Forest Peoples Programme: Conclusions and Recommendations of the Final Report of the Extractive Industries Review of December 2003: Summary of Main Points

This short note summarizes the main points in the conclusions and recommendations sections of the Final Report of the Extractive Industries Review (EIR). The Final Report was authored by Dr. Emil Salim, the Eminent Person appointed by World Bank President Wolfensohn in July 2001. Rather than undertake a comprehensive review of the Final Report, I have focused on a few issues only including: indigenous peoples’ rights, human rights generally, World Bank accountability/institutional issues and the definition of poverty and sustainable development. Reference is made to the corresponding page numbers in the Final Report, which can be downloaded from:

The World Bank Group’s (WBG) professed mission and mandate is poverty alleviation through sustainable development. Importantly, the EIR Final Report defines poverty from a human rights perspective, adopting the views of the UN Committee on Economic, Social and Cultural Rights, and has centred sustainable development on human beings, communities and societies rather than on purely economic grounds (various forms of capital) as found in earlier drafts of the report. Equally importantly, it also recognizes that for indigenous peoples poverty alleviation and sustainable development may have additional or nuanced interpretations/requirements and include effective guarantees for territorial rights and the right to self-determination.

The Final Report recognizes that if the WBG is to comply with its mandate, strict conditions must be applied to Extractive Industry (EI) projects. It also recognizes that at present risks and benefits are unevenly shared and that the majority of the negative burden falls on the poor, local communities, women and indigenous peoples (p. 8). Unfortunately, the end result still appears to be a ‘net gain’ analysis that is incompatible with the ‘do no harm’ approach that is supposed to underlie WB safeguard policies.

The Final Report has a strong focus on the need to improve governance issues in EI projects. Governance is interpreted broadly to include issues such as rule of law, adequate legal frameworks recognizing and protecting indigenous peoples’ rights, human rights generally, revenue sharing, etc., and extends to both state and corporate borrowers and clients. The section on establishing a grievance mechanism is inadequate and does not offer a conclusion (p. 26, recommendation, p. 55)).

The recommendations state that the WBG should not increase its involvement in EI projects without addressing a series of prior conditions. These conditions relate both to borrower and corporate governance and institutional reforms within the WBG. The three main “enabling conditions” are defined as:

· pro-poor public and corporate governance, including proactive planning and management to maximize poverty alleviation through sustainable development;

· government capacity and willingness to publish and manage revenues transparently and to maintain macroeconomic stability;

· government willingness to allow independent audits of its receipts from the extractive sector;

· the existence of effective frameworks for revenue sharing among local, regional, and national authorities;

· the government’s respect for labor standards and human rights, as indicated by its adherence to international human rights treaties it has ratified; and

· the government’s recognition of and willingness to protect the internationally guaranteed rights of indigenous peoples.

The Final Report concludes that “indigenous peoples and other affected parties do have the right to participate in decision-making and to give their free prior and informed consent (FPIC) throughout each phase of a project cycle;” and that “there are real issues that need to be worked out to make free prior and informed consent a clearer and more effective tool. These should be worked out in cooperation with bodies that have expertise in indigenous peoples’ issues, such as the UN Permanent Forum on Indigenous Issues, which has established a working group on the topic.” [1] The recommendations specify that FPIC is an internationally guaranteed right for indigenous peoples and part of obtaining social license to operate in the case of local communities and state that “the WBG should ensure that indigenous peoples’ right to give their free prior and informed consent is incorporated and respected in its Safeguard Policies and project-related instruments.” See, also, FPIC in connection with involuntary resettlement (pps. 58, 63).

The Final Report further recommends that it is “necessary to include covenants in project agreements that provide for multiparty negotiated and enforceable agreements that govern various project activities, should indigenous peoples and local communities consent to the project.” This is a very important statement as this recommendation provides for negotiated and enforceable conditions/agreements in the project agreement/contract itself. The project agreement is the primary legal document (and technically an international treaty) pertaining to the project and presumably also accords indigenous peoples standing to challenge implementation of the project in cases of alleged breach.

