New World Bank palm oil strategy under scrutiny

New World Bank palm oil strategy under scrutiny

In January the World Bank and its private sector arm, the International Finance Corporation (IFC), released a substantially revised draft of their framework and strategy for engagement in the palm oil sector. The text, circulated for 30 days of public comment, is due to be submitted for approval - after revisions based on any comments received - to the President and Board of Directors in March or April 2011. If the text is approved, the World Bank will then end the worldwide funding moratorium for palm oil projects that it agreed to in 2009 after an internal audit (carried out in response to FPP and partners’ complaints) revealed major violations of due diligence and serious social and environmental impacts.

The new draft marks a substantial improvement on an earlier one, circulated for comment in July-August 2010, which was found to be too sketchy, omitted addressing key issues and which, in the view of FPP and its partners, amounted to little more than business as usual (see article in FPP October 2010 ENewsletter). This time, the new strategy makes clearer just what World Bank and IFC staff are expected to do differently when considering investments in the controversial palm oil sector. IFC staff in particular will be required to screen country and local situations to assess the risks of investment and a new Best Practice Note is designed to guide them in developing projects so they avoid causing social and environmental harms. Where possible future investments will prioritise smallholders, will seek to improve existing plantations rather than create new ones, and will target degraded lands in preference to peatlands and primary forests. Less clear provisions are also meant to lessen green house gas emissions and protect areas with ‘high conservation values’.  

There are still some serious weaknesses in the text. There are still no explicit requirements to recognise the customary rights of indigenous peoples and local communities or to respect their right to give or withhold their ‘Free, Prior and Informed Consent’ prior to oil palm being developed on their lands. This means the IFC’s requirements still fall below that of the Roundtable on Sustainable Palm Oil (RSPO), which is a bit odd as the IFC is a member of the RSPO and as such is obliged by its membership rules to uphold the RSPO standard. The text is also ambiguous about how the IFC and World Bank will deal with the fact that the two main palm oil producing countries, Malaysia and Indonesia, have legal frameworks which, quite contrary to the IFC’s strategy, allow land grabbing, forest clearance and peatland drainage. There are thousands of land conflicts in palm oil plantations in Indonesia (see a related article in this newsletter). The text suggests that, if these governments so choose, the World Bank would be able to provide them with technical assistance to reform their inadequate legal and policy frameworks. But what happens if they choose not to reform their laws: will the IFC turn a blind eye? (see FPP/signatories’ next position paper).

There is likely to be further controversy before the new strategy is finalised and approved. The stakes are higher than might be thought, as the new palm oil strategy is being treated as a ‘trial run’ for a wider IFC strategy for all its future investments in agribusiness worldwide. This makes it all the more important that the palm oil strategy really is further revised and made acceptable before it is approved.