- World Bank shenaningans in Cambodia

In 2004, the task manager for the World Bank’s Forest Concession Management and Control Pilot Project (FCMCPP) described Cambodia’s forest concession system as "inadequate on paper, dysfunctional in reality". He might have added that all the concessionaires had committed legal or contractual breaches and extensively looted what the World Bank termed "Cambodia’s most developmentally important natural resource". Such considerations have not, however, prevented the World Bank from investing five years in supporting this same flawed management system and its piratical operators.

The Bank launched the US$ 5 million FCMCPP in 2000 with the aim of reforming Cambodia's concession system through technical assistance to the Forest Administration and the logging concessionaires. The FCMCPP tied in with a US$ 30 million Structural Adjustment Credit (SAC) to Cambodia. The Bank made the release of the second US$ 15 million tranche of this loan conditional on progress in forest sector reform.

Linking government performance in forestry with loan disbursements made good sense. Conversely, the Bank's hypothesis that the existing concession system could be made to work was entirely misplaced. By the time its project got underway, Global Witness and others had been documenting the activities of the concessionaires - their illegal logging, abuse of local people's rights and wholesale royalty evasion - over several years. In basing its project objectives on the assumption that the system should be maintained, the Bank unwisely fused its interests with those of the logging companies and their government patrons.

The Bank's decision to use loan money to benefit logging companies breached its existing 1993 Forest Policy. The FCMCPP’s architects, however, had anticipated the introduction of a new and more permissive policy by almost two years; indeed project documents from 2000 predicted that the review of the Bank’s 1993 policy "should build legitimacy for involvement in production forestry". The FCMCPP appears to have been a conceived as an outrider for future World Bank forestry projects involving direct support for commercial logging.

The project's main component has involved helping companies to meet government requirements for new sustainable forest management plans and environmental and social impact assessments. Project staff have then assessed the same plans that they helped produce, using a scoring system that attached overwhelming importance to standing timber volume rather than the quality of planning or public consultation.

Efforts to lower the bar for the companies and dilute or circumvent standards have been a hallmark of the FCMCPP. The Bank has urged deferral of full social impact assessments until after the companies have had their strategic level (25 year) management plans approved. It has also argued against holding the companies to agreed deadlines. In December 2001, after all concessionaires failed to submit management plans on time, the Cambodian government suspended further cutting and log transportation. The Bank has successfully lobbied to have the transportation ban overturned, however, thus eroding one of the few points of leverage over the companies.

In November 2002, the Bank agreed to take on the Cambodian government's legal obligation to disclose publicly the concessionaires' management plans. However, when villagers came to the World Bank office in Phnom Penh to request the documents, Bank staff announced that they did not have sufficient funds to make photocopies. In the weeks following, companies and officials belatedly organised public consultations to discuss the plans. Although a number of these were marred by intimidation, the Bank's Regional Vice-President pronounced them satisfactory.

The FCMCPP's efforts to help concessionaires through the forest management planning process reached a critical stage in mid 2004, when the project team recommended that the Cambodian government approve the strategic level plans of six of the logging companies. FCMCPP planning documents state that "the concession management and operations plans developed with the aid of technical assistance will serve as models for similar plans to be developed, subsequently, in all operating concessions”. Given the quality of plans that the project recommended for approval, one can only hope that this expectation is not realised. Highlights of the six "models" include concessionaires' stated intent to cut villagers' resin trees in violation of the law, proposals for the illegal exclusion of local people from areas of the concessions and entire passages cribbed from other companies' plans. The Bank would argue that its interventions have supported a set of commonly agreed goals on forest reform. In reality, they have served to undermine safeguards designed to exclude predatory companies and enable ordinary Cambodians to hold the remainder to account. Thanks to the FCMCPP, the six companies whose plans it endorsed are now in a stronger position than before the project commenced. It is unlikely that any of them would have stood a chance of clearing the strategic level planning stage without assistance provided by the FCMCPP; both its technical advice on drafting plans and its overly accommodating approach to assessing them. Moreover, as already demonstrated, the six companies are able to use the Bank's endorsement to deflect criticism of their operations. For the next 25 years, or rather until they have finished stripping their concessions, the six companies will present themselves as the concessionaires that have the seal of approval of the World Bank. Meanwhile, the Bank has not succeeded in introducing changes to forest sector governance that would persuade the companies to show any greater respect for the law and the rights of local people once they resume logging.

