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Down to Earth IFIs Update

No 32, May 2003

Civil society withdraws from Asia-Pacific Extractive Industry Review Workshop

The Asia-Pacific workshop of the Extractive Industry Review (EIR), an assessment of the World Bank's policy in extractive industries (mining, oil and natural gas), was originally scheduled for 24-29 March 2003 but was postponed due to the Iraq war. The meeting was finally held in Nusa Dua, Bali on 26-30 April 2003 (see IFI No. 31 March 2003). One of the objectives of the meeting was consultation with civil society.

Civil society groups, made up of the main non-governmental organisations and local communities in the Asia Pacific region, withdrew from the meeting because they considered the consultation process to be unsatisfactory since it did not actually take into their comments into account. They considered the process did not accurately reflect civil society's concerns over the World Bank's role in extractive industries.

The inappropriateness of the process could be seen, for example, in the distribution of a draft document containing the conclusions of the EIR process entitled Compilation of Consultation Inputs, ( which was distributed BEFORE (1) the Consultation with Indigenous Peoples; (2) the Asia-Pacific Consultation; and (3) the Middle East and North Africa Consultation. This draft in no way reflected the views of civil society groups since it stated that the involvement of the World Bank in extractive industries was still needed, even though these consultations with civil society and NGOs had not yet taken place.

Emil Salim himself regretted the withdrawal of civil society groups from the workshop since this meeting presented an opportunity for critical assessment, given that the key heads of the extractive industries were present at the civil society consultative meeting.

During the consultation in Bali, Emil Salim commented that gender issues and transparency over state income were the two issues that should be addressed by extractive industries. In his opinion, the tackling of these two issues had already been agreed by civil society, the government and the extractive industry sector.

Meanwhile between 13-15 April 2003 in Oxford (UK), The Tebtebba Foundation and Forest Peoples Programmes held an international workshop as part of an independent review process on “Indigenous People, Extractive Industries and The World Bank”. At this workshop, the indigenous people rejected the myth of 'sustainable mining', because, in their experience, these industries caused serious social and environmental problems. In fact, extractive industries had caused poverty and social inequality within communities, as well as not respecting local cultures and customary laws. This group therefore called for a halt to further funding of mining, oil and gas projects by international financial institutions, as well as a stop to new government extractive industries initiatives and to new investment in extractive industries by companies until respect for the rights of indigenous peoples' is assured.

Source of information on the Asia Pacific Extractive Industry Review, Kompas, 1 May 2003
For more information, contact the AMAN campaign co-ordinator, Rukka S Sombolinggi or see
The Indigenous Peoples' statement in Oxford can be accessed at

Marginalisation of Indigenous Peoples in Development Projects

On the 21 March 2003, dozens of NGO activists under the umbrella of the 'Alliance to Reject the World Bank as a Tool of Global Capitalism to Control Natural Resources' demanded that the World Bank withdraw from Indonesia because the extractive industries which they fund (mining, oil and gas) have caused environmental destruction and poverty. According to the NGOs, the assumption that exploitation of mineral, oil and gas resources can contribute to poverty alleviation and sustainable development, has not proved to be true. In fact the opposite has happened; the presence of transnational companies such as PT Freeport Indonesia (Papua), Kelian Equatorial Mining (East Kalimantan), Indo Muro Kencana/Rio Tinto (Central Kalimantan), UNOCAL (East Kalimantan), and INCO in Soroako, South-east Sulawesi, has resulted in serious social problems and environmental damage.

In addition, 95 groups from 24 countries called on OPIC (Overseas Private Investment Corporation) to postpone its plan to provide US$ 350 million for UNOCAL to develop an oil and gas project off the coast of East Kalimantan. This request was based on strong indications that the project has caused serious environmental destruction and violated the human rights of the indigenous communities in the area.

Disregard for the rights of Indigenous People is not only found in extractive industry projects but also in other types of development project. In addition to having their land ownership rights ignored, indigenous communities also often suffer from negative development impacts.

In April 2003 Earth Day was celebrated in Sirait Uruk, Porsea (North Sumatera) with the theme "Save Toba Samosir, Save the Earth", in order to commemorate the local communities' struggle against the injustice of Indorayon, a pulp and paper company in North Sumatera.

Even though, ever since the 1992 Earth Summit, international development agencies have continually emphasised the importance of involving civil society and indigenous people in the decision-making process, in practice in the implementation of their projects they have failed to ensure such involvement.

Research carried out by Tom Griffiths of the UK based NGO, Forest Peoples Programme concluded that only 3 out of 27 international development agencies have policies on Indigenous Peoples' rights. See

Environmental Defense, April 2, 2003

The second stage of the World Bank's Operations Evaluation Department (OED) implementation review (OD4.20), which evaluated the implementation of the Bank's policy on indigenous people in 47 World Bank projects carried out from 1992-2000, including field evaluation of 20 of those projects, can be found at:$FILE/IP_evaluation_phase_2.pdf

Disbursement of IMF funds and Indonesia's commitment to Economic Reform

After the Executive Body of the IMF reviewed the achievement of economic reform targets, at the end of March 2003 Indonesia received fresh loans from the IMF to the tune of US$ 469 million, including US$ 5 million to fund the government's commitment to carry out structural economic reform. In addition, the IMF also emphasised the need for reform in the legal and judicial sector. Anne Krueger (Deputy of the IMF) stated that the IMF was satisfied with the progress made by the Indonesian government in reaching economic reform targets even though there is still a need to continue the programme in order to promote economic growth.

