings arranged by the Eminent Person and for the Washington-based Secretariat, leaving limited funds for the consultations, experts, and advisors needed to assure the quality of the work.

While some of the budget has already been spent and some will remain earmarked, the rest is now entirely under the Eminent Person's control. The Eminent Person also retains the independence to raise funds if necessary, and the EIR is open to contributions of funds from other stakeholders of the Review, providing this does not jeopardise independence. The use of the funds will be made clear with details in the EIR website.

The Secretariat & Team
The staff of the secretariat, including the Deputy Head, was appointed by senior members of the World Bank Group. This has resulted in overlapping perceptions of roles and responsibilities with the Secretariat Head and in problems of co-ordination. Unco-ordinated external communication by the deputy head, for example, has negatively impacted the effectiveness of the EIR process in building trust with various stakeholders. There have been concerns over the location of the Washington-based EIR Secretariat in the IFC building -- raising questions about the Secretariat's independence from the Bank. In addition, Dr. Salim is based in Jakarta and was only equipped with one personal assistant and one half-time secretary.

Starting February 1, 2002, the EIR Secretariat will be based in Jakarta, with Dr. Salim. Mr. Bernard Salome who was the Deputy Head of the DC-based EIR Secretariat, remains in that post but he is now based in Jakarta. The EIR Secretariat will consist of Mr. Bernard Salome, Ms. Chandra Kirana, and a full time secretary in Jakarta. Meanwhile, Ms. Roberta Lovatelli, Julia Grutzner, and Iona Zamfir will remain in Washington, DC.

In the meantime, Dr. Salim has appointed Dr. Robert Goodland, a retired World Bank environment specialist, to be his advisor on environmental and social aspects of extractive industries, provide support in consultations and, co-ordinate experts committees.

The EIR Team in Charge of the Process
Responding to questions about the lack of clarity of the EIR process and how much the EIR team would be in charge of the process, Dr. Salim said in late January 2002 that the EIR team will be responsible for carrying out work with the Regional and Final Consultation Workshop facilitators. The EIR team claims that it will establish clear procedures that will ensure the participation of and a positive dialogue among civil society, business, and governments, and the World Bank Group staff.

The composition of each workshop will be 15 representatives from governments, 25 from civil society (ten NGOs, ten community representatives, and five representatives from labour organisations), 15 industry representatives (five from junior companies, five from senior companies, and five representing small-scale mining), ten World Bank Group representatives, and five representing other interest groups such as academia.

Terms of Reference are Revised and Available in EIR Website
In early January 2002, the revised terms of reference (TOR) were finally made public. Dr. Salim claims that the revised TOR have taken into consideration input provided during the planning workshop in Brussels, letters from civil society, and other stakeholder input provided formally and informally.

Concerns Raised by President Wolfensohn

While most of Dr. Salim's requests were filled, President Wolfensohn has insisted on two critical issues:

World Bank Active Participation in the Process
President Wolfensohn insisted that Bank staff be active participants in the review. He said that a review that does not involve the World Bank Group staff as active participants in the consultation process will end up with recommendations that are unlikely be founded on the real facts of the Bank's operations, and thus will not be of much use to the Executive Board and the Management.

The Bank's participation in the review has been criticized. Civil society groups argue that the Bank should not participate as an equal stakeholder in these meetings since this would not serve the goal of these consultations, i.e. to solicit local perspectives and experience. Its presence may also influence discussions that will be the basis for EIR recommendations. The Bank staff should only be observers and, upon request, make factual clarifications.

Developing Countries' Governments and People as Chief Stakeholders
In his letter to Dr. Salim dated January 17, 2002, President Wolfensohn said that this review is carried out for, and on behalf of, poor people living in developing countries. These people and their governments must be the chief stakeholders in any consultation. He further said that the extractive industries which invest in these countries must also have a say because they will be able to provide guidance on what is and what is not feasible for the World Bank Group to do in the industry.