The Bank's misadventures in concession reform did not persuade the Cambodian government to abide by conditions for disbursement of the US$ 15 million second tranche of the SAC. With a revised release date of December 2003 looming, several of these remained unmet, notably the requirement that the concessionaires complete the restructuring and planning programme. Eager to draw a line under the contentious SAC, the Bank misleadingly claimed that the only commitment the government had yet to fulfil was the appointment of a new independent monitor of the forest sector. This condition was then instantly met as the Bank, through the FCMCPP, put up the money to recruit Swiss firm SGS to the role. The SAC money was duly disbursed; however the Bank's sleight of hand further severely undermined its credibility.

Criticism over several years has not wrought substantive changes to the Bank's approach in Cambodia. There are signs that some within the Bank recognise that serious mistakes have been made. Crucially, however, senior staff have so far declined to face up to the shortcomings and rectify the damage caused. In February this year a group of Cambodians, supported by NGOs, submitted a complaint to the World Bank's Inspection Panel, expressing their concern that the FCMCPP had increased substantially the likelihood of communities again suffering harm at the hands of the logging concessionaires in the near future. Following a visit to Cambodia in mid March, the Panel is due to make a recommendation to the World Bank board in early April on whether it should conduct a full investigation into the project's activities and impacts.

For further details on the complaint lodged with the Inspection Panel, please contact Mike Davis at mdavis@globalwitness.org. For a summary of issues surrounding the World Bank's release of the second tranche of the SAC, see Global Witness article at http://www.phnompenhpost.com/TXT/comments/c1301-1.htm

By Global Witness, e-mail: mail@globalwitness.org

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- The Great “Community Forest Management” Swindle In India – critical evaluation of an ongoing World bank-financed project in Andhra Pradesh

Despite years of controversy surrounding World Bank forestry projects in India, the Bank is pressing ahead with major plans to make the way for large loans for further forestry projects in several States. In 2005, the Bank has pilot “community forest management” (CFM) and participatory forest management (PFM) projects beginning in Madhya Pradesh and Jharkhand states. These pilot projects are intended to precede major loans for full-scale State-wide forestry projects. The World Bank claims that it has learned from past mistakes in stemming from its loans for social forestry and Joint Forest Management (JFM) in India. Recent Bank reports stress that it is now seeking to support the Indian government to move away from previous JFM approaches towards a new “community forest management” (CFM) approach (see, for example,PROFOR Periodic Update - March 2005).

While plans for these new forestry projects gather pace, the Bank has been implementing a five-year Andhra Pradesh Community Forest Management Project (APCFMP) since late 2002. This project, which is financed with a loan of $108 million USD, is described by the Bank as a “Community Driven” intervention that aims to reduce poverty and “empower” communities to take autonomous decisions regarding forest management on lands assigned to existing village forest protection committees - Vana Samrakshana Samithi (VSS). Many of the 5000 VSS involved in the CFM project were established under a previous controversial Bank-assisted Joint Forest Management (JFM) Project (1994-2000), which was heavily criticised for involving forced evictions of tribal people who received little or no compensation.

Given the problems with the previous Bank-financed project, strong opposition to the second Bank loan among many forest-related and development NGOs in Andhra Pradesh (AP) was only averted after NGO protest letters secured a commitment from Bank that: (i) the project design and resettlement policy would be strengthened to expressly prohibit and safeguard against further forced relocation of forest-dependent families and (ii) families relocated without compensation under the prior JFM project would be properly rehabilitated as a condition of the loan agreement.

Those sceptical about the second Bank loan were assured that the follow-up project would represent a significant departure from the previous JFM project, because the CFM intervention would aim to ensure that community VSS would take the lead on forest management decisions, while the state forest department would act primarily as a “facilitator” (Project Appraisal Document – PAD: page 5.). Those promoting the project maintained that CFM would help reduce poverty among participating VSS communities by increasing their legal entitlements to benefit sharing from the sale of forest produce.

After more than two years implementation how has this project faired and what have been the experiences of affected communities? Are there any signs the Bank is promoting genuine CFM? Is the Bank really learning lessons and promoting a new approach? An effort to answer these questions was made in July 2004 when Samata and the Forest Peoples Programme (FPP) worked with nine communities in the central and NE Coastal District of Andhra Pradesh to document their experiences and views of the project so far. The remainder of this article highlights some of the main findings of the independent evaluation.

