MAC: Mines and Communities

Letter of protest on World Bank chiefs reject proposal to quit oil and coal finance

Published by MAC on 2004-02-03

As the article below reveals, the Financial Times has discovered that the World Bank management has already rejected the outcomes of much of the Extractive Industries Review.

Therefore a number of NGOs have circulated a letter which was presented to World Bank President James Wolfensohn on Thursday 12th February at a face to face meeting. The text of letter long with the call to sign on is circulated below.

Please find a letter to World Bank President James Wolfensohn re: the Extractive Industries Review below. This review, which caps a two-year-long evaluation of the development impacts of the World Bank Groups support for oil, mining, and gas projects worldwide, has recommended that the World Bank adopt significant reforms, including immediately ceasing funding for coal projects worldwide and phasing out its support for oil production by 2008. The Bank-sponsored review also recommended enhanced human rights protections, prior informed consent for indigenous and project-affected peoples, and an end to support for destructive mining technologies.

Not surprisingly, the Bank's management is proposing rejecting all but the weakest of the EIR's recommendations. Only a strong message from civil society and others that this response is inadequate can sway the Bank on this. Your signature below is vital in helping the Bank to get this message.

Please distribute this far and wide through allied networks. Check and for more updates about the EIR and information about what you can do. Thanks in advance.

February xx, 2004

Mr. James Wolfensohn
World Bank Group
1818 H Street NW
DC 20433

Dear Mr. Wolfensohn,

We write to you today in good faith and with genuine hopes for meaningful action towards our mutual goals of poverty alleviation and sustainable development. As you know, Dr. Emil Salim has just completed the Final Report of the Extractive Industries Review (EIR). We want to thank you for initiating this historic process in Prague more than three years ago, and for devoting significant World Bank Group (WBG) staff time and financial resources to the review over the last several years.

We also want to thank Dr. Salim for his adherence to the principle that genuine development requires partnership not only with governments and companies, but with civil society as well. Dr. Salim's commitment in this regard allows us to endorse his recommendations to you, and to encourage you to adopt all of them without exception or reservation.

The EIR correctly concluded that if the WBG intends to pursue its mandate of poverty alleviation, then it should not support extractive industries unless the broad set of enabling conditions outlined in the Report's recommendations are in place. Furthermore, the EIR found that support for certain types of extractive activities does not represent the best use of the WBG's money to promote and support sustainable development, and thus that the WBG should phase-out its financing for these types of projects and reallocate its funds to other activities.

We will not view as sufficient the adoption of only a certain percentage of the EIRs recommendations. The failure to meet any one of them can lead and has indeed led to a failure to contribute to poverty alleviation or sustainable development.

At your insistence, the EIR integrated World Bank Group staff at nearly every level, and the process and the Final Report were clearly richer for it. We certainly hope and expect that this integration of Bank staff and perspectives now translates smoothly into implementation of all the Reports recommendations. This was, after all, the premise upon which it was argued that Bank staff should be deeply involved in the EIR.

Those of us who have previously engaged in the Structural Adjustment Participatory Review Initiative and the World Commission on Dams review already have great reason to be skeptical ­ and that skepticism would only harden if the World Bank Group were to pick and choose only those recommendations from the EIR Report that are least challenging. In the intervening time that it may take to fully adopt the EIR recommendations, we feel that a good faith gesture would be for you to instruct staff and management to immediately freeze any further action on policies or projects that are potentially affected by EIR recommendations.

We congratulate the EIR for recognizing climate change to be a profound threat to sustainable development and poverty alleviation and we strongly endorse the recommendation for the World Bank to immediately end its support for coal mining and to phase-out financing for oil projects by 2008. By shifting financial support from fossil fuels to renewable energy, the Bank could play an important catalytic role toward renewable energy development in the South, in turn leveraging significant global benefits.

We would like to also highlight the EIRs endorsement of the right of free, prior and informed consent for indigenous peoples and the importance of securing a social licensefrom affected communities to operate before projects proceed. While this right is already recognized for indigenous people under international law, other communities often have very little influence over project decisions despite the significant impacts that extractive industry operations have on their livelihoods and on the environments on which they depend. Empowering communities is not only the right thing to do, it will also spare the Bank and project sponsors considerable reputational risk and added cost.

Recognition of and respect for human rights is one of the core elements of sustainable development. Despite your best efforts to date, which we recognize and applaud, the World Bank is far behind many other intergovernmental organizations in accepting its human rights responsibilities, including the rights of workers, and in integrating these and other human rights- related issues into its operations and programs. As the EIR correctly concludes, this is not a matter of discretion but rather it is a matter of compliance with international law that is binding on the Bank; it is also sound development practice. We are aware that you have expressed an interest in human rights and have promoted rights-related issues within the Bank. We hope that now you will use all of your influence to demonstrate that commitment by adopting all of the EIRs recommendations.

