World Bank Policies Destroy Forests
Internal Report Documents Bank Contribution to
by Karinna Horta
Multinational Monitor magazine, June 2000
Destruction of tropical forests as well as of the world's
temperate and boreal forests has continued unabated over the past
decade, with consequences no longer seriously in dispute: Hundreds
of millions of people who rely wholly or in part on the use of
forests for their livelihoods are put at risk. Agriculture is
suffering as local climates are changing with the advance of savannas
and deserts. The world's terrestrial biodiversity, predominantly
found in tropical forests, is increasingly at risk. In addition,
deforestation worldwide is estimated to contribute about 20 percent
of the greenhouse gases now released into the atmosphere.
Virtually all tropical forests are located in developing countries,
and no single global institution plays a bigger role in developing
countries than the World Bank.
Environmentalist campaigns in the 1980s against the World
Bank's contribution to forest destruction-through support for
commercial logging, road-building through forested areas and mega-dams
that flooded large forest areas -led in the early 1990s to a rethink
at the Bank. In 1991, the Bank published a Forest Policy paper
which ended Bank support for commercial logging in primary forests
and promised a new Bank approach that would emphasize conservation,
poverty reduction and support for the rights of local people.
Nearly a decade later, the World Bank's Operations Evaluation
Department (OED, its internal review agency), published a review
in November 1999 of the Bank's implementation of its Forest Policy
Paper of 1991. The OED report documents that the Bank's performance
has been a flop.
"Bank influence on containing rates of deforestation
in tropical moist forests has been negligible in the 20 countries
identified for Bank focus," the report concludes.
The OED finds that World Bank has largely ignored the guidelines
provided in the Forest Policy Paper, and that it has paid little
attention to the impacts of its loans on forests. Most strikingly,
the OED report identifies the economic policies promoted by World
Bank structural adjustment programs as one of the driving forces
of deforestation-meaning the Bank is making the problem worse.
In a break from previous World Bank studies, the OED report
does not blame poor farmers and "slash and burn" agriculture
for deforestation, nor is demographic pressure mentioned as a
major underlying cause of forest loss. The new report declares
globalization and economic policies designed to promote exports,
bad governance, corruption and out-of control logging companies
to be the driving forces of deforestation in the world.
ADJUSTMENT AND DEFORESTATION
Some of the economic policies identified by the OED report
as harmful to forests, such as trade liberalization and export
promotion, lie at the very heart of the World Bank's structural
Structural adjustment loans are made to governments in exchange
for their commitment to adopt a set of policy changes, including
promotion of exports and opening up to foreign investment. Last
year, for the first time in the World Bank's history, the volume
of structural adjustment loans was larger than the volume of regular
project loans, representing more than 50 percent of the institution's
approximately $30 billion annual lending in fiscal year 1999.
The OED highlighted a range of structural adjustment measures
that contribute to deforestation. "[P]olicies associated
with economic crisis and adjustment-such as devaluation, export
incentives and removal of price controls- tend to boost production
of tradable goods, including agricultural and forestry products.
In doing so, and without mitigatory measures, they encourage forest
conversion," the report states. "Further, constrained
fiscal situations may lead to reduced public spending on environmental
protection and weaken the capacities of forest ministries to enforce
laws and regulations. "
Yet the OED report concludes that "the Bank has made
little progress in addressing the impacts of adjustment lending
on the forest sector." In a few cases, the Bank has added
special conditionalities to protect forests to structural adjustment
packages. However, the OED report found that these measures "lack
credibility," because building capacity and institutions
require long-term efforts and agreement from national governments.
While emphasizing the distinction between the processes of
globalization and Bank adjustment lending, Uma Lele, an adviser
in the World Bank's OED and the chief author of the November report,
says that "the Bank's own adjustment lending must do a better
job of environmental impact assessment." Noting the technical
difficulty in conducting such an analysis (as compared to environmental
assessments for project loans), she says that she is relatively
optimistic that the Bank will move in this direction.
