EXTRACTIVE INDUSTRIES AND SUSTAINABLE DEVELOPMENT

AN EVALUATION OF WORLD BANK GROUP EXPERIENCE (VOLUME ONE: OVERVIEW)

O Banco Mundial 'ultimamente' tem andado a fazer o trabalho de casa!

The World Bank Group (WBG) has the potential to improve the contribution of extractive industries (EI) to sustainable
development and poverty reduction. However, this report by
the WBG's operations evaluation departments finds that
although its EI projects have produced positive economic
and financial results, it has not been successful in
ensuring compliance to environmental and social safeguards.
The paper examines the World Bank, the IFC and MIGA, to
assess their performance in moving away from a focus on
economic benefits towards sustainable development,
addressing the governance challenges associated with
resource-rich countries, and mitigating environmental and
social costs of the extractive industry.

The paper finds that the WBG has not devoted enough
attention to the developmental needs of poorly performing
resource-abundant countries, and can do much to improve its
performance. In particular it recommends that the WBG
should:

Formulate an integrated strategy that starts with the
presumption that successful projects should not only
provide returns to investors but should also provide
revenues for governments, mitigate negative environmental
and social effects and benefit local communities. To this
they must:

* formulate a WBG sector strategy: that encourages
sustainable development and the reliable mitigation of
adverse environmental and social impacts. The WBG should
not support sector expansion unless it can mitigate these
risks

* address EI in Country Assistance Strategies (CAS): CAS
should explicitly discuss the sector's current and
potential economy-wide linkages in order to guide future
project design, facilitate monitoring and evaluation and
provide a framework for WBG-wide coordination and
collaboration in the sector

* promote governance improvements: by devoting greater
management attention and administrative budget for
advisory and analytical activities aimed at improving the
policy, institutional, and governance framework for EI for
resource-rich countries with weak macro and sectoral
governance

* support private sector development and environmental
sustainability: by continuing to support closure of
uneconomic mines, reform and privatise state-owned
enterprises, and mitigate pre-existing environmental and
social problems

Strengthen project implementation: rigorous implementation
of safeguard policies by the WBG is a minimum requirement
for it to operate sustainably. The WBG needs to more
systematically define, monitor, document, and report on the
economic, social and environmental impacts of its projects.
Specifically, the distribution of benefits needs to be
explicitly monitored and evaluated:

* improve project screening and monitoring: by providing
clear and consistent guidance for categorising projects,
identifying applicable safeguards, the appropriate scope
and nature of instruments, and reporting and evaluation of
safeguards implementation

* involve specialists throughout: by providing adequate
resources and incentives for the participation of
qualified environmental and social specialists at the
preparation, appraisal and supervision of all projects
likely to have adverse impacts

* enhance reporting of results: by strengthening reporting
of its results by ensuring that project completion reports
include ex post economic rate of return or net
present value

* evaluate the sharing of benefits: by estimating the
distribution of project benefits among different
stakeholder groups (government, private companies, local
communities), the acceptability of benefit sharing should
be discussed with key stakeholder groups

* Engage with stakeholders:the WBG has played an important
convening role bringing different stakeholders together,
but it has inadequately addressed some areas - notably
governance and revenue management. The WBG's performance
in these areas can be enhanced through improved
consultation with stakeholders (including local
communities) and by systematically and transparently
reporting on key sustainability indicators

* update policy framework: by consulting with stakeholders
to periodically adjust the policy framework to reflect
evolving industry practice and to address identified gaps
such as those related to consultation and disclosure,
community development, social issues of mine closure,
security, hazardous materials management and gas flaring.
It should also recognise the expanding awareness of the
human rights dimensions of WBGs policies

* promote disclosure of fiscal revenues from EI: by
vigorously pursuing country- and industry- wide disclosure
of government revenues from EI. The Bank should work
toward and support disclosure of EI revenues and their use
in resource-rich countries. The IFC and MIGA should also
consider requiring their private sector clients to publish
their payments to governments

* develop and monitor sustainability indicators: by
consulting with stakeholders to develop indicators of
economic, social and environmental sustainability,
establish baseline data, provide adequate monitoring, and
report and evaluate the results during supervision and in
project completion reports. The WBG should encourage
independent outside monitoring, ideally using local
capacity

* increase local community participation:
throughout the life cycle of EI-projects. The WBG should
assist countries to increase community involvement in EI
decision-making processes, and ongoing consultation
throughout the project life cycle, including closure

- Operations Evaluation Division (OED), World Bank
(2003)