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WB-IMF 2004 Spring Meetings This session on the Extractive Industries Review (EIR) offered 28 Civil Society Organization (CSO) representatives from 19 countries an opportunity for dialogue with James Wolfensohn, President of the World Bank Group (WBG) who was joined by Peter Woicke, Executive Vice President, IFC; Mamphela Ramphele, Managing Director, World Bank; Ian Goldin, Vice President, World Bank; Ian Johnson, Vice President, World Bank; Rashad Kaldany, Director, Oil, Gas, Mining & Chemicals Department, WBG; Rachel Kyte, Director, Environment Department, IFC; as well as other senior members of the WBG. Mr. Wolfensohn provided the welcome and Sreedhar Ramamurthi of the New Delhi Center for mines, minerals, and peoples, and Ms. Andrea Durbin spoke for the CSOs and introduced the meeting.
In his welcome, Mr. Wolfensohn reported on his Paris meetings with Dr. Emil Salim on the Extractive Industries Review’s (EIR) final report which had taken place just the week before. He said there were a number of issues that were not contentious on either side and that in general there was no big disagreement on the report and its direction. Mr. Wolfensohn acknowledged that there are many versions of what happened in the meeting with Dr. Salim; that the meeting with Dr. Salim was very amicable and they had a good discussion. Mr. Wolfensohn invited others to talk to Dr. Salim about it directly. What had been decided at the Paris meeting was that, instead of coming to any conclusions there, Mr. Wolfensohn would come back to Washington and agreed to have some more meetings with all stakeholders before the draft response is submitted to the Committee on Development Effectiveness (CODE). After the meeting with CODE, Mr. Wolfensohn will meet with Dr. Salim and broadly see what the likely progress on each of the issues was, and recommend to CODE that the response be made public for comments, before submitting the final response to the Board. Emphasizing the need to consult, Mr. Wolfensohn said, “Frankly if I agreed to something without talking to people on my board, in governments and in the private sector, it would be an agreement without meaning.” He said he would like to have a management response by June or July and really get something started. He said he did not know whether he would be here another year or another ten years, and “I don’t want to delay introducing things that I think I could move forward.” Mr. Ramamurthi expressed gratitude on behalf of the CSO representatives for the meeting and spoke of the urgency of endorsing the EIR recommendations because, extractive industries have had “no demonstrable positive impact on poverty reduction.” Governance and transparency of projects are very important elements and the violation of human rights must be dealt with more strictly. Free Prior Informed Consent should be a must. There is at present virtually no benefit sharing and it is time, he said, to seriously consider the community and the impact on the community and what changes could be made to improve the situation. Moderator Andrea Durbin reiterated appreciation that the President took the time to meet. She said the CSOs welcomed the fact that there was a lot of agreement with the EIR recommendations. They were looking forward in this meeting to going beyond institutional commitment to talking actually about how to implement and deliver upon that commitment. Also, they were hoping that after the meeting, as it prepares its management response to the report, the Bank will include clear benchmarks and clear indications of responsibility and timelines, so that everyone will know the plan and have an opportunity to track the implementation and progress. Ms. Durbin then explained the structure of the session: three parts with short presentations on pre-selected issues by self-selected representatives of the group, followed by responses from Mr. Wolfensohn and others. The issues chosen were: impact on the poor, governance and transparency, human rights protections and free prior informed consent. Impact on the Poor Miguel Palacin Quispe: In Peru, rivers have been polluted, populations have been displaced, people don’t have access to health care; leaders are being persecuted; some leaders have been killed because the government is corrupt, because the laws of the country have not operated in the people’s favor and because the government and the mining companies don’t understand what the people want. Mining has not had any positive effects on communities. One region where mining has been developed (in part with World Bank support) was the fourth poorest region in the country in 1993. Now it is the second poorest. So mining has meant only more poverty because the riches, the income, the resources of these operations are being distributed in an unjust manner. This is a problem of economic gains, but it is also a problem of human rights and the peoples’ participation in a process. Mining represents 50% of all the export earnings in the country, but mining companies are only responsible for paying a tax for the use of the land. Unlike other kinds of businesses, the mining companies are not paying anything for the materials they use. Furthermore, the money that is received by the government is not getting to the people. Everything is connected to the free prior informed consent of these communities. The people are not against mining but against the policies that are being applied. The recommendation is that an assessment, an evaluation of the impact on indigenous communities be done, and that this assessment covers economic issues, cultural issues, social issues, and spiritual issues. The communities are asking for this, and for the World Bank to help convey the injustice that is affecting the people. Keith Slack (Oxfam America) The Bank now is focused on the issue of poverty reduction, and progress toward the Millennium Development Goals (MDG), and, one of the things that the EIR does is pose questions to extractive industries that, if addressed, will help to achieve the MDGs and poverty reduction in general. There are a lot of studies, some of them done by the Bank itself, which suggest that extractive industries may actually be taking us backwards, making us poorer. So if the Bank is going to remain involved in these industries, it is recommended very strongly in the EIR, that there be a real rethinking of the involvement from the perspective of poverty reduction.
