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Down to Earth IFIs Update

No 30, December 2002

World Bank concedes to Indigenous Demands on Policy Revision Process

The World Bank is in the final stages of revising its Indigenous Peoples Policy. The current policy, Operational Directive 4.20 (OD 4.20) has been in effect since 1992. The main objectives of the policy are "to insure that World-Bank financed development projects do not cause adverse impacts upon indigenous peoples, and that they provide them with culturally compatible social and economic benefits." The current revision process, which began in 1998, is meant to facilitate the implementation of the policy. Some observers suggest that the draft revised policy (OP/BP 4.10), is considerably weaker in important areas. Indigenous organizations complain that the language of the draft is not strong enough to protect their rights, and that the consultation was inadequate.

On October 18th the World Bank Vice-President for Environmental and Socially Sustainable Development, Mr. Ian Johnson, publicly agreed to a number of longstanding indigenous demands regarding the on-going revision of the World Bank indigenous peoples policy. His proposals, which have yet to receive a formal response from indigenous movement representatives, include:

  1. A draft revision of the new IP policy will be made available to the public before it is given to the Board of Directors for approval. It will note or include explanation of changes that have been made as a result of indigenous proposals during years of consultation.
  2. OED review: The World Bank concedes that indigenous leaders made a valid call for the full findings of the Bank's internal review of the IP policy, carried out by the Operations Evaluation Department, to be considered in the revision of the policy. They are changing their schedule accordingly.
  3. The Bank agreed to calls for further legal discussion between indigenous and World Bank legal experts regarding the Bank and international human rights standards.
  4. The Bank would like to pursue some form of permanent and transparent dialogue with indigenous representatives, possibly through periodic meetings.
The announcement came at the conclusion of an unprecedented roundtable meeting at which 15 indigenous delegates from around the world participated in two days of discussions with Bank management, staff, and members of the Bank's legal department. The meeting discussed the policy and the obligations of the World Bank under international law, in particular human rights law.

Following the announcement by Mr. Johnson, the World Bank has revised the timetable so that a new draft of Indigenous Peoples policy will be posted for public comments in early 2003. In March 2003, the Operational Policy draft will be sent to the Committee on Development Effectiveness (CODE) with comments from indigenous peoples. In early June 2003 a new policy will be submitted to the Board for approval.

Source: Bank Information Center website prepared by Melina Selverston-Scher

World Bank's Extractive Industry Review Consultation for Asia Pacific Stakeholders Rescheduled

Due to the Bali bomb atrocity, the World Bank decided to reschedule the Asia Pacific Stakeholder Consultation of its Extractive Industry Review (EIR) from November this year to March 25-29, 2003 in Bali (see DTE Update 29, October 2002). The Indonesia-based environmental organization WALHI has taken on the role of facilitator in the self-selection process by civil society groups to identify their representatives to the consultation. WALHI is still accepting names of groups to be nominated as civil society participants. To date, six groups have been nominated.

The new self-selection process is as follows:

For inquiries, contact Fabby Tumiwa at WALHI, cell phone: (62) 811 949 759.
Source: WALHI emails of November 19, 2002 and November 25, 2002.

Potential Tool for Affected Peoples to Obtain Redress from Japanese Funder

The Japan Bank for International Co-operation (JBIC) established new Social and Environmental guidelines this April. These will become fully effective in October 2003. JBIC released its draft complaints procedure for the Environmental Guidelines just prior to a public consultation held on August 30, 2002. People negatively affected by projects funded by JBIC will be able to file complaints through this new procedure. An unofficial English translation will be made available soon.

It is likely to be a struggle to ensure that the complaints procedure is effective and fair. Likely problems include:

  1. Potential lack of independence. An "Environmental Inspector" will be responsible for investigating complaints, but the criteria for this position do not ensure the Inspector's independence.
  2. Intimidation of those who file complaints. It is mentioned several times in the draft procedures that those who file complaints may be held responsible for covering the cost of preliminary investigations or the inspection if any false statements are found in their submitted documentation.
  3. Timing of complaints. Complaints can be filed only after serious damage due to non-compliance has occurred and after loan agreements have been signed. This means that complaints cannot be raised against foreseeable negative impacts.
  4. Underlying suspicions. The tone of the procedure implies an underlying suspicion that those who file complaints are not to be trusted. Multiple references are made to the need to ensure that the procedure is not abused for ulterior political or economic motives.
NGOs participating in the public consultations continue to raise concerns regarding the complaints procedure. JBIC is expected to issue its second draft soon.

