World Bank must reform

Hannah Ellis, Guardian News Service, London

Imagine a bank investing around US$55 billion a year in the world's economy with the specific mandate of alleviating poverty and with the potential to invest billions of dollars into public healthcare, education and infrastructure for the world's poorest people. This is supposed to be the World Bank. It turns 60 next month -- but I won't be sending a birthday card.

The World Bank finances energy projects, often run by multinational energy corporations, including Shell and BP, in developing countries. More than 80 percent of the energy extracted is exported and used in the developed world -- including Britain. World Bank money has left a legacy of environmental and social devastation, from cyanide spills in Peru to land expropriation and water pollution at oil pipelines in Chad. The bank has blindly chanted an "economic growth" mantra to those who have questioned the appropriateness of this investment, presenting a dogmatic argument that these projects will somehow inevitably help the poor.

This cannot continue. The World Bank has already received an unwelcome early birthday present in the form of its own Extractive Industries Review (EIR). Three years' research over four continents, with input from international governments, multinationals, academics, civil society and affected communities, has concluded that the bank's involvement in oil, mining and gas has failed the world's poor.

This research, commissioned by the World Bank, parallels an internal report, leaked last year, that weak governance inhibits these projects from delivering to those for whom they are intended.

A bank with a mission of alleviating poverty must be able to prove that its projects have the potential to deliver. As a provider of public subsidy, the bank should have environmental and social standards, as well as economic ones, guiding its investments to ensure that its involvement in projects is responsible and sustainable.

The EIR concluded that free, prior and informed consent of affected communities, respect for human rights, and the protection of internationally established "no-go" zones in areas of armed conflict, high spiritual or scientific value must be prerequisites to ensure extractive industry projects have the potential to promote sustainable development and alleviate poverty.

The conclusions of the review have received a huge amount of international support. This ranges from governments, indigenous people and religious leaders, including Desmond Tutu, and yet not from the British government.

As Agnes van Ardenne, the Netherlands' development minister, says: "The World Bank's mission is real poverty alleviation for the poorest. The question is whether oil and mining can really alleviate poverty. An independent report indicates clearly that the World Bank needs to undertake other activities to do so. This has been discussed before and it sounds like great advice to me."

Antonio Vitorino, European commissioner for justice and home affairs, has assured the European parliament that "the commission supports the call for the full implementation of the recommendations of the EIR which relate to the sustainability of investments, the promotion of good governance, popular consent, social and environmental impact assessment and the respect of human rights and core labor standard".

The World Bank board meets next month to decide what to do about the EIR. The bank has been highly critical of the review, and seems keen to bury it.

The only hope now for those affected by the environmental and social devastation caused by these projects is that the shareholders of the bank -- including Britain -- will demand change.

Early indications are that Britain, represented by its Department for International Development (DFID), is non- committal. This is despite DFID's mandate being poverty alleviation and the promotion of human (not corporate) rights.

The EIR recognizes that climate change will affect the world's poor the hardest, and it recommends that the World Bank stop financing oil and coal projects. The bank does not accept this recommendation, but admits that a radical shift in its energy portfolio -- currently under 20 percent renewables, compared to 80 percent fossil fuel -- is required.

It has held on to its relationship with the big businesses of the extractive industry by arguing that it can limit the potential for social and environmental devastation these projects might otherwise cause.

Despite the World Bank being able to provide no evidence to suggest this added value, the argument itself misses the target. The question is not what World Bank money will do for a project, but what a project will do to alleviate poverty.

The answer is clear and is repeated by parliamentarians, religious leaders, scientists and communities around the world. The World Bank is turning 60 this year. It is time for the bank to deliver or retire.

The writer is international financial institutions campaigner for Friends of the Earth.