Adam Attarian

24 November 2001

PS 336

Analyzing The Environmental Record of the International Bank for Reconstruction and Development (IBRD)

I. Introduction

The World Bank was founded in 1944 as an international and public lending institution with the mission to foster international economic development. The bank itself is divided into two sections: the International Bank for Reconstruction and Development (IBRD), and the International Development Association (IDA). The IBRD is the main lending arm of the Bank, while the IDA provides the lowest interest loans to the poorest of countries. The Bank’s financing of various energy, water, and infrastructure projects gives it massive influence in how a borrowing nation develops. With such a large number of environmentally impacting projects currently underway, the Bank must realize how the projects they fund could impact the people and environment. Thus, the Bank imposes rules to mitigate environmental damage in order for the loan to go through. Seldom do these rules achieve their goal: 78% of all conditions associated with World Bank loans are not complied with, though the World Bank continues to load, and increase the volume of the loans every year. There are currently hundreds of World Bank projects, 150 are collectively resettling over 2 million people, who will lose their livelihood to relocation. Internal World Bank documents have shown that no plan is in place, either by the World Bank or the Nation in question to provide an economic restoration[1]. Throughout the history of the World Bank, an uncounted number of Bank-sponsored projects have led to environmental havoc and tremendous impact on the people living in the affected area. Since the inception of the World Bank, US taxpayers contributed around $47.4 Billion in hard currency, equaling $190 for every man, woman, and child currently living in the US. The American populous rarely knows this fact, and even fewer know exactly how that money is being used and delegated. The World Bank meetings are held in secrecy, few people are allowed to know what is happening within the Bank. These conditions often lead to violent protests by activists demanding accountability within the Bank.

II. The Prevailing Paradigm

History has shown time and time again that the World Bank is more concerned with development at any cost than human rights and environmental impact. Indeed, there was a time early on when environmental impact studies weren’t even conducted prior to the issuance of a loan. In the era of the paradigm shift, environmental impact studies are now conducted but are routinely disregarded by Bank staff in considering the loan.

The current dominating paradigm within Bank management is that of profit over human rights, profit and success over environmental impacts. A prime example of the World Bank management's inability to ensure sound lending practices is seen in its insistence in financing the Sardar Sarovar dam on India's Narmada River despite years of massive international protest and clear evidence of flagrant violations of bank policies. The dam and associated canals were expected to displace a quarter million rural poor. In the face of relentless international political pressure over human rights and environmental abuse, the World Bank created an independent review of unprecedented proportions, and then decided to continue to support the damn, defying the review’s recommendations as well as a majority block of donor countries. Funding for the project did cease eventually, but only after a majority of the Executive board threatened to over rule management for the first time in history[2].

This attitude and position is quite typical for the Bank. A position of success and development at any cost can be traced through history by analyzing the dozens upon dozens of failed projects, while still having a significant impact on the environment and surrounding populations. The Bank’s many financial backers and donor countries often sponsor specific projects that they have a vested interest in seeing through completion, as they will most likely result in profit and financial gain for the sponsor. For example, the World Bank is considering supporting an oil pipeline project between Cameroon and Chad. This project, which will devastate much of the rainforest in Cameroon and worsen the already bad human rights situation in Chad, is financed in large part by Exxon-Mobil, a significant donor in many resource-extraction projects[3].

The Bank has a check system in place to provide an avenue of investigation based on a private citizen’s voice. The Inspection Panel investigates many projects upon request, and consists of a three-judge panel that makes recommendations to the Board of Directors. In fact, the Bank has some of the most strenuous requirements for a loan of any lending institution in the world, as well as some great policies to prevent ‘excess’ environmental damage and havoc. The problem is the policies are seldom adhered to. Several internal documents cite management turning a blind eye to environmental ramifications, despite current and past polices in place.

III. Existing Regimes

Several regimes exist within the Bank, and are most visible when describing the different types of projects that the Bank and donors sponsor. Basic Bank projects can be separated into three basic classes: resource extraction/energy utilization, water projects, and agriculture. The style with which the Bank’s projects are handled form the regimes that are the Bank.