Discussions with communities, forest-related NGOs and activists confirm that although the revision of the resettlement action plan (RAP) did result in some stronger procedural safeguards against forced eviction, loopholes remain that will hinder proper redress in the case of grievances and block land-for-land compensation. To the further anger of NGOs that campaigned for the resettlement loan conditions, the final revised document released in May 2004 asserts that lands under the previous project were relinquished voluntarily. It also maintains that up to 50% of the 16,190 potentially affected families in the CFM project are expected to willingly choose to surrender their lands to the Forest Department. NGOs and community leaders vigorously challenge this assertion and point out that the both public consultations on the RAP in 2001 in 2003 clearly record that the majority of tribal people and other forest dependent people defined by the Andhra Pradesh Forest Department (APFD) as “encroachers” will not under any circumstances voluntarily surrender their “encroached” land to the VSS. A further key loan condition has so far not been complied with: after more than two years those families adversely impacted by the previous JFM project have still not been identified and have not been compensated.

In addition, there are severe criticisms of the Tribal Development Strategy (TDS) financed under the project, which was drawn up by outsiders with no prior agreement and little knowledge of Adivasis leaders. Villagers talked to as part of the evaluation said they had never seen the final document and were unaware of its budget or its objectives. On being told of its rationale contents, leaders affirm that they strongly reject the stated “underlying philosophy of the tribal component”, which is “to reduce the dependence of the tribals on the forests for their economic subsistence” (through provision of wage employment with the forest department and alternative market-based income alternatives).

Civil society organisations are also critical of the project’s failure to promote the reforms necessary for CFM. They point out that Revisions to the AP Forest Act under the project are narrow and restricted to the revision of rules for VSS elections, VSS membership and benefit sharing. They stress that the Bank’s intervention does not address the major inequities and injustices enshrined in the national legislation such as the 1980 Forest Conservation Act, and so is unable to promote genuine and far reaching reforms, and does nothing to address to demands of forest dependent communities for recognition of their ownership rights over forest and cultivated lands.

In addition, members of Adivasi communities complain that they have not been empowered under the project as most decisions on forest management are still taken by the Andhra Pradesh Forest Department (APFD). People are upset because their forest management priorities and decisions set out in VSS resolutions are routinely ignored or dismissed by the APFD, while crucial issues such as land tenure conflicts are not being dealt with under the project. In several villages, the APFD is putting pressure on VSS to enter into contracts with private forestry and pulp firms to establish plantations of eucalyptus and teak on VSS land against the wishes of the VSS and community members. VSS members that dare to challenge the Forest Department instructions are threatened with legal sanction and/or exclusion from project benefits. Project benefits for villagers have been confined to occasional and temporary wage labour for the APFD.It turns out that the “community forest management” component of the project is narrowly restricted to the preparation of micro plans for village development and VSS forest management “treatments”. Most of these plans are being drawn up by APFD staff and are considered sub-plans of the government’s own forest plans.

There is also sinister evidence that the State government and APFD is using VSS to manipulate communities and force open commercial access to indigenous forest lands for exploitation by private extractive industries, including plantation, pulp and mining companies. APFD officials are making dubious promises of benefit-sharing schemes with VSS in an effort to establish mining and plantation leases on community lands. For this reason, the legitimacy of VSS as representative community institutions is being called into question. Local NGOs in Andhra Pradesh tracking forest policy conclude that the VSS are becoming an instrument of the government that is primarily being used to control communities and neutralise their opposition to the colonisation and expropriation of their lands by commercial enterprises.

Given all these problems, communities and support NGOs that initially accepted the APCFM project (with misgivings) are becoming bitterly disillusioned:

“The CFM project is like a sugar-coated pill which is bitter inside. The Forest Department explains CFM as being different from the previous JFM project in Andhra Pradesh -when communities were just treated as labour to do the Forest Department works and forest protection. But what we see now after two years is that CFM is just old wine in a new bottle. There are small changes, but basically this project is JFM with another name and the people do not have more power to decide how to use the forest ... the Forest Department still dictates how the forest and land is to be used...” [Sanjeeva Rao, Velugu Association, Srikakulam District, AP, July 2004]

