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Why World Bank financing does not bring Sustainable Development
“If this is development, you can keep it.” These were the words of a Cameroonian
farmer commenting on the Chad-Cameroon Oil and Pipeline Project. He was looking
at the land where his home once stood, which had been converted into a construction
site.
The farmer was sent off the land that his family had worked for generations to
make way for the pipeline, run by oil giants Exxon and Chevron. He received a
negligible compensation for his loss of income. And he was not alone. As many
had feared, this pipeline investment – Africa’s single largest development project
– has to date caused many problems for local people and did not fulfill its promises
of poverty alleviation, environmental protection, revenue distribution and sustainable
development. What went wrong?
A FAILED MODEL PROJECT
The 1070 km long oil pipeline, transporting oil from Chad to Cameroon for export
to the U.S., was touted as a model project for development when it started in
2002. It was supposed to show how foreign investment in oil could really help
poor people. The World Bank gave strong backing to the project. This powerful
institution has been telling poor countries how to run their economies for decades,
and is one of the main forces behind the pipeline.
The World Bank gave technical advice, legitimacy and millions of dollars in support
of the project. This was followed by loans from the European Investment Bank,
private banks and a series of western export credit agencies. The banks promised
that the Chad-Cameroon project would really transform oil wealth into benefits
for the poor. To make sure this would happen, the World Bank insisted on many
environmental and social plans, and monitoring by about seven international bodies.
But all these plans and statements did not prevent the pipeline from causing
grave problems on the ground. The project quickly became a liability for the World
Bank. Construction of the pipeline was completed more than a year ahead of schedule,
while the implementation of social and environmental measures continue to suffer
serious delays. The mechanisms through which local people would benefit from the
pipeline have still not been put in place.
Meanwhile, around the pipeline itself, poor sanitary conditions, a growing migrant
work force, and increasing prostitution has led to the spread of diseases, including
HIV/AIDS. The current impact of the pipeline project on biodiversity and wildlife
suggests that the environment has not been well managed. And the ‘Indigenous Peoples’
Plan’ included in the project does not address the critical question of land security,
endangering for instance the survival of the Bakola (pygmy) people, whose land
is now traversed by the pipeline.
In addition, the Chadian parliament announced in January of this year that it
wanted to use the revenues of the project to purchase weapons, violating the project’s
agreements.
In this embarrassing situation, World Bank President Paul Wolfowitz could do
little but announce a freeze on further loans for Chad.
MORE FAILED PROJECTS
 The failure of the Chad-Cameroon pipeline is not an isolated case. Local communities
around the world suffer from the devastating impacts of projects financed by the
World Bank. In fact, the list of fiascos financed by the World Bank and its sister
banks is impressive.
In August of this year, thousands of people took to the streets in the Andean
city of Cajamarca in Peru, in protest at gold mining activities by a subsidiary
of mining giant Newmont. The cyanide poison that runs off the gold mine has been
polluting rivers and killing fish for over ten years now. Local campesinos experience grave health problems and don’t see any of the profits of the gold
exported from their land. The World Bank Group continues to support this project,
even though poverty in the area has increased ten fold since this gold mine started
operating. This is one of the most profitable investments for Newmont and the
World Bank Group, but where these profits end up is not certain.
On the other side of the world a similar scenario is unfolding. Since 1994, oil
giant Royal Dutch Shell has been spearheading a USD 20 billion oil and gas extraction
project in far east Russia, on Sakhalin Island. The company started to build two
pipelines on the island, which lies in one of the most seismic regions in the
world. The project is threatening the livelihoods of tens of thousands of fishermen
by dumping tons of waste into the sea, which is likely to destroy key salmon fishing
areas. The project is already negatively affecting the shallow waters off Sakhalin’s
north-east coast, the only known feeding ground of the world’s last 100 western
pacific grey whales. And then there is the permanent threat of a large oil spill.
