The World Bank’s Forest Policy

The 2002 World Bank forest policy left serious loopholes that would permit the destruction of critical forest habitats
By
Nicolas Fredericks

The World Bank’s Forest Policy

As the World Bank reviews its environmental and social standards, a major opportunity to overhaul World Bank approach to forests must not be missed.

The negative impacts of World Bank-financed projects on tropical forests have been an issue of concern for civil society and forest peoples for decades. In the 1980s, World Bank megaprojects in the Amazon and in Indonesia in support for infrastructure projects, agricultural colonisation and transmigration generated major criticism from the public. This in turn generated the political pressure that was a key factor in leading the World Bank Group to adopt mandatory social and environmental standards, known as safeguards, to demonstrate its commitment to preventing harm to people and the environment [See Article 1].

The first specific safeguard policy on Forests was adopted by the Bank in 1991. It represented a new approach by promising to focus on poverty reduction and respect for local rights. It also introduced a proscription against Bank finance for large-scale logging in primary moist tropical forests. However, internal opposition at the Bank against this Policy was strong from the beginning. Bank management claimed that the Policy was too conservationist and that the ban on Bank support for industrial logging had created a ‘chilling effect’ on its lending. It argued that the policy was preventing the institution from enabling positive forest sector reform. Although an evaluation by the Bank’s own evaluation group found that the systematic lack of monitoring of project implementation was the key problem[i], Bank management did not address the problems related to safeguard compliance. Instead, after a prolonged process of implementation review and strategy development, the World Bank threw out the 1991 Forest Policy and adopted a revised forest safeguard policy and strategy in 2002. This new Policy lifted the proscription on Bank finance for industrial logging, subject to independent certification of sustainable timber harvesting or a plan to achieve certification at some undefined point in the future. At the same time, the 2002 policy established the rule that the Bank would not finance “commercial harvesting operations” in “critical” forests, but did not state who would define an area as “critical” forests (OP4.36 at paragraphs 8, 9 and 10).[ii]  The policy also left serious loopholes that would permit the destruction of critical forest habitats.

Problems with the existing policy and strategy: At the time, NGOs, including FPP, pointed out major problems and gaps in the Bank’s Forest Policy and Strategy, and the Bank’s related Natural Habitats policy (OP4.04), which are unresolved until today. Key remaining problems include:

  • the lack of adequate protections for the tenure and resource rights of non-indigenous forest dependent communities;
  • the lack of a cross-sectoral approach to forests to ensure that all types of World Bank Group programmes, including projects in the energy and transportation sectors would be consistent with forest protection;
  • major loopholes in the Natural Habitats Policy that permit logging, forest clearance and development activities in critical habitats (thus undermining the ‘critical forests’ safeguard)
  • exclusion of safeguard coverage for Development Policy Loans and other forms of programmatic lending;
  • reliance on uncertain certification standards[iii]

As well as highlighting these gaps, NGOs repeatedly made calls on the Bank to carry out an implementation evaluation on its Natural Habitats Policy, in order to learn lessons and pinpoint ways to implement the critical habitats safeguard effectively. Given the controversy surrounding this policy, the World Bank promised that an external advisory group would be set up to ensure transparency and provide independent guidance on policy implementation; a new mechanism would be established to address forests in adjustment lending and a forest sourcebook (manual) would be developed to explain to staff and Borrowers how the critical forests safeguard should be applied, whilst the International Finance Corporation (IFC) would adopt a revised version of the policy for private sector loans to the forest sector.

Weak follow up:

Although the Bank did set up the External Advisory Group (EAG) in 2003[iv], its impact on Bank operations has not been significant. Recent EAG communications calling on the Bank to adopt international human rights standards, including alignment of Bank policies with UNDRIP[v], have so far received no direct reply.[vi] Other promises have been broken or have not yet been fulfilled.  The IFC never adopted the policy as a distinct standard, but rather swallowed up forests in its Performance Standard 6 on “Biodiversity Conservation and Sustainable Management of Living Natural Resources”.[vii] This IFC standard leaves large loopholes for conversion of natural forests for industrial development and even allows for the financing of activities that destroy critical habitats as long as an off-set plan is put in place, even though biodiversity offsets are highly controversial.[viii] The Sourcebook on Forests was finally published in 2008[ix], but the Bank’s 2004 policy on Development Policy Lending makes only passing mention of forests with only minimal requirements to address potential negative impacts on forests and forest peoples (OP8.60 at paragraph 11).[x] Despite repeated requests, implementation of the World Bank’s safeguard on Natural Habitats has not been subject to an evaluation (implementation review) by the Bank’s own evaluation group.

