NEWS 2005

 

FINANCING GLOBAL FOREST DESTRUCTION

excerpts from W R M B U L L E T I N 95 - June 2005


- The World Bank, Forests and Forest Peoples: Policies, Impacts and Implications

New policies, old problems. Ever since the 1970s, the World Bank has struggled to define an approach to forests, which reconciles its expressed commitment to poverty alleviation with its model of promoting 'development' through top-down growth and commercialisation. Free market models of development based on private property rights do not fit well with conventional forestry approaches. Since the 1700s, the dominant model of 'scientific forestry', developed in Europe, has opposed the free play of market forces by reserving forests for State-chosen strategic interests. This has entailed State control of forest reserves, as 'public goods', to the exclusion of both local communities and (at least in theory) destructive industries. Forestry ministries, which favour State control and public ownership, and agricultural ministries, which favour private property and free markets, have long been suspicious of each other.

This model of 'scientific forestry' was first imposed on developing countries by the British in Burma in the 1840s. Ever since, the political economy in tropical forests has been dominated by unhealthily close relations between those in State agencies, who control forests, and large-scale loggers, prepared to pay them back-handers to get access to the timber. 'Scientific forestry' has thus not only favoured collusive corruption but has led to the development of institutionalised graft, whereby substantial proportions of timber profits bank-roll politicians, their patrimonial networks and - in today's so-called democracies - political parties. Corruption and social exclusion have penetrated the forestry sector so seriously that the goals of 'scientific forestry' - which aimed to reserve forests for producing timber for strategic industries and ensure environmental services - have been wholly defeated. Forests have been mined for the economic and political gains of business elites, with severe social and environmental consequences.

This kind of forestry has not only been riven with economic 'inefficiencies' - so distasteful to World Bank economists - but has imposed huge costs on local communities and indigenous peoples, whose rights were denied in setting up State forest reserves, to such an extent that the contradiction between forestry and the poor has been too harsh for even the World Bank to ignore. Since the 1980s, the World Bank's favoured solution to these problems has thus been to promote market- based approaches to the concession system - through measures like competitive bidding, market transparency, undoing log export bans -  on the one hand, while promoting 'social forestry', usually outside forest reserves, on the other. 'Social forestry', based on the Chinese model of mass plantings by State-directed peasantries, was meant to provide rural people with at least some forest products. However, in more capitalist countries it was quickly found that these plantations could be designed to benefit pulp mills and paper industries more than local farmers, whose labour was co-opted for planting and looking after seedlings and saplings but who got scant access to the trees once they matured.

It was only in the mid-1980s, that the World Bank's approach to forests was seriously challenged by social justice and environment movements. Once it became clear that the World Bank was funding the mass destruction of tropical forests and indigenous peoples - through colonisation schemes, plantations, dams, mines, road building and agribusiness - the World Bank promised reforms. It set up a new environment department, adopted what came to be called 'safeguard policies' - required procedures designed to protect vulnerable social groups and environments from the worst impacts - and announced that its goal was to promote 'sustainable development', an oxymoron made popular by the Brundtland Commission.

NGO focus on the World Bank's forestry policy, however, only really started in earnest with the unveiling in 1986 of the Tropical Forestry Action Plan (TFAP), a proposal from the World Bank, FAO, UNDP and World Resources Institute to slosh US$ 7 billion of aid money into tropical forestry. This was to be more of the same - more commercial logging, more plantations modelled on the Aracruz example in Brazil and more top-down social forestry of the kind that was dispossessing peasants and covering ill-named 'wastelands' in India with a sea of Eucalyptus. One response from NGOs was to set up the World Rainforest Movement, which was founded at an international conference in Malaysia in 1986 as a riposte to TFAP.

The outcry was so loud and the evidence uncovered by the NGOs so compelling that, in 1990, the G-7 summit called for the TFAP to be revamped - it soon fell apart. For a short period, the critical voice of NGOs was so strong that, when it became clear that there was barely a single example worldwide of sustainable forest management in the tropics, the Bank felt obliged , in 1991, to adopt a forest policy based on a precautionary approach to natural resource exploitation. In the absence of any good evidence that tropical forest logging could be sustainable, the new 'Forestry policy' proscribed World Bank funding of projects that would damage primary moist tropical forests.

