WASHINGTON, 3 August 2004
– The Board of the World Bank Group considered on Tuesday management’s response to the Extractive Industries Review and internal reports on the Bank’s Group’s investments in the extractive industries – oil, gas, and mining – and broadly agreed that it represented a balanced way forward for the Bank Group.
“The proposals of management are built around the central theme that our investments and policy advice in the extractive industries should benefit the poor first and foremost,”
said James D. Wolfensohn, Chairman and President of the World Bank Group.
Board consideration of the management response is the culmination of a wide-ranging process of review that included multiple in-depth, independent technical reviews (see links below), project site visits, and a series of conferences around the globe to solicit the views of stakeholders in government, industry, civil society, and local communities.
Board members expressed a wide range of views on specific issues in the draft management response and, in response, management agreed to refine language on some issues and submit a final version of the text in the next few weeks. In addition, a Chairman’s Summary of the Board discussion will be released.
“The role played by the stakeholder process led by Dr. Emil Salim was valuable in shaping our thinking and has contributed to global dialogue on extractive industries”
Wolfensohn said.
“That dialogue has produced higher standards on issues such as transparency, governance, local participation, disclosure, protection of the environment, and promotion of renewable energy.”
Management, in its proposal to the Board, indicated that it would continue investments in oil, gas, and mining production, as these will continue to be an essential part of the development of many poor nations. Management also noted that as countries develop their resources, Bank Group capital and expertise can help ensure such projects meet high environmental, social, and governance standards, and that revenue from the projects is used transparently and effectively.
“The harsh reality is that some 1.6 billion people in the developing nations still do not have electricity, and some 2.3 billion people still depend on biomass fuels that are harmful to their health and the environment,”
Wolfensohn said.
“That underscores the need for our continued but selective engagement in oil, gas, and coal investments.”
“It is important to understand that the various reports and the management response do
not
end with today’s meeting,”
Wolfensohn said.
“We are engaged in a process aimed at improving the situation of those in poverty and ensuring that work with extractive industries and new initiatives on renewable energy continue to be developed. The Bank Group is committed to working with governments, the private sector, and civil society to improve outcomes and ensure it maintains its leadership role.”
Management proposed, and the Board agreed, that the Bank Group would have an annual review with the Board of progress toward achievement of the objectives outlined in the management response and to remain engaged with all stakeholders.
The central message of the reviews was that while extractive industries investments can contribute to sustainable development, the Bank Group should further enhance its efforts in several areas: more explicitly identifying and tracking poverty reduction associated with its projects, the overall quality of governance in host countries, broader inclusion of local stakeholders, transparency of revenue management and project documents, and the promotion of renewable energy and cleaner fuel alternatives.
Among the reforms proposed:
·
Poverty Alleviation
: The Bank Group is to develop new indicators of project-specific poverty reduction impacts, identify such indicators prior to project approval, and track progress against those indicators over the lifetime of a project.
·
Transparency
: The World Bank Group has endorsed the Extractive Industries Transparency Initiative and is actively engaged with several developing nations – Nigeria, Azerbaijan, and Kyrgyzstan, among others -- to develop a more systematic approach to disclosure of revenues from extractive industries. In addition, the Bank Group will begin requiring disclosure of revenue figures for new major extractive industries projects immediately, and for all projects within two years. Said Wolfensohn:
“We believe increased transparency to be absolutely essential to improving poverty impact.”
·
Governance
: The World Bank Group is committing to use explicit governance indicators – such as the quality of fiscal management, transparency, and anti-corruption policies – in determining whether to engage in extractive industries projects and how such projects should be structured. In project documents disclosed to the public, the Bank Group will describe its governance assessment of a project.
·
Renewable Energy
: Following on the renewable energy conference held in Bonn, Germany earlier this year,
“we intend to take a leadership role on this issue and work with stakeholders to ensure the renewable and energy efficiency agenda is central to an environmentally sustainable energy policy,”
said Peter Woicke, Executive Vice President of the International Finance Corporation. The World Bank Group will seek to scale up its activities in this sector, and management has set an initial target to increase its renewable energy and energy efficiency portfolios by 20 percent annually over the next five years, which will increase the level of investments in this sector to more than $400 million per year. This target will be reviewed on a regular basis.
·
Inclusion
: The World Bank Group is to strengthen its procedures for local community participation with respect to extractive industries projects. The Bank Group will only support projects where affected communities, including Indigenous Peoples, are engaged through free, prior, and informed consultation, leading to broad community support.
·
Sectoral Composition
: The World Bank Group will put an increased emphasis on the development of natural gas and other cleaner fuel alternatives, and has committed to working with stakeholders to update the Bank Group’s renewable energy strategy, expand capacity, and identify opportunities for partnership. In addition, the Bank Group will put an increased emphasis on working with local and regional companies.
·
Environmental and Social Issues
: The World Bank Group continues to refine and improve its approach to environmental and social issues. The private-sector lending arm of the World Bank Group, the International Finance Corporation, is currently revising its environmental and social safeguards to improve their clarity, accessibility, and implementation. In addition, the Bank Group will immediately put in place a process to ensure that the use of security forces to protect extractive industry project sites is in line with best practices.
“Altogether, these reforms put the World Bank Group at the forefront of the development community in addressing the complex challenges associated with these projects. It strikes a new and better balance in our approach, and we intend to monitor implementation so this can be an ongoing learning process,”
Wolfensohn said.
* * *
The full set of WBG reforms, encompassing draft responses to both internal and external reviews, can be found at:
www.worldbank.org/ogmc
. Additional information about the various extractive industries reviews can be found at the following web addresses:
The internal joint review by the World Bank Group’s evaluation unit (OED/OEG/OEU) of past activities in the sector is available at:
http://www.ifc.org/oeg
The review by the Compliance Advisor Ombudsman’s office of eight recent private-sector projects by the International Finance Corporation and the Multilateral Investment Guaranty Agency, the private-sector lending arms of the World Bank Group, is available at:
http://www.cao-ombudsman.org
.