“We support NGOs in AP got involved in the JFM and CFM because we genuinely believed that this would bring some benefits for the Adivasi peoples and other forest dependent communities in AP. However, with first World Bank-assisted JFM project there were serious problems with involuntary resettlement and the Forest Department took a great deal of land away from the tribal communities in the name of the VSS. We were very upset and complained bitterly to the AP government and the World Bank. In the preparation for the new CFM project, they assured us that things would be changed, but now there is a realisation that the CFM project still gives almost total control to the Forest Department and the VSS institution is still undermining the traditional authorities in the village and the communities are not well informed…”[Devullu P, Sanjeevini Rural Development Society, Vishakhapatnam District, AP, July 2004]

This initial evaluation of this Bank Forestry Project finds that the Bank is in violation of its Forests Policy, Indigenous Peoples Policy and Resettlement Policy. At the same time, the loan agreement is not being upheld and those who lost shifting cultivation land (podu) under the previous Bank project are complaining that they are suffering severe and growing deprivation and want their traditional lands back. For its part, the Bank is still disbursing funds for the project, which activists and community leaders maintain shows that the Bank has not changed its spots and is not learning lessons…

The main conclusion so far among leading forest activists in AP is that the Bank’s piecemeal project by project approach at the State level is diverting attention away from the popular calls for wider legal and governance reforms required to promote genuine community forest management through the recognition of the ownership rights of Adivasi and other forest-dependent communities in India.

Activists stress that the serious problems with the APCFMP should be a stark warning to those communities being promised a “new approach” in new proposed Bank forestry projects planned in other states.

Compiled by Tom Griffith, Forest Peoples Programme, e-mail: tom@forestpeoples.org, http://www.forestpeoples.org, and Ravi Rebbapragada & Bhanu Kalluri, Samata, e-mail: Samatha@satyam.net.in

(The full evaluation report compiled by Samata and the FPP is due to be completed shortly, and will be available on request via: info@forestpeoples.org . For more information on proposed World Bank forest sector plans in India, see http://www.forestpeoples.org)

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- Investing in disaster: the IFC and palm oil plantations in Indonesia

Indonesia has the third most extensive area of tropical forest on earth and is one of its richest centres of biodiversity. It is also the world's second largest palm oil producer with an output of over 11 million tonnes of Crude Palm Oil (CPO) in 2004. With Indonesia’s forests disappearing at 3.8 million hectares per year, the land area converted to oil palm plantations has doubled during the past decade to nearly 5 million ha - an area roughly the size of Costa Rica. Most oil palm plantations in Indonesia are established on land which was, until very recently, mature rainforest. According to a report commissioned by the World Bank, around 50 million people live on state forest land in Indonesia with 20 million more living in villages near forests, of which about 6 million receive much of their cash income from forests. It should be no surprise, then, that the expansion of large-scale oil palm plantations has brought widespread environmental destruction and social conflict. The financial institutions that provide, including the World Bank Group, must share responsibility for these adverse impacts.

The World Bank Group has directly and indirectly assisted the development of large-scale palm oil plantations in Indonesia. The World Bank was heavily involved in ‘development’ projects throughout the three decades of the Suharto regime. Forestry programmes during the late 1980s and early 90s supported the official forest policy in which over one third of the country’s forests was handed over to commercial logging companies while another third was destined for ‘conversion’ to plantations. Typically, same conglomerates owned both the companies that destroyed the forest by over-logging and the plantation companies that benefit from the land clearance. During the same period, the World Bank helped to finance Indonesia’s transmigration programme. Government-sponsored transmigrants and other settlers encouraged through Indonesia’s resettlement policy were a readily available source of cheap labour for the nucleus-estate plantation system (PIR). Plantations also benefited from Bank-funded infrastructure projects, including roads. The International Finance Group (IFC) provided at least one loan to an Indonesian company during the 1990s to develop oil palm plantations and CPO mills.

When the Indonesian economy collapsed in 1998, the IMF and World Bank imposed conditionalities on a financial ‘rescue package’. These included measures to promote the palm oil sector, including reductions of export taxes on CPO and lifting the ban on foreign investment in palm oil ventures in Indonesia. The IMF/WB deal also helped to restructure Indonesia’s banking sector. As bankrupted conglomerates had interests in forestry as well as banking, over 100 heavily indebted forest-related companies benefited to the tune of at least US$ 2bn when the state took over some of their private debts. An internal review of World Bank forestry policy and practices, which included Indonesia, came to the damning conclusion that both deforestation and poverty increased during the 1990s.

