In 1991 the World Bank adopted a new policy towards forests with the objectives of encouraging:

q       Protection of forests, particularly of moist tropical forests.

q       A cross-sectoral approach to forests in future Bank lending.

q       Attention to potential impacts on forests in macro-economic planning and lending.

q       Care to prevent agriculture projects from promoting deforestation.

q       Much greater environmental impact assessment and mitigation for transportation and infrastructure projects that might affect forests.

q       Attention to social and poverty issues in the promotion of plantations.

q       Linkage of forestry-related lending to poverty alleviation.

q       Promotion of protected areas, through concessional financing where possible.

q       A ban on direct financing of logging in primary moist tropical forest.

q       Improved civil society participation in Bank forest-related activities.

q       Special attention to the rights of forest dwellers and indigenous peoples, especially with respect to land tenure.

q       Special attention to gender issues.

q       Engagement with borrowers to encourage good governance, institutional strengthening and policy reform aimed at sustainable forest management.

The OED review: main findings

The 2000 OED report finds that the Bank has failed to achieve what it set out to do in 1991:

q       The Bank had a negligible if any effect on meeting the main goal of curbing deforestation.

q       Bank staff did not incorporate the policy into Country Assistance Strategies and Economic Sector Work.

q       The policy was largely ignored in structural and sectoral adjustment lending, even though the report finds that liberalization and globalization have been major pressures on forests.

q       Even where forestry conditionality was included in sectoral and structural adjustment packages it was not backed up with long-term strategies for governance reform and institution building.

q       Contrary to the policy, forest related lending largely failed to promote  poverty alleviation.

q       Participation of civil society was weak although it improved in Natural Resource Management Projects.

q       The importance of reforming land tenure regimes in favour of the poor and customary owners has been poorly appreciated by Bank staff.

q       Gender considerations were inadequately addressed in 99.5% of forest-related projects.

q       Governance issues were generally neglected and institution building was weak.

q       Although safeguard policies were observed at entry level, they were often not adhered to in the implementation phase of projects.

q       For lack of reporting and monitoring, the OED is unable to ascertain the extent to which adjustment, agriculture, infrastructure and transportation lending contributed to deforestation.

Bank staff agree that there has been a lost decade in which it failed to combat deforestation and failed to address the needs of the poor and powerless through its forest-related work. Although most Bank staff still agree with the overall thrust of the 1991 policy, they admit that it was not well-integrated into the Bank’s operations, neither in projects nor adjustment lending, nor in country assistance strategies and economic and sector work.

The failure of compliance:

The reasons for the continuing failure of the Bank to apply its forest policy are disputed. On the one hand, the OED study finds that staff lack the expertise, time, resources and incentives and reporting tools to observe the policy. Project preparation and research time is limited. Participation is weak and comes too late in the project cycle and environment assessment is also carried out too late to be effective.

Our conclusion, in line with the Wapenhans report and other studies, is that the main failure was in the lack of staff compliance with the policy and in Bank culture and not in the policy itself.

A second reason for the failure in compliance comes from the Bank’s relationship with borrower countries. On the one hand, few borrowers are in sympathy with the Bank’s approach to forests but the study is less clear about the extent to which Bank staff tried therefore to encourage national dialogue and policy reform to address this gap.

On the other hand the OED study makes clear that the Bank lacks attractive financial tools to offer borrower countries.

q       IBRD and even IDA loans incur balance of payments burdens that forestry and conservation projects are unlikely to be able to repay, thus further miring borrowers in debt.

q       Adjustment lending is too hasty and top-down to allow effective engagement with borrowers on complex issues like forest policy and institutional reform.

q       Concessional financing through the GEF is limited to addressing only a few global concerns and is payable only for securing global benefits and not for national benefits.

q       Concessional funds for economic and sector work, technical assistance and project preparation are inadequate.

These appear to be very real obstacles to Bank involvement in the forest sector.

Despite these findings, the OED report and CODE place the most of the blame for the Bank’s ‘lost decade’ on the forest policy itself, which they argue was overly cautious and which created risk averse behaviour. The policy, they argue, failed to promote a bold and engaged approach by the Bank towards forests. The OED study, especially in its executive summary and conclusions, thus argues that the current forest policy needs to be reformed and even that it has already been superseded (though what it has been superseded by is not made clear).

NGO disagreement with this finding is likely to be a dominant theme of discussion at the OED workshop. It is not that NGOs consider the 1991 policy faultless but that we are concerned that its deficiencies are being exaggerated by culpable Bank staff who are using its alleged weaknesses as a scapegoat for their lack of compliance with the policy.

Is the alleged ‘chilling effect’ of the policy a myth?

