Letter to EIB on the Bank consideration of the World Bank Extractive Industries Review in its energy portfolio

Advocacy letter    |    31 October 2003

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Mr Philippe Maystadt
President
European Investment Bank
100, bd Konrad Adenauer
L-2950 Luxembourg

Re: World Bank Extractive Industries Review

Dear Philippe Maystadt,

It was a pleasure to meet you last week in Dublin. Thank you for finding time to answer some of my queries about the EIB’s energy investment portfolio. We welcome the EIB’s commitment to increasing its support for renewable energy. In light of your interest in the World Bank’s Extractive Industry Review I have enclosed some extracts of the draft report for your information. The final report is due to be released in December; and I will send you a copy of this upon publication, as per your request in Dublin.

Mr. Wolfensohn, President of the World Bank Group launched the Extractive Industries Review in order to investigate whether the World Bank should have a future role in the extractive industries. The aim of this independent review is to produce a set of recommendations that will guide any involvement of the World Bank Group in the oil, gas and mining sectors. The discussion is taking place within the context of the World Bank Group’s overall mission of poverty reduction and the promotion of sustainable development. For more information regarding the review, please see Extractive Industry Reviw and Frinds of the Earth International web pages.

Michael Tutty [1] has stated regarding the Chad-Cameroon pipeline loan, that “The EIB will work closely with the World Bank to ensure this [project] opportunity is properly developed” and that “..the project is an exceptional development challenge for Chad and a chance to lift its people out of extreme poverty.” However, based on the reality on the ground in Chad, Cameroon and many other countries, the World Bank’s Extractive Industry Review found that these benefits have not materialized. The draft report states: web pages.

“Some EI company, government and WBG representatives have made the point that WBG involvement in the EI sector has helped some poor countries attract foreign direct investment that would otherwise be impossible, and this provides countries with painfully needed revenue that can be used to finance sustainable development. However, due to various reasons including rampant corruption, poor governance, civil unrest, etc, it was proven over and over again that this rarely happens.” (167)

Even though Friends of the Earth and CEE Bankwatch Network have strong concerns with the practices of the World Bank Group, we presume that the findings and recommendations of the Extractive Industries Review will have significant repercussions for the EIB’s investment portfolio in this sector. We are eager to hear the EIB’s response to the very significant findings of this Review and what necessary policy measures the EIB would then take.

I look forward to hearing from you at your earliest convenience.

Regards,

Hannah Ellis
CEE Bankwatch Network
Friends of the Earth International

Extracts of The World Bank’s EIR Draft Report Version II, August 2003

“Some EI company, government and WBG representatives have made the point that WBG involvement in the EI sector has helped some poor countries attract foreign direct investment that would otherwise be impossible, and this provides countries with painfully needed revenue that can be used to finance sustainable development. However, due to various reasons including rampant corruption, poor governance, civil unrest, etc, it was proven over and over again that this rarely happens.” (167)

“Legal and regulatory frameworks need to be supported and put in place before public companies are privatized. Rushed privatization can result in massive social problems and badly managed environmental problems.” (186)

“The imbalance created when there is substantial World Bank Group support for the development of those extractive products that are exported, and almost no support for extractive production of products required to meet the needs of the poor domestically.” (192)

“While the export sector is surely important, so is the domestic sector. A sustainable development path requires balance between the two. The emphasis has been too much on the export sector and needs to shift toward a greater balance.” (192)

“Often EI development in corrupt and undemocratic countries may actually cause political instability, and fuel violations of human rights, seriously jeopardizing the security of local communities. The EIR supports the idea that EI companies and the WBG should avoid operating in areas or countries that are undergoing armed c conflict, or where the risk of armed conflict is imminent.” (183)

“We recommend that the World Bank Group clearly commit to accelerate natural gas as a bridging fuel over the next decades as the world struggles to find a way to reduce its dependence on coal and oil. The WBG should focus on natural gas during the transition to renewable energy options, leaving oil exploration and oil transport to the private sector.” (210)

“We recommend a new commitment to the removal of subsidies to carbon based fuels. The Bank is a great center of expertise on identification and removal of subsidies; it should put this expertise to work to help remove the subsidies to fuels that are the source of the greenhouse problem. Society should not have to pay to create a larger and large problem for itself. It should focus on the legal, tax and regulatory infrastructure that subsidizes fossil fuel use and penalizes alternatives.” (210)

“We recommend that there is no more funding for new coal mining or new projects that use coal from now on. The only support for the coal industry should be in (a) job creation and training for coal workers unemployed by mine closure, and (b) rehabilition of coal mining areas.” (211)

“EIR notes the observation that mining, oil and gas development poses one of the greatest threats facing indigenous peoples and the lands, territories and resources that they depend upon.” (187)

“More than one third of World Bank projects that impact indigenous peoples have not applied the safeguard policy. While in projects that did apply the policy, 14% had the required “Indigenous Peoples Development Plan” on paper only.” (187)

“The EIR notes the observation that the World Bank Group has directly supported mining, oil and gas ventures without adequate assessment of the social and environmental consequences and without taking heed of the lack of good governance and institutional or regulatory capacity in project areas or countries. Overall, the World Bank Group’s involvement in the sector can intensify pressure on indigenous lands which remain unsecured.” (187)

“There is also a need to accelerate the use of prior informed consent. Prior informed consent (PIC) should be seen as the principal determinant of whether there is a social license to operate, hence is a principle tool in deciding whether to support the operation. If there are real issues that need to be worked out to make prior informed consent a clearer and more effective tool in use, these need to be resolved in full consultation with affected stakeholders” (200)

“The impact of extractive industries on indigenous peoples, going back through centuries of European colonial expansion, is tragic and unconscionable. It is unlikely that the WGB can move forward adequately to a better future without a clear and unmistakable acknowledgement of the reality and continuing impacts of this experience.” (202)

“The WB’s documentation and reporting on the economic benefits of the projects (…) have been limited.” (154)

“The WBG should require full and early disclosure of all project documents, where feasible in an accessible and user friendly format” (171)

“The legacy of human rights and environmental violations related to EI development in the past is still truly haunting the EI sector in the present day.” (179)

Notes

[1] Press Release dated 22/06/2001, EIB web pages, your reference: 2001-046