Indonesia is still expanding its plantations, not least to satisfy the demands of local governments who were given considerable power over land use decisions and income generation when regional autonomy was introduced in 2001. Large areas have already been allocated for oil palm - 1 million ha in Jambi; 1 million ha in East Kalimantan; 3 million ha in West Kalimantan – with overall targets of over 9 million ha. Central and local governments now look to the plantation sector as the driving force for development and a major revenue earner for the economy. Ironically, this replaces the wood-processing sector – relegated to a sunset industry as forests outside protected areas in the western part of the archipelago have been logged to the extent that they are no longer commercially attractive.

The private lending branch of the World Bank Group, the International Finance Corporation, has been increasingly active in Indonesia. The IFC’s mission is to promote sustainable private investment in developing countries by mobilising capital in international markets and providing technical advice for businesses and governments. In the Indonesian context, the IFC wants to promote exports – particularly from agribusiness - and to improve the climate for investment. However, the IFC has no oil palm policy to define the conditions under which plantation companies and their financial backers are eligible for IFC support.

Like other parts of the World Bank Group, the IFC shares a duty to help reduce poverty and improve people’s lives in line with the UN’s Millennium Development Goals. Arguably, it should be trying to help small and medium Indonesian enterprises, owned by independent small-holders, to attract financing so that they can improve the productivity and management of existing plantations. Instead, the IFC is offering support to some of the biggest operators in the Indonesian oil palm sector, including foreign investors and companies with very poor environmental and social track records who are expanding into new areas.

Under IFC’s Environmental & Social Guidelines, projects are classified in three ways:

Category A: Major economic and social impacts

Category B: “Limited number of specific environmental and social impacts may result that can be avoided or mitigated by adhering to generally recognised performance standards, guidelines or design criteria”.

Category C: minimal or no adverse environmental impacts.

It is not clear what sanctions, if any, the IFC will impose if its Environmental and Social Guidelines are ignored.

Equity and loans directly for Indonesian oil palm plantations are generally graded as Category B, so an Environmental Impact Assessment is required. In practice this provides few safeguards. EIAs in Indonesia are often perfunctory exercises and it is not uncommon for the study to be carried out several years after a plantation has been developed. Furthermore, compliance with host country laws and local regulations means indigenous peoples’ rights can be ignored with impunity and there is weak enforcement of environmental and labour standards.

The situation is even worse for trade-related IFC financing which is classified as Category C. Here there is a presumption of no adverse environmental impacts, while social impacts are not even considered, let alone checked in the field. This means that the IFC cannot obtain the information necessary to ensure compliance with its own standards.

A case in point is the IFC’s pre-shipment financial support for the Singaporean company Wilmar Trading. The Wilmar Group is the biggest crude oil palm refiner and exporter in Indonesia. It owns four CPO refineries in Indonesia and another in Malaysia, with a total production of 3.3 million tonnes/year.It has investments in at least 85,000ha of oil palm plantations, but buys some 90% of its supplies from Indonesian producers belonging to other conglomerates.

The IFC describes this project as “enabling Wilmar to meet its workingcapital requirement to purchase crude palm oil from plantations in Indonesia and process them (sic) into refined oil for export.” In other words, the IFC provides a US$ 33.3 million guarantee, renewable annually for three years, so Wilmar can borrow money more easily from commercial banks to buy palm oil supplies. The loans are repaid after the CPO has been delivered to overseas purchasers such as detergent companies or food processors. Unilever is one of Wilmar’s clients.

It is not clear why this project is considered worthy of IFC’s support. Wilmar is the second-largest edible oils trader in the world. In 2002, Wilmar Holdings had an annual turnover of US$ 3,530 million and made a net profit of US$ 52.2 million.The IFC justifies its action by saying that commercial banks are nervous about investing in Indonesia. Yet Wilmar has obtained loans from several international sources on its own or through the services of the Dutch-based international bank, Rabobank. Rabobank may even be an investor in Wilmar.

There is no doubt that the IFC’s credit guarantee will facilitate exports of Indonesian palm oil and benefit the Wilmar group and its Indonesian subsidiaries. What is less clear is whether IFC’s claims of positive benefits for local farmers can be justified. Indeed, the IFC has no means of gauging the impact on small-scale sharecroppers or local economies as the Wilmar deal is graded Category C.

The IFC has never made public basic information on all Wilmar’s subsidiaries – including the plantations, CPO mills and other investments in Indonesia.Although Wilmar apparently holds this list on its website, it is perpetually inaccessible. It is therefore very difficult to assess the full extent of the IFC’s responsibilities.Neither the IFC nor Wilmar has attended any meetings of the Roundtable on Sustainable Palm Oil. Even so, Dutch and Indonesian NGOs who are trying to track down Wilmar’s connections have raised concerns about a number of environmental, social and human rights issues.