Source: Mekong Watch CATFISH TALE, Issue #6, 2 October, 2002.

Indonesia Likely to Request More Loans from CGI due to Budget Deficit

During its Interim Meeting in early November this year, the World Bank-led Consultative Group on Indonesia (CGI) indicated its support for a higher level of new loan commitments for next year. It is very likely that the Government will have to borrow more money than expected due to an increase in the budget. It is estimated that financing from international donors under the CGI will increase to 29 trillion rupiah (approximately USD 3.2 billion) from a previous forecast of 26 trillion (approximately USD 2.9 billion).

On November 18, the parliamentary budget committee and the government revised upwards the proposed 2003 budget deficit to 1.78% of GDP, or 34.436 trillion rupiah (approximately USD 3.8 billion), from 1.3%. Approximately 22.45 trillion rupiah (approximately USD 2.5 billion) of the deficit will be funded by domestic sources and the remaining 11.986 trillion rupiah (approximately USD 1.3 billion) through foreign financing.

The CGI has demanded that Indonesia conducts reforms in the judicial and banking sectors, which, to date, have not shown significant improvements. How the CGI will justify its commitment to providing financial support to Indonesia, despite the lack of the reforms demanded, remains to be seen.

Source: AFX-ASIA, November 19, 2002.

Farmers and Civil Society Groups Raise Concerns over Water Resource Bill

A USD 300 million World Bank Water Resource Sector Adjustment Loan (WATSAL) to Indonesia has allegedly been used to pressure the Indonesian government to reform water sector management. An article by the Indonesian Forum on Globalization (INFOG) details the problems with the Water Resource Management Bill (RUU-SDA). A new Water Resource Management Act is one of the conditions for the disbursement of the final tranche of WATSAL.

The RUU-SDA draft (May 6, 2002) maintains that the bill was developed in response to the imbalance between the declining water supply and rising water demand. The solution given to this problem in the bill is privatizing water sector management. In addition, the bill also contains language which indicates that cost recovery principles will be implemented. Cost recovery principles mean that users should bear all costs incurred in providing the goods and services.

According to INFOG's article, the privatization and commoditification of water will lead to several problems. Firstly, the RUU-SDA changes the traditional view that water is common property instead of an individual asset. Secondly, the full-cost recovery policy seems to be an incentive for conservation and efficiency in water utilization, but it can also mean that those who cannot afford to bear the full costs of operations, maintenance, rehabilitation, and investment and debt servicing will not be given access to water unless certain protection schemes can be developed for the disadvantaged. The bill fails to clearly stipulate such schemes. Thirdly, privatization requires a clear and strong governance mechanism to ensure that it works in a fair and accountable manner. The bill lacks clear provisions on how the governance of a privatized water sector would operate.

Together with a number of farmers' groups and civil society organizations, INFOG have organized campaigns to urge the Government to review the flawed bill. They have also approached parliamentarians to scrutinize the contents before the bill is approved. The World Bank has been pressured not to disburse the loan even if the bill is approved because of the poor quality of the drafting.

Indonesian Forum on Globalization
World Bank's Resident Staff in Indonesia

World Bank's Approach to Agenda 21 Fails, Report Says

A joint publication by Friends of the Earth-US and the Halifax Initiative entitled "Marketing the Earth: The World Bank and Sustainable Development" was released at the recent World Summit on Sustainable Development (WSSD). The report documents the World Bank's approach to sustainable development in specific sectors addressed in Agenda 21 a landmark document resulting from the United Nations Conference on Environment and Development in 1992, popularly called the Rio Summit.

The report reveals serious adverse impacts on people and the environment that result from World Bank-supported policies and projects in developing countries. This is particularly the case for those that stem from the Bank's market-based approach to protecting forests, marine, and freshwater resources, and to reducing pesticide use, greenhouse gas emissions and poverty. During the Rio Summit, the Bank agreed to lead the process of setting up the Global Environmental Facility (GEF) to tackle serious concerns on key environmental areas. While the GEF has grown, the impact of investments supported by GEF has not been fully evaluated. Even if it is assumed to be successful, GEF investment is not at all representative of the Bank's work in larger sectors and programs.

The reports concludes that the WSSD is not a space to negotiate changes to the World Bank, but it must be a forum to fundamentally address power imbalances and economic, social, and environmental injustice.

Source: Friends of the Earth US website
The report is available online at

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

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