We are confident the EIR will be remembered as one of the most important initiatives of your tenure, and one of the cornerstones of your legacy as World Bank President. We would submit to you that the true test of the World Bank Groups willingness to place poverty alleviation and sustainable development above bureaucracy, corporate interests, corruption, and institutional barriers to change will be in your willingness to push to redefine the Bank and the way in which it approaches development. The upcoming formulation and adoption of a concrete and specific EIR action plan will prove to what extent the World Bank is serious about ensuring that the twin goals of poverty alleviation and sustainable development are strongly upheld.


[your name & organization here]

World Bank chiefs reject proposal to quit oil and coal finance

By Alan Beattie, Financial Times

3 February 2004

The World Bank's management has rejected the key proposals of an independent review it commissioned that recommended the bank pull out of financing all oil and coal projects in the developing world.

A draft copy, seen by the FT, of the bank's response to the Extractive Industries Review (EIR) - a two-year review of the bank's role in financing oil, gas and mining - shows the management declining to propose several of its key recommendations to the bank's executive board for adoption.

Environmental campaigners reacted angrily to the management response, saying it showed the bank was not serious enough about protecting the environment.

The management response, prepared on behalf of James Wolfensohn, the bank's president, flatly rejects the ambitious proposal that the bank and its private sector arm, the International Finance Corporation, should phase out its involvement in oil projects within five years and shift its financing to renewable energy.

"Adopting this policy would not be consistent with the World Bank Group mission of helping to fight poverty and improve the living standards of people in the developing world," the management report said. Attempting to use the bank as a lever to achieve reduction in fossil fuel emissions, as the review proposed, was counter-productive, it said. Such a strategy would contradict the proposals of the Kyoto initiative, which stressed the importance of sharing the burden of reduced carbon emissions, the report added.

Ending the financing of oil projects "would unfairly penalise small and poor countries that need the revenues from their oil resources to stimulate economic growth and alleviate poverty". The report cited as an example Chad, where the bank has financed an oil pipeline against the vociferous complaints of environmentalists.

The EIR, led by Emil Salim, a former Indonesian environment minister, also proposed that local indigenous peoples should be required to give "free prior informed consent" before an oil, gas or mining project went ahead. The bank said this could violate local laws.

Though the management did accept that the bank should work to increase the transparency of oil revenues, environmental campaigners said they were disappointed with its response.

They said they would continue to press their case when the proposals went to the bank's executive board, though admitted that the management proposals were very likely to be accepted.

"The World Wildlife Fund feels very strongly that all the recommendations from the EIR should be adopted," said Francis Grant-Suttie, director of private sector initiatives for WWF. "We are disappointed that the draft World Bank management response seems to reject out of hand some of the most critical recommendations in the report. However, we look forward to working with Mr Wolfensohn and the World Bank Group in making the case why these reforms need to be instituted."

The EIR involved consultation with industry, government and pressure group representatives around the world but drafting of the recommendations was left entirely to Mr Salim.

(c) 2004 The Financial Times Limited. All rights reserved

World Bank rejects call to leave oil, coal projects

4 February 2004

Reuters News

Washington (Reuters) - The World Bank has rejected the findings of an independent report that recommends the institution phase out investment in oil and gas projects because of environmental concerns. The bank's management said in a draft of the response to the report, a copy of which was obtained by Reuters, that World Bank absence from certain oil and coal projects could result in worse quality projects and governance. "Hence the World Bank Group does not accept the Extractive Industries Review's recommendations to cease funding oil and coal projects," the World Bank said.

The review was commissioned by bank president James Wolfensohn and started work in July 2001, after criticism from the nongovernmental community about the bank's work in extractive industries. The study was led by former Indonesian environment minister Emil Salim.

Two of the bank's most controversial recent projects, the Chad-Cameroon and the Caspian oil pipelines, were approved by the lender's shareholders in the face of fierce opposition from environmental and nongovernmental groups who said the projects would do more harm than good.

The World Bank is not obliged to follow the recommendations in the report but nongovernmental groups have seized on the findings to urge the bank to change its ways.

In its response, the management also argued that restricting World Bank group financing for oil and coal projects will not reduce global supplies which would be financed and produced in other ways.

