• Secrets and lies: The Asian Development Bank’s new forest policy
• The Inter-American Development Bank, Forests and Plantations
• The European Investment Bank: Surrounded by secrecy
  

- Secrets and lies: The Asian Development Bank’s new forest policy

Founded in 1966, the Asian Development Bank (ADB) claims to be "dedicated to reducing poverty in Asia and the Pacific". The Bank's lending to the forestry sector indicates that in fact the Bank's focus is on promoting industry and corporations rather than addressing the needs of the region's poor.

The ADB's first loan to the forestry sector was in 1977, since when the Bank has lent over US$1 billion for forestry projects. More than 80 per cent of this total was spent on establishing more than one million hectares of tree plantations, three-quarters of which are commercial plantations. These plantations provide few, if any, benefits to the poor.

For the last two years, the Asian Development Bank has been conducting discussions in secret about its proposed new forest policy. No details about the Bank’s discussions are available to the public. The most recent draft of the proposed forest policy which is available to the public is dated June 2003. The ADB’s Board rejected this version in July 2003.

In November 2004, 24 NGOs from 16 countries wrote to then-ADB President Tadao Chino pointing out the flaws in the Bank’s forest policy review process. In response, Robert Dobias, director of the Agriculture, Natural Resources, and Social Sectors Division at the ADB, explained that the Bank had revised the June 2003 draft policy to “incorporate comments received from internal and external reviewers”. At some point after this, he added, “fundamental issues were raised related to ADB’s support to the forest sector.”

Dobias avoided saying what the “fundamental issues” were, or who raised them. “We currently are in the process of an internal discussion of these concerns,” he wrote. “Please be assured,” Dobias added at the end of his letter, “that we will make public the conclusions of our internal deliberations and invite comment on them.”

In January 2004, in response to my questions, Grant Curtis, an “NGO specialist” in the ADB’s Regional and Sustainable Development Department told me that “ADB plans to make the final version of the policy paper available to the public prior to the Board’s consideration.”

Details of forthcoming ADB Board meetings are secret. However, a leaked internal Bank Memorandum dated 7 April 2005 lists a Forest Policy R-paper (the “R” stands for restricted) for discussion and possible approval by the ADB’s Board on 5 July 2005.

The date of the Board meeting may change. Nevertheless, the leaked Memorandum confirms that the ADB has produced another version of its forest policy. Contrary to Dobias’ and Curtis’ assurances, it is not publicly available.

The ADB started a review of its 1995 Forest Policy in June 2000. The new forest policy was planned to be completed by the end of 2002. By this time, according to Jan van Heeswijk, then-Director General of the ADB’s Regional and Sustainable Development Department, “the studies and drafting of a policy document were completed”. After six months of “internal review and refinement of the document” the ADB produced the June 2003 draft of its proposed forest policy.

For a while, via its web-site, the Bank asked for comments on this draft, without mentioning that the Bank’s Board had rejected it in July 2003. Then the ADB stopped asking for comments and promised that it would release a revised draft in July 2004.

In September 2004, when the revised draft had still not appeared (and the Bank’s web-site was still promising that the draft would be released two months previously, in July 2004) I wrote to Javed Mir, ADB’s Senior Natural Resources Specialist (Forestry) and the Mission Leader for the new forest policy, to ask him, among other things, when we might expect the next draft to be released. Mir declined to reply.

Then, on 27 October 2004, the Bank posted the following explanation on its web-site: “Following internal and external consultations, a draft working paper (W-paper) was prepared and discussed during the second half of 2003. A revised draft of the paper was expected to be posted here for public comment. However, recent (August 2004) internal discussions have raised fundamental issues related to ADB’s support to the forest sector. Further progress on the draft policy will depend on the results of these discussions, which are ongoing.”

I wrote to Javed Mir again in March 2005. I asked him why the Bank did not release the working paper from the second half of 2003 and who, exactly, discussed the draft. I asked whether notes of these discussions were available. I asked what happened between the second half of 2003 and August 2004. I asked what “fundamental issues” were raised, and by whom. I asked when the Bank anticipated releasing the next draft of its proposed forest policy. Once again Mir declined to answer my questions.

After receiving the leaked ADB Memorandum which states that the Board will discuss the forest policy in July, I wrote to Rolf Eckermann, the Executive Director for Germany at the ADB. I asked him about the current status of the Bank’s proposed new forest policy and when the Bank anticipates producing the new policy. I asked what documents the Bank had produced since July 2003. And I asked Eckermann to ensure that Javed Mir, or someone else at the Bank, answers my letters from September 2004 and March 2005. Eckermann declined to reply.

The Bank’s claim that its proposed forest policy is based on a “participatory review process” is nonsense. The Bank’s process exposes the ADB for the secretive, dishonest, undemocratic institution that it is.

By Chris Lang, e-mail: chrislang@t-online.de

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- The Inter-American Development Bank, Forests and Plantations

The Inter-American Development Bank (IDB) does not have a specific forest policy or sector strategy, as they claim they have covered forests in other policy and strategy documents, including those on rural poverty reduction, rural finance, agriculture, water resources, coastal resources and energy. The IDB’s current draft of its Environment and Safeguards Compliance Policy also touches on protection of natural habitats.

