Poverty / World Bank Group Extractive Industries Review / Revenue Transparency / The Demand for Renewable Energy
The ability of extractive industry and energy projects to contribute to poverty alleviation has been questioned by many who note the poor social development record of mineral- and oil-dependent economies and the consistently imbalanced and non-transparent contracts negotiated between energy companies and developing country governments. Despite, or perhaps because, of its profitability, the exploitation of petroleum and mineral resources has been linked empirically to corruption, conflict, and impoverishment- a phenomenon known as the “resource curse.” The World Bank Group’s own studies have revealed that in absence of good governance, oil, gas, and mineral exploitation tends to exacerbate problems rather than ameliorate them.
The paradox presented by the poor economic, social, and political performance of resource-rich countries has led many to question the wisdom of using the public funds of MDBs, intended for poverty alleviation, to support investment in the extractive industries. Such challenges spurred the World Bank Group to conduct a two-year evaluation of its activities in the oil, gas, and mineral sectors, called the Extractive Industries Review.
Background
The Extractive Industries Review was a three-year independent review process aimed at evaluating the impacts of World Bank Group activities in the oil, mining and gas sectors, and making recommendations about the future involvement of the World Bank Group in the extractive industries. The review process included six regional consultations with industry, government, and civil society representatives; commissioned research; and project site visits.
An Advisory Group was created in June 2003 to assist the head of the EIR, Dr. Emil Salim, in drafting the final report, which was released in December 2003 and officially presented to the President of the World Bank Group in January 2004. The report is available in English, Spanish, Russian, and French.
On September 17, 2004 the World Bank Group released the management’s final response to the EIR recommendations. The report is available in English, Arabic, French, Russian, Spanish, and Chinese:
Civil Society concerns with the EIR
A number of concerns have been raised regarding the Bank’s response to the EIR, namely: the failure to address recommendations regarding human rights; the watering down of the recommendation on indigenous and community consent to read “free prior informed consultation”; lack of clarity in definition of “significant projects” for which revenue transparency will be required; no requirement of contract disclosure for “non-significant” projects; lack of commitment to respect “no-go zones” including sensitive biodiversity zones and conflict-affected areas; failure to require assessment of environmental and social impacts of policy-lending; and failure to define prerequisite conditions for EI support.
The Board of Directors agreed that the Bank Group would conduct an annual review of progress toward the achievement of the objectives outlined in the management response and would remain engaged with all stakeholders. To do so, an Extractive Industry Advisory Group has been formed, comprising government, industry, and civil society representatives (4-5 each). The TOR for the Group is available on the IFC website, at the link below.
Additional Resources
Civil Society Participation in the EIR
- Letter from Nobel Laureates for Peace to President Wolfensohn urging acceptance of EIR recommendations, February 9, 2004 (Civil Society Views on the EIR website)
- Letter from over 300 NGOs urging acceptance of EIR recommendations, February 12, 2004 (Civil Society Views on the EIR website)
- Compilation of civil society submissions to and responses from the EIR (EIR website)
- Letter from over 90 NGOs rejecting the EIR's draft summary of consultation inputs, March 2003 (Acrobat pdf 188 KB)
- Joint declaration issued in Maputo by African civil society participants, Jan. 13-17, 2003 (Acrobat pdf 121 KB)
- Information on the Africa consultation proceedings (January 13-17, 2003), documents, and civil society submissions (EIR website)
- Civil Society Views on the World Bank's EIR website:
This independent website contains more letters and civil society views on the EIR.
World Bank Group Operations Evaluations divisions reports on extractive industry activities:
- Volume I (presents a summary of the OED, OEG, OEU findings) (Acrobat pdf 480KB)
- Volume II (OED evaluation of World Bank extractive industry activities) (Acrobat pdf 1.5MB)
- Volume III (presents the OEG evaluation of the IFC's support for extractive industries) (Acrobat pdf 2.7MB)
- Volume IV (presents the OEU evaluation of MIGAs involvement in extractive industries (Acrobat pdf 1.5MB)
A January 2003 World Bank Operations Evaluation Department (OED) draft report on how the Bank factors governance into extractive industries investments offers a sharp critique of current WB strategy in this sector. This report recommended that the Bank stop promoting increased investment in extractive industries in countries with weak governance.
