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Multilateral Development Bank Loans That
Raise Environmental ConcernsSeptember 2001
>> Summary >> Introduction
Summary MDB Assistance Proposals - By Region & Country
23
Introduction
This report is submitted by the U.S. Agency for International Development in accordance with Title XIII of the International Financial Institutions Act, as amended, 22 U.S.C. Sec. 262m-1-7 (as enacted in section 537 of Public Law 100-202), and 22 U.S.C. 262r-2. To fulfill our duty under the law, USAID reports to Congress on a selection of proposed and current multilateral development bank (MDB) projects and other assistance proposals likely to have adverse impacts on the environment, natural resources, public health, or indigenous peoples.
Since this is a report to the public as well as to the Congress, the introduction to this report describes who reviews proposals, how the assessment and reviews are done, and the kinds of things USAID looks for in terms of key risks, with particular attention to safeguard policies designed to address the most critical environmental issues. The main body of the report presents reviews of projects by region and country, exemplifying the types of environmental issues that arise in some MDB activities.
USAID would like to acknowledge the valuable work of the Treasury Department's Office of Multilateral Banks, the U.S. executive directors at the MDBs, the Environmental Protection Agency's Office of International Affairs, the Department of State's bureaus involved with MDBs, the National Oceanographic and Atmospheric Administration, the National Invasive Species Council, the U.S. Department of Agriculture's Foreign Agriculture Service's Development Resources Division, colleagues throughout USAID, investigators of the General Accounting Office, the Congressional Research Service, the Netherlands Commission on Environmental Impact Assessment, and the many nongovernmental organizations (NGOs) monitoring both the banks and the agencies. USAID also wishes to acknowledge the MDBs' environmental experts, who continue to produce some of the best analyses in the world.
While greater emphasis is placed in this report on the World Bank than on regional banks, this should not be taken as implying that the issues at the World Bank are greater than the regional banks. We expect to address the regional banks in more detail in future reports.
As seen in previous reports, the loans surveyed below indicate that infrastructure, power, natural resource extraction, and road projects were the most environmentally problematic sectors.
The Loan Review Process
The process of reviewing proposed MDB loans relies upon several departments and agencies. These work together to assess risks and propose measures, including alternative courses of action, to eliminate the risks. USAID is working with the other departments and agencies involved in the process of implementing federal law and developing Administration policy with regard to the MDBs to improve the implementation of the law and the performance of the MDBs.
USAID's Review of Proposed Multilateral Development Bank Loans
USAID and other development agencies have found that an underlying goal of sustainable development is maintaining the natural resource base on which economic and social development depend so progress can continue over time and backsliding is avoided. Even for programs with narrower goals such as reducing poverty, we have found that success will not last unless environmental soundness is fully assessed and integrated into such programs. This report represents part of the process required by law to ensure that the MDBs effectively support such sustainable development.
In the late 1980's the Congress found, and stated in Title XIII of the International Financial Institutions Act, that US assistance to the MDBs should promote the sustainable use of natural resources, the protection of the environment, public health and the status of indigenous peoples. But the Congress found that "MDB projects, polices and loans have failed… to provide adequate safeguards" and that sometimes their borrowers do not ensure that appropriate policies and procedures are in place to use natural resources sustainably, and that the MDBs do not yet provide systematic and adequate assistance to their borrowers" in this regard.
Congress therefore required Treasury, State, the Environmental Protection Agency, the National Oceanographic and Atmospheric Administration, the Council on Environmental Quality and USAID to help develop and promote mechanisms and institutional and procedural arrangements within the MDBs to ensure sustainable use of natural resources and protection of these values. As part of this process, USAID is directed to draw information from our own investigations, other agencies, other countries, and the public to enhance USAID notices and reports.
Congress set out in Title XIII several elements of USAID's role:
In the course of reviewing assistance proposals of the multilateral development banks, the Administrator of the Agency for International Development shall ensure that other agencies and . . . overseas missions . . . analyze . . . the environmental impacts of multilateral development loans well in advance of such loans' approval to determine whether the proposals will contribute to the sustainable development [emphasis added] of the borrowing country. . . .
