Environmentalists Assail Forestry Loan Programs

DESTRUCTION for development. That's the charge many international environmentalists continue to level against the world's largest lending institutions. Critics are disturbed with what they say is a continuing trend: The world's poor, often funded by the World Bank, the International Monetary Fund (IMF), the United Nations, and various regional development banks, are rapidly industrializing while degrading their water, land, and air resources.

Environmentalists are lobbying the United States Congress to refuse new funding for the IMF's newest and largest financing increase and to withhold a portion of 1992 financing for the World Bank, until both multilaterals address environmental and social implications of their programs.

But bank officials say many of the environmental groups' allegations are tired, rehearsed from years of distrust and campaigns against the World Bank. No policy change will be enough, one senior bank official observes sadly. For the bank's environmental critics, he says, "the glass is half empty."

Earlier this week, bank officials met with international environmental groups to discuss the bank's forestry lending program.

Ecology advocates still look to Washington to lead the policy reform. As the single largest donor to the World Bank and the International Monetary Fund, the US can affect more change in these organizations' policies than any other country. Building mandated environmental reforms into all lending programs for developing countries has long been a goal of groups such as the Environmental Defense Fund, the National Wildlife Federation, the Natural Audubon Society, and the Sierra Club.

US participation in the bank's environmental role is now under Capitol Hill scrutiny. Bruce Rich, senior attorney with the Environmental Defense Fund and director of the EDF's international program, represented the major US and international environmental groups before the House Appropriations subcommittee last week. He warned that the World Bank's "continued financing of new environmental and social disasters is particularly distressing."

The World Bank hopes to expand its lending capacity from $21 billion this year to $22 billion in the 1992 fiscal year, which begins July 1, 1991.

The World Bank's US executive director, Patrick Coady, is widely credited with bringing an environmental agenda to the bank when he was appointed in June 1989. The time was ripe for marked change in the bank. Months earlier, the September 1988 annual meetings of the World Bank and the IMF in Berlin were disrupted by tens of thousands of demonstrators agitating for lending policies linked to environmental reforms rather than to ecological destruction.

By October 1989 the bank issued a directive that every proposed project undergo an environmental assessment. This is designed to weed out problems and assess a country's ability to address ecological strains brought on by bank-financed projects.

Mr. Rich's list of "bank-financed eco-catastrophies" is long, ranging from irrigation and power-sector loans that threaten to displace hundreds of thousands of poor in India to road construction and agricultural expansion in Brazil that destroy its rainforest.

A window into the bank's disastrous policies, he says, is the collection of forestry loans, the bank's fastest-growing sector.

It became the institution's stated priority in September 1989 when World Bank president Barber Conable announced a tripling of bank forestry lending through the early 1990s.

Six months later, two forest-sector loans, one to Guinea and another to the Ivory Coast, were submitted for approval.

"Both were prime examples of how the bank's approaches to forestry projects led directly to the board coming back to the staff and saying 'these are horrible, and don't come back until you revamp the forestry lending policy,' " says Rich.

US executive director Coady was the strongest opponent of the loan, which was designed to promote timber concessions while leveling 500,000 hectares of tropical forest in the Ivory Coast. A World Bank forestry official last week said the West African country's forest has already worn down "through agricultural expansion, overgrazing, commercial logging, and infrastructure development."

"Six months after Conable said 'one of the best things we can do for our global environment is to triple our forestry lending,' his own board of directors went to the staff in April 1990 and delivered a clear message - we need a policy," recalls Rich.

Coady concedes that there has been "an incredible loss of tropical assets without any perceptible gain - whether it was Brazil's deforestation or population growth in Africa. There are 500 million people in and around tropical forests who are the victims of flawed local government policies."

One of the bank's obstacles to reform in many of the world's forest areas - principally in Africa and the Amazon - is corrupt local governments, which turn quick profits from logging that produces fuel wood, timber, and pulp, all with a significant effect - deforestation.

With its financial leverage and technical expertise, "the bank is one institution that can set environmental standards in developing countries. It can forge a new approach and results in the future," says Coady.

A coming World Bank forestry policy paper, scheduled for release in June, is now in its third draft. Coady says the first two versions, which focused on forest preservation, were dismissed as too vague. The US executive director says he will reject any new forestry lending policy that comes up short of environmental protection, but he stresses the importance of continuing forestry-sector loans. "If the World Bank is to play a constructive role, it should proceed cautiously, on a case-by-case basis - bu t it should proceed."

This troubles Mr. Rich, who says the bank must extract concessions from borrowers in support of environmental protection before they're supplied with the "bank's international stamp of approval."