T

he World Bank will no longer finance upstream oil and gas activities after 2019. At the One Planet Summit attended by French President Emmanuel Macron, United Nations Secretary-General Antonio Guterres and World Bank President Jim Yong Kim in late 2017, the World Bank Group announced it would put an end to its financing of these industries. And it is about time!

While this is welcome news, one is left wondering why the institution is still financing any extractive industries to this day.

In an attempt to create growth, employment and energy supply for the poor, the world’s most potent development bank has been giving money and knowledge to projects that provably hurt the climate and destroy the habitat of future generations, creating extreme weather conditions and instability, and thus making it necessary to spend billions on climate adaptation and resilience.

Archipelagos like the Philippines and Indonesia have been suffering tremendously from these externalities.

You don’t have to cite disappearing islands like Fiji and Tuvalu; just consider the floods in Jakarta when asking whether this is the type of development we want.

But even without the externalities of oil and gas, how much have countries like Indonesia really profited from resource extraction? Take the huge mining projects like the ones for gold and copper managed by Freeport in Papua, or by Newmont Nusa Tenggara, now PT Amman Mineral Nusa Tenggara, in Sumbawa, West Nusa Tenggara.

They have left enormous areas devastated — but who has really profited? How many local people have become managers and engineers?

The so-called development aimed for in these projects has usually been limited to the provision of low-skill labor, while creating huge dependencies on the managing companies for the local population.

On the other end, the environment suffers and the indigenous population is often resettled and insufficiently compensated. In most cases, these people do not have a real say during the process.

As the World Bank mentions in its press release, in line with the Paris Agreement, it is finally ramping up its investment in renewable energies and creating transparency on its greenhouse gas emissions for all projects.

Exactly 15 years before this decision, James Wolfensohn, the World Bank president at the time, had already reacted to transnational protests that asked for exactly these measures.

In fact, at his institution’s annual meeting in Prague in 2000, the protests against the World Bank’s investment in extractive industries became so overwhelming that he promised an institution-wide review of all practices in the extractive industries: the Extractive Industries Review (EIR).

He asked Indonesian economist Emil Salim to chair the review as an “eminent person.” Emil, who was Indonesia’s environment and development monitoring minister from 1979 to 1983, as well as a member of the UN commission Our Common Future, took the job and instantiated a complex review process with stakeholder consultations all over the world.

Together with his assistant, Chandra Kirana, he talked to civil society groups, companies, government agencies, academics and especially, affected people.

After two years, they finished their report called “Striking a better balance.”

The EIR recommended a number of far-reaching reforms and change processes for the World Bank’s further project management. Among other things, it recommended extractive companies to “publish what they pay” and governments to “publish what they receive.”
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When Emil presented his conclusions to the World Bank, he was greeted with hostility [...]

This call for more transparency probably had the biggest impact if seen from today, because one of the major followup activities of the World Bank was to engage in the Extractive Industries Transparency Initiative.

The second far-reaching recommendation was the “free prior and informed consent” of local people, especially before involuntary resettlement measures.

This recommendation remained among the hottest topics for more than 10 years and has only been implemented in 2016 (for high-risk projects).

The third major recommendation was for the World Bank to stop all investments in oil projects by 2008, and to continue not to invest in coal. The review’s question of under which conditions extractive industries could help alleviate poverty was therefore answered with “under no conditions” in the case of crude oil and coal mining.

When Emil presented his conclusions to the World Bank, he was greeted with hostility by its staff, especially the bank’s private arm, the International Finance Corporation (IFC), which insisted that his report be more industry-friendly.

When he refused to modify the recommendations, the report was not published. Until today, it is a poorlydesigned Word document — in contrast to all the other shiny World Bank reports with pictures of smiling children on the front page.

Some of Emil’s recommendations were nevertheless taken up, but the spirit of the EIR was ignored. While Emil and his team had spelled out necessary conditions under which development can be reached through non-renewable resources, the World Bank only heard what they wanted to hear, namely that extractive industries can help development.

This obviously begs the question: Whose development are we talking about? This is also my deepest concern with the World Bank’s welcome farewell from extractives. Is this a late victory for Emil?

The institution leaves the door open for “exceptional circumstances” under which upstream gas will be invested in if there is a clear benefit in terms of energy access for the poor.

Fair enough. But if the World Bank wants to become a credible player in fighting climate change and environmental destruction, this should be the only gap in the door. This means the IFC must not become the backdoor through which all kinds of hidden investments into extractive industries are channeled into intermediaries, like private banks.

Only then can the World Bank regain the necessary trust to be a bank for development and not just any bank. This would finally be Emil’s desired victory — and one for the affected communities.
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The writer is a research associate in international relations at Goethe University Frankfurt, Germany. He is finishing his PhD project on the World Bank’s interaction with protest movements.