CODE and the OED report argue that the policy proscription on Bank financing of logging in primary tropical moist forests had a ‘chilling effect’ on forest-related lending. This argument needs to be challenged. Indeed it seems to be contradicted by the evidence of the OED study itself.

q       In the first place, even before 1991, the Bank provided very little direct funding of logging anyway (‘though OED does not tell us how much, if any). 

q       Second there is almost no evidence that conventional logging promotes poverty alleviation (the OED study was also unable to trace the linkages).

q       On the contrary, most logging (the majority of which is illegal) seems to encourage the ‘environmentally exploitative and socio-economically inequitable exploitation of natural capital’, coupled with cronyism, corruption and nepotism.

q       OP 4.36 actually allows experimental logging. It encourages Bank staff to engage in projects that promote better forest governance where there is a borrower government  commitment to sustainable forest management objectives.

q       Bank forest-related lending has increased by 78% since 1991.

q       Forest-related lending declined in countries with no or little commitment to sound forest management.

q       Most of the growth in forest-related lending was in natural resource management projects which, while far from perfect, were more participatory than direct forestry projects.

q       Moreover, according to the OED study, in comparison with direct forestry projects, these ‘environmental projects’ paid more attention to land tenure and indigenous peoples, and better addressed cross-sectoral forces on forests.

q       In fact, according to OED (but not the QAG) they had an overall more ‘satisfactory’ performance than any other kind of forest-related lending and even than Bank projects in general.

q       Far from finding the precautionary stipulation ‘chilling’, most Bank staff found the proscription ‘irrelevant’.

Does the 1991 policy fail to address boreal, temperate and dry tropical forests?

It is true that the 1991 policy focuses on (primary) moist tropical forests and targets 20 countries where 85% of these forests grow. However, nowhere does it state that the precautionary approach should not be applied to other forest types. In fact, GBP 4.36 specifically directs Bank staff to develop forest sector work that ‘ameliorates environmental damage in temperate and boreal forests’ (para. 11).

By 1994, at the time of the first Forest Policy Implementation Review, NGOs were already vocal in calling on Bank staff and the board of Executive Directors to extend the pre-cautionary approach to other forest types. The Bank chose to ignore this, a piece of history that the OED study glosses over.

Does the policy not focus enough on poverty alleviation?

In fact, the policy does give explicit treatment to the issue of poverty- alleviation, meeting basic needs and the importance of taking into account the needs for land and resources of the rural poor. The focus of the policy is on the need for community forestry, and afforestation generally, to supply the demand for forest products; and on agricultural programmes targetted at the rural poor on forest margins. The policy also focuses attention on the special needs of women and the importance of respecting the customary rights of forest-dwellers and indigenous peoples. Both OP and GBP 4.36 are also explicit on the need to integrate poverty alleviation objectives into Bank forest sector work.

Other concerns about the OED study:

During and before the OED ‘design phase’, NGOs urged that a representative sample of Bank projects should be selected as case studies to ascertain the extent to which the documentation available to the OED accurately portrays the real impacts and effects of Bank projects. We urged that such studies should be carried out in close consultation with projected affected groups. We regret that this never happened as it would have allowed the OED to go much further in assessing impacts on such issues as the effectiveness of participation, poverty alleviation, gender sensitivity, attention to land tenure, addressing the concerns of indigenous peoples, environmental impacts etc. These are just the issues that the OED review ended up being least clear on.

Is it too late to carry out such studies?

Like the 1991 policy, the OED study fails to discriminate clearly between the relative usefulness of various forms of afforestation to address the needs of the poor, women and indigenous people. The, in our view, erroneous impression is given that ‘resource expansion’ (large scale tree plantations) can alleviate poverty and meet basic needs.

There is little analysis of the impact of plantation projects on the poor, on Indigenous Peoples, on land tenure and on biodiversity. The study gives the impression that OED staff are little aware of the highly contentious nature of industrial tree mono-crops which are treated as a viable substitute for natural forests.

Which kinds of afforestation projects have really brought social benefits? Under what conditions? With what safeguards in place? The OED study would substantially benefit from reworking this aspect.

Some of the OED’s conclusions are welcome:

Some conclusions of the OED review are welcome:

q       Operational incentives should be revised to encourage Bank staff to adhere to the policy (and they should be penalised where they do not)

q       The Bank should tackle illegal logging through encouraging improved governance

q       Poverty alleviation should be a focus of future action

q       The precautionary approach should be extended to other forest types.

Other recommendations:

Gaining a better understanding of compliance failures:

There is a need for a series of follow-up questionnaires with Bank operational staff to discover why they failed to apply the policy in their areas of responsibility:

Are staff generally aware of the OP and GBP 4.36? Have they discussed the Bank’s Forest Policy with counterparts in borrower projects in the context of specific projects? Why did they not apply the policy in CAS? ESW? Structural lending? Cross-sectoral projects impacting forests?

