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Down to Earth IFIs Update

No 39, October 2004

This will be the last IFI update for the time being. DTE is undertaking a review of its IFIs work to decide how to direct staff time and resources most effectively.

We welcome readers' feedback on the usefulness of the current system of dual language factsheets as well as your suggestions for alternative formats and topics for publications on IFIs. Please address replies to

World Bank Management Response to the Extractive Industry Review (EIR) Recommendations

On 3 August 2004, the World Bank Group decided to respond to the results of the Extractive Industry Review (EIR) and an independent evaluation carried out internally by the World Bank. In its written response, the World Bank management asserted that investment in extractive industries was beneficial for the poor and for the majority, as stated by James D. Wolfensohn, Head and President of the World Bank Group. The management proposed that the World Bank Group continue to invest in the oil, gas and mining sectors, and that this represents an important aspect of the development of poor countries. If these countries are going to develop their resources, the World Bank Group's capital and expertise would assist such projects to attain environmental, social and good governance standards. In addition, income from such projects would be used transparently and effectively.

The World Bank said it would be able to continue to contribute to poverty reduction and support the development of renewable energy initiatives. It also committed to issuing an annual progress report on the Bank's work in the extractive industries sector and establishing an advisory group, including representatives of governments, the private sector and civil society.

Seven policy reforms will be implemented:

  1. Poverty Reduction: new indicators will be drafted in order to evaluate the impact of projects;
  2. Transparency: a more systematic approach will be developed in order to ensure that income generated from extractive industries is properly and transparently accounted for;
  3. Good Governance: determining indicators for quality of fiscal management, transparency and anti-corruption policies;
  4. Develop renewable energy: the World Bank will head co-operation between stakeholders to ensure the implementation of an energy-efficient and renewable energy agenda;
  5. The World Bank Group will strengthen procedures that will encourage local community participation. It will only support projects that have a positive impact on local communities, including indigenous peoples, after a public consultation process;
  6. Sectoral Composition: the World Bank Group will develop natural gas and alternative fuel sources, and a commitment to collaborate with stakeholders, plus develop capacity and identify opportunities for cooperation;
  7. Social and Environmental Issues: the World Bank Group will continue to improve its approach to social and environmental issues.

The World Bank's response, which rejects the basic recommendations of the EIR by continuing its involvement and investment in oil, gas and mining, clearly demonstrates the fact that the Bank prioritises business and government interests over the rights of indigenous and marginal peoples. The World Bank has not been serious in its response to and implementation of the EIR recommendations.

During the celebration of 60 years of the World Bank, a number of NGOs including Christian Aid, Friends of the Earth, People and Planet, Indigenous People Links, Rising Tide, Platform Research and Forest People Programme, called on the UK government's Department for International Development (DFID) to ensure that the World Bank fully implements the recommendations made by the EIR Team. In Indonesia, the National Director of WALHI, Longgena Ginting, stated that the involvement of the World Bank in the extractive industries is not in accordance with its mission to eradicate poverty and ensure sustainable development.

NGOforum Yahoo group Kompas, 22 July 2004

The IFC and the Social and Environmental Review: an opportunity for NGOs to be heard

The International Finance Corporation (IFC) will begin regional consultations to review its social and environmental policies, including more than 70 technical pollution standards. The IFC public consultation process, which includes regional consultations for safeguard policies, will take place between August and December this year. The regional consultation for Asia will be held in October. It has been estimated that the process for reviewing pollution standards will take more than two years. This review is important as it will influence IFC standards. IFC social and environmental standards are often used by both governments and influential private sector institutions such as the OECD (29 industrial nations) and the Equator Banks (20 international organisations). The regional consultation is an opportunity for NGOs to raise issues related to the EIR recommendations which have not been addressed by the World Bank. The most fundamental question is the IFC's involvement in the mining sector and whether indigenous peoples have the right to reject the presence of industries that are harmful to them. It is hoped that NGOs will take an active role by providing input into the process and through advocacy work. NGOs may register by sending a blank email to GGGR - Global Rights, Rules and Responsibilities.