James Wolfensohn: All issues raised are not contentious. No one can not be moved by the issues of lack of human rights and increased poverty and the iniquity. Prior to the EIR, there had not been a frontal attack on EI impacts. And I expected this to be a hot subject and to generate criticism of many projects and in some cases that the Bank has contributed to projects with adverse effects, but I wanted to take the risk of that because I think the subject should not be ignored. I should tell you that in history, the same thing happened in the United States, it happened in Wales, it happened in Central Europe; rich mine, poor community is not a new phenomenon. It happened throughout development in extractive industries. but it has even more devastating effects in developing countries, where the base is so low and there is no structure of support. How to deal with it has been a worry of mine for a long time. And let me tell you that the World Bank is a powerful institution but it is not God, and in many of the projects that we could or could not participate in—wouldn’t make any difference in terms of the project going ahead. They often don’t need our money and they are not about to change. Take the Chad-Cameroon pipeline. We are trying to get equitable distribution; guarantees are needed, but guarantees may mean nothing. If we had not gone ahead then someone else would have financed it the next day. The project is not a money maker and we knew we’d take heat. I’m not trying to shirk responsibility, but you have to understand what the leverage is that we have. I could agree tomorrow on every recommendation you make and it will have no effect. Some on the Board can say “why engage in a process like this? The WB is supposed to deal with economic development, not social issues.” In today’s world, there are multiple sources of funding for oil, including China—which needs more fossil fuel than anyone. The World Bank has an influence, but it is not a compulsive influence on governments, particularly corrupt governments. I just make that as my first rejoinder to you. I agree with every word you have said about inequities, about need, about the human tragedy, about the need for social, economic, cultural assessments. I agree with spiritual assessments. But you should understand that many of the governments are not interested. I also agree with Oxfam, but there is one issue that is not in the report and that is the 2.3 billion people who have no power. But I have no problem with what you say. The question is how do we bring about change? Peter Woicke: Even in an imperfect environment, there are ways of engaging private companies on their own terms, on the basis of private sector interests, not charity. Some companies just say, we pay taxes, but others see or can be persuaded that it is in their long-term business interest to be socially responsible, and it is important to find opportunities to engage the private sector in development to enhance long term sustainability. Rashad Kaldany: We are participating in the Global Reporting Initiative. We are happy to develop indicators of poverty reduction. James Wolfensohn: We will respond specifically. We are seeking to work with the Chadians into doing something transparently We will come back with an opinion on community involvement, prior informed consent. Andrea Durbin: I’d like to move on to Governance and Transparency. James Wolfensohn: I’m happy to move on but can’t we also agree what the next step is in each of the areas. What we are going to do is to come back quite specifically on each of these issues. Today helps us understand the issues, and, what we are now going to do in all these cases, is to see how far can we push them to establish a framework that becomes a norm. I’d like to agree to practical steps to address poverty issues. Andrea Durbin: Is it possible to have opportunities for civil society groups to engage with the management staff drafting that specific response, and address the issues that we have just discussed, poverty indicators, social assessments and community benefits from Extractive Industries? James Wolfensohn: If you have good ideas or suggestions that are not in the report, we’ll arrange with Rashad to make sure there is mechanism to get your input regarding implementation. Andrea Durbin: We do have ideas, and, in order to communicate those ideas most effectively, it is actually useful to sit down with the appropriate people and to have those conversations, to talk about the details; you can only write so much, it really is in talking it through that you can work out the details. Governance and Transparency Ian Gary (Catholic Relief Services) The World Bank plays a catalyzing role in the oil sector in Africa, legitimizing governance/governments. There is a growing body of academic research, and evaluations internal and external to the Bank on extractive industries that conclude that good governance is an essential ingredient to proper management of extractive-resource dependent economies. The EIR concludes this also and the Bank should focus its support on strengthening governance and managing the environmental and social risks. It is crucial that governance issues be addressed prior to investment in the extractive industries, and one specific recommendation that we have regarding implementation of the