The Return of the Market: divide and rule. Unfortunately, NGOs did not hold firm in their rejection of market models for forestry reform. True, some such as WRM did prioritise alternative approaches to forests, based on the restitution of the rights of indigenous peoples, land reform to bring justice for peasants and the landless rural poor, the promotion of local livelihoods, gender justice and self-governance. However, many others, including major conservation bodies like the WWF, were attracted by the potential of harnessing market forces to provide the private sector with incentives to manage forests 'sustainably', which they hoped would in turn drive forestry reforms. The immediate result was the Forest Stewardship Council, set up in 1993, which while its principles and criteria included strong protections of the rights of local communities, indigenous peoples and workers, led to the rehabilitation of the suspect concept of Sustainable Forest Management. In 1998, the WWF and the World Bank announced a new joint 'Forest Alliance' dedicated to promoting the certification of 200 million hectares of forests in World Bank target countries by 2005. The World Bank was back in the forestry game.

The problem remained for the World Bank, that its 1991 forest strategy was not really compatible with a market approach to forests. However, with the NGOs divided, the Bank embarked on a complex manoeuvre designed to legitimise its return to the promotion of tropical forest logging and market based reforms. It carried out a lengthy Forest Policy Implementation Review and Strategy Development, undertook extensive regional consultations, commissioned a series of papers examining worthy matters like poverty alleviation, indigenous peoples and community forestry and, then came to the unsurprising, though contested, conclusion that it was time to do forestry again just as it had in the 1970s and 1980s - promoting market-based reforms of forest industry, while doing 'community forestry' to show it still cared about poverty. The proscription on funding logging in primary moist tropical forests was lifted, the precautionary approach dropped.

The new Strategy and associated policy, adopted in 2002, however, has even more of a market emphasis than before. New markets in environmental services are to be promoted, alongside markets in 'green' timber, which the policy aims to achieve through voluntary certification. Carbon trading is also being promoted through the Bank's new Biocarbon Fund.

As detailed in the April issue of the WRM Bulletin (No. 93), unleashed by the new policy, recent World Bank investments are causing serious problems - expansion of socially and environmentally harmful investments in plantations, agribusiness and phoney carbon sinks; top-down community forestry schemes which trample the rights of indigenous peoples, while best practice examples of Bank-funded certified sustainable forestry operations are nowhere to be seen.

Markets without rights. No one should be surprised that the World Bank favours a market approach to dealing with forests, but what is tragically inconsistent about the World Bank's approach is its treatment of the property rights of the poor. Of course, NGOs tend to argue for the recognition of the land rights of indigenous peoples and local communities on the grounds of human rights and natural justice, but capitalist economists, such as De Soto, have also stressed that development cannot work in favour of the poor without a strong framework to protect property rights.

As the eighteenth century free market philosopher Adam Smith noted, for 'free markets' to work, the State must protect 'as far as possible, every member of the society from the injustice or oppression of every other member of it...' through the 'establishment of an exact administration of justice'. The rule of law, Smith concluded, is required for the protection of private property, and this must be done fairly if it is not to 'excite the indignation of the poor', leading to the great risk that 'civil government, so far as it is instituted for the security of property, is in reality instituted for the defence of the rich against the poor' (Adam Smith, The Wealth of Nations).

Yet, the new market-based 'Forests Policy' of the World Bank falls into exactly this trap. The World Bank notes that some 1.2 billion poor people worldwide depend on forests for fuel-wood, water and other basic elements in their livelihoods. Of these, 350 million people are forest-dependent people, while only 60 million of these are classified by the Bank as 'Indigenous Peoples'. Although, the new forests policy does require that Bank-funded logging projects ensure 'recognition and respect for legally documented or customary land tenure and use rights', no such protections are extended to peoples impacted by other Bank-funded projects that affect forests, like dams, mines, roads, colonisation schemes, agribusiness and  plantations. Instead of addressing these concerns head on, the World Bank said it would deal with these broader concerns about tenure in its revised Indigenous Peoples policy, even though this policy is only aimed at some 5% of the 1.2 billion people that the World Bank estimates depend on forests. In effect, the World Bank is prepared to impose its market-based policy for the 'development' of forests and plantations without dealing with the tenure rights of some 1.1 billion people who depend on these forests for their well-being.