President Wolfensohn's remark on this issue is seen as countering the claims that certain stakeholder groups may have too much influence on Dr. Salim. Citizen groups working on issues of the environment, indigenous peoples, mining, global justice, and MDB reforms have been actively monitoring the EIR process. They have made public a great deal of information on the problems of the proposed EIR process and have actively informed Dr. Salim about the flaws of the proposed process. This has been seen by other stakeholder groups -- most probably the Bank staff and the industry representatives -- as being too controlling.

New Timetable

Given the new timeframe of the Review, the timetable for activities has been changed accordingly. The first workshop will take place in Latin America in April 2002. The details of the new timetable are as follows:

Time Activity
February 2002 Opening of Extractive Industries Review Office in Jakarta
April 16-19, 2002 Regional Consultation Workshop I - Latin America & Caribbean Region
May 20-23, 2002 Regional Consultation Workshop II - Africa & Middle East Region
July 14-17, 2002 Regional Consultation Workshop III - Asia/Pacific Region, Lombok, Indonesia
August 2002 Regional Consultation Workshop IV - Eastern Europe & Central Asia Region
By August 30, 2002 Deadline for commissioned research and Community Consultation Projects;
Interim closing for consultations for report writing
December 2002 Draft Report posted on the web and widely distributed for comments
January 3-6, 2003 Final Consultation Workshop to discuss Draft Report
June 2003 Final Consultation Report presented by Dr. Emil Salim to World Bank Group President
Within 3 months of presentation of final report Management Recommendation to World Bank Group Board of Directors on "Extractive Industries".

The Next Battle: Substance

Although the way the secretariat and team will operate and their degree of independence and accountability still leave many questions, the battle over logistical and process issues may be over shortly. However, the EIR will have to deal with a more challenging issue: the substance of the review. For example, there needs to be criteria on what research is to be conducted; which projects to visit; what the focus for each field visit is; how selection for planning workshops will be conducted; and how conclusions can be drawn, given the regional scope as well as the diversity and complexity of issues and projects. The EIR team will also have to immediately identify a Group of Experts and facilitators for regional consultations who have credibility and acceptability.

To date, such discussions have yet to emerge although the EIR team should be ready with at least general criteria to be used for reference.

Where Will the Review Lead?

A fundamental question about the EIR is what action the World Bank will take as a result of the review. The Bank has declined to give any clear idea of what kind of steps it could take to 'operationalise' any of the EIR's recommendations. Previous experience with the World Commission on Dams (WCD) shows that the World Bank, one of the major sponsors of the Commission, refused to adopt the Commission's recommendations. Based on the WCD experience, and given the continuous lack of clarity from the Bank's side on how the EIR recommendation will be used, it seems that the Bank wants to reserve for itself the role of deciding what concrete actions and operational guidance should result from the EIR.*

Dr. Emil Salim's letter to President Wolfensohn. Dated January 2, 2002.
President Wolfensohn' s letter to Dr. Emil Salim. Dated January 17, 2002
Dr. Emil Salim's letter to all the Extractive Industries Review Stakeholders. Dated January 30, 2002.
Extractive Industries Review website
Wahana Lingkungan Hidup Indonesia (WALHI)

Contacts for NGOs:
Emmy Hafild, Wahana Lingkungan Hidup Indonesia (WALHI),
Philippines Indigenous Peoples Links
Vicky Corpuz, Tebtebba Foundation, Philippines
Keith Slack, Oxfam America
Marcus Colchester, Forest Peoples Programme, UK

*It is worth noting the Oxfam US finding that oil, mining and poverty are closely related – see next month's IFIs update.

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

DTE IFIs updates and factsheets are available in English and Bahasa Indonesia.

They can be sent via email (rtf version) free of charge, or normal postage (printed version), included quarterly with the Down to Earth newsletter. Printed versions are free of charge to existing DTE subscribers and exchange partners.

If you would like to receive the monthly updates and factsheets via email, please email us. Please state what language you would prefer. You can choose both languages if you prefer.

Office: 59 Athenlay Rd, London SE15 3EN, England, email: tel/fax: +44 207732 7984;

   Back to Campaigns    DTE Homepage    Newsletter    Links