World Bank: protecting one's forests and mining them?

World Bank: protecting one's forests and mining them?

Claiming to be the world's biggest funder of protected forests and parks, the World Bank has announced a new forestry policy. Some critics claim this will simply encourage deforestation while failing to alleviate poverty. Meanwhile, in Indonesia, a Bank representative apparently threatens to cancel funding if the government permits mining in protected forests. But, a week later, another official denies any such threat.

Just another month in the life of the world's most confusing - if not contradictory - "development" agency...

World Bank approves controversial forest plan

Source: Reuters, October 31, 2002

Washington

The World Bank approved a new forestry policy on Thursday, paving the way for the lender to provide funds to forestry projects around the world in a move that infuriated some environmental groups.

Since 1991, the bank has refrained from getting involved in forestry projects because of environmental concerns. The new policy is designed to reduce poverty and at the same time protect the world's forests. "The old approach of Bank disengagement from forestry clearly has not worked," said World Bank President James Wolfensohn.

"The new course of action is centered on improving the protection of the environment and biodiversity while increasing the livelihoods of the poor."

Critics said the new plan would open the door to logging, extractive investments and plantations in forest areas that all eventually have a negative impact on the environment. "It is very disappointing," said Korinna Horta, of the nongovernmental organization, Environmental Defense. "The plan is seriously flawed and represents a dangerous set-back for the world's forest ecosystems and the people whose livelihoods depend on them." A bank study found that its 1991 policy on forests, which included a ban on providing financing for logging projects in tropical moist forests, had failed to slow deforestation as destructive and illegal logging practices had expanded in many developing countries. The bank estimates that each year, forest areas equal to the size of Greece are lost.

The bank said it is the world's largest financier of protected forest areas and parks. The new policy will seek to expand the average of 8 percent forest areas under protection in developing countries, and to maintain a ban on logging in "critical forests." The policy was unanimously approved by the bank's decision-making board of directors. Several members of the U.S. Congress had also raised concerns about the plan to the bank, a bank source said. The United States is the World Bank's largest shareholder.

Clarification on the GEF grant

Source: Jakarta Post, October 28, 2002

The Mining policy may lead to lower grants article published on Oct. 22 was evidently based on discussions during and after the recent Country Dialogue Workshop on the Global Environment Facility (GEF) held in Jakarta. It quoted statements from our Senior Biodiversity Specialist, Dr. Kathy MacKinnon. The article covers several important issues related to Indonesia's future ability to attract funds from the GEF and other donors. However, its title is misleading, and so is the implication that the World Bank or the GEF have a policy that would lead to the withholding of grant funds because of legislative approval for six open-pit mining operations on forest land.

The topic at the workshop related to the article was Indonesia's credibility as a future recipient of grants to support biodiversity conservation. Indonesia is receiving considerably less grant funding from GEF than its status as arguably the world's foremost country for both terrestrial and marine biodiversity would merit. The point Dr. MacKinnon was making is that grants for biodiversity conservation are limited and that in choosing where to use them, donors no longer consider only the ecological value of the resource. The probability that the conservation effort will be successful and sustainable is also an important aspect of the grant funding decision. The illegal logging in many of Indonesia's national parks is well-known to the donors, and they also understand that the factors that make it difficult to control are not so much limited technical capacity as they are weak law enforcement and lack of political will. Donors can assist with capacity-building but not with political will, and they can be expected to remain skeptical about future grant funding for national parks in Indonesia until they see some progress in that area.

Similarly, if there is a risk that a conservation area could be opened for mining, donors like GEF will likely choose to put their money elsewhere. That the legislative approval for six companies to resume open pit mining operations in forested areas set aside for watershed protection would trigger a reduction in grant funding for conservation was not a part of Dr. MacKinnon's message, nor is it the opinion of the World Bank. The Bank has, however, for a long time urged that any decisions regarding land use changes in Indonesia's official forest estate be made transparently, in consultation with all stakeholders, and in consideration of all relevant information including potential environmental, social and economic impact.