Do they feel their line managers care about the Forest Policy? Do they feel their line managers want to see application of the policy? Will staff be rewarded for investing time and resources into the application of the policy?

More research into the real relationship between logging and poverty:

The real benefits of large-scale logging need to be better assessed. What are the real impacts on forest-dwellers, women and other forest-dependent groups? What long term benefits accrue to the poor in terms of employment and services? The too-easy equation of logging with ‘development’ needs to be substantiated or discarded. In what circumstances, if any, does large-scale timber harvesting really bring lasting benefits to the poor and powerless?

A brief historical background on the current OED report

1980s. Controversy about forest destruction has been the Bank’s Achilles Heel for nearly two decades. The flagship disasters in Brazil and Indonesia in the 1980s focused on the role of the Bank as a forest destroyer. Public criticism of World Bank lending for logging in West Africa, initiated by civil society organizations in the late 1980s, served as a catalyst in convincing the World Bank’s Board of the need to develop a new forest policy.

1991. When the World Bank’s Board of Executive Directors approved the current Forest Policy in 1991, it requested that the World Bank carry out a review of how the new policy was being implemented in practice after a period of two years. Such a review was deemed necessary in light of some of the innovative aspects of the Forest Policy, such as its emphasis on intersectoral linkages, a pre-cautionary approach to forest utilization, the need to respect the customary land rights of forest-dwellers and to take into account the interests of local communities in the establishment of plantations.

1994. A desk study prepared in 1994 represented a first attempt to comply with the request from the World Bank’s Executive Directors. However, the lack of field input and the study’s failure to consider the cross-sectoral impacts of Bank lending on forests and the social impacts of lending related to forests, turned this study into a rather unsuccessful stocktaking exercise. As a result, members of the World Bank’s Board of Executive Directors requested that a more in-depth review be conducted in order to provide a more definitive assessment of the implementation of the 1991 Forest Policy.

2000. The present OED study represents the response to this request.

Main findings of the OED report on how the World Bank’s 1991 Forest Policy has been implemented

1. Lack of Attention to Inter-Sectoral and Macro-Economic Policy Linkages

An important innovative feature of the World Bank’s 1991 Forest Policy was the adoption of a multi-sectoral approach to forests.

The OED report found that forest sector issues have been largely ignored in economic and sector work in areas with the potential to affect forests, such as agriculture, mining, transportation, poverty (p. 6).

Similarly, the establishment of protected areas has also not been part of a multi-sectoral approach in line with the policy (p.33).

The OED report identifies economic policies to accelerate liberalization and promote exports, such as devaluations, as important forces driving deforestation.  These policies are central to the World Bank’s structural adjustment lending which – according to the OED report – has increased by 63% since adoption of the new Forest Policy. However, despite this shift in lending and the 1991 policy requirement to adopt a multi-sectoral approach, ‘adjustment loans have rarely taken forest sector issues into account’  (p.12-13).

Integration of the policy with country-assistance strategies, macro-economic and sectoral analysis was also limited. ‘The country teams often fail to view forest issues strategically, even in countries where forest sectors are important in the macro-economy’ (p.6).

‘The Bank has made little progress in addressing the impacts of adjustment lending on the forest sector. Tracking the impact on the ground is even rarer. The environmental assessment guidelines are not systematically applied to structural adjustment loans.’ (p.3)

While the potential impacts of economic policies prescribed by structural adjustment lending have been largely ignored, some structural adjustment loans have included specific forestry conditionalities. But the OED report concludes that these conditionalities had a very limited impact and it is critical of the use of quick disbursing loans as a vehicle to force forest policy reforms on governments.

‘The history of poor dialogue between the Bank and the countries may explain the Bank’s eagerness to use the opening provided by an economic crisis to push reforms in the forest sector. But the risks involved in doing so are significant since sustainability of promises made under pressure to secure quick-disbursing assistance is far from certain. This approach to conditionality may not be adequate to induce real commitment (let alone build necessary capacity)  and therefore lacks credibility’ (p.13).

bThe OED report considers that the combination of trade liberalization and infrastructure development is a major cause of illegal and unsustainable logging (p.4). Yet contrary to the 1991 Forest Policy, Bank investments in both areas do not examine their impacts on forests.

2. Poverty Alleviation and Participation

The 1991 Forest Policy placed great emphasis on the reduction of poverty as a central tenet of its forest-related activities.

According to the OED report, implementation of the Forest Policy has generally failed in the poverty area. ‘There has not been sufficient synergy between conservation and development objectives in policy implementation’ (p.xi). In addition, no new links between direct forest lending and poverty alleviation have been established (p.39).