[S]uch reviews shall address the economic viability of the project, adverse impacts on the environment, natural resources, public health, and indigenous peoples, and recommendations as to measures, including alternatives, that could eliminate or mitigate adverse impacts. . . .
If . . . any such loan is particularly likely to have substantial adverse impacts, the Administrator . . ., in consultation with the Secretary of the Treasury and the Secretary of State, shall ensure that an affirmative investigation of such impacts is undertaken in consultation with relevant Federal agencies. If not classified under the national security system of classification, the information collected pursuant to this paragraph shall be made available to the public. . . .
[T]he Administrator . . . shall identify those assistance proposals likely to have adverse impacts on the environment, natural resources, public health, or indigenous peoples. The proposals so identified shall be transmitted to the Committees [of jurisdiction in the U.S. Congress]. Other sections of the law require U.S. departments and representatives to encourage MDBs to promote renewable, nonpolluting energy and other environmentally benign technologies to enhance development and the environment and, in the process, to coordinate those efforts with USAID (e.g., 22 U.S.C. 262j and 262f).
As one of its steps in reviewing MDB activities for environmental soundness, USAID sends information about these projects and other activities to its missions around the world for review and comment through its Early Project Notification system. When information derived through the EPN system or through other research raises substantial questions or provides a new perspective, it is shared with Treasury, other agencies, and in cases of loans particularly likely to have substantial adverse effects, with the public.
Within this context, USAID develops information and analysis concerning specific bank projects and overall processes. We share that information and analysis with other agencies. They also bring their own expertise to interagency review meetings at two levels: the environmental reviews that occur weeks or months before the relevant MDB board votes, and the overall review that occurs as little as a week or two before the boards vote.
Complementing this interagency process is the Tuesday Group of concerned NGOs and government agencies. Meeting monthly for more than a decade, it addresses policies and macroeconomic and project loans of the MDBs. Meetings are held in Washington and attended by representatives of several agencies and about 25 NGOs as well as guests from around the world. USAID and the Bank Information Center, an NGO serving citizens groups concerned about MDBs, cochair the meetings. Minutes from the meetings are shared with about 165 NGOs worldwide.
The Pelosi Amendment, Environmental Assessments, And the Interagency and Public Review Process
USAID's role under Title XIII complements the Pelosi amendment in (section 1307, 22 U.S.C. 262m-7). The Pelosi amendment in most cases requires that the United States not vote in favor of --
…any MDB action which would have a significant effect on the human environment, unless for at least 120 days before the date of the vote an assessment analyzing the environmental impacts of the proposed action and of alternatives . . . has been completed by the borrowing country or the institution, and made available to the board of directors of the institution. Further, the Pelosi amendment requires that the assessment or a comprehensive summary must, in most cases, have been made available in the same time frame, to the "bank, affected groups, and local nongovernmental organizations." Consideration of the adequacy of such assessments is part of the USAID and interagency process of reviewing proposals and making recommendations to the U.S. executive directors (representatives of the U.S. government on each bank's board of directors (USEDs)).
An International Review System
Title XIII, in section 1304, requires a cooperative information exchange system:
The Secretary of the Treasury, in consultation with the Secretary of State and the Administrator of the Agency for International Development, shall create a system for cooperative exchange of information with other interested member countries on assistance proposals of the multilateral development banks. USAID is working with Treasury, State, and others on this process. For example, in the case of the Chad-Cameroon pipeline, USAID received an analysis by the Netherlands Commission on Environmental Impact Assessment of the project's General Oil Spill Response Plan (GOSRP) from concerned NGOs. This led USAID to ask U.S. agencies with special expertise to review the GOSRP. They agreed with the Dutch about the inadequacy of the plan. Their concerns about the plan were shared by USAID and eventually were incorporated into the official U.S. position represented by the U.S. executive director which led to a requirement that the more detailed response plans be prepared earlier in project's development.