Steps in the right direction:  

Despite the above serious shortcomings, some positive steps have been taken by the Bank in its engagement with the forest sector. These include progressive community-based forest management projects in Mexico, efforts to support communities through the Growing Forest Partnerships (GFP), capacity building and support for FLEGT (Forest Law Enforcement, Governance and Trade) through the Program on Forests (PROFOR), and recent efforts to set up a dedicated grant mechanism for forest peoples under the Forest Investment Programme (FIP), as well as useful analytical work on forest governance. Among the latter is an important study on the significant role of illegal logging in many of the Bank’s client countries. The said study urges the Bank (and other development agencies) to assist countries in strengthening their criminal justice and anti-money laundering systems.[xi] In addition, it is noteworthy that the FIP prohibits support for conversion, deforestation or degradation of natural forests through inter alia industrial logging and tree plantations (FIP Design Document).[xii] Unfortunately, these important initiatives are not integrated into the Bank’s wider portfolio on forests. Poor safeguard implementation and ineffective treatment of social and poverty issues continue to plague the Bank’s approach to forests. Examples are forest management projects in Asia which were meant to be participatory, but have failed to empower communities and have even included harmful resettlement schemes.[xiii]

On-going implementation problems and flawed strategy:

Problems in the implementation of the Bank’s forests safeguards and related policies are well documented in official evaluations, civil society reports and community complaints submitted to the IFC Compliance Advisor Ombudsman and the Inspection Panel.[xiv] The 2007 mid-term review of the Forest Strategy, for example, found that poverty concerns and potential adverse social impacts had not been given adequate attention in the Bank’s projects or economic and sector analysis. It also found that World Bank staff tended to treat safeguard policies as obstacles to project processing, instead of seeing them as key instruments to reduce risk and improve development outcomes.[xv] Similar problems with weak implementation have been found in a recent Independent Evaluation Group  (IEG) review, which found no evidence   that Bank support for policies and investments supporting industrial logging concessions have led to sustainable development (see box below).[xvi]

Some key findings of the 2013 IEG evaluation of World Bank engagement in the forest sector[xvii]

  • Attention to rural poverty has been lacking in World Bank supported concession reforms
  • Only 2 out of 37 forest protected area projects achieved their intended livelihood aims
  • Three-quarters of forest protected area projects triggered OP 4.12 (Involuntary Resettlement), but only two reported on whether the adverse impacts on livelihoods had been mitigated
  • Less than half of the Bank-financed projects using wood from natural or plantation forests achieved certification as required
  • Monitoring and reporting systems for forest projects are not sufficient to assess if the Bank is supporting forest management in an environmentally and socially sustainable way
  • Gender considerations have not been adequately addressed
  • Most projects did not take due account of climate change issues and challenges

Among multiple recommendations, the 2013 IEG evaluation advised that the Bank should undertake a thorough review of Bank-financed concession reforms and commercial logging projects to verify if the concession model for forest development has contributed to poverty reduction outcomes in order to inform further revisions in Bank policies and strategies for the forest sector. In February 2013, the Bank’s management and the Board’s Committee on Development Effectiveness (CODE) flatly rejected this recommendation. Bank management repudiated much of the IEG’s findings, alleging that they were based on methodological errors in the evaluation.[xviii] It appears that once again, the Bank’s internal goals of meeting lending targets is taking precedence over learning lessons from past experience and ensuring socially and environmentally sustainable development outcomes.

Major reforms needed to deliver sustainable outcomes:

NGOs, including FPP and Urgewald, are urging the World Bank to use the current safeguard review and update process (see Article 5) to strengthen its safeguard framework for forests and forest-dependent peoples. In summary, civil society organisations are emphasising the need for the World Bank to:

