World Bank ignores its own advice

The World Bank has declared itself to be more concerned with the needs of oil companies than the impoverished people it officially serves, by ignoring most of the recommendations of a pathbreaking report that the lender itself commissioned over three years ago.

After spending millions of dollars having an independent team of experts evaluate the effects of its energy lending, the bank brushed off most of the final report's conclusions - one of which was to pull out of oil and coal projects by 2008.

By doing this, the lender has failed to distinguish its goals and standards from the likes of Halliburton, ExxonMobil, Shell, and other profit-driven institutions. US taxpayers' contributions to the World Bank are supposed to constitute international development assistance, not corporate handouts.

Here's what happened: After years of pressure to make the World Bank more accountable for its investments, the bank's president, James Wolfensohn, pledged in Prague in 2000 to undertake a review of the World Bank's support for the extractive industries, particularly oil, gas, and mining.

A year later, Mr. Wolfensohn appointed Emil Salim, a former Indonesian environment minister who served under the Suharto dictatorship, to lead the review. Dr. Salim was also on the board of a coal company at the time of the appointment (though he resigned later). With those credentials, most of the environmentalists, faith-based groups, development advocates, and human rights activists who'd demanded this assessment were pessimistic about ever seeing the bank change.

To every observer's surprise, the report concluded in January that World Bank support for fossil fuel and other mining projects simply doesn't alleviate poverty. The bank sat on the startling report for six months.

The report called on the World Bank to improve its practices in the energy industry by setting in place better mechanisms to ensure that money gained from extractive projects will be used for basic needs such as education and health, instead of weapons. It urged the World Bank to adopt policies to guarantee the rights of people affected by large extractive projects, especially indigenous people. Most important, the report concluded that the World Bank should stop financing oil and coal projects altogether.

The bank's board of directors finally discussed this report, known as the Extractive Industries Review, on Aug. 3 and opted merely to endorse minimal commitments to change the way the bank does business. For example, while they pledged to increase renewable energy financing by 20 percent annually, the base line the lender is using is so low that the target for renewable support in 2005 is lower than the bank's loans for renewables in 1994. Currently fossil fuel financing at the World Bank exceeds renewable lending by a factor of 17 to 1.

Although the World Bank is a taxpayer-funded institution whose mission is to help the poorest people on the planet, it is putting the interests of oil companies based in rich countries ahead of the needs the world's poor.

Twelve years have passed since the World Bank and most of the nations in the world committed to help reduce greenhouse gas emissions at the Rio Earth Summit. Yet the Bank remains one of the biggest catalysts of fossil-fuel extraction in the developing world, and nothing that the board did in response to the Extractive Industries Review will reverse that trend.

The World Bank's rationale for continuing to subsidize oil companies is that people in developing countries need energy. However, the Institute for Policy Studies' research suggests that 82 percent of the bank's oil- extraction projects wind up supplying consumers in the United States and Europe. The Institute has also calculated that the main beneficiaries of World Bank fossil-fuel extractive projects are Halliburton, Shell, ChevronTexaco, Total, and ExxonMobil, in that order, and the list continues.

Another rationale the World Bank offers is that its involvement in these projects offers oversight that makes them more environmentally sound and less prone to corruption. In reality, many of the bank's projects are riddled with these kinds of problems. For example, the president of Chad reportedly used part of the first proceeds from the World Bank-supported Chad-Cameroon oil pipeline on military weapons.

The bank's own review of extractive industries was proof enough that oil companies' profits don't trickle down to the people the institution is supposed to serve - but the World Bank chose not to bring its lending more in line with its stated mission.

• Nadia Martinez is Latin America coordinator for the Sustainable Energy and Economy Network at the Institute for Policy Studies.