In June 2005, the IDB put out a Forest Investment Attractiveness Index (IAIF) that rates countries on how fit they are for investments in the forest sector. The index rates Latin American and Caribbean countries based on 80 indicators, including national economic measures, political risk, national regulations, and rule of law. Using 2002 data, the index identified Brazil, Chile, Argentina, Uruguay and Costa Rica as offering the best “business investment climate” for forestry. The index identified Haiti, Ecuador, Guatemala, Belize, and Paraguay as the most challenging countries for forestry business.

Prior to developing the index, the IDB commissioned three studies on IDB actions in forestry and the forest sector between 1999 and 2002. The most recent report, “Forest Financing in Latin America: The Role of the Inter-American Development Bank” presents recommendations for the IDB’s forest-related lending and support to institutional and policy development.

The report states that the financing potential for the forestry sector in Latin America and the Caribbean is estimated at US$6.8 billion per year over the next 10 years, with more than two-thirds of the potential finance in industrial plantations. This obviously means that the countries identified as offering the best “business investment climate” for forestry will be further impacted by IDB-funded industrial monoculture tree plantations, which have already proven to have negative social and environmental effects in the five countries mentioned above.

The IDB’s investment in the forestry sector dropped through the 1990’s from US$100 million to between US$20 and US$40 million. However, the report encourages the IDB to increase financing in the forestry sector to take advantage of “investment opportunities” in what it calls “sustainable forest management.”

The report explores a wide variety of financing sources and instruments that could make private forest management investments more feasible. It goes on to say that IDB’s public sector loans will continue to be important to promote environmental and social forestry, and that they can also be used to create enabling conditions for industrial forestry.

The IDB will also promote the use of “market development instruments such as carbon offsets, water use charges, and venture funds” to promote “sustainable forest management activities.” Sustainable forest management would include a shift to “sustainable” plantation forestry, which, according to the report, means that “strict adherence to environmental precautions should be required and due consideration should be given to the protection of indigenous peoples’ rights and other social issues.” Brazil, Chile and Uruguay are presented as important success stories in plantation forestry in Latin America.

In spite of what the report says, the fact is that plantations in none of those countries can be defined as “success stories” for people or the environment. Unless of course loss of livelihoods, human rights abuses, dispossession of indigenous peoples and forest communities, land concentration in corporate hands, water and soil depletion and biodiversity loss are considered as “successful” achievements. IDB lending to the plantation sector would only exacerbate those impacts.

A number of IDB strategy and policy documents deal with forests in a variety of ways, but they do not seem to add up to a comprehensive forest strategy. The Environment Strategy acknowledges that forests are “fragile and in most cases are in a state of deterioration,” but fails to outline any specific steps to stop deforestation. The Rural Poverty Reduction strategy says that one of the key factors in new rural strategies is “breaking the vicious circle of deforestation, the degradation of water and soil resources and growth in rural poverty.” The implementation of this strategy should lead the bank to stop funding industrial plantations –because these result in the mentioned impacts- but this is obviously not the case.

The Strategy for Agricultural Development includes forestry production in the agricultural sector, and says that new trade agreements are presenting new opportunities to increase trade in forestry products. The strategy again calls for sustainable management of forest products, sustainable use of natural resources, and reforestation practices in high watershed areas. This raises the question: what are “reforestation practices”? Are they industrial plantations or the replanting of diverse native species?

The IDB has had the same one and a half page Environment Policy since 1979, and is finally revising the policy this year. The revision process came about following the IDB’s decision to fund the highly controversial Camisea natural gas pipeline project in Peru, which extracts gas deposits from one of the most culturally and biologically diverse areas of the Amazon rainforest, transports it across the Andes mountains to the coast, and processes and exports the gas from a facility in Paracas Bay, in an area adjacent to a UN Ramsar Site.

Camisea’s concession area in the Amazon and the gas fractionation plant on the coast were among the most controversial parts of the project. Seventy-four percent of the concession area is in the Nahua -Kugapakori Territorial Reserve for isolated indigenous peoples, some of whom actively avoid contact with outsiders. The Paracas Bay fractionation facility poses a direct threat to Peru’s only marine protected area. The debates that emerged over construction in these areas seemed to have served as an impetus for the IDB to revise both its Environment Policy and to create an Indigenous Peoples’ Policy –but not to revise its lending to Camisea. The consultation processes for both policies have ended, but neither policy has yet been approved.

The consultation draft of the new Environment and Safeguards Compliance Policy has a directive protecting “critical conservation areas” that is roughly parallel to the World Bank’s policy protecting critical natural habitats. The IDB draft version of the natural habitats policy, however, is significantly weaker than the World Bank’s policy and would protect fewer areas. During the consultations on the policy, NGOs urged the IDB to strengthen the wording of this directive, but it remains unclear how the IDB will incorporate this input in the final draft.