Very recently, on September 19, the Russian Government announced the withdrawal
of Shell’s environmental permit for the project. In spite of all this, the European
Bank for Reconstruction and Development (EBRD) is considering financially supporting
the transnational corporations involved in this project, including Shell, Mitsubishi,
Mitsui and, most recently, Gazprom.
The World Bank and the EBRD are multilateral development banks with priorities
of environmental protection and sustainable development. The World Bank’s mission
is to alleviate poverty, while the EBRD is supposed to promote democratic change.
Why public banks with these mandates would become involved in such risky business
remains a big question. There is overwhelming evidence to suggest that the old-fashioned
promotion of large-scale private sector projects in a weak regulatory environment
is unlikely to bring about sustainable development.
The World Bank is talking the talk on fighting climate change, but still financing
climate change-causing fossil fuel projects while failing to promote genuinely
sustainable energy paths that would also benefit poor people. For several decades,
the World Bank’s energy lending has focused on centralized, large-scale, export-oriented
fossil fuel and hydropower projects and on the privatization of public power utilities.
From 1992 to 2004, the World Bank Group financed an estimated USD 28 billion in
fossil fuel projects, including extraction, power plants, and sector reforms –
averaging about USD 2 billion each year. The estimated carbon emissions resulting
from these projects is 43.4 billion tons, almost half of which is related to the
oil trade.
The Bank’s new ‘Clean Energy Investment Framework’ accepts global greenhouse
gas emissions levels that would still allow ‘dangerous climate change’ as defined
by the Intergovernmental Panel on Climate Change. The G8 mandated the World Bank
to draft this framework, which would lay out a path for world-wide clean energy
development. However, the proposed Framework will not catalyze the massive shift
to sustainable renewable energy technologies necessary to create the double dividend
of environmental benefits and poverty reduction.
LOSING CREDIBILITY
 In mid-September, the World Bank and the International Monetary Fund (IMF) held
their annual meeting in Singapore. These meetings are usually attended by hundreds
of civil society representatives. But the Singaporean authorities banned campaigners
from entering the authoritarian state, generating widespread outrage and culminating
in an effective boycott of the World Bank and IMF meetings by over 160 organizations
from around the world. The Bank had ignored calls not to choose Singapore for
its Annual Meeting while knowing full-well that a ban on protests was likely to
be put in place. What happened in Singapore was yet another blow to what little
is left of the credibility of the World Bank and the IMF.
TIME TO PUT PUBLIC MONEY IN THE RIGHT PLACE
 The World Bank’s own Extractive Industries Review found in 2004 that the Bank
had “not devoted enough attention to the developmental needs of poorly performing,
resource-abundant countries, many of which experienced negative growth during
the 1990s.” According to the World Commission on Dams, large dams like those financed
by the World Bank have so far displaced 40 to 80 million people, and have impoverished
most of them in the process.
This research supports experiences around the world. For decades now, people
have been protesting the World Bank’s policies and practices. Under the guise
of the need for debt repayment, the World Bank has put pressure on impoverished
countries to restructure legal and regulatory frameworks to promote more foreign
direct investment, that rarely benefits local people. The famous World Bank/IMF
recipe of privatizing basic services and cutting social expenditures has caused
grave challenges to poor people’s survival. Communities that rely on natural resources
such as forests, water or fisheries have found that they do not come first in
the World Bank’s vision of development. Cherished words like ‘sustainable development’,
‘empowerment’ and ‘rights-based approach’ are becoming empty concepts.
This is a situation we should no longer tolerate if we truly care about people
and the environment. It is high time for public development banks to put their
money where their mouth is.
Sustainable livelihoods, not corporate profits, should be the main aim of International
Financial Institutions. In a world where everybody – including financial institutions
– respected people’s rights, and valued our forests, water and land, people would
not be hungry and all would be able to live in dignity. This is our common responsibility
today.
Janneke Bruil has been coordinating the program on International Financial Institutions of
Friends of the Earth International since 2003. She specializes in environment
and development issues and has spent time researching and campaigning in Africa
and Latin America.
Further reading:
by Janneke Bruil 
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