Nobel Laureates, More than 300 NGOs, Urge Wolfensohn To Reform World Bank Policies on Oil, Coal and Mining Wolfensohn discusses issues with NGOs in Australia

Environmental Defense – Friends of the Earth - Institute for Policy Studies - Oxfam America

February 12, 2004

Contacts: Steve Kretzmann, IPS, 202-497-1033
Bruce Rich, Env. Defense, 202-387-3500
Carol Welch, FOE, 202-222-0719
Keith Slack, Oxfam, 202-496-1308

As evidence of a mounting campaign to reform the World Bank’s support of the oil and mining industries, Archbishop Desmond Tutu today joined four other Nobel Peace Prize winners and over 300 organizations from 72 countries in calling on Bank President James Wolfensohn to accept and adopt the recommendations of a review that he commissioned. A draft copy of World Bank management’s response, leaked last week, indicates that the Bank has not yet embraced and committed itself to adopting the important and necessary changes to ensure poverty alleviation and local communities benefit from the World Bank Group’s investments.

The Extractive Industries Review (EIR) was initiated at the World Bank Annual Meetings in Prague in 2000 by Bank President James Wolfensohn, who pledged to evaluate how much (or whether) extractive industries contribute to poverty alleviation. Wolfensohn met with civil society representatives today in Melbourne Australia, and pledged to ensure that “justice is done to the work that has been done on the EIR” and to not be constrained by “bureaucratic processes in the Bank”. He also distanced himself from Bank management’s draft response to the EIR, which was leaked last week.

The Final Report validates many of the concerns that communities and civil society organizations have been raising with the Bank Group for more than two decades. Human rights groups, environmental organizations, development agencies, community and indigenous peoples representatives, have welcomed the Report. Even the Bank’s own data show that countries which rely on oil as their primary export are more than 40 times more likely than other nations to be involved in civil war.1

“War, poverty, climate change, greed, corruption, and ongoing violations of human rights – all of these scourges are all too often linked to the oil and mining industries.” wrote Tutu and the other Laureates in their letter to Wolfensohn “Your efforts to create a world without poverty need not exacerbate these problems. The Review provides you an extraordinary opportunity to direct the resources of the World Bank Group in a way that is truly oriented towards a better future for all humanity.” Nobel Peace prize winner Jody Williams released the letter, which was also signed by Rigoberta Menchu Tum, Sir Joseph Rotblat, Betty Williams, and Mairead Maguire.

The EIR concluded that if the World Bank Group intends to pursue its mandate of poverty alleviation, then it should not support extractive industries unless the broad set of good governance enabling conditions outlined in the Report are in place first. Furthermore, the EIR found that support for coal and oil, as well as projects in critical natural habitats and areas of conflict, does not represent the best use of public World Bank money to promote sustainable development, and thus that the World Bank Group should phase-out its financing for these types of projects and reallocate its funds towards renewable energy.

“This process clearly concluded that World Bank support for the oil and mining industries has not contributed to significant poverty reduction, and that there have been serious problems in protecting communities’ basic rights and the environment,,” said Keith Slack of Oxfam America . Will the World Bank Group keep its commitment to own up to these failures and make the necessary changes? We hope that the answer is yes, and that Mr. Wolfensohn delivers on the good faith that he showed by initiating this process.”

The recommendations of the EIR include:

-obtaining prior informed consent of local communities and indigenous peoples affected by extractive projects as a precondition for financing;
-phase out lending in support of oil and coal and to invest its scarce development resources in renewable energy by setting lending targets of increasing renewable energy lending by 20% a year;
-ensuring the establishment of indigenous peoples’ land rights as a condition for project finance;
-ensuring that revenues of Bank-financed projects benefit all affected local groups;
-requiring that freedom of association be present in Bank financed projects as a basic human/labor rights requirement;
-ensuring that good governance structures are in place before project finance and implementation occurs;
-protecting biodiversity through establishing “no go” areas for internationally recognized critical habitats;
-requiring that submarine tailings disposal not be used in World Bank Group supported mining projects;
-increasing revenue transparency and improving public disclosure about projects; and promoting overdue key institutional reforms to deal with the long documented “pressure to lend” in the World Bank that has resulted in weakening of implementation of key environmental and social protection policies.

For more information on the EIR, view

Copies of the Nobel Laureates Letter and the International NGO letter can be viewed at

[1] Collier, Paul, and Anke Hoeffler, "Greed and Grievance in Civil War". Policy Research Working Paper 2355, Development Research Group, World Bank, May 2000

Pressure Rises on World Bank on Funding for Mining

Bob Burton, IPS

February 13th 2004

World Bank President James Wolfensohn has come under increased pressure, in the wake of a call by five Nobel Laureates, including Archbishop Desmond Tutu, for him to embrace proposals from an internal review that would set much higher standards before financing would be provided to the mining, oil or gas industries.

