KANANASKIS G7 SUMMIT ISSUE BRIEFS (June 2002): Extractive Industries and the Role of the World Bank
One of the most controversial areas of World Bank involvement is the financing of oil, gas and mining projects in developing nations. This brief describes World Bank involvement in these extractive industries, specifically the devastating effects of these projects on local people and the environment and the solutions put forward by nongovernmental organizations (NGOs) to correct these problems.
World Bank support for extractive projects continues to have negative impacts on development, the environment and human rights, and essentially is corporate welfare. Although earmarked for sustainable development and poverty relief, 9 out of 10 World Bank fossil fuel projects benefit transnational corporations (TNCs) based in wealthy countries. The World Bank finances 25 times more fossil fuel projects than renewables.
Furthermore, when the World Bank subsidizes these corporate giants it diverts much needed aid from programs that truly benefit the poor.
Countries are forced to compete with one another to attract foreign investment by providing the most favourable economic conditions, which often comes at the expense of environmental standards and human security. This typically results in a “race to the bottom” in terms of standards, an increased vulnerability to market fluctuations and exploitation by international financial institutions and TNC’s. Moreover, the profits generated from these extractive industries are not invested in the economy to promote growth and development, but are invested back in the corporation’s home country.
Chad Cameroon Pipeline Project - Corporate Exploitation
The World Bank provided $250 million to a project led by Exxon Mobil, a company with annual profits that are four times the budget of Cameroon and forty times the budget of Chad. This pipeline comes at a cost to these countries in the form of widespread environmental degradation, and on-going human rights abuses. It is highly unlikely that any of the profits generated from the operation of the pipeline will be used to stimulate economic growth in the region.
From Siberia’s Boreal Forest, to the mangroves of Central Africa, to the rainforest of the Amazon, oil, gas and mining projects threaten precious forests and cause irreversible damage to ecosystems and biodiversity loss. Corporations in search of profits are rarely concerned for the long-term environmental impact of their practices. The absence of strict environmental regulations in many developing nations is often a selling point to corporations.
Cameco/Kumtor Gold Mine - Environmental Destruction
The International Finance Corporation (IFC), a division of the World Bank, provided $40 million in financial backing and MIGA(another Bank division) provided $45 million in political risk insurance to Cameco for the Kumtor mine, located in the Tien Shan Mountains of Kyrgyzstan. The regions have suffered three chemical spills in the past two years, the most egregious was when a company truck spilled 1.7 tons of highly toxic sodium cyanide into the Barskoon River, a source of water for drinking and irrigation, flowing downstream in to the country’s largest lake. Approximately 2,600 people were treated and 1,000 of them hospitalized. The IFC continues to support the company despite its lack of transparency and information disclosure with regards to the accident and its emergency reponse plan for the future.
Support for extractive industries are also tied to human rights abuses. From forced relocation, to the brutal suppression of those who dare demand fair compensation or clean up, the threat to human security is high. In many cases the people living in these regions are ill equipped to protect their rights and are therefore easily exploited. The Ogoni people of Nigeria have demanded the clean up of pollution of their land by the oil industry which are continually ignored. The exploitation of their land and labour destroys traditional agricultural and cultural practices, leading to an increased dependency on foreign aid and high interest loans.
Solutions
Proposed solution to the current practices employed by the World Bank include support for micro and small enterprises, debt cancellation for the worlds poorest countries, sustainable and renewable energy sources, support for education and technical training and the promotion of healthy societies.
The World Bank could be leading industries to energy efficiency and renewable alternatives , instead it continues to promote projects and provide subsides to an industry that is essentially fuelling global warming. The World Bank has financed 30 renewable energy/energy efficiency projects since 1992 and 212 fossil fuel projects. Furthermore, fossil fuel financing by the World Bank since 1992 has been $20.8 Billion in contrast to the $900 million spent on renewable energy/energy efficiency projects. NGOs are demanding the phase out of financing for destructive oil, gas and mining projects, as they enable wealthy transnational corporations to extract resources and profits from poor countries leaving poverty and environmental destruction in their wake.
Produced by:
Social Justice Committee
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Montreal QC H3H 1J9
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