MAC: Mines and Communities

Earth's riches should help the poor - Comment on Extractive Industries Review

Published by MAC on 2004-04-27

Earth's riches should help the poor

Desmond Tutu and Jody Williams, the International Herald Tribune

Tuesday, April 27, 2004

Ground rules for the World Bank

Washington - It is a cruel irony that countries around the world that suffer from some of the highest rates of poverty, disease, corruption, violent conflict and human rights troubles are also - at least on paper - some of the richest. Paradoxically, their wealth in natural resources like oil, natural gas, gold, diamonds and copper, has helped fuel many of their problems.

Economists call this phenomenon the "resource curse" or the "paradox of plenty" and have struggled for years to come up with ways to deal with it. Now after much study and analysis, the World Bank, the world's most important poverty-reduction institution, has perhaps the best opportunity ever to help poor countries break out of this trap. But for this to happen, its board of directors and its president, James Wolfensohn, must exert the leadership necessary to assure that the earth's riches help the world's poor.

Some countries have been able to convert their natural wealth into improved standards of living for their citizens. But in the vast majority of cases, this has not happened. The money generated from natural resources has helped perpetuate civil wars, as in Sierra Leone and Angola, or has been squandered by corrupt government officials - perhaps most spectacularly in Nigeria, which lost which lost an estimated $4 billion in government funds, 90 percent derived from oil, during the dictatorship of Sani Abachi in the 1990s.

In addition, the spills of oil and toxic chemicals used in mining, such as cyanide, can cause grave damage to poor communities near mines or oil installations that depend on subsistence farming or fishing to sustain themselves. Such communities rarely see any "trickle down" benefits from such operations. A lack of transparency in accounting for oil and mining revenues makes graft and corruption harder to address effectively.

The World Bank has played a central role in opening the economies of poor countries to investment by foreign oil and mining companies. The bank's theory has been that such investment would generate the money needed by poor countries to help lift them out of poverty.

The reality has proven far different. According to several studies, including some by the bank itself, poor countries that depend on oil and mining resources actually grow more slowly than those that do not. Additionally, they have lower education and higher malnutrition rates and a much greater tendency to violent conflict.

To its credit, the World Bank began to recognize these problems several years ago. In 2000, prodded by environmental and human rights organizations, the bank began a major review of its policies for its oil and mining projects.

The review, conducted by a former Indonesian environment minister, Emil Salim, produced a sweeping set of recommendations for overhauling the bank's involvement in these sectors. These include doing more to protect human rights, requiring that oil and mining companies obtain the consent of local communities before setting up operations and avoiding investing in areas of conflict.

These recommendations are reasonable and necessary if the World Bank wants to improve the impact of its investments. These changes have broad support from a range of interests, including religious leaders, renewable energy companies, socially responsible investment firms and nongovernmental organizations such as Oxfam and the World Wildlife Fund, as well as local organizations from around the world.

If implemented, these policy reforms could dramatically change the way the bank does business in the oil and mining sectors and could significantly improve the chances that this natural wealth could benefit the poorest populations. But to overcome the inertia of the bank's bureaucracy - which has squelched previous reform efforts - Wolfensohn and the World Bank's shareholders must take steps now to ensure the adoption of the review's recommendations.

The time for action is now. The world's poorest, who suffer daily from the negative impact of these industries while being denied the benefits they could bring, cannot wait any longer.

Archbishop Desmond Tutu was awarded the Nobel Peace Prize in 1984 and Jody Williams in 1997.

Copyright (c) 2003 The International Herald Tribune

World Bank to decide on oil investing by July

Source: Planet Ark

April 29, 2004

Wahsington - The World Bank will decide by July whether to keep investing in oil, gas and mining projects, World Bank President James Wolfensohn said this week, a subject of concern to environmental groups.

Wolfensohn commissioned an independent report in July 2001 to review the bank's role in so-called extractive industries. Questions have been raised by environmental and global nongovernmental groups whether the bank's backing of such projects contributes to development and lowering poverty in poor countries.

The Extractive Industries Review, led by former Indonesian environment minister Emil Salim, recommended the bank cease funding oil and coal projects because of environmental concerns. In a draft response to the report in February, the bank said its absence from these projects could result in lower quality projects and weaker governance. The bank's most controversial oil projects, the Chad-Cameroon and Caspian oil pipelines, were approved by the lender's shareholders amid fierce opposition by development groups, which said the projects would do more harm than good. But Wolfensohn said this week the bank first wanted to complete consultations with industry and governments on the matter before it made a final decision. "I would guess you're looking at a June or July date for something definitive," Wolfensohn told a Washington conference on energy sponsored by the Center for Strategic and International Studies. "In the meantime, dialogue is going along constructively," he added.

Wolfensohn also said the oil and gas industry should pay attention to the needs of the developing world, where demand for energy is set to increase as populations grow. In China energy demand is expected to triple in the next 20 years, Wolfensohn said, adding: "And my guess is that's a conservative estimate."


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