FINANCE-ENVIRONMENT: Gold mine disasters forces change at World Bank insurance arm

By Pratap Chatterjee Reprint | | Print |

Pratap Chatterjee

WASHINGTON, Oct 18 1995 (IPS) - Recent disasters at two World Bank- insured gold mines in Guyana and Indonesia, have forced the institution to upgrade its environmental practices, according to officials here.

The two projects were insured by the Multilateral Investment Guarantee Agency (MIGA), a five-year-old Bank affiliate that insures foreign investors in developing countries against risks like nationalisation of assets and war.

The Bank regards this service as critical to encouraging foreign companies to invest in poor countries. But critics point out that, while the Bank insurance covers the foreign company against local interference, the local communities are not protected against corporate disasters or abuses.

This is precisely what has concerned activists about the Freeport gold mine on the island of West Papua in the South Pacific and the Omai gold mine in Guyana on the north-east shoulder of South America, where several disasters have recently come to light.

Operations at the Freeport mine, which was the very first project insured by MIGA, has inflamed popular opinion on the western half of the island, which was invaded and annexed by Indonesia and renamed Irian Jaya in 1967.

Last month, the Indonesian government’s National Human Rights Commission confirmed reports by the Australian Council for Overseas Aid (ACFOA) that 37 people had been killed by security forces near the mine. Company reports also show that Freeport dumps massive quantities of toxic mining waste into local rivers.

In August, a holding pond at the Omai gold mine in Guyana broke, causing about four billion litres of cyanide-laced waste to spill into a tributary of the Essequibo River, the main country’s main river, over a five-day period.

MIGA sold 50 million dollars of insurance cover for Freeport, a New Orleans-based company, while it provided slightly less than that in re-insurance cover for the Omai mine, which is jointly owned by Cambior of Montreal, Canada, and Golden Star of Colorado.

But MIGA did not conduct environmental assessments for either of these projects, because it has no environmental staff among the 60 employees who review the 50-odd applications for insurance that it receives every month.

MIGA is the only one of the four agencies of the Bank group that has no environmental staff. So when news reports of the two disasters started to mention MIGA’s role, its director, Akira Ida, decided it was time to consult more experienced colleagues in the other agencies.

“We have had a series of consultations with a number of Bank staff in the last few weeks, such as Andrew Steer, the head of the Bank’s environment department, to enhance coordination of our policies and implementation,” Ida told IPS.

“MIGA has agreed to provide certain resources in the future for the International Finance Corporation (IFC) in environmental risk, to travel to the site, et cetera, in order to enhance our standards,” he added.

The IFC, the Bank’s private sector affiliate, has done desk reviews of MIGA projects on request in the past, but it has never sent staff into the field to visit sites. Some environmental officials in the IFC has pressed for on-site visits, especially for “Category A” projects which involve substantial environmental risk.

“This is especially important now, because a lot of the new projects are in mining, which are by definition category A projects,” one Bank official told IPS.

Ida told IPS that he was satisfied that Freeport security officials were not involved in the killings in Irian Jaya and that the Guyanese disaster had been dealt with properly.

Ida did not say how much of the 14 million dollars that MIGA received in fees last year for insuring 1.6 billion dollars in projects would be spent on environmental work.

Activists say that MIGA should assess not only project sites but also check into the environmental records elsewhere of companies seeking insurance, including their home countries.

Freeport’s environmental record in the United States, for example, should have suggested problems overseas as well, according to groups like Friends of the Earth. Statistics issued by the United States Environmental Protection Agency (EPA) show that Freeport is the country’s single biggest polluter.

Likewise, Golden Star Resources was controlled by Robert Friedland, the man who ran the Summitville gold mine in Colorado, site of the most expensive environmental disaster in U.S. history.

MIGA’s new proposals have been welcomed by activist groups, although some point out that they are only a first step. They also say MIGA should offer some compensation for affected communities.

Andrea Durbin of Friends of the Earth also warns that the IFC’s environmental standards are lower than that of the International Bank for Reconstruction and Development and the International Development Association, the two principal agencies of the Bank.

FINANCE-ENVIRONMENT: Gold mine disasters forces change at World Bank insurance arm

By Pratap Chatterjee Reprint | | Print |

Pratap Chatterjee

WASHINGTON, Oct 18 1995 (IPS) - Recent disasters at two World Bank- insured gold mines in Guyana and Indonesia, have forced the institution to upgrade its environmental practices, according to officials here.
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