Power needs are critical to developing countries, and thus resource extraction projects are very common within the Bank. In June 1993, the World Bank began lending to the National Thermal Power Corporation in India, which would go on to produce one of the largest new sources of greenhouses gasses in the world. The first loan of $400 million was one of several to increase the production of coal-fired electricity throughout India. With the approval of this loan, the Bank defied several key donor countries (Germany, Austria, Belgium, and the US), ignored the advice from several scientific panels, ignored energy efficiency and conservation programs which would have provided India with cheaper electricity in the long run, and ignored the economic initiatives needed to assist the 140,000 people displaced by World Bank projects in the past[4]. A more current project involves the construction of the Exxon-Mobil pipeline in Chad and Cameroon. This project has the potential to harm fragile rain forests in Cameroon, but would stand to worsen the continually deteriorating human rights situation in Chad by making the government more corrupt. The construction allows oil exploration throughout native population’s tribal lands, throughout thousands of acres of rainforest. The risk of oil spills is described as ‘highly likely due to location and terrain’, and up to 2000 gallons could leak a day with the best technology. With these and other similar projects, the Bank has worked against the popular opinion and scientific evidence and has bowed to corporate interest and pressure.

Water projects are popular in both developing and industrializing countries alike, as they can provide renewable electricity and flood control for isolated parts of the country. These dam projects can come at very heavy environmental and social costs. The Three Gorges Dam (China), for example will displace over 1.9 Million People in a year. The IBRD has bankrolled many water projects, with varying results. In the early 1980’s, the Bank funded two projects in Brazil, the Sobradinho and Machadinho dams collectively forcing the relocation of 70,000 rural poor people without adequate consultation and compensation. This generated wide spread mistrust and bitterness towards the bank. Despite this, the bank in 1986 went forward with another mega-dam in the northeast, Itaparica. Brazil’s power company worked with the Bank to form “Plan 2010”, outlining the development plan for the Amazon basin. The plan called for 136 dams over a twenty-year period, 79 of which were in the rain forest; this plan would have destroyed the ecological and cultural integrity of much of the Amazon basin. Word soon got out about the future impacts, and at the next meeting of the Executive Board, grave reservations were expressed, leading to a provision requiring the decent resettlement and rehabilitation of the population. Had the board not objected and construction proceeded, the cultural and ecological damage within the rainforest would have been unparalleled. The US representative voiced more concern, citing past botched projects in the region. When the vote came up on June 19, 1986, a majority voted to approve it but the US voted against it. It was the first time any member of the World Bank voted not to approve a loan based on environmental concerns[5].

Another core segment of bank projects are those concerning agriculture, and most of the time that includes heavy deforestation and mass relocation of poorer native people from their land. One of the better known World Bank projects concerned the Brazilian province of Rondônia. Throughout the 1980’s, Rondônia was a location in Brazil where deforestation was most intense. This is also the site of two gigantic World Bank infrastructure projects: Polonoroeste, a road building and agricultural colonization scheme, and Carajás, a mining and railroad development project. Together with the help of the World Bank funds, they catalyzed an unprecedented ecological and human disaster that continued even after the World Bank had completed its funding. Between 1981 and 1983, the Bank dumped $443.4 Million into the projects, half of which went to the construction of a Brazilian highway, while the rest went to constructing feeder and access roads in the frontier end of the highway. The original plan was to attract settlers to grow tree crops, mainly cocoa and café. There were thought to be upwards of 10,000 indigenous persons living in the area belonging to some 40 tribes. In 1980 parts of the region were so isolated from civilization, and were so pristine that they had not previously had contact with the outside world. The Bank plunged into the Rondônia region with reckless abandon. The Bank argued that migration into the region had been on the rise since the late 1970’s, and it’s assistance was making the region sustainable. The migration accelerated, and set in motion a series of events that would forever ruin Rondônia. Migration increased to the newly developed region at a rate that the Brazilian government couldn’t handle. The immigrants tried to grow standard crops, which lasted a mere two growing seasons (as is typical with forest land). These crops failed, so they resorted to slash and burn techniques to add nutrients to the soil. These too eventually failed. As a last resort, the people tried to sell their land to cattle ranchers who got about 3 seasons of use out of it. The World Bank projects transformed Rondônia, an area about the size of Oregon. By the mid 1980’s, the burning of Rondônia’s forests became a major focus of NASA research, as it was the single largest, most rapid human-caused change on Earth directly visible from space.

It can be deduced that the regimes that currently form the World Bank could stand to be modified, with greater emphasis on future impact mitigation and environmental strengthening.