report by the World Bank Group, is to agree to a process that would establish a minimum floor for governance issues, a threshold not a laundry list or a straight jacket to hamper the activities of the World Bank but a threshold of governance criteria that must be met before investments are made and we would hope that in the Bank the response to this process would be committed to and concluded over a time-bound period, for example six months. The World Bank Institute has done considerable work on governance indicators and this could be a reference. On a closely related issue—revenue transparency: We believe that the World Bank Group should agree to require revenue transparency of an extractive industry project. Making sure that revenues are transparent could be something done at the management level in the Bank. It would not require a policy change or board approval. We think there should be shown commitment by government to transparency prior to extractive investment, and extractive industries revenues should be audited by an internationally reputable audit firm on an annual basis for at least two years prior to the Bank supporting the investment. Finally, we believe that the World Bank Group should agree to disclose a number of kinds of agreements such as power purchase agreements. These public disclosure requirements should be made explicit. Kalia Moldogazieva: (Bureau of Human Rights and Rule of Law-Kyrgyz Republic) I would like to give the example of lack of good governance surrounding the mine investment in sustainable development in my country. At present, Kyrgyzstan has different development programs supported by different international donors like World Bank UNDP and other donors. Some of them support mining. However, this strategy undermines the country’s national sustainable development conception, which is based on development without mining, and, this program was accepted by our government and was presented at the Johannesburg summit on sustainable development. I hope that you will support the recommendations of the EIR and start addressing the lack of good governance and lack of coordination surrounding the bigger development programs in our country. James Wolfensohn: There is no disagreement on the importance of good governance and disclosure. We know that if you have transparency, it’s the best way to deal with corruption. We agree that good governments protect people. I have no problem with “Publish What You Pay” and the need to have transparent disclosure. The question is what does report mean? Let’s sit down and agree on this. Good governance does protect people. In Australia, a country with basically good governance, it took two hundred years to deal with the issue of aboriginal right. Would we have waited? And if the World Bank had been in Australia, would it have made any difference? This subject needs to be debated. I am very interested to see your (Ian Gary’s) research and where the World Bank projects are involved. In principle, we agree on elements of governance and sequencing. I also agree with all of the criteria that you have suggested. Again I say, this is not just whether there is ideal sequencing but what can we do to advance things without adversely affecting things. Are you better off waiting or are you better off diving into the water and seeing if you can do something? Chad is coming out of conflict, there’s corruption. The project is expected to bring $2 billion in income to the Chadian people. Money is being put into a transparent box. There are lots of factors that could weaken this. Peter [Woicke] sent a team to Chad [to look into this]. We know that we are exposed as hell on Chad. I still don’t think that we made a bad decision. I remain hopeful. We are working hard on it and have just sent a team to see what is happening. I don’t want to make my people too risk averse either, so that when there is a chance to make a difference, we don’t and that itself is a serious issue. So I think what we should do on this, is to have a direct discussion on the best way we can use the instrument of the World Bank to bring about change. A simple statement by us that “here are 7 pre-conditions without which the Bank won’t go in”…it is arguable that that will have an impact. Or should we say that the achievement of those seven conditions is the goal and work on those? How can we use the WB to influence and advance those principles? Human Rights and Free Prior Informed Consent Isaac Osuoka: (Oil Watch Africa, Nigeria) Last weekend 20 people were killed because of a clash between the community and Shell. That’s a continuation of a very vigorous pattern of abuse. In the past, even Shell has acknowledged that they did send policemen into communities. In some of these communities, people have been killed in the protests. Other companies like Chevron and Texaco have also been involved with the military. In many cases, we see oil company contractors employing local workers in near slavish conditions, and sacking them when they demand better wages. There is a need to apply the core labor standards to these contractors and the whole industry, including the right for workers to organize. So we understand the issue of human rights in relation to oil and mining and know that there are similar experiences in other parts of Africa. We are aware that the World Bank is not involved, that it is not financing Shell, but it has not participated in discussions about pressuring the companies to change. And there is the issue of political risk guarantees. Even though mining companies don’t need World Bank money, it is important that while addressing the question of risks, the World Bank not only risks for companies but also risks for communities. Joji Carino (Tebtebba Foundation—Philippines) We all know that extractive industries present a governance challenge in relationship to sustainable development at all levels. And we know that