JP/7/EMIL

JP/7/EMIL

MINING: TREASURE OR TROUBLE

Emil Salim
Former State Minister
of the Environment

A few years ago in the annual meeting of the World Bank Group
(WBG), its President, James Wolfensohn, agreed with civil society
to review the WBG role in extractive industries (oil, gas and
mining) to alleviate poverty through sustainable development.

The World Bank set up an Extractive Industries Review Team in
September 2001 to hold consultations with stakeholders,
comprising governments, corporations and civil societies.
Consultation is focused on understanding the views of the
stakeholders on the WBG's role in extractive industries and
identifying areas of consensus and dissenting views in this
regard. On the basis of this understanding the WBG will then make
recommendations on its future policies, programs, projects and
processes in this sector.

Oil, gas, coal and mining activity will continue to grow to
meet increasing demand. This will lead to more exploration and
exploitation of mining resources in developing countries and
countries in transition. Most of these activities take place in
remote areas with indigenous communities and fragile ecosystems.

Governments of these countries consider this an opportunity to
attract extractive industries to promote development. Businesses
are attracted by the possibility of obtaining profits from these
ventures.

The WBG is supporting governments to reform national laws,
policies and institutions to promote investment and development
of extractive industries in developing countries. Through capital
investment of international finance corporations (IFCs) and risk
financing through multilateral investment guarantee agencies
(MIGAs), both part of the WBG family, the WBG have significantly
affected extractive industry development in developing countries
over the last 15 years.

Close to 4 billion people today live in 56 countries with
mining resources. Among them 1.5 billion people live on less than
US$2 a day. In Indonesian provinces where oil, gas, coal and
mining industries are operating, a large proportion of people are
still poor, such as in Aceh, Riau, South Sumatra, East Kalimantan
or Papua.

In addition to poverty, concern has also been raised by civil
societies all over the world with regards to negative impacts of
extractive industries on the environment. In Indonesia, the
remains of open pit mining in Singkep, Bangka, Biliton and
Sawahlunto have left dirty footprints in our ecological systems.

While there are views and opinions that exploitation of oil,
gas, coal and mining resources can contribute positively to
poverty eradication and sustainable development, there are also
numerous studies that point in the opposite direction. It is not
surprising that WBG deems it important to post the question in
one of the many documents: "Treasure or Trouble? Mining in
Developing Countries."

Since last year regional consultations have been held on
extractive industries for Latin America and the Caribbean,
Eastern Europe and Central Asia and Africa to resolve this issue.
The Asia Pacific Consultation will be held in Bali, Indonesia, at
the end of April.

This meeting is a follow-up to the World Summit on Sustainable
Development in Johannesburg last September that placed poverty
eradication in the mainstream of sustainable development.

Sustainable development embraces economic, social and
environmental sustainability. The economy needs to sustain growth
while safeguarding nature's life support system and ensuring
poverty eradication.

The basic question for this regional consultation is whether
oil, gas and mining industries can promote sustainable
development and whether they are compatible with WBG's mission of
poverty eradication through sustainable development. Concrete
examples of WBG projects operating in Asia-Pacific will be
raised, such as the MIGA-guaranteed Lihir gold mine project in
Papua New Guinea, and IFC participation in the SEPON mine project
in Laos.

Problems in oil, gas and mining industries have a technical
dimension, as to how to cope with disposal of waste in the sea,
artesian and small-scale mining, issues of air pollution
affecting climate change. And issues of governance, corruption,
transparency, social and environmental accountability and revenue
management.

Oil, gas and mining are industries that provide huge sums of
earnings for the corporations, governments and public at large.
However it also leaves behind a deep footprint of environmental
degradation and social ills. If we are marching forward in the
21st century on the path of sustainable development, it is of
crucial importance not to repeat mistakes of conventional
development.

It is necessary to explore new venues and new paradigms to
focus extractive industries on poverty eradication while
sustaining the environment. This is the challenge faced by not
only the World Bank Group but also by the government and
industries.

A review of the World Bank's role in extractive industries
will be conducted in the Asia Pacific Consultation Workshop, to
be hosted by the Extractive Industries Review Team in Bali on
April 26 to April 30.