At a meeting in Melbourne Thursday evening, Wolfensohn was presented with a Feb. 9 letter from the five -Archbishop Tutu, Jody Williams, Sir Joseph Rotblat, Betty Williams and Mairead Maguire - urging him to adopt the recommendations of the Extractive Industries Review.

"We urge you in the strongest possible terms to embrace the spirit of the report and accept the recommendations in their entirety when devising a strategy for moving forward," they wrote.

"War, poverty, climate change, greed, corruption, and ongoing violations of human rights all of these scourges are all too often linked to the oil and mining industries. Your efforts to create a world without poverty need not exacerbate these problems. The Review provides you an extraordinary opportunity to direct the resources of the World Bank Group in a way that is truly oriented towards a better future for all," they wrote.

Their letter keeps up the pressure on the Wolfensohn and the World Bank to adopt the advice of the Review, days after reports were leaked of a draft Bank reply indicating plans to reject the review's main recommendations.

The Extractive Industries Review (EIR) was initiated at the 2000 World Bank Annual Meeting in Prague by Wolfensohn, to assess whether support for extractive industries was consistent with the bank's goal of poverty alleviation.

The final report of the review team - which was headed by former Indonesian environment minister Emil Salim - was presented to the World Bank on Jan. 16.

At the Melbourne meeting, Wolfensohn distanced himself from an internal report that was leaked last week in which bank staff dismissed key recommendations of the EIR report.

Kate Walsh, campaigner with the Sydney-based watchdog group Aidwatch, said Wolfensohn was quizzed on the topic at a meeting of Australian Council for Overseas Aid (ACFOA) member groups. "He is clearly critical of the management report, which he said was poorly written and not very well researched," she said.

A spokesman for the World Bank confirmed this and that there will be a further round of consultation. "That leaked report does not represent the final Bank view of the EIR report as there will be further internal and external consultations à Given the importance of the topic we will take as long as necessary to get it right," he said.

The EIR report recommendations are bitterly opposed by the mining, oil and gas industry. A key recommendation of the final report is that project proponents be required to obtain prior informed consent of affected local communities and indigenous peoples. It is a recommendation that has been strongly advocated by community development and indigenous groups.

However, it is a proposal opposed by the global mining industry lobby group, the International Council on Mines and Metals (ICMM), which represents companies including Mitsubishi, Nippon Mining, Sumitomo, BHP-Billiton and Rio Tinto.

In mid-December 2003, the ICMM dispatched a submission to Salim opposing his support for prior informed consent and arguing that the World Bank should leave it to governments to decide.

"ICMM believes the Report should à confirm that it is the role of governments to define how mining decisions are to be made in the best interests of the nation and of Indigenous Peoples, taking into accounts the human rights conventions to which they are committed," they wrote.

But Matilda Koma, campaigner for the Papua New Guinean non-government organisation Environmental Watch Group, argues that the recommendation supporting prior informed consent is fundamental to reforming mining practices.

"It is a way of respecting local and Indigenous peoples' culture or way of life, particular in areas where land resource ownership is paramount to the people," she wrote in congratulating Salim on his recommendation.

Koma argues that not only should the World Bank adopt standards governing prior consent, it should also ensure a grievance procedure is included.

Noting government and mining industry opposition to prior informed consent, World Bank staff reviewing Salim's review preferred only that additional work be done "expanding awareness of the human rights dimension of World Bank Group policies".

Salim's recommendation that the World Bank's phaseout of the funding of oil and gas projects by 2008 has horrified the oil industry.

In a January 2004 submission from four major oil companies -- Shell, BP, the International Association of Oil and Gas Producers and Norsk Hydro -- argued that while World Bank involvement in the sector was relatively minor, the recommendations would have a major ripple effect.

An end to World Bank funding, they argued, "would be perceived by many external observers as a 'seal of disapproval' for oil development in general. If implemented it would threaten the industry's 'social licence to operate'.

"As such it could likely add significantly to the cost of borrowing by entities, including governments engaged in oil development and would be seen by many as reason for not investing in oil stocks for ethical reasons," they complained.

According to Walsh, Wolfensohn has already made up his mind not to exclude funding for coal and oil projects. "He was really opposed to the idea of a phaseout of coal and oil,"' she said.

Despite this, she is hopeful that the global community campaign that resulted in Salim's strong recommendations will continue to build and blunt the mining industry lobbying campaign. "We welcome his commitment to further consultation and will be stepping up the campaign to push them to accept all the recommendations in the final review report," she said.

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