The conclusions contain good language describing the human rights implications of involuntary resettlement and the ethnocidal impact on indigenous peoples. It recommends that the “WBG should engage in consent processes leading to free prior and informed consent before resettlement takes place, thereby complying with indigenous peoples rights and receiving a social license to operate. This means WBG projects would only result in voluntary resettlements, not forced ones.” It further states that “Involuntary resettlement of indigenous peoples should be strictly prohibited. Resettlement should only be allowed if the indigenous community has given free and prior informed consent, there are guarantees of a right to return once the reason for resettlement ceases to exist, and subsequent to agreement on resettlement benefits” (p. 63).

Prior Recognition of Rights to Lands, Territories and Resources (pps. 43-4, 62-3)

The conclusions contain a good statement of the importance of territorial rights to indigenous peoples and notes that failure to recognize these rights “undermines efforts to alleviate indigenous peoples’ poverty and to achieve sustainable development” and; “will jeopardize the potential for development and poverty alleviation from the extractives sector” (p. 43). It further concludes that “Structural reforms and legal codes that provide for automatic approval of exploration and development concessions on indigenous lands, territories, and resources without the participation and the free prior and informed consent of these peoples and communities only exacerbate the problem.”

The Final Report then recommends that “the WBG should not support extractive industry projects that affect indigenous peoples without prior recognition of and effective guarantees for indigenous peoples’ rights to own, control, and manage their lands, territories, and resources” and, “the WBG should promote only those ‘sector reforms’ that concomitantly recognize and guarantee indigenous peoples’ rights to lands, territories, and resources traditionally owned or otherwise occupied and used by them” (p. 63).

The Final Report observes that OD 4.20 is presently being converted to a new format known as draft OP/BP 4.10. It also observes that the present draft has been repudiated by indigenous peoples and concludes that “To be legitimate and effective, a Safeguard Policy must be seen by the intended beneficiaries to provide adequate safeguards and must be consistent with their internationally guaranteed rights. This is presently not the case [with draft OP 4.10]” (p. 44). It recommends that (p. 63):

· With the meaningful participation of indigenous people, the WBG should revise its Safeguard Policy (Operational Directive 4.20 now in the form of draft Operational Policy 4.10) and ensure that it is consistent with indigenous rights in international law;

· The WBG must also ensure that there is consensus among indigenous peoples about the contents of the policy; the policy’s beneficiaries must consider that it provides adequate safeguards;

· Indeed, the WBG should refrain from approving the current draft OP 4.10 before high-level discussions with indigenous peoples, including a legal roundtable discussion between WBG lawyers, indigenous representatives, and legal experts on the consistency of the policy with internationally guaranteed human rights; and,

· It is recommended that this high-level discussion take place within a year of the submission of this report.

It is recommended that the WBG not support any project that involves riverine tailings disposal and that it not support projects involving submarine disposal until further research has been done on this method. However, it also “recommends that, irrespective of the final outcome of the research, STD and tailings disposal in rivers not be used in areas such as coral reefs that have important ecological functions or cultural significance or in coastal waters used by indigenous peoples and local communities for subsistence purposes.”

The Final Report concludes that “The reality in the field suggests that the current Safeguard Policies have been unable to ensure that ‘no harm is done’ and that this is due to both poor implementation rates and deficiencies in the policies themselves;” and “the EIR wants to be assured that these policies are binding, with assurance of compliance to make sure that companies are actually adhering to the policies in their operations.” It also quotes an OED report, which states that “performance in the area of safeguards has been only partially satisfactory. Fundamental reform of implementation and accountability processes is crucial. … The current system does not provide the appropriate accountability structure to meet the WBG’s commitments to incorporate environmental sustainability into its core objectives and to mainstream the environment into its operations.”

With regard to safeguard policies and human rights, the Final Report recommends that the “WBG should make explicit the human rights basis for each Safeguard Policy; where a policy may lie outside international human rights law, it should be brought into line with current thinking and standards. The Safeguard Policies should become an explicit tool for ensuring that the WBG respects human rights, and the staff in extractive industries should receive adequate training to be able to implement the human rights dimensions of these policies” (p. 63). It adds that “Compliance rates with existing Safeguard Policies are often far below acceptable and, in some cases, the substance of the policies is inconsistent with internationally recognized rights. Much greater emphasis needs to be placed on ensuring compliance with Safeguard Policies and the consistency of these policies with human rights” (p. 66).