extractive industries are highly site specific. Therefore, we hope in terms of governance principles and processes, that we address the particular challenges at the local level to ensure that the affected indigenous people in the communities are part of decision making process with extractive industries and to ensure that they become direct beneficiaries of extractive development. The principles of free prior informed consent are particularly good because the concept has the potential to cover all the interested and affected parties and provide a framework, which allows us to actually see how we can go forward together. This is a concept we can confidently say is now accepted as the internationally recognized norm applying to indigenous peoples in the development process and it is also being recognized in law. Accepting free prior informed consent has the potential to very significantly improve the World Bank’s performance and development effectiveness in relation to poverty and sustainable issues. It means accepting indigenous peoples in local communities as central stakeholders and rights holders in extractive industries. And accepting the concept is necessary to continue the Bank’s legitimacy in the formation of partnerships with indigenous peoples’ organizations. Semen Svitelman (Green Salvation—Kazakhstan) Semen prepared a short statement. The state of extractive industries in Kazakhstan provides an example of the violation of human rights principles. The lack of openness and the failure of representative bodies to improve the conditions of contracts with extractive enterprises are reflected in the following two short examples. First, the principle confirmed by Kazakhstany law, that citizens have the right to receive information necessary for making informed decisions is frequently not adhered to and second, there is frequently no opportunity for recourse provided regardless of the extent to which the people’s rights are violated. I have written a letter to you providing details from Kazakhstan and would like to present it to you today. And as a representative of Kazakhstan, I hope that you support the EIR recommendations on human rights. Henry Tito (CEADES-Bolivia) Bolivia is the perfect example of how things should never be done. There is tremendous corruption, particularly in relation to extractive industry operations. This corruption and lack of proper accountability have resulted in conflict that is erupting into violence. The message from indigenous communities is that the recommendations of the EIR should be implemented because those recommendations will contribute to the promotion of sustainable development. Regarding free prior informed consent, it is the same principle that is applied in the Bank. When I came here today to the Bank entrance I was asked to show identification. I had to ask permission to come in here, and I complied with that. Free prior informed consent is not a veto. Some people at the Bank seem to think it is; it is not. What people want is that when someone comes to their land and their community, and wants to have operations there; they want to be asked, they want to be consulted; that’s what they want. And the other aspect I want to mention briefly here is the issue of natural habitats. The recommendations indicate that there are protected areas that should be no-go areas, areas where operations should not take place. There are very good definitions of what these areas are; and the reason is that forests, nature, are very sacred things to people, to communities, they are part of their lives and by respecting those forests and nature, the respect for life and sustainable development will be promoted. James Wolfensohn: First about Nigeria, after Saro-Wiwa died, the World Bank was the only institution that took action. I have long been worried about the issues of violence and the oil industry. The reason I went to Nigeria this time was really to try to get a sense from Shell about whether they really were changing, and I came back with the same questions. Except for an IFC project, the Bank Group is not involved in the sector in Nigeria. Maybe Peter should reconsider trying to engage with local people in Nigeria. If we are adding to the problem, then we’ll take a very hard look at it. We are exactly on your side. It is not an issue we can solve, easily---there is giant corruption and great inequity. I have been going to Nigeria since 1961; corruption in endemic. It starts at the top in Nigeria; it’s not an issue we can solve in the Delta. There is a small team of reformers with the new Finance Minister. Peter Woicke: The Niger Delta is one of the most difficult regions I have ever seen and I think everybody agrees with that. What concerned us at the IFC, and the reason we got involved was that in the contracts that the oil companies were handing out, the local companies—smaller companies—could not participate because they simply did not have the financing available—the long-term financing, and we thought it would be a step in getting the local community involved in the oil business by allowing them to bid the contracts that were going to foreigners. We had discussions with local companies and were welcomed by them and a lot of NGOs, so we approached the oil companies and said, how can we work it out so that local companies can bid on your contracts, which they can’t today? and Shell was the one that responded. It is not a question of protecting Shell politically, it is not a question of Shell not having enough money, but the idea was really to help the local community develop some business and as I said, our impression was that the small entrepreneurs who had no access to these companies, really welcomed this model, and NGOs did as well. Isaac Osuoka: Nigeria earns about $17 billion in oil revenues annually and we are poorer than we were in the 1980s, and the corruption is worse than ever before and