June 28, 2004

Via Fax: 202 522 3031 & Mail

Dear Mr. Wolfensohn,

We thank you for the opportunity to provide comments on the Bank’s draft policy for adjustment lending, now named Development Policy Lending (O.P. 8.60).

The undersigned NGOs have a long-standing interest in forest policy and many of us participated actively in the Bank’s consultations on its new “Forests Policy” (O.P. 4.36).  This consultation process led to a broad consensus that the new Forests Policy should cover the impacts on forests of adjustment and programmatic lending. However this unanimous recommendation was swept aside with the promise by Bank management that  the problem of forests and the impacts of adjustment lending would be addressed in a future revision of the Bank’s OP 8.60.  During the Board discussion of the revised “Forests Policy”, several Executive Directors referred to the need to include references to the impact of structural adjustment in the new “Forests Policy”. In response, Bank management assured the Board:

‘Management plans to address the treatment of possible forestry impacts of programs supported by Bank adjustment operations as  part of the treatment of overall environmental impacts of such programs in the ongoing update of Operational Directive OD 8.60 into a new OP/BP 8.60…. Management expects that the new policy will include specific provisions setting out a transparent mechanism for systematically addressing the environmental aspects, including in particular possible forestry impacts’ (Source: World Bank document # R2002-0195/2 Revised Forest Strategy for the World Bank Group: Management Responses to Executive Directors’ Comments and Suggestions. Dated 31 October 2002: page 4 (emphasis added).

The present draft of OP 8.60 (December 2003) does not reflect this commitment made to the Bank’s Board. The draft OP does not contain specific provisions that address the impact of structural and programmatic lending on forests.

While our focus here has been on the Bank’s promise with regards to forests, we are equally concerned about the lack of  inclusion in the draft OP 8.60 of a requirement to hold public consultations on the development of these loans in borrowing countries. It is difficult to reconcile the lack of such a requirement with the Bank’s emphasis on transparency and country ownership in its discourse and publications. 

Furthermore, we think that paragraphs 10 and 11 of the draft OP are not befitting an institution whose stated mission is poverty alleviation and sustainable development. These paragraphs require Bank staff to determine and to describe the effects of specific country policies supported by the Bank on the poor, especially on the most vulnerable groups, and on the environment and natural resources.  Yet, the draft OP does not require that Bank staff ensure that effective measures are in place that will avoid or mitigate negative social and environmental impacts of Bank lending. 

The new OP 8.60 will affect approximately one third of all Bank lending. In the absence of a firm requirement to ensure that these loans do not lead to negative social and environmental impacts, the Bank’s focus on achieving the Millennium Development Goals and its commitment to sustainable development have to be seriously questioned.

Mr. Wolfensohn, in your foreword to the 2003 Development Report you state that “Environmental and social assets matter greatly for well-being and productivity, but they are often neglected.”  Yet it is this neglect that is most in evidence in the draft OP 8.60. We urge that the draft policy be substantially revised.

Sincerely,