Economic experts believe that the disbursement of the IMF loan is evidence of the government's commitment to undertake an economic reform programme. Even so, Pardi Kendi, a financial market analyst, believes that the disbursement of these IMF funds will not encourage an improvement in the rupiah exchange rate since nowadays exchange rate fluctuations are no longer influenced by injections of new funds but rather by market conditions, and especially the conflict in Iraq.

The American-led invasion of Iraq and the spread of the SARS virus have led the IMF and the World Bank to fear a downturn in economic growth in countries affected by the virus, primarily those in Asia.

Since Asian economies are concentrated on the business and tourism sectors and tourists expect health and security guarantees in their destination countries, the spread of SARS has caused a significant economic downturn. It is estimated that the GDP of Asian countries will decrease 25% as a result of SARS, while the GDP of Indonesia is estimated to decrease by 0.2%. This is a worrying situation for the Indonesian economy which is currently starting to recover through promotion of non-petroleum export commodities and tourism.

At the same time, the invasion of Iraq has had more of an impact on non-petroleum exports since the biggest market for these commodities is the United States. In a difficult investor climate, exports and domestic consumption are considered key to economic growth in Indonesia.

Jakarta Post, 01 April 2003, 04 April 2003
Independent 12 March 2003,
Dow Jones Newswires,

NGO Position Statement: Halting Co-operation and Boycotting US products

As a political position statement, and in support of human rights enforcement and democracy in the wake of the United States invasion of Iraq, the National Executive of WALHI decided to halt all forms of co-operation with development agencies related to the governments of the US, United Kingdom and Australia. WALHI has discontinued its co-operation with USAID and in the near future will complete all administration related to the co-operation that has already taken place. In addition, WALHI has called a halt to its negotiations on co-operation with DFID (the UK's Department for International Development), and AusAid (Australian Agency for International Development).

In addition to WALHI, other organisations who have ceased co-operation with US, UK and Australian development agencies include:

The cessation of co-operation has so far only been with donor agencies which are funded directly by the governments of the US, UK and Australia. There has as yet been no statement on halting co-operation with the World Bank and the IMF.

Jakarta Post, 31 March 2003,
Laksamana.Net, 25 Maret 2003

Water Project developments in Indonesia

ADB: Grants

The ADB is providing a grant of US$ 1 million to the Indonesian government in the form of technical assistance to develop clean water and health services for the poor in rural and semi-urban areas. This aid is provided in the knowledge that the poor condition of clean water supplies and sanitation is the main cause of diarrheoa, worms and skin diseases – some of the major health problems in Indonesia. This project is to be carried out in 4-6 provinces yet to be determined. The Department of Health's choice of target provinces will be based on consideration of the level of poverty, the range of clean water and sanitation services, and the presence and prevalence of water-related illness.
Source:, 3 April 2003

The World Bank: Water as the Key to Growth and Poverty Alleviation

At the Third World Water Forum in Kyoto, Ian Johnson, the Deputy President for Sustainable Development at the World Bank emphasised the importance of providing appropriate incentives to improve water services, i.e. transparency and participation, price determination for water and water services, and rights and responsibilities related to water. According to Johnson, now is the time to change the development paradigm through involvement of government, civil society organisations, communities, the private sector and development agencies.

Since the funds available to developing countries are not sufficient for development and improvement of clean water, at the G-8 Summit to be held in Evian (France) in June 2003, the developed countries of the G-8 will be asked to provide financial and technical support to less developed nations.

Two of the points on the agenda are: to increase investment in clean water provision; and reform in the management of clean water supply. Increased investment will be achieved by obtaining funds from the public, local and foreign private investment, and international aid funding. The required reform concerns: increasing participation of water users and civil society organisations in the decision-making process; the development of public-private cooperation to obtain funds; and the use of a framework that will guarantee environmental and social sustainability. Those water-related sectors that need to be reformed include water resource management, water supply and sanitation systems, irrigation and drainage, hydroelectric power, and environmental sustainability. (see also DTE IFIs Factsheet 28, March 2003.

For more information, contact:
Kyoto – Kristyn Ebro 090-6942-4580,
Richard Uku  090-6942-4657,
DC –  Sergio Jellinek  202-458-2841, and

In April, Albert Wright (Co-Chairman of the Task Force on Water and Sanitation for the UN Millenium Development Goal/MDG Project) visited Indonesia at the invitation of the World Bank to review the sanitation system in Indonesia. The results of this review will be used to formulate a policy framework for improving access to basic sanitation infrastructure for the poor.

For more information, contact:
Mr. Yosa Yuliarsa (62-21-5299-3179) and Mohamad Al-Arief (62-21-5299-3084)
or or and

Spring Meetings of the World Bank and the IMF

The Meetings of the World Bank and the IMF which are held every spring took place on 12-13 April 2003 in Washington DC. These internal meeting are held to discuss progress and future strategies. In addition, a meeting with NGOs was also scheduled.

Sources and more information can be found on and up-to-date information can be found on

A number of other related events are listed below:

  1. The World Bank discussion on Harmonisation and Review of Safeguarding Policy, 9 April 2003.
  2. Discussion on progress on the Low Income Countries Under Stress (LICUS) Initiative, 9 April 2003.
  3. Progress on the programmes of the Independent Evaluation Office (IEO), 9 April 2003
  4. Discussion on progress on the Heavily Indebted Poor Countries (HIPC) Initiative, 10 April 2003
  5. Consultation with the research team who compiled The World Development Report 2004: Making Services Work for Poor People, 10 April 2003
  6. IMF discussion on fiscal transparency, 10 April 2003
  7. Progress on the IMF Debt Restructuralisation Mechanism, 14 April 2003
The results of these meetings can be found at:

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

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