IV. Policy Recommendations

The World Bank’s approach to addressing environmental concerns is inadequate and fails to ensure that environmental sustainability is achieved at a local, national, and international level. Quite simply, the Bank does not promote environmental protection in its operations and loans. The structure and operations of the Bank shows that the Bank is neither interested in mainstreaming environment or more broadly, promoting sustainable development[6]. The following recommendations can be made:

Establish Positive Environmental Lending Goals

The Bank’s lending should incorporate the goals of shifting the operations towards environmentally sustainable development. To shift those goals, the World Bank should challenge the private sector and set a global example by investing in environmentally sound power projects. Energy projects should be designed to meet the energy needs of the 2 billion rural people who have no access to power[7]. The Bank should target its agricultural projects to emphasize farmer participation, alternative chemical usage, and ecological education. Doing so would assure sound environmental practices for generations to come. For the water sector, the World Bank should increase it’s funding for water efficiency projects that focus on water conservation over new supply.

Expand and update lending exclusionary list to reduce environmental harm

The Bank maintains a list of projects that the Bank will not finance, such as investments in tobacco production or loans that will be used for “military hardware, luxury goods, or environmentally hazardous goods”[8]. This list should be expanded to include activities that are well known as causing serious and otherwise irreversible damage to the environment or communities. The World Bank should recognize that the negative environmental and social impacts of certain projects cannot be mitigated. Projects containing the following, but not limited to, should be excluded from lending: gold mining projects involving cyanide leachate processing, aqua-culture projects within mangrove areas, projects that involuntarily relocate more than 500 people (According to it’s own assessment, the Bank’s record on resettling affecting communities is a failure.), logging or otherwise extractive forest projects unless they are certified by an accredited NGO. Projects involving these elements have been shown to cause irreparable social and environmental damage.

Strengthen accountability and mainstream environmental goals

The Bank has made progress in the last few years in establishing environmental and social policies, but they remain to be poorly implemented[9]. The Bank hasn’t followed it’s own recommendations; a system of staff level incentives which promote compliance with the Bank’s own already existing policies, rewarding those who achieve environmental sustainability would provide a structure with self-compliance. The Bank should improve environmental monitoring of projects and improve the quality of monitoring for the worst environmentally damaging projects. To provide more accountability for projects, the World Bank’s Inspection Panel should be extended to provide oversight over all World Bank private lending arms, the International Finance Corporation and the Multilateral Investment Guarantee Agency, which are able to sponsor projects of their own.

For the environmental community, a large question is whether or not the Bank is “putting its money where its mouth is”. The answer is a definitive ‘no’. It will be up to the donor countries to pressure the Bank into mainstreaming the environment into it’s loans, and stopping the internal side stepping that has allowed the Bank to operate this long without any substantive change[10]

V. Conclusion

The World Bank has been around for more than 50 years. Originally chartered after World War II, it had the mission to help developing nations get on their feet and onto the world stage. With such a noble purpose, how could the Bank in some ways have gotten so far off track? The Bank is a private institution; its donors are companies, countries, and people. The Bank can be swayed by donor’s wishes. The Bank has invested in many very successful projects that have been very helpful to the countries that they were built to assist. At the same time, the Bank has financed projects that have caused unthinkable environmental and social havoc, from the deserts of Chad to the rainforests of Brazil. The Bank has a strong future, should certain preventative measures be taken to ensure that social and environmental impact be mitigated to the fullest extent possible. Many nations rely on the Bank and donor countries to support them and get them rolling, something that isn’t likely to change for generations to come. The Bank has a future with the World, how much the world will be able to take remains to be seen. With the current regimes in place, it will take a lot of work to alter the current paradigm and to make real progress in the world of sustainable environmentalism.

[1] http://www.environmentaldefense.org/pubs/FactSheets/g_WBFact.html

[3] Friends of The Earth Online http://www.foe.org/international/worldbank/chadcameroon.html

[4] Bruce Rich, “Mortgaging the Earth: The World Bank, Environmental Impoverishment, and The Crisis of Development”

[6] Atmospheric Alliance (US) et al, Benchmarks for Mainstreaming The Environment: Environmental Reform Recommendations for The World Bank Group

[8] World Bank Publications, “Procurement Arrangements for Adjustment Operations, in Operational Directive 11.03”

[9] Atmospheric Alliance (US) et al, Benchmarks for Mainstreaming The Environment: Environmental Reform Recommendations for The World Bank Group