These include the following issues:

- Wilmar subsidiary PT Jatim Perkasa Jaya in Riau province owns a plantation in an area of peat swamp forest. That part of the Rokan Hilir district has been repeatedly burned in forest fires. The local authorities and environmental NGOs are convinced the company is implicated in this illegal land clearance, but the case has yet to be proven in court.

- The development of oil palm plantations in West Sumatra has been the focus of violent conflicts since April 2000, when armed police tried to bully local people into giving up their land to Wilmar-subsidiary, PT Permata Hijau Pasaman. A local NGO monitored instances of intimidation, raids, shooting, kidnapping, arrest and torture by the security forces.

- There is evidence that Wilmar’s third party suppliers, belonging to the Salim, London Sumatra, Sinar Mas and Surya Dumai Groups, have also been involved in forest destruction, illegal land clearing by burning, land seizure and human rights violations.

- Further investigations have revealed company-led cooperatives which left smallholders waiting for plot allocations; serious cases of water pollution due to palm waste and at least one CPO mill which has been operating for 4 years without an EIA.

IFC’s immediate reaction to the NGOs’ study was to deny that it was supporting the expansion of oil palm plantations or that there were social and environmental problems associated with Wilmar’s subsidiaries. It dismissed reports of land disputes, saying that Wilmar was not responsible for the initial land acquisition for the plantations. Wilmar also condemned the briefing document as “incomplete and inaccurate” and told Rabobank that PT Jatim was sold in late 2003.Later Wilmar agreed to engage a consultant to carry out an independent study of its social and environmental performance.Before this took place, the IFC Board announced in May 2004 that the US$ 33.3 million guarantee for Wilmar had been approved.

Wilmar Trading is only one of several deals in Indonesia that raise questions about the IFC’s commitment to promoting environmental sustainability, social justice and the eradication of poverty. Since 2002, the IFC has invested about US$ 3.5 million and provided stand-by equity for up to US$ 16.5 million to PT Astra International for debt restructuring in order to support the company’s existing operations and future development. Astra is one of Indonesia’s largest conglomerates whose interests include cars, banking and real estate, in addition to oil palm plantations. The IFC has also made a US$ 40 million loan to Verdaine – a Mauritius-based company set up as a vehicle to acquire and manage oil palm plantations in Indonesia. It currently controls a 9,100ha plantation in the Tapanuli Selatan district of North Sumatra and a 5,000 ha concession on Belitung island, off the east Sumatran coast. One of its founders is Austindo Nusantara Jaya, another Indonesian conglomerate with interests in agribusiness, electric power generation, mining and financial services. The IFC had already bought a 7% stake in an Indonesian palm oil plantation subsidiary of Austindo called PT Agro Muko in Bengkulu. The IFC is also helping the Indonesian Wings Group to move into the lucrative market of cooking oil, in addition to its existing ventures in toiletries, building materials, ceramics, cement, asbestos, banking and property. It provided a US$ 10 million loan and helped organise a US$ 11 million syndicated loan for three oil palm estates in South Kalimantan under PT Gawi.

The IFC still maintains that its engagement can have an impact, both in terms of broad, beneficial economic impacts and of improvements in environmental and social performance. “The renewed involvement of the IFC in funding projects in Indonesia sends a very positive message to companies with a commitment to good corporate governance, sustainable development and the creation of employment opportunities for the Indonesian people”, said one of Verdaine’s directors. However, the significant issue here is that the IFC completely denies responsibility for its investments higher up the trade chain. And local communities are telling a very different story from the rosypicture painted by IFC representatives.

By Liz Chidley, Down to Earth, e-mail: dtecampaign@gn.apc.org, http://www.dte.org

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- Laos: World Bank finances the Nam Theun 2 dam regardless of its own policies

Back in 1989, when Australian company Snowy Mountains Engineering Corporation was hired to produce a World Bank-funded feasibility study of Nam Theun 2 hydropower dam, the project under study was a dam to generate electricity for export to Thailand.

