MAC: Mines and Communities

World Bank/IFC may increase vulnerability

Published by MAC on 2006-02-21

World Bank/IFC may increase vulnerability

21st February 2006

Several major organisations, monitoring the World Bank/IFC from Europe and the US, claim that the agency's "new approach" to guaranteeing acceptable standards "could leave people and environments...more vulnerable than before"

Even the mining industry body, the ICMM, is said to be ahead of the Bank, when it comes to veteoing encroachment on World Heritage sites

IFC new standards are a risky step for people and planet

Bank Information Center. Bretton Woods Project. BothEnds Environmental Defense. Forest Peoples Programme. Friends of the Earth-US Indian Law Resource Center. International Accountability Project

21st February 2005

Warning that the International Finance Corporation's overhaul of its social and environmental standards relies too heavily on promises of good intentions, international civil society organizations have called the IFC's new approach a risky experiment that could leave the people and environments affected by its projects more vulnerable than they were before.

Despite the fact that IFC has a development mandate, the proposed revisions - expected to be approved by its Board of Directors today -leave the IFC behind other lenders on issues of critical importance to sustainable development, caution civil society groups. Furthermore, without many of the minimum requirements and concrete benchmarks that provide some guaranteed protections in existing policies, IFC's new standards undermine the institution's accountability for the social and environmental impacts of its operations.

"The IFC wants the public to trust them that the vague principles in their standards will be implemented rigorously," said Lucy Baker from the Bretton Woods Project. "They've put in lots of discretionary language with few teeth. Past experience provides little basis for faith that IFC or its clients will ensure that projects leave communities and ecosystems better off."

IFC's new standards do not specify when consultation with local populations affected by its operations will take place, do not adequately protect the rights of indigenous peoples to their lands and natural resources-including their right to free prior informed consent, undermine existing World Bank policy with respect to resettlement, and do not require independent assessment and verification of project impacts, relying heavily instead on companies' self-reporting.

Civil society experts argue that both the IFC's former policies and a growing body of international norms are more stringent than the new standards. "The slippage is a clear weakening of IFC's commitment to 'do no harm'" said David Hunter, Department of Law, American University. "Furthermore, the new standards fail to acknowledge, for instance, UN norms on human rights and transnational corporations."

One example of where IFC finds itself behind the curve is with respect to no-go zones. The mining industry association, ICMM, and some major commercial lenders, including JP Morgan Chase and ABN AMRO, consider UNESCO World Heritage Sites out of bounds for investment. The IFC, however, refuses to recognize any area as a "no-go zone," identifying instead circumstances in which it could support projects in critical natural habitats.

"In its effort to be a leader in the world of international finance, the IFC has promoted itself more as a consultant to companies than as an institution dedicated to poverty reduction," said Hunter. "It's a great way to make money and a lousy way to combat poverty. What is supposed to set the IFC apart from other institutions is its mandate to reduce poverty and improve people's lives."

Recently, the IFC has been strongly criticized for its support of highly controversial projects including an oil pipeline in Chad and mines in Ghana and Guatemala.

"Undercutting the rights of the world's poor to make things easier and cheaper for the IFC's corporate clients won't lead to equitable or sustainable development. Rather, it will lead to increased impoverishment and resistance," said Dana Clark from the International Accountability Project. "It is unfortunate that the IFC has apparently failed to develop rights respecting standards suitable for the twenty-first century."

At a time when more than 40 commercial banks are looking to the IFC to set the standard for socially and environmentally responsible finance, IFC has responded with a set of policies that civil society experts call inadequate to ensure sustainable outcomes from private investments.

Contact Information for Interviews:

In the USA: Bruce Rich, Environmental Defense
Tel: +1 (202) 387 3500 x134

David Hunter, Department of Law, American University
Tel: +1 (202) 274 4415

Dana Clark, International Accountability Project
Tel: +1 (510) 525 4276
Cell : +1 (510) 759 4440

Bruce Jenkins, Bank Information Center
Tel: +1 (202) 624 0620

In the UK: Tom Griffiths, Forest Peoples Programme
Tel: +44 1608 652 893

Lucy Baker, Bretton Woods Project
Tel: +44 207 561 7610

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