one of the reports that we saw, said the World Bank is proposing some $1 billion investment in Nigeria. We were shocked, that that kind of investment would be made. If you accept that things are still that bad, why don’t you ensure that there is more transparency and there’s more accountability before you think about investing $1 billion, which is a debt on the people. James Wolfensohn: I’ll tell you the reason. The reason is that the projects are all social projects and meant to be model projects, and the basis on which they are being funded is that they be made fully transparent. And we want to support the reformers. Ngozi and 11-12 other people I trust asked for backing. Obasanjo is backing the reform team. This investment is an attempt to do it right. Now on the question of free prior informed consent: The first thing is that we are going to put out early in June the draft Indigenous People’s Policy, and we are not going to put it out for 60 days, we are going to put it out for 90 days, and that will be available for you to comment on; it is not the final draft. If we’ve got it right, we’ll agree, if not, we’ll discuss it further. I will meet on it personally if you think it is not what you want. Secondly, we are going to have a legal roundtable on the issue of free prior informed consent on the margins of the Permanent Forum. It will be run by Roberto Danino, our new General Counsel, whom I think you will find to be very fair-minded and supportive. If you have problems with Danino, then they should let me know. He is not aware of any issues. We will also have a discussion of free prior informed consent within the team, and, I must tell you that the people who do not want any form of it are all putting the spin on it that this is a veto for the last indigenous person who doesn’t want a project to go ahead. That isn’t right; it’s about consensus. We would like your help on filling out what has actually happened in the communities where it is working. For example, what is happening in the Philippines in communities where FPIC is working? I have no problem at all with insisting that communities get information and be given an opportunity to participate and, I would take it even further. It is not just free prior informed consent that is needed, there also needs to be a mechanism for continuing the process and some sort of punch that comes if the thing is not made to work. One problem is that you can have participation and information and can get agreement with the company and the government, but then when the money is spent, nothing happens. There are examples of this in coal and dam projects. So I think that what we have to do is to explain that free prior informed consent is not unreasonable. It is not an attempt to get a veto, it is an attempt to have exposure of the issue to the community, a full discussion and a mechanism by which differences can be resolved and a fair deal can be done. Even the representative of Peru said you are not against mining, what you are against is improper mining, mining that diminishes growth instead of increasing growth. I think that the issue of environment and culture, the meaning of the lands, and then the economics are all incredibly important and all issues should be on the table. And I don’t think you’re going to find much problem with us, if we can get something, which allows us to vigorously maintain that this is not an attempt to give people a gun with one bullet. If there is wild disagreement with a project and everybody hates the thing, then the World Bank should not go ahead with financing. If it affects the environment in such a way that it affects national treasures and important ecological areas, then the World Bank should not go ahead. Finally, we must really do better in the post decision period. A lot of the problem in the Bank is examples of things that were agreed to up front, but then nothing happens and we here are being caught with some projects in which the loans have been repaid, we have no more leverage, and people come to us and say ten years later, why can’t you stop them doing that thing? Why can’t you make them do what you agreed to ten years ago and which is not being done? and what I would like to see is some sort of mechanism for post review that allows the assurance of delivery. I think if we can do that, we will make a lot of progress. By the way, on Bolivia, I agree with you, it is a tragedy, what is happening, that you have a lot of violence. The decline of the Bolivian situation in just two years has been a tragedy and if you have ideas about what you think we could do to help on Bolivia, we’ll make sure that we have a mechanism for getting your ideas. Just before I left for Europe, I got my team together to give me briefing on the Bolivian situation. It was not very positive, so we welcome your ideas. We are looking for good ideas. Andrea Durbin: Before we finish, I did want to go back to Asume’s point. You offered at the beginning to arrange a meeting for Asume’s group in Nigeria to meet with you and the Bank team. Can we agree that that meeting be set up to discuss this new loan. James Wolfensohn: Yes, of course we can arrange to have that happen. You should be in touch with my staff. Andrea Durbin: We would also like to request that the Management Response be made publicly available when it goes to CODE. Since this has been an unusual process and the end of a three year effort involving many stakeholders, it is important to make it publicly available as soon as possible. James Wolfensohn: It is not in my hands, but I can certainly make the request and recommendation. Concluding Remarks Andrea Durbin: Thank you. We will be in touch then about following up on these specific issues, including governance, pro-poor measures, FPIC, renewables and no go zones to talk with your staff in more detail. James Wolfensohn: Thank you again it has been very useful meeting. |