Moreover, even the Indigenous Peoples policy, which was finally adopted by the World Bank in May 2005, offers very uncertain protections. Although the policy is a slight improvement on discussion drafts issued over the previous four years, the new policy does not call for full recognition of land rights. It only requires borrower governments to set out an 'action plan' for either full legal recognition of existing customary land tenure systems, or a process for converting customary rights into ownership rights, or measures for legal recognition of long term use rights.

Indigenous peoples have not been happy with the new policy. A signed statement by many of the main indigenous peoples' organisations attending the UN Permanent Forum on Indigenous Issues in May 2005 noted of the new World Bank policy that:

"The newly revised policy has made important improvements in several areas, such as requiring that the commercial development of affected indigenous peoples' cultural resources and knowledge be conditioned upon their prior agreement to such development. Nevertheless, we continue to be extremely concerned about these Multilateral Development Banks lack of recognition of indigenous peoples' customary rights to their lands, territories and natural resources and to their related right of free prior informed consent, and their derogation of international standards to national law."

Indigenous peoples have in particular been concerned by the way their demand for recognition of the right of impacted communities to free, prior and informed consent to projects proposed on their customary lands, has been turned into a requirement for 'free, prior and informed consultation' leading to 'broad community support'. According to the Bank's new policy, such consultation and the assessment of 'broad community support' is to be carried out by the borrower government, does not entail the right of the community to veto the project, and is only verified by World Bank staff through their review of documents provided by the government.

All this allows far too much room for projects to be imposed without adequate respect for indigenous peoples' rights to their lands and to self-determination. As Canadian indigenous rights activist Arthur Manuel noted:

"Consultation sounds good, but does nothing. It's a mechanism to allow for the ultimate theft of our indigenous propriety interests free of charge. Prior informed consent is recognition of our land, culture, and way of life."

By Marcus Colchester, Forest Peoples Programme, e-mail: marcus@forestpeoples.org. Further details on the implications of the World Bank's Forests Policy can be found on http://www.wrm.org.uy/actors/WB/brokenpromises.html. For additional background information see: www.forestpeoples.org

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- The IMF's role in the destruction of tropical forests

Let us make no mistake. When the IMF talks about a "favourable environment," it is referring to business, to a favourable environment for direct foreign investment through operations on the stock exchange, or indirect foreign investment through the operation of transnational companies.  The sporadic references made to the environment in their loans, grants, documents and strategies are functional to their classical recipes based on adjustment and stabilization programmes, which if properly applied, should lead us to sustained development, understood of course in terms of the continuous growth of the GDP.  The IMF continues to believe, or to insist on making us believe that there is a magic or "virtuous" circle in which "sustained" economic growth reduces poverty and increases available resources to improve the environment. Furthermore, this circle has its own feedback (1). Something similar to the invisible hand of Adam Smith.

The IMF itself confesses that it does not take environmental problems into account as it is limited by its mandate and by the scant preparation of its staff in such matters. This institution declares itself to specialize "only in issues referring to macro- economic, monetary, trade and tax policies on a national and international level" and that it is other organizations such as the World Bank, the United Nations or the regional development banks that are "better equipped" to address environmental problems." (2). In this way, the IMF eludes all responsibility for the environmental impacts generated by its stabilization and structural adjustment programmes.

Three decades have gone by since the first structural adjustment experiments were implemented by the bloody dictatorships of Uruguay, Chile and Argentina in the mid- seventies.  Since then and with no distinction of a historical, geographical, cultural or social nature, the IMF has been imposing a single recipe for any country attempting to access its funds, which supposedly aims at achieving economic growth.  The IMF takes advantage of the opportunity to impose structural adjustment and stabilization programmes as a conditionality to obtain its loans.  These include the implementation of measures aimed at overcoming the budgetary deficit through cuts in public expenditure, the implementation of privatization processes, deregulation of the economy including trade and financial liberalization and economic growth based on an increase in exports. These adjustments involve a structural reform of the State, making it possible to eliminate barriers preventing access to resources and the creation of an environment favourable to foreign investment.  Such "barriers" include any type of social regulation (including measures for labour and environmental protection).  Summing up, when a country has difficulties with its balance of payments and is on the verge of bankruptcy it finds itself forced to accept the IMF's financial "assistance,"  but in fact it really starts to sink in a process whereby it looses control of its resources (understood in the WIDE sense) and of its sovereignty.