In general, the IDB seems to view the promotion of “forest-based business” as a prerequisite for the sustainable management of forestry resources, and is therefore promoting plantations and other investments in the forest sector as a way of promoting “sustainability”. Unfortunately, what the IDB understands by sustainability does not necessarily mean what we understand it means.

By Elizabeth Bast, Friends of the Earth-U.S., email: ebast@foe.org, www.foe.org

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- The European Investment Bank: Surrounded by secrecy

Financial deliberations generally take place between dubious actors in obscure corners of the political arena. This is definitely the case with the European Investment Bank, which has only recently been put in the public spotlight. It is now time to uncover the dirty secrets of the European Union’s house bank.

Established in 1958 to support integration within Europe, the EIB has never been subject to public scrutiny. This is quite unbelievable if you look at the figures. The EIB currently has an annual budget that is bigger than the World Bank’s: around 4 billion Euro. It has a history of financing large scale infrastructure within the European Union, including many controversial airports and the package of destructive highways known as the Trans European Networks. Its gigantic lending portfolio gives it great influence over the development of recipient nations. Many of its loans go to risky infrastructure projects as well as oil, gas and mining operations and large hydro dams. Contrary to other financial institutions, the EIB never bothered to adopt safeguards to ensure that its projects would protect people and the environment.

While the World Bank and other banks are acknowledging the need for the establishment of social and environmental standards, the EIB remains silent. Although the EIB is required to follow European Union legislation in its activities, there is little evidence that it does.

The EIB’s legal status and its obligations with respect to the EU have never been properly clarified. There is confusion over how exactly it can be held responsible to EU laws, and made accountable for failures to abide by relevant environmental and social laws, policies and regulations. The Gothenburg European Council (2001) and the European Parliament (2002) have both underlined the need for the EIB to integrate the general priorities of the Union in its activities.

The reality in practice is that the EIB’s project appraisal is done on economic, financial and technical terms rather than by placing sustainable development at the core. While the EIB says it supports the EU climate change policy, it still engages in the financing of large-scale fossil fuel projects. It has begun making controversial loans for the sequestration of greenhouse gases through so called 'sustainable forest development', and participates in the implementation of disputed mechanisms of the Kyoto Protocol. “The EIB believes that flexible market-based mechanisms are the key to cost-effective and timely climate change mitigation efforts,” said EIB Vice President Peter Sedgwick in December 2004.

The European Investment Bank is now increasingly looking towards investing in the global South. Yet, its mandate for doing so is very unclear.

The majority of EIB lending outside the EU is directed towards African, Caribbean and Pacific (ACP) countries. On 2 June 2003, the EIB started the Cotonou Agreement Investment Facility for ACP countries, which channels money to the private sector. From 2003 to 2008, about 2.2 billion Euros will be disbursed to the ACP region by this investment facility, as well as 1.7 billion Euros from the EIB’s own resources. But there is no evidence that the EIB gives any substantive consideration to the key Cotonou objective of eradicating poverty in ACP countries. At the same time, the EIB does not have its own development strategy.

The EIB is more explicit about its reasons for financing in Latin America. A December 2004 memorandum with the Inter American Development Bank states that “Lending activity in Latin America has a clear operational focus mainly in support of European Foreign Direct Investment”. The EIB is clear about its ambitions and states that the “political reach” of the Inter American Development Bank makes the cooperation very attractive. The EIB currently has committed to invest 2,480 million Euro to the Asia and Latin America region. The banks look forward to working together to implement IIRSA, South America’s megalomanic scheme for infrastructure integration. IIRSA’s projects are likely to put some of the region’s most delicate cultures and ecosystems at great risk. There is no assurance that any of these projects will be appropriate or sustainable. Worse still, the EIB/IDB memorandum goes on to say that project preparation will generally be delegated to the sponsors. This means that both financial institutions absolve themselves of any environmental and social responsibility.

Just a few of EIB projects that have caused grave impacts on the world’s communities and forests in the past decade include Shell’s Brazil-Bolivia Gas Pipeline (55 million in 1998), Exxon’s Chad-Cameroon Pipeline (134 million to in 2001), Veracel’s Brazilian Eucalyptus Plantation and Pulp Mill (98 million in 2003) and the Nam Theun II Dam in Laos (40 million in 2004.

The main problems identified in European Investment Bank activities include:

- Confusing status as both an EU institution and an independent entity;
- Unclear mandate for operations in the global south;
- Continued secrecy around its operations;
- Lack of clear environmental and social guidelines;
- Lack of consultation with affected communities;
- Small number of and inadequately directed staff;
- No proactive environmental protection lending;
- No implementation of environmental objectives.

As the European Investment Bank starts to move around the world, so will we. Civil society recently launched a web site where all projects financed by the EIB in the past ten years can be traced. With the ‘no’ to the European constitution, there is now renewed space for civil protest in the European political area. And we can use it by exposing the secrets of the European finance activities around the world. Organise, mobilise, protest and propose in the name of our forests, our dignity and our lives. Visit www.eibprojects.org and inform yourself.

By Janneke Bruil, FoE International, e-mail: janneke@foei.org
Read more at: www.foei.org/ifi/eib.html, www.eibprojects.org, http://www.eib.org