SUNS 4305 Tuesday 20 October 1998



Environment: World Bank's 'zero tolerance' of rule-breakers



Washington, Oct 18 (IPS/Abid Aslam) -- The World Bank is promising that it will not tolerate any breach of its environmental and social policies - even as decentralisation in lending operations
makes it tougher to keep track of projects.

Financial crises in Asia, Russia and Latin America receive much of the agency's attention but "the Bank is still committed to the environment," says Ian Johnson, Vice President for Environmentally
and Socially Sustainable Development.

The global lender is setting up a 'Safeguard Compliance Unit' to ensure that loans either protect people and the planet or mitigate harm done - for example, by compensating and resettling communities uprooted by infrastructure projects. The unit will practice "zero tolerance" in dealing with any failure to comply, says Johnson.

'Green' groups, however, say the Bank should not back potentially devastating projects in the first place.

"Development dollars are limited," says Andrea Durbin, international programme director at Friends of the Earth. "They should be used for projects that reap real benefits for development, not for mitigating the harm caused by destructive lending."
A coalition of 41 non-governmental organisations (NGOs) from lending and borrowing countries is challenging Bank claims of progress in "mainstreaming the environment", or integrating 'green'
concerns into the Bank's overall portfolio. Despite those claims, the groups say in a recent report, the agency continues to invest in only "a handful of environmentally- oriented side projects."

The Bank approved 902 million dollars in loans for 'stand-alone' environmental projects in fiscal 1998, which ended Jun. 30, and passed an additional 590 million dollars for agriculture, water,
and urban development projects "with a strong environmental focus," says Johnson.

Combined, those sums amount to about five percent of the 28.6 billion dollars in new loan commitments made in fiscal 1998.

Nearly five times as much - some $6.7 billion dollars, or about 24% of the total - is devoted to the transportation, industrial, mining, oil and gas, electric power and other energy sectors, according to the agency's latest annual report.

Lending for fossil fuel exploitation (a prime culprit in pollution, climate change, and natural resource depletion) is far in excess of lending for renewable energy, such as wind and solar power, according to environment department Director Robert Watson.

He disputes NGO reports that the imbalance is as great as 100-to-one, saying the Bank's own research suggests that seven or eight dollars are committed to fossil fuels for every one dollar
earmarked for 'renewables'.

Bank staffers will rely more on 'green accounting' to show that traditional energy projects, while appearing to be financially more cost-effective than 'renewables' in the short term, involve long
term costs - such as cleaning up pollution and dealing with respiratory diseases and other health problems related to 'dirty' technologies.

This, and an emphasis on energy-efficient technologies, eventually should tip the scales in favour of cleaner alternatives.

Meanwhile "we have to be pragmatic," says Watson. "China has lots of cheap coal. They're going to use it."

All projects likely to affect the environment are covered by 'safeguard policies' covering environmental assessments of projects, natural habitats, forestry, pest management, involuntary
resettlement, indigenous peoples, management of cultural property, safety of dams, and projects on international waterways.

Responsibility for complying with these policies rests with the Bank's six regional vice presidencies, according to the agency's latest annual review of environmental operations. This is "consistent with the effort to devolve decision-making and resources closer to the operational front line," says the report, 'Environment Matters'.

Ongoing Bank decentralisation responds to years of criticism that the institution knows little of the countries to which it lends. 'Country departments' are being relocated from Washington to borrowing countries.

"With the Bank's devolution of responsibility, however, comes the need to ensure consistent compliance with the safeguard policies across the six regions," the report adds.

The Bank will conduct random audits of selected projects while these are being formulated, appraised and supervised, to ensure that safeguard policies are honoured and the new compliance unit will oversee these audits. Additionally, the agency will explore the possibility of sanctions against staff deemed to have broken the policies.

How much of that work will be conducted in the public eye remains to be seen but the report notes that "scrutiny by NGOs and others of Bank operations...has reinforced the importance of strict
compliance with these policies." The Bank also credits outside groups with prompting "the creation of the Inspection Panel in the early 1990s in response to criticism of environmentally damaging
projects."
A three-member Inspection Panel was created in 1993 to look into complaints from people in borrowing countries who believe they have been harmed by violations of Bank policies and procedures. Thirteen cases so far have been filed by citizens of Bangladesh, Brazil, Chile, India, Nepal, Nigeria, Paraguay, and South Africa.

>From the outset, the Panel has been politicised and its activities impeded by the Bank's executive board, which can authorise or quash investigations, according to the Washington-based Centre for
International Environmental Law "This method has proven to be cumbersome and plagued by politics, indecision and delays," it says in a recent assessment.

As a former Panel member told IPS, Bank managers typically seek to pin the blame for policy violations on borrower governments. This often splits the executive board, where representatives of
borrowing countries resist what they see as Bank efforts to probe government operations.

To appease the board and outside critics, Bank staff sometimes offer 'action plans' designed to address shortcomings - so long as borrowers take out additional loans to finance the plans. The board has approved these schemes even in cases where the Panel has deemed the remedial measures insufficient.

Executive directors are weighing the Panel's future and could decide to ban Panel members from travelling to project sites or limit the types of complaint deemed eligible, according to Friends
of the Earth's Durbin. At present, only two or more people need sign a complaint although it is common to find hundreds of signatures.

NGOs fear such moves will have a chilling effect at the grassroots. But according to Bank Vice President Johnson, "we need to look at the issue of compliance, the protection of minimum standards, not at the end of a project but from the beginning." The Panel, however, "only looks at the end."