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DEVELOPMENT: World Bank Backpedals on Environment, Groups Charge

Emad Mekay

WASHINGTON, Sep 19 2003 (IPS) - Activists are accusing the World Bank of sacrificing environmental and social balance in poor nations by funding large projects like dams, power plants and pipelines as part of its new strategy to back ”high-risk, high-reward” projects.

"The World Bank is playing a reckless, high-stakes game of roulette, where the poor – and not the Bank – stand to lose big," said Shannon Lawrence, a policy analyst with U.S.-based Environmental Defence, one of three groups that launched a report Friday critiquing the Bank’s new funding strategy for projects in water, forestry, and extractive industries.

"While the Bank and private investors are shielded from project risk, the communities affected by its projects have no such guarantees," she added in a news release.

The report, ‘Gambling With People’s Lives’, charges that the Bank’s most important environmental reforms of the 1990s, which included a cautious approach to high-risk infrastructure and forestry projects, was now being reversed.

The Bank, which lent some 18.5 billion dollars last year to countries that often cannot borrow on the private market, said earlier this year it would re-engage in water and large infrastructure projects in what it billed a "high risk-high reward" strategy..

The Washington-based international financial institution (IFI), the world’s largest development agency, also said it was considering renewed support for new oil, mining, and gas projects in developing countries, some of which, say the ”green” groups, are unstable and mismanaged.

Civil society organisations and some independent economists have long called these projects ”contentious”, saying the Bank, which uses public money from its stakeholders like the United States and Britain, undermines its own development role.

Such projects, opponents say, tend to poison the air and water, remove forests, and destroy subsistence farms and grazing lands, which provide the livelihoods of locals.

In the late 1990s, and in response to loud criticism that loans to those projects contributed to the contamination and impoverishment of the developing world, the Bank cut its funding significantly.

For instance, while it approved close to two billion dollars for 13 hydropower projects in the 1990-95 period, it loaned less than 600 million dollars for only six projects from 1999 to 2002.

”Now the pendulum has swung back,” said Peter Bosshard, policy director of U.S.-based International Rivers Network (IRN), in an email interview.

IRN is another of the groups behind the 52-page report, whose cover includes a picture of activist women in India submerged to their necks by the Sardar Sarovar Dam in that country’s Narmada Valley.

In October 2002, the Bank changed course again, lifting its ban on financing commercial logging operations in tropical forests. It followed that in February 2003 by adopting the ”high risk-high reward” approach to projects in the water sector.

The new water sector strategy openly called for increased investment in ”hydraulic infrastructure", based on the high reward for such projects. Without such an approach, it argued, the Bank would lose its ability to influence resource management practices.

Activists say this spells damage for millions of people.

"The Bank’s spotty implementation of its inadequate safeguard policies means that communities and the environment will continue to face the greatest risks in World Bank projects," said Carol Welch, international programme director at Friends of the Earth, the third group that authored the report.

The Bank counters that it switched strategy because developers that work on its projects have learned from past mistakes, and that ”in recent decades, thinking and practice have changed dramatically”.

But critics say the Bank has failed to put social and environmental concerns at the core of its development model and point out the organisation did not adopt the recommendations of the World Commission on Dams in 2000.

WCD stressed the importance of public acceptance, transparency and environmental impact assessments of such projects.

Corporations in rich nations and some Bank staff say that this approach would prolong projects.

Such answers further alarm critics, who point to a 2002 statement by the Bank’s own internal evaluation body: ”The Bank has done little institutionally to promote, monitor, or otherwise make (environmental) mainstreaming happen.”

And because borrowing countries have to pay the Bank back, regardless of who benefits from a project and whether it is beneficial to the country, its staff tend to be negligent in analysing who will be exposed to the high risks of such projects, they say.

Among the recent failures of such projects is the high-profile Bujagali dam in Uganda.

The Bank Inspection Panel, the World Bank’s independent investigative arm, found that several key safeguard policies, which contractors have to follow to access Bank money, had actually been violated.

Last year, an independent review commissioned by IRN found that the power purchase agreement required Uganda to make annual payments 20 million dollars higher than the standard industry practice.

The Ugandan government asked to renegotiate the contract but the dam’s main contractor, U.S.-based energy giant AES Corporation, withdrew from the project last month.

The report recommends, among other things, that the World Bank repair the damage caused by its previous high-risk projects, stay away from such ventures in the future, study alternative schemes and concentrate on the human rights dimensions of its work.

One future undertaking the groups specifically want the Bank to avoid is an ambitious plan by India’s national government to link the country’s major water systems – some 30 canals and rivers, stretching 10,000 kms.

”This would involve at least 32 large dams, cost an estimated 200 billion dollars and involuntarily displace about three million people,” says the report.

The groups fear that since no studies have been commissioned on the ecological impact of the scheme, it could irreparably alter India’s topography in ways that cannot be anticipated.