In the context of EIs, the report recommends that “So-called transaction costs must be adequate and commensurate with the high-risk nature of EI projects, rather than reduced;” “[b]ecause these are high-risk projects, conditionality may be appropriate and necessary. This is particularly the case with projects affecting indigenous peoples and local communities;” and, the “EIR recommends that in the case of EI projects, a verifiable and enforceable commitment by the WBG and the borrower to comply with appropriate conditions and effective Safeguard Policies is a prerequisite for WBG involvement” (p. 66-7).

Discussing institutional issues in general the Final Report concludes that the “WBG does not appear to be set up to effectively facilitate and promote poverty alleviation through sustainable development in extractive industries in the countries it assists. In terms of staff and budget allocation, the institution does not appear to be as committed to the social and environmental aspects of sustainable development as it is to the economic aspects of development. This is further reflected in the balance of WBG projects and programs” (p. 64; see, also, p. 46). Finally, the Final Report states that for the WBG to increase support for EI projects it must comply with a number of conditions (pps. 48-9) and, in order to do this, “the institution itself needs to implement a number of serious reforms—changes in the composition of its portfolio, improvements and reinforced implementation of its Safeguard Policies, increased coordination across the arms of the WBG, and changes in WBG staff incentives” (p. 48).

The conclusions contain a good statement that EIs or other so-called development initiatives may not violate human rights, that this is widely recognized in international law and that the “WBG must internalize and respect this principle, both in terms of its operating polices and in its relations with borrowers and clients” (p. 41). Women’s rights, labour rights and indigenous peoples’ rights are also adequately addressed, although much more could have been done on women’s and children’s rights. The recommendations propose that the WBG, among others (p. 61-2):

· develop a system-wide policy that integrates and mainstreams human rights into all areas of WBG policy and practice and that WBG polices and operations must be, at a minimum, consistent with its obligations, as a subject of international law, in relation to international human rights law.

· ensures that it does not undermine the ability of its member countries to faithfully fulfil their international obligations or facilitate or that it assists violation of those obligations. … At a minimum, the WBG should assess state obligations and ensure that its operations, including macro-level intervention such as structural adjustment, do not violate those obligations.

· should systematically incorporate experienced, independent, and reputable third parties to verify the status of human rights in all relevant projects. A central Human Rights unit is essential, with regional counterparts, together with a clear policy and a mandate for monitoring, verification, and transparent annual audits.

· IFC and MIGA should assess the human rights records of these companies, including their policies on human rights and indigenous peoples, and ensure that WBG-funded projects are designed and implemented in a manner consistent with applicable international human rights standards. Adoption of and demonstrated compliance with human rights principles should be a prerequisite for companies seeking WBG support for extractive industries.

· ideally, the WBG should adopt a rights-based approach to development and ensure that its support for projects is directed toward fulfilling international guaranteed human rights and in particular addresses power imbalances that affect the full exercise and enjoyment of all human rights by the poor and most vulnerable.

The Final Report concludes that if “the WBG is endorsing EI activities in protected areas, this could be counterproductive to the organization’s commitment to sustainable development,” and that “current WBG approach could have serious impacts on biodiversity.” It recommends that the “WBG should not finance any oil, gas, or mining projects or activities (including through policy lending and technical assistance) that might affect existing World Heritage properties, current official protected areas, or critical natural habitat (as described in its current Natural Habitat Policy) or areas planned in the future to be designated by national or local officials as protected.” With regard to ‘compensatory off-sets’ required under the Natural Habitats Policy, the Final Report recommends that “Special attention must always be paid to ensuring that the rights of indigenous peoples to their lands, territories, and resources traditionally owned or otherwise occupied and used are respected when choosing and designing an offset” (p. 57).

[1] The Permanent Forum on Indigenous Issues has not in fact established a Working Group (WG) on FPIC, but has recommended to ECOSOC (UN Economic and Social Council) that it finance the establishment and operation of such a WG.