New World Bank Structural Adjustment Policy: New Development Policy Lending

After a consultation process with its members, stakeholders and others, the Executive Body of the World Bank published a draft new policy on structural loans entitled Development Policy Lending (OP 8.60) to replace the old Structural Adjustment Programmes (SAP). The new policy includes changes to a number of instruments including sectoral adjustment loans and credit to support poverty reduction. The scope of the policy includes planning, fiduciary arrangements, debt repayment and dissemination and disclosure.

The consultation process covered (1) policy paper consultation and reports from a number of nations that have successfully tried out the new scheme (2) issue paper consultation. The policy paper consultation was carried out between November 2003 and June 2004 in Cape Verde, Madagascar, Sweden, Colombia, Poland, Nigeria and France. The issue paper consultation was held between July 2002 and January 2003 in Jordan, Korea, Mexico, Pakistan, Poland, Senegal, Tanzania, UK, and the USA. The World Bank also received public opinion via its website up until January 2004. In principle, this consultation round was held in order to seek the opinion of governments, civil society and academics concerning the substance, model and methodology of policy-based loans.

Features of the new policy include:

Country ownership. There is no longer a blueprint for all countries: instead, implementation is now dependent on the needs of each country. James Adams, the World Bank Vice President and Head of Operational Policy and Country Services Network has stated that the Bank has learned that the key ingredients to economic growth include giving greater space to the private sector, and promoting the rule of law and a functioning judiciary. Structural adjustment policies will be determined by each country through consultation with civil society and the private sector, after taking into account the social and environmental impact. In future, the World Bank will only provide support to countries that have good working policies that are owned by the government and its citizens.

Long Term Focus. Programmes will no longer be short and mid-term oriented towards overcoming a crisis, but will include complex institutional changes that require a longer term, staged approach. These include strengthening health and education policies, improving the investment climate, addressing weaknesses in governance, public expenditure management and public financial accountability.

Evolution of Loan Conditionalities. Structural adjustment loans are now disbursed after actions have already been completed by a country, rather than before. This way, the Bank and the country reach an understanding about their goals and how to assess progress. If this is deemed adequate, funding can be continued for a second operation.

Responding to this new draft policy, the Bank Information Center (BIC) said the draft had failed to take into account critical suggestions from both civil society and governments. In its letter to the Executive Director of the World Bank, the BIC asked the World Bank not to pass the Development Policy Lending policy, because this policy:

  1. Had failed to include the recommendations of 3 review teams, (IDA-13 Deputies' Replenishment Agreement, Forestry Policy revision, and Extractive Industries Review);
  2. Did not provide adequate transparency or accountability regarding potential social and environmental impacts associated with policy lending; and
  3. Did not contain any specific social or environmental requirements for policy lending linked directly or indirectly to critical sectors, such as forests or extractive industries.


Indonesia Has Not Used USD150 Million in IDA Loans

At an event to mark the 60th Anniversary of the World Bank, held by the International NGO Forum on Indonesia Development (INFID) in Jakarta, The Bank's Lead Economist and Acting Director of the World Bank, Bert Hofman, stated that during 2003, Indonesia had not made use of USD 150 million of the IDA loan allocation. He said a reason for this was that agreement has not yet been reached on the government projects to be funded. As a result, the loan has been allocated to Vietnam.

The IDA is the World Bank's low-cost lending arm. It provides loans at 0% interest to countries that are experiencing economic difficulties. Since the economic crisis of 1997, Indonesia has been included in the list of countries considered to qualify for IDA loans. Fifty-three percent of the IDA loans are made to the 10 countries experiencing the deepest economic difficulties.

Kompas 22 July 2004

NGO Voices Marking 60 Years of The World Bank

Hannah Ellis of Friends of the Earth England Wales and Northern Ireland stated that DFID must expose the World Bank's failure to promote environmental sustainability. "DFID must wake up to the World Bank's failure to deliver on sustainable development. It's time to shake up the World Bank and implementing the Extractive Industries Review is a crucial first step. The World Bank is a public institution, intended to alleviate poverty, but instead it is supporting damaging industries and putting corporate profit before people and the environment."

Jonathan Glennie, Senior Policy Staff with Christian Aid also agreed that it was DFID's job to ensure the World bank fulfils its mission. "If DFID is serious about poverty alleviation, it's time DFID had a serious talk with the World Bank."