The Netherlands Commission has now proposed that an international body be established to review each year a selection of important environmental assessments, particularly ones with international ramifications, to improve the practice worldwide and to provide decision-makers with the best available analysis.
Sharing Environmental AnalysisTo implement that law more fully and to be more effective, USAID and the other core reviewing agencies are encouraging other federal agencies and, as appropriate, other governments, to review the environmental soundness of MDB proposals. For example, the Interior Department has expertise in migratory birds and other internationally shared wildlife. The National Oceanographic and Atmospheric Administration (NOAA) has special expertise in coastal pollution from oil tanker filling operations.
In the case of other countries, the G-7 nations and their finance ministers have expressed a desire for cooperation to improve the transparency and performance of the MDBs regarding safeguard policies and due diligence. As a start, USAID has begun reaching out, for example, to the Netherlands, the United Kingdom, and Japan, because those nations have indicated a desire to cooperate on these issues.
In response to NGO requests for bank documents and information on the Chad-Cameroon Pipeline Project, USAID reviewed the statutory provision requiring the public release of information concerning likely substantial adverse effects. USAID determined that it should promptly release such information (except for agency decision memoranda), and the Agency provided such information to interested NGOs.
Multilateral Development Bank Safeguard Policies: Substantive Limits Complementing the Assessment Process
The binding policies of the World Bank protecting environmental and related values are called safeguard policies. The environmental assessment policy was the first of what are now 10 safeguard policies created since 1989. As the term indicates, they are intended to safeguard people and resources that could be harmed by projects that are not carefully assessed and planned before they are implemented. These are
4.01 - Environmental assessment
4.30 - Involuntary resettlement
4.04 - Natural habitats
4.36 - Forestry
4.09 - Pest management
4.37 - Safety of dams
4.11 - Cultural property
7.50 - Projects on international waterways
4.20 - Indigenous peoples
7.60 - Projects in disputed areas
The World Bank has additional directives and guidelines in place to run its operations, but the safeguard policies are perceived by many as the primary policies that are enforceable by persons whose interests in the environment, natural resources, and the status of indigenous peoples could be harmed. Such policies are ultimately enforced through the World Bank's Inspection Panel. Several of them, such as policies on forests, resettlement, information disclosure, and indigenous peoples, are being revised or will be reviewed again soon. The cultural property policy may also be updated, and a gender policy may be added. Related strategies are more action-oriented plans than policies limiting bank impacts. Some Bank strategies, such as the forest and water strategies are also being revised.
The monthly meetings of the Tuesday Group of NGOs and agency representatives, and the Interagency Environmental Working Group of Treasury, State, USAID, and EPA help us to review and to develop comments not only on some of the MDB loans but also on some of the policy proposals of the MDBs.
In addition to the formal bank safeguard policies, USAID is aware of the need to respect and support international law in the process of development. USAID also weighs the benefits, costs, and risks inherent in different development choices such as different kinds of energy production and natural resource extraction, of the intentional or mistaken introduction of non-native species in agricultural aid and the opening of new transportation routes, and of difficulty of allocating scarce water resources.
Conclusion
The MDBs still have a distance to go in improving their environmental performance. As in previous reports, infrastructure, power, natural resource extraction, and road projects continue to be the most environmentally problematic sectors reviewed by USAID in this report.
Nevertheless, there has been a decline in recent years in the number of objections and abstentions by the USED on Pelosi Amendment grounds. This indicates that the MDBs are probably getting better, for example, at circulating Environmental Assessments within 120 days of Board votes for those project loans that they classify as category A projects.
USAID, Treasury, State, and EPA are working together to improve the selection process and the development work that it makes possible. We are also working together to improve the policies and strategies of the MDBs to ensure better stewardship of natural resources and related values and the most effective development work possible. We will continue to work with these agencies, and with all our other partners, to ensure that with the help of the MDBs, the nations of the world will learn together to use our natural resources in a way that restores and sustains public health, indigenous peoples and the environment, which must sustain us all.
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Last Updated on: March 20, 2002 |