The protests and demonstrations of the affected communities, civil society organizations and studies by environmental organizations have proved over and over again, that in most of the IMF client countries, in addition to the development objectives not being attained, the general results of these policies have been devastating on the environment" (3).  And forest ecosystems do not escape this rule. In the year 2002, a study by the American Lands Alliance concluded that the International Monetary Fund (IMF) credits and policies caused a notorious increase in deforestation in Latin American, Asian and African countries possessing great biological wealth. The study points out that the IMF strategy of promoting growth based on exports and foreign investment, while putting pressure on the countries to cut back on their expenditure on environmental programmes, has also accelerated deforestation." The IMF seems to have promoted the logging of endangered forests in Brazil, Cameroon, Chile, Ecuador, Ghana, Honduras, Indonesia, Côte d'Ivoire, Madagascar, Nicaragua, Papua New Guinea, the Central African Republic, Russia and Tanzania.

The response to this report by the IMF was that it would seem to have been based on "old or incorrect" information. The Fund argues that it has incorporated conditions requiring the reform of forestry policies - aimed at reducing illegal logging and at strengthening forest protection - and that it has even suspended loans to various countries in an attempt to halt illegal logging and deforestation (4). However, the truth is that so far, the Fund refuses to acknowledge the environmental impacts of its structural adjustment programmes.

For example, the study points out that in Brazil, where the tropical forests represent one third of all the rainforests left on the planet, the Government reduced its environmental expenses by almost two thirds, as a condition for an agreement on an emergency package of 41,500 million dollars signed with the IMF in 1998.  This implied a budgetary reduction in which 10 of the 16 environmental programmes in Brazil - several of them aimed at enforcing forest exploitation standards and forest protection - ceased to be applied.

In Cameroon, one of the countries with the greatest biological diversity in Africa, the IMF managed to get it to devalue its currency and reduce taxes on exports of forest products. "This made forest exploitation more profitable, and increased the number of commercially viable species, thus increasing the volume logged per hectare." As a result, the number of logging companies operating in Cameroon increased from 177 to 479 between 1990 and 1998, compared to the scant 106 operating in 1980, with the result that over 75 per cent of the country's forests have been logged or will have been logged in the near future.

In Papua New Guinea, which hosts 1,500 species of trees, 200 species of mammals and 750 species of birds, half of which are endemic, cuts in public expenditure resulted in the dismantling of the Environmental and Conservation Department.  To encourage the timber industry, the IMF managed to have taxes on forest exports cut from 33 per cent to between zero and five per cent in 1998.  The result did not take long to appear: various large Malaysian logging companies immediately established themselves in Papua New Guinea, seriously affecting the forests of that country.

The IMF -which mainly reports to the United States Treasury- has not made any substantial changes to improve the situation.  It has merely recognized that its policies have some impact on poverty, which has implied a cosmetic change in its structural adjustment programmes. No mention of policies favouring the environment. On June 11, the Ministers of Finance of the G8 made a public declaration on "Development and Debt" including a proposal to cancel the multilateral debt to be submitted to the Annual Meetings of the IMF, the World Bank and the African Development Bank in September 2005.  This cancelling of the multilateral debt is still linked to observation of conditions exacerbating poverty, over-exploitation and plundering of natural resources and the perpetuation of domination over the South. In cancelling the debt, no restitution or reparation is commuted for slavery and colonization, for the looting of wealth and natural resources, the exploitation of labour, for human, social and ecological destruction in the South caused by economic activities, military operations and wars protecting the interests of international cleptocracy (5).

The silence of the IMF technocrats, produced by universities such as Harvard and its peers, is not a mere coincidence.  They have been trained in function of a single objective: that of removing the obstacles hindering access and control of the planet's natural resources by the major corporations. Or perhaps the perpetuation of the United States trade deficit aimed at financing the business of world cleptocracy. Once more, the end justifies the means: letters of intent are signed, workshops are organized to build up technical capacity, extortion is exerted with threats of closing access to the markets of international capital and those who have the courage to oppose this neo-liberal development model are repressed. The actors are powerful and well-known: the governments of the rich countries in the North, the multinational corporations, and the corrupt elites and oligarchies of the South.  The result can in no way be called development, not if it is done at the expense of destroying healthy ecosystems, the impoverishment and social exclusion of the communities that inhabit them or that depend on them for survival, and the perpetuation at all costs of the present system of global production.