As part of a global day of action on 22 July 2004, NGOs reminded the World Bank to:

  1. Provide communities with the right to decide the direction of development in their own localities;
  2. Cease investment in the oil, mining and gas sectors;
  3. Respect human rights;
  4. Stop large scale dam projects and encourage renewable energy initiatives;
  5. Implement complete transparency;
  6. Cancel 100 percent of poor countries' debts.

Actions were carried out in a number of places all over the world, including in Indonesia, UK and Bolivia. In Indonesia, there were demonstrations in Jakarta, Yogyakarta, Makassar, and Riau. These actions were spearheaded by a number of NGOs. Walhi, the Anti-Debt Coalition (KAU), the Indonesian Federation of Peasants Unions (FSPI), Indonesian Women's Coalition (KPI) and the Indonesian National Students League (LMND) stated in Jakarta that the World Bank had failed to implement its mandate to overcome poverty through sustainable development. The Secretary of the International NGO Forum on Indonesian Development (INFID), Binny Buchori, stated that although the World Bank had undergone some changes, it was still intervening in borrowing nations, by imposing conditions before disbursing loans.

The Anti-Debt Coalition issued a statement accusing the World Bank of failing to pay sufficient attention to projects that showed poor performance levels, including corruption and failure to meet deadlines. Despite this, the government still has to pay the interest on the loan. As a result, the country suffers because the debt burden increases. Two examples of government policies that show how the World Bank imposes its agenda are the Anti-Monopoly Bill which promotes liberalisation of the economy and the Water Resources Bill which opens up the possibility of water privatisation.

Kompas, 22 July 2004

The International Rivers Network

The International Rivers Network (IRN) is providing a new service for civil society organisations and institutions that monitor water and energy projects funded by the IFIs, large-scale dam projects in particular. Each month, the IRN will draft a list of all new water and energy projects of the World Bank and Regional Development Banks such as the ADB. This includes projects that have already been agreed.

The first list - July 2004 - includes 23 new projects in Africa, Asia and Latin America and can be accessed at: Source:
Website IRN

The ADB and Japan Sponsor Water Resource Management Training

Between 26 July and 2 August 2004, the ADB and Japan sponsored a training programme on Integrated Water Resource Management (IWRM) and the strengthening of River Basin Committees in Bangkok and Chiang Mai. This training was aimed at planning and implementing the most effective regulations for river basins, both from the economic as well as ecological perspective, and which involves the participation of all stakeholders.

Apichart Anukularmphai, President of the Thai Water Resources Association and organiser of the activity, emphasised that the training not only included IWRM planning, but also how to institutionalise regulations so that they function according to the unique conditions of each country in Asia, including Indonesia.

Wouter Lincklaen Arriens, Head Water Resource Specialist for the ADB, stated that the ADB was very keen to support this training programme. He also stated that IWRM was a stepping stone for ADB water policies and that river basin organisations were essential instruments for the planning and implementation of IWRM.

Representatives from Indonesia made presentations at the training programme on water resource and river basin management, including the public corporation, Jasa Tirta I and II, the Indonesian Water Partnership and the Brantas and Jeneberang River Basin Development Projects. In principle, this training represents an aspect of the IFIs' agreement to promote mechanisms for water resource management which positions water as an economic commodity.


The papers presented during this training may be viewed at the following site:

Dr. Apichart Anukularmphai
Thailand Water Resources Association

Dr. Takeyoshi Sadahiro
Japan Water Agency

5.1 Billion Yen Grant from Japan for Infrastructure

On 26 July 2004, the Japanese Ambassador to Indonesia, Yutaka Iimura, signed an agreement to provide a grant to the sum of 5.1 billion Yen to support four projects:

  1. Security infrastructure in seven airports as part of the fight against terrorism (Rp 62bn);
  2. Clean water projects in the interior of Nusa Tenggara Timur and Nusa Tenggara Barat provinces (Rp 18.5bn);
  3. Rehabilitation of Gresik power plant (Rp 164.8 bn);
  4. Improvements to research facilities for the biodiversity conservation and exploitation (Rp 108.2 bn).

In addition to the airports, Japan is also providing assistance for improving security equipment at Tanjung Priok, Tanjung Perak and Batam sea-ports. Transport security is an important issue for countries in this area because it is related to market confidence. The Japanese assistance is consistent with the Japanese government's concern to support infrastructure projects that promote security as an important contribution to economic growth.

Kompas 27 July 2004

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

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