Mainline World Bank officials did not respond to requests
for comment on the OED report.
The 1991 Forest Policy Paper emphasized the importance of
respect for indigenous peoples' rights and local community participation
in project development. With some caveats, environmental and development
organizations applauded this policy as a break from the past and
as offering hope for a more holistic Bank approach to the world's
The Forest Policy instructed World Bank staff that all types
of investments, including infrastructure construction and energy
and mining projects, had to take into account their potential
impacts on forests. It also required that the World Bank's investment
plans for a country, known as country assistance strategies, and
all economic sector work consider possible impacts on forests.
But the 1991 policy's promise has not been met, the OED report
After reviewing hundreds of project documents, the OED study
concludes that the Forest Policy has largely been ignored at all
levels and that forest-related World Bank lending had done little
to alleviate poverty.
While "plans for incorporating participation in Bank
projects have become more ambitious," the report states,
"implementation has lagged." The report cites five "weaknesses"
to account for this implementation failure: "inadequate reflection
of social, technical, institutional and political realities on
the ground in project design; 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 monitoring and evaluation indicators."
In addition, it found that the Bank had neglected governance
issues and that its activities in the area of institution building
had been weak.
Despite its claims of being a ''Knowledge Bank," the
OED report found that the World Bank is frequently oblivious to
the local political, economic and social realities in regions
affected by its projects. The report stated that "crucial
information" on land tenure (land ownership arrangements)
is frequently missing from key Bank documents, even though this
information is essential to respect and protect indigenous rights
and to advance effective conservation schemes.
WHICH WAY FOR THE BANK
The OED report reveals that a whole decade has been lost in
which the world's forests could have benefited from improved protection.
In order to address the problem, the OED report urges the creation
of incentives to ensure that Bank staff have the necessary resources
and can be held accountable for implementing forest policy guidelines.
But environmentalists were stunned by other OED recommendations,
which they found entirely divorced from the report's findings.
Many environmentalists believe senior World Bank staff whose goal
is to increase lending for forestry projects significantly influenced
The OED report claims that the prohibition of direct financing
for logging in moist primary tropical forests has had the effect
of discouraging innovative investments in forestry-implying that
investments in logging can save forests. Furthermore, it claims
that the prohibition has led to a "chill" in overall
lending for forestry-even though, as the OED itself documents,
annual Bank lending for forestry-related projects has increased
by 78 percent since adoption of the Forest Policy Paper in 1991.
In fact, a specific policy directive published in 1993 created
an enormous loophole allowing direct support for logging under
special circumstances which are not defined in detail.
The OED's Uma Lele says that the OED review shows that in
individual cases the Bank is funding important forest projects
that facilitate both conservation and poverty elimination, especially
in tree-poor countries. In China, she says, Bank-supported tree
planting may absorb one fifth of the country's carbon emissions.
"It would be a mistake to throw out the baby with the bath
water," she says, in arguing for increased funding.
Environmental and development NGOs have emphasized that small-scale
community-based logging on a pilot basis might provide valuable
learning experiences about how to manage forests sustainably for
the benefit of local people. But, citing the extensive recent
record of failure, they have resolutely opposed large-scale industrial
forestry in the tropics. Industrial systems, they insist, cannot
sustain timber yields over time, much less protect ecosystems
and biodiversity. And as the OED report itself acknowledges, it
has done nothing to improve the livelihoods of local communities.
What remains to be seen is whether the Bank in the years ahead
will follow the implicit recommendations in the OED report's findings,
while strengthening the 1991 Forest Policy Paper to provide added
focus on boreal forests in Russia which since the end of the Cold
War have increasingly become the target for World Bank investments;
or whether the Bank will instead open the floodgates for new large-scale
industrial forestry investments, thereby spelling an ever faster
acceleration of global deforestation.
Karinna Horta, a Multinational Monitor contributing writer,
is senior economist at Environmental Defense.
IMF, World Bank, Structural