Tom Walton, Environment and Safeguards, CoordinatorWorld Bank Office, Jakarta

Mining policy may lead to lower grants

Source: Jakarta Post, October 22, 2002

By Moch. N. Kurniawan, Jakarta

The World Bank is warning that foreign donors may further reduce their environmental grants to Indonesia in response to the government's recent decision to allow several mining firms to operate in protected forests. Kathy MacKinnon, the World Bank's senior biodiversity specialist, said here on Monday that even before the mining firms were allowed to operate in protected forests, donors to Indonesia were already reluctant to earmark funds for the environment due to unrest in various regions and illegal logging in conservation areas. "We can't give our funds to improve environmental conditions where there is a high risk of not succeeding," she told The Jakarta Post on the sidelines of a workshop on Global Environment Facility (GEF). She said the GEF, established in 1992 following the Earth Summit in Rio de Janeiro and managed by the United Nations Development Program, was one of agencies that was unwilling to provide more grants to Indonesia.

The GEF has canceled a project to maintain biodiversity in Maluku due to the prolonged conflict there, halted a project in West Kalimantan due to unrest and recalled project objectives in the Kerinci Seblat national park in Sumatra, she said. Since GEF established representative here in 1992, it has disbursed over US$50 million in grants for environmental programs carried out by the government and non-governmental organizations. Indonesia receives environmental grants from a number of other agencies as well, including USAID and the Asian Development Bank. MacKinnon urged the Indonesian government to foster good governance to ensure its policies do not harm the environment, which would in turn convince donors to provide additional grants. However, the government's approval to the six mining companies to operate in protected forests will only discourage international institutions from funding environmental protection programs in Indonesia, she said.

Earlier this month, the House of Representatives approved the government's plan to allow at least six mining firms to resume open pit mining operations in protected forests in order to help promote regional development. The six mining companies are: PT Weda Bay Nikel and PT Nusa Halmahera (located in Maluku province), PT Gag Nikel (Papua), PT Galuh Cempaka (South Kalimantan), PT Jorong Barutama (Papua) and PT Barisan Tropical Mining (South Sumatra). To avoid violation of Law No. 41/1999 on forestry, which banned open pit mining in protected forests, the House changed the status of the six firms' operating areas from protected forests to production forests. Several NGOs have accused the government and the House of betraying the trust place in them by the people to protect the forests, and have threatened to file a lawsuit.

A senior adviser to the state minister for the environment, Aboejowono Aboeprajitno, said Indonesia would continue to receive environmental grants from foreign donors if the government was active in promoting its environmental protection programs. "Indonesia has the largest biodiversity in the world. Therefore, our environment has become the focus of attention for the world. However, we lack the funds to manage our environment properly. So we must upgrade our skills if we want to get more and more grants," he said.

Rebuttal by the World Bank

October 27, 2002

The Jakarta Post article arose from discussions at a GEF-sponsored Country Dialogue workshop which was attended by participants, many government officials, from across Indonesia. It is important to understand the context because the GEF, like other donors, has both a desire and a responsibility to provide conservation grants where they have a high likelihood of success. The Global Environment Facility (GEF) is a global funding mechanism with limited resources and is, therefore, highly competitive. Increasingly decisions regarding GEF investment are being made on country performance. Naturally participants attending the workshop were keen to understand how they could access future GEF resources for projects within Indonesia.

One of our challenges was to make participants aware that while Indonesia certainly qualifies for GEF assistance on biodiversity grounds (as the No.1 megadiversity country) there are other major constraints which reduce country credibility and impact on project performance: illegal logging in national parks; civil conflict in some areas; and conflicting and contradictory policies and activities regarding landuse in protected areas and high biodiversity forests, including building of new roads into national parks and overlap with mining exploration and exploitation permits. In the past all of these factors have influenced performance of GEF projects in Indonesia.

I did not specifically target mining nor suggest that legislative approval for the six open-pit mining operations mentioned in the article would lead to withholding of donor funds. This is not World Bank policy. In that sense both the title and the content of the article are misleading. I, and other speakers, did, however, highlight the credibility issues, especially in regard to conflicting policies over resource management, which Indonesia faces if it is to compete successfully for a greater share of GEF biodiversity resources. The World Bank has sent a response to the Jakarta Post.

Kathy MacKinnon
Senior Biodiversity Specialist
Environment Department
World Bank