Sixteen years later, generating electricity appears to be a side-product of a project aimed at alleviating poverty. On 31 March 2005, the World Bank's board of directors approved US$270 million in guarantees and loans for the dam. "We are only interested in doing what we can to help some of the poorest people in Asia get more money so they can have a better life -and that's the purpose of the Nam Theun 2 hydro-electric project," Peter Stephens, a World Bank spokesperson in Singapore, told Voice of America.

As Stephens is fully aware, the project will lead to increased debt for the Lao government, will flood 450 square kilometres of forest, wetlands, fields and villages. It will involve the forced eviction of 6,200 people and will destroy the fisheries and livelihoods of a further 120,000. The project will destroy large areas of the last remaining habitat of the endangered Asian elephant and white-winged duck.

The World Bank's involvement ensures a series of lucrative contracts for international companies. EDF International of France leads the Nam Theun 2 Power Company, the consortium building the dam. The other members of the consortium are the Lao government, Italian-Thai Development and the Electricity Generating Public Company of Thailand. The developer's engineer is Germany's Lahmeyer International.

"This is exactly the kind of project proposal that the safeguard procedures of the World Bank . . . are designed to prevent," wrote David Hales of Worldwatch Institute. "The risk of further impoverishment of the people, of corruption and mismanagement, and of financial failure of the project is just too high."

Not surprisingly, World Bank President James Wolfensohn disagrees. His job, after all, involves running an institution with an immense capacity for self-delusion. "Our decision, after a lot of deliberation, is that the risks can be managed; in fact, one major reason we are involved is to help manage those risks," said Wolfensohn in a statement released by the Bank after the Board decision.

The World Bank has been involved in the Nam Theun 2 project since funding the feasibility study in 1989. Since then a Lao military-run logging company has made millions from logging the reservoir area. Thousands of people on the Nakai Plateau have seen their livelihoods destroyed. Although international consultants have benefited from millions of dollars worth of studies on the project, the World Bank has failed utterly to "manage the risks".

James Chamberlain is an anthropologist who has lived in Laos since 1965. In 1997, he was the team leader of a "consultation" process on the Nam Theun 2 project. A 1997 World Bank video records his comments about three groups of Indigenous Peoples living in the area of the proposed project. "They are primarily hunters and gatherers traditionally, with little or no agriculture, depending upon foraging and nomadism as a way of life," said Chamberlain. They speak a Vietic language which is unrelated to the other language groups in the area. Chamberlain described them as "almost extinct", with cultures that are "very, very different than anything else we have ever run across.

The Lao government has in the past forced Vietic speaking people out of their spirit forests and into villages. "It hasn't worked," Chamberlain said. "Most of them have died, actually, as a result of living in a village, for both psychological and physical reasons."

Chamberlain's team recommended that these Indigenous Peoples should be allowed to remain in the forest. "We think of this as being a conscious decision on the part of those people as to their preference of lifestyle and their preference of a place to live. It's an ecological preference," Chamberlain said.

"From the point of view of the World Bank, and their Indigenous Peoples policy," Chamberlain added, "this is what should happen. According to the Indigenous Peoples operational directive, OD 4.2, people must be consulted as to what they want to do with their own future. And that should be adhered to in policy and planning."

But Chamberlain's recommendations were ignored. In 2000, as the World Bank-funded Panel of Experts on Nam Theun 2 has documented, the Lao government evicted 34 households of Vietic speaking peoples from their spirit forests to a village called Ban Nakadok. The next year, ten more families were forced to move to another village, Ban Nathon. Several Vietic households died shortly after being moved to Ban Nathon in the mid-1970s.

Having previously recommended that Vietic people should not be moved, in its latest report (February 2005) the Panel of Experts recommends that the project developers should hire an NGO to work with Vietic communities. The NGO consultancy would be, according to the Panel of Experts, "for the purpose of better understanding their current status, identifying their relocation preferences and improving their livelihoods." In other words, the project developers, the Lao government, the Panel of Experts and the World Bank do not even know Vietic speaking peoples' "current status", let alone their "relocation preferences".

This amounts to little more than an admission that the project developers have paid no attention to either Chamberlain's recommendations or the WorldBank's policy on Indigenous Peoples. The eviction of Vietic speaking peoplefrom their spirit forests is not only in breach of the World Bank'ssafeguard policies. For the people concerned it is a matter of life anddeath.

Nam Theun 2 will become another in a long list of World Bank boondoggles. But it is also conclusive proof (as if yet more proof were really needed) that the only way to stop the World Bank from repeating the same mistakes is to close it down.

By Chris Lang, e-mail: http://chrislang.org