The most promising results may have been obtained by community forestry approached in China and India (where Bank has not so much taken the lead as followed country initiatives) which have helped alleviate poverty (p.xiv) through Joint Forest Management and small farm forestry (p. 22).

The OED Report states that participation seems to have improved since 1994 (p.14). However, it also states that there is still ‘inadequate appreciation of the social, institutional and political realities on the ground’ (p.14). The report goes on to notice ‘an omission of key stakeholders during project preparation and implementation; inadequate time and resources allowed to develop genuine participatory approaches; lack of sufficient expertise in participatory techniques among Bank staff and consultants; and poor choice of  M&E indicators ’(p.14).  Furthermore, ‘the Bank has been weak in exchanging experiences within or across regions’ (p.14).

The unconvincing results in poverty alleviation lead the OED report to recommend that a revised forest Policy should include elements to address employment and income needs of the poor directly (xv). The OED report’s assessment on participation seems to be based on project documents “at entry”, i.e. on the intentions stated at that time and not on verification of actual field experience.

3. Governance, Institution-Building and Land Tenure

The OED Report identifies governance and political will as being critical to poverty alleviation, the protection of indigenous rights and forest management (p.12).

‘The poor have been less a source of deforestation in the forest-rich countries than the policy has assumed’ industrial demand is main problem’ (p.xiii). ‘In many forest-rich countries demand for timber is a major cause of deforestation’ (p.4). Illegal logging supplies at least half the total timber supply in many forest-rich countries (p.xii)  ‘to contain rates of deforestation, countries need…the management of demand for tropical timber in international markets’ (pxiii). The OED report does not say how this is to be achieved. 

‘Poor governance and political alliances between some parts of the private sector and the ruling elite, corruption, and minimal enforcement capacity at the local and regional levels all  play a part in deforestation’ (p.xii). ‘These factors lead to environmentally damaging and socio-economically inequitable exploitation of natural capital’ (pxii).

The OED Report – as the World Bank’s recent emphasis on institutional economics – considers institution building to be the conditio-sine-qua-non for successful project implementation. However, it finds that ‘the institutional development ratings are low in all sectors, and particularly low in forest component and environment sector projects’ (p.10).

It suggests that institution-building is better achieved through project lending than adjustment-based lending operations which ‘do not have the time intervals required to deal with institutional and capacity-building reforms or indeed even consensus building’ (p.12). This accounts for the relative failure of forest related lending in PNG and Cameroon ‘where adjustment lending has deployed forest conditionality’ (p 12).

In forest-rich countries like Brazil, Cameroon and Indonesia powerful vested interests have foiled Bank efforts to institute effective reforms  (p.28).

Land tenure:

Clarification of tenure rights was given higher priority in forest component projects than in direct forestry projects (p. 9). This is evidence that the precautionary approach in the policy did help shift lending towards a more holistic and participatory approach to forests.

In the Cameroon, however. ‘the Bank viewed customary tenure rights as an impediment to the development of ‘unused’ forest resources’ and this has still not been sorted out so that security is still only given to those who clear forests (p. 26).

 4.      Reporting and Monitoring

Environmental assessments have improved projects at entry’ (p. xiii). ‘However, with some notable exceptions, these assessments have generally lacked focus and on issues critical to a particular project and typically have come too late in the project design process’ (p.16). ‘Even where assessments have been satisfactory, recommendations are often not carried forward into project design and implementation’ (p.16).

Despite the sensitive nature of forest-related investments, reporting is inadequate ‘… the explanation of forest-related project performance ratings often lacks substance’ (p. 11). Furthermore, ‘M&E systems do not adequately flag projects with serious implementation problems, in part because systemic problems inhibit the functioning of the M&E system itself’ (p.11).

5.       Conclusion:

The OED findings on the implementation of the 1991 Forest Policy are unambiguous. The Policy, including its specific policy provisions, has not been implemented.

What can explain this serious lack of compliance with the Policy and how can this serious problem be addressed in the future?

The results of this lack of implementation are at hand. According to the OED report only 27% of forest projects and 32% of forest component projects are thought to be sustainable. Just over 50% of these projects are thought to have satisfactory outcomes.

There is little point in strengthening and revising the existing Policy unless this is accompanied by precise and enforceable measures, including incentives and penalties, which obtain greater attention and adherence to the policy amongst line management and taskmanagers.

The OED Report does mot examine the reasons for the failure of Bank staff to comply with the Policy. Ultimately, the translation of the principal findings of the OED report into practical changes in the World Bank’s institutional and incentive structure and its operations also serves as a test case for the effectiveness and impact of the OED as the institution’s primary evaluation and learning instrument.

Preliminary reactions: 26 January 2000