By Marta Zogbi, Friends of the Earth International, e-mail: marta@foei.org

Sources consulted:

1. Ficha técnica - Abril de 2004 "El FMI y el medio ambiente", http://www.imf.org/external/np/exr/facts/spa/enviros.htm

2. "The IMF and the Environment", Ved P. Gandhi, July 28, 1998 http://www.imf.org/external/pubs/ft/exrp/environ/

3. "The IMF: Funding Deforestation" by Jason Tockman, American Lands Alliance. The complete report may be read (in English) at http://www.wrm.org.uy/actores/FMI/Jason.doc

4. AMBIENTE: FMI bajo fuego por promover desforestación by Danielle Knight www.tierramerica.net/2002/0203/noticias1.shtml

5. ADITAL 22.06.05 - ARGENTINA "Respuesta de Jubileo Sur a la propuesta sobre Deuda del G8" http://www.adital.org.br/site/noticias/17311.asp?lang=ES&cod=17311

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- The European Investment Bank: Surrounded by secrecy

Financial deliberations generally take place between dubious actors in obscure corners of the political arena. This is definitely the case with the European Investment Bank, which has only recently been put in the public spotlight. It is now time to uncover the dirty secrets of the European Union's house bank.

Established in 1958 to support integration within Europe, the EIB has never been subject to public scrutiny. This is quite unbelievable if you look at the figures. The EIB currently has an annual budget that is bigger than the World Bank's: around 4 billion Euro. It has a history of financing large scale infrastructure within the European Union, including many controversial airports and the package of destructive highways known as the Trans European Networks. Its gigantic lending portfolio gives it great influence over the development of recipient nations. Many of its loans go to risky infrastructure projects as well as oil, gas and mining operations and large hydro dams. Contrary to other financial institutions, the EIB never bothered to adopt safeguards to ensure that its projects would protect people and the environment.

While the World Bank and other banks are acknowledging the need for the establishment of social and environmental standards, the EIB remains silent. Although the EIB is required to follow European Union legislation in its activities, there is little evidence that it does.

The EIB's legal status and its obligations with respect to the EU have never been properly clarified. There is confusion over how exactly it can be held responsible to EU laws, and made accountable for failures to abide by relevant environmental and social laws, policies and regulations.  The Gothenburg European Council (2001) and the European Parliament (2002) have both underlined the need for the EIB to integrate the general priorities of the Union in its activities.

The reality in practice is that the EIB's project appraisal is done on economic, financial and technical terms rather than by placing sustainable development at the core. While the EIB says it supports the EU climate change policy, it still engages in the financing of large-scale fossil fuel projects. It has begun making controversial loans for the sequestration of greenhouse gases through so called 'sustainable forest development', and participates in the implementation of disputed mechanisms of the Kyoto Protocol. "The EIB believes that flexible market-based mechanisms are the key to cost-effective and timely climate change mitigation efforts," said EIB Vice President Peter Sedgwick in December 2004.

The European Investment Bank is now increasingly looking towards investing in the global South. Yet, its mandate for doing so is very unclear.

The majority of EIB lending outside the EU is directed towards African, Caribbean and Pacific (ACP) countries. On 2 June 2003, the EIB started the Cotonou Agreement Investment Facility for ACP countries, which channels money to the private sector. From 2003 to 2008, about 2.2 billion Euros will be disbursed to the ACP region by this investment facility, as well as 1.7 billion Euros from the EIB's own resources. But there is no evidence that the EIB gives any substantive consideration to the key Cotonou objective of eradicating poverty in ACP countries. At the same time, the EIB does not have its own development strategy.

The EIB is more explicit about its reasons for financing in Latin America. A December 2004 memorandum with the Inter American Development Bank states that "Lending activity in Latin America has a clear operational focus mainly in support of European Foreign Direct Investment". The EIB is clear about its ambitions and states that the "political reach" of the Inter American Development Bank makes the cooperation very attractive. The EIB currently has committed to invest 2,480 million Euro to the Asia and Latin America region. The banks look forward to working together to implement IIRSA, South America's megalomanic scheme for infrastructure integration. IIRSA's projects are likely