Striking a better balance: The World Bank Group and extractive industries - the final report of the extractive industries review (Vol. 1)

In November 2003, the Board of the International Finance Corporation (IFC) approved a loan of up to $125 million for the Baku-Tbilisi-Ceyhan pipeline, which will bring oil from landlocked Azerbaijan to the Mediterranean coast of Turkey--one of the longest pipelines of its kind in the world .... In China, the World Bank Group (WBG) is involved in developing and restructuring the gas sector in Sichuan province .... In Chad, one of the world's poorest countries, a WBG-supported project will develop oil fields in the south and build a 1,070-kilometer pipeline to offshore oil-loading facilities on Cameroon's coast.

Are these projects and others in oil, gas, and mining consistent with the World Bank Group's overall objective of achieving poverty alleviation through sustainable development? That is the issue at the heart of the debate about WBG involvement in extractive industries. In June 2000, at the annual meeting in Prague, WBG President James Wolfensohn responded to criticism from the nongovernmental community about WBG involvement in extractive industries with a promise to review the Bank's role in this sector. In July 2001, the Extractive Industries Review (EIR) was initiated with the appointment of Dr. Emil Salim, former Minister of the Environment for Indonesia, as Eminent Person to the review.

The EIR was designed to engage all stakeholders-governments, nongovernmental organizations (NGOs), indigenous peoples' organizations, affected communities and community-based organizations, labor unions, industry, academia, international organizations, and the WBG itself-in a dialogue. Regional workshops were held in Brazil, Hungary, Mozambique, Indonesia, and Morocco--each preceded by an open forum of testimonies by civil society. The EIR secretariat commissioned six research projects, visited four project sites, attended relevant international conferences, and held informal consultations with stakeholders worldwide.

The basic question addressed throughout this process was, Can extractive industries projects be compatible with the WBG's goals of sustainable development and poverty reduction? Based on more than two years of consultations and research, the answer is yes, the Extractive Industries Review believes that there is still a role for the World Bank Group in the oil, gas, and mining sectors-but only if its interventions allow extractive industries to contribute to poverty alleviation through sustainable development. And that can only happen when the right conditions are in place. The three main enabling conditions are:

• pro-poor public and corporate governance, including proactive planning and management to maximize poverty alleviation through sustainable development;
• much more effective social and environmental policies; and 
• respect for human rights.

In order for the WBG to be able to promote these conditions, the institution itself needs to implement a number of serious reforms, including improvements and reinforced implementation of its Safeguard Policies and changes in WBG staff incentives.

In essence, all the recommendations in the Extractive Industries Review are aimed at the need to strike a better balance of life and development in this world. Their ultimate goal is:

• to lift up civil society so it is balanced in the triangle of partnership between governments, business, and civil society;
• to raise social and environmental considerations so they are balanced with economic
  considerations in efforts at poverty alleviation through sustainable development; and
• to strive for a human-rights-based development that balances the material and the spiritual goals of life.

To follow up on the recommendations in this report, a global consultation workshop should be held in 2005 to assess the extent to which the World Bank Group has succeeded in moving the extractive industry sector on to a sustainable development path that contributes to poverty alleviation worldwide.