  • Improve oversight, supervision and compliance arrangements in Bank and borrower systems to ensure effective implementation of forest-related safeguards, including the tracking of governance, poverty and livelihood outcomes, in Bank projects and programmes;
  • Focus on promoting forest sector and tenure reforms to secure community ownership and control of community forests, community conserved areas and indigenous peoples’ forest territories,  including measures to recognise and protect customary rights;
  • Ensure effective participation and involvement of forest peoples and communities in efforts to identify and tackle the direct and indirect drivers of deforestation, including measures to secure customary land rights
  • Pay special attention to the gender impacts of the Bank’s projects and programmes affecting forests;
  • Redirect Bank finance away from industrial-scale logging towards support for community-based forest management and empowerment of forest peoples, based on secure tenure and respect for their rights which are proven to be effective measure to protect forests;[xix]
  • Use more robust measures to identify and protect High Conservation Value Forests in World Bank projects, in cooperation with forest peoples and civil society organisations
  • Adopt a genuine cross-sectoral approach to forest protection, by addressing the drivers of deforestation, including the Bank’s own support for agribusiness, extractive industries and infrastructure programmes
  • Expand the scope of a revised forest safeguard policy beyond investment lending, including extension of policy coverage to Development Policy Loans and other Bank lending instruments;

The World Bank Group needs to act on all of the above recommendations in order to ensure strengthened safeguards to protect forest peoples, forests and natural habitats. The Bank must maintain and upgrade a specific World Bank operational policy on Forests designed to avoid negative social and environmental impacts and promote sustainable forest development.

Tom Griffiths (FPP) and Korinna Horta (Urgewald)

[i] Operations Evaluation Department (OED), A  Review of the World Bank's 1991 Forest Strategy and its Implementation, The World Bank, January 13, 2000.

[iii] Carrere, R and Colchester M (2005) “The World Bank and forests: a tissue of lies and deception” pp.4-5 in Broken Promises: how World Bank Group policies and practice fail to protect forests and forest peoples’ rights FPP-WRM-RF-UK-EDF--Global Witness http://www.forestpeoples.org/sites/fpp/files/publication/2010/08/wbforestsjointpubapr05eng.pdf

[v] External Advisory Group (2011) Letter to Vice President of the Sustainable Development Network (SDN) re Implementation of the World Bank Forest Strategy, November 30, 2011

[vi] The Bank reply to the EAG in March 2012 did not address rights issues raised, but rather gave a selective response  to other issues (e.g. applying a landscape approach to forests ) – see http://siteresources.worldbank.org/INTFORESTS/Resources/RK-EAG-response-March2012.pdf

[viii] On the problems with biodiversity offsets, see, for example, FPP (2011) Submission to the Convention on Biological Diversity relating to innovative financial mechanisms and the rights of indigenous peoples and local communities: http://www.forestpeoples.org/sites/fpp/files/news/2011/08/FPP%20submission%20to%20CBD_July_2011_final_version.pdf

[xi] Pereira Gonclaves, M, Panjer, M, Greenberg, TS and Magrath, W B (2012) Justice in the Forests: Improving criminal justice efforts to combat illegal logging World Bank, Washington, DC ; Castro T and Pillai, M (2011)  Forest Governance 2.0: a primer on ICT and governance, PROFOR Washington, DC

[xiii] IEG (2011) Project Performance Assessment Report. India Integrated Watershed Development Project; Karnataka Watershed Development Project; Andhra Pradesh Community Forestry Management Project; and Managing Watershed Externalities in India Project. Washington, DC: World Bank

[xiv] Regarding: Request for Inspection, the Development Forest Sector Management Project (Liberia) Sustainable Development Institute, September 24, 2010: http://siteresources.worldbank.org/EXTINSPECTIONPANEL/Resources/01_SDI_Complaint.pdf and Letter of complaint regarding New Forests Company, Namwasa Plantation; IFC financing via Agri-Vie Fund PCC (project Number: 27674): http://www.cao-ombudsman.org/cases/document-links/documents/Complaint_AgriVie_MubendeNamwasa_122011_web.pdf See also http://www.illegal-logging.info/uploads/WB_Inspection_Panel_Cambodia.pdf

[xv] Contreras Hermosilla, A and Simula, M (2007) Mid-term Review of Implementation of the World Bank Forest Strategy IEG, World Bank, Washington D.C

[xvi] IEG (2013) Managing Forest Resources for Sustainable Development: An Evaluation of World Bank Group Experience IEG, Washington, DC http://ieg.worldbankgroup.org/content/dam/ieg/forest/forest_eval.pdf

[xvii] Ibid

[xviii] World Bank (2013) Managing Forest Resources for Sustainable Development: An Evaluation of World Bank Group Experience Management Response, February 6, 2013

In 2007, the WB Inspection Panel found the Bank’s support for forest sector reforms in DRC failed to comply with its safeguards
By
John Nelson