by Marta Miranda
In late December the World Bank will receive recommendations from the independent commission charged with examining the Bank’s involvement in extractive industry projects, such as mining and oil and gas development. The draft report prepared by the so-called Extractive Industries Review outlines how current investments in these sectors often fall short of fulfilling the Bank’s avowed mission of poverty alleviation. The report also recommends significant changes in investments that would help reduce the negative impacts often resulting from extractive activities.
In many cases, mining and energy projects have negatively impacted communities and the environment. Massive spills of toxic tailings and wastes, inequitable distribution of benefits, and pervasive corruption plague extractive-industry projects around the world. For example, several large mines in Papua New Guinea have dumped massive quantities of waste into the country’s major river systems, in some cases destroying forests and the communities they supported for hundreds of kilometers downstream. Three of the country’s mining provinces have fared worse than the national average in basic human development levels, despite substantial payments by mining companies to provincial governments, according to a new report published by the World Resources Institute and our partners.
The WRI report, Mining and Critical Ecosystems, reveals that at least three-quarters of active mines and exploration sites around the world fall within areas deemed by environmental organizations to be of high conservation value. The report also finds that many mineral-dependent countries in the developing world lack important safeguards to ensure that responsible mining occurs, such as the ability to enforce laws, control corruption, and foster a strong civil society.
After considering contributions representing a wide range of perspectives, the report issued by the Extractive Industries Review finds that the Bank should not support any extractive industry projects in World Heritage Sites, protected areas, or in “critical natural habitat.” The report also recommends that the Bank not support any mining projects that propose dumping waste into rivers or into the ocean when a mine is near areas with high ecological and cultural significance.
Perhaps most importantly, the report finds that poor governance mechanisms in mineral-rich countries are a key obstacle to poverty alleviation. Countries often do not benefit from extractive industry projects within their borders, especially if the right enabling conditions are not in place. In this regard, the report strongly endorses the notion of transparency in revenue payments from the extractive industries, and urges the World Bank to invest in developing good governance practices before promoting the extraction of high-value, non-renewable resources.
Such change will only be possible if the World Bank takes concrete steps to implement the recommendations proposed by the Extractive Industries Review. The Bank’s past experience implementing recommendations from reviews it commissioned leaves much to be desired. In 1997 the World Bank initiated a review of large dam development, resulting in a multi-stakeholder process and recommendations for the Bank’s future involvement in dam construction. Despite the diversity of the stakeholders represented, the Bank failed to implement the commission’s far-reaching recommendations.
Bank President James Wolfensohn made the right step by calling for the Extractive Industries Review. The World Bank has already invested nearly $2.5 million and two years in stakeholder dialogues to arrive at this stage. This time around the Bank ought to take action.
Implementation of the review’s recommendations would help ensure that the Bank’s investments contribute to poverty alleviation while minimizing damage to sensitive ecosystems. The World Bank plays an important role in financing the extractive industry sectors. It also sets the standards that other public and private financial institutions tend to follow. It will be a significant loss if Wolfensohn simply ignores the findings. (WRI Features, 610 words)