Assessment of World Bank Group’s Revenue Transparency Implementation in the Extractive Industries
BIC has produced an assessment of how the World Bank and International Finance Corporation (IFC) are implementing revenue transparency in their operations involving the extractive industries (oil, gas, and mining - EI). The assessment reviews EI operations in more than 40 countries for the lending period of July 2005 to December 2006. Overall, the assessment concludes that, although the World Bank Group is strongly promoting EITI and requiring private sector projects to disclose revenues, the Bank is missing important opportunities and has not implemented a comprehensive or consistent program to ensure revenue transparency in all its EI operations. For a summary of key findings, please click on the document below. To see detailed project-by-project and country-by-country assessment results, click on Annexes 1 and 2 below.
Assessment of World Bank Group’s Revenue Transparency Implementation in the Extractive Industries (pdf, 148 KB) Also available: Pусский (Russian) (pdf, 218 KB)
Annex 1. Revenue Transparency Requirements in Extractive Industry Projects of the World Bank and IFC Projects Approved; Proposed July 2005 – December 2006 (pdf, 98 KB)
Annex 2: Country Information on World Bank Extractive Industry Revenue Transparency (pdf, 182 KB)
United Kingdom’s Department for International Development (DFID) launched a multi-stakeholder Extractive Industries Transparency Initiative in 2002 aiming to increase transparency in transactions between governments and companies within extractive industries. EITI is a voluntary approach and currently Azerbaijan, Ghana, Kyrgyz Republic and Nigeria are implementing it while nearly 20 countries have committed to the EITI principles.
Country in Focus:
Chad's Oil: Miracle or Mirage? /chadreport/index.php report concludes that Chad needs a stronger, more transparent revenue management system and effective citizen watchdogs to escape the corruption, conflict, and poverty that have afflicted its oil-rich African neighbors.
Responsible management of the revenues accruing from oil, gas, and mineral extraction in resource-rich countries is crucial if proceeds are to serve as a tool for economic growth in developing and transition countries. However, countries dependent on oil, mineral and gas sales are among the most corrupt and poorest in the world. Increasing transparency in the extractive industries opens up the decision making process to public debate and may encourage more prudent and equitable management of natural resource revenues. Recognizing the importance of revenue and contract transparency as an essential prerequisite for responsible management of the extractive industries, many civil society, government and international actors have recently directed their attention to transparency initiatives. While this heightened attention is promising, transparency alone does not guarantee accountability. Beyond disclosure revenue payments and receipts and of the contracts that determine the respective earnings of governments and corporations, a more just management of oil, gas and mineral resources requires, a functioning system of democratic accountability, respect for human rights, an independent judiciary and a free press, among other elements.
BIC Publications
Quick Reference Guide to Extractive Industries’ Revenue and Contract Transparency at the International Financial Institutions, Bank Information Center (Acrobat pdf, 76 KB)
Public Disclosure of Legal Agreements in EBRD Extractive Industry Projects, Bank Information Center (Acrobat pdf, 39 KB)
EIR Implementation Status Report: World Bank commitments on Revenue and Contract Transparency , Bank Information Center (Acrobat pdf, 65 KB)
BIC also has prepared a document that provides the transparency relevant policy language contained in the IFC's Policy on Social and Environmental Sustainability and the EBRD's Energy Operations Policy.
Extractive Industry Revenue and Contract Transparency Language contained in the IFC’s Policy on Social and Environmental Sustainability andthe EBRD’s Energy Operations Policy (MS Word doc, 61 KB)
The Publish What You Pay coalition of over 250 NGOs worldwide, including BIC, calls for the mandatory disclosure of the payments made by oil, gas, and mining companies to all governments for the extraction of natural resources. The campaign was founded by Global Witness, CAFOD, Oxfam, Save the Children UK, Transparency International UK and George Soros, Chairman of the Open Society Institute. There are now several Publish What You Pay national NGO coalitions around the world, including in Azerbaijan, Chad, Congo Brazzaville, France, Kazakhstan, The Netherlands, Nigeria, the United States and the United Kingdom.
Multilateral Development Bank financing for the production of fossil fuels (oil, gas, and coal) in the Global South, destined primarily for export, has been criticized as public subsidization of over-consumption in the Global North. Concerns around the contribution of fossil fuel consumption to greenhouse gas emissions and climate change have led many civil society organizations to call for an end to public financing for these energy sources, demanding a renewed emphasis on energy alternatives, including solar, micro-hydro, geothermal and others.
The World Bank Group, however, currently invests approximately 20 times more money in the fossil fuel sector than it does in renewable energy projects. Other Multilateral Development Banks have made some progress on this front but still fall short of what is needed to reduce dependence on petroleum and coal. The European Bank for Reconstruction and Development (EBRD) has established an annual quota for the amount of financing it must direct toward renewable energy projects. For more information, see Renewable Energy links below.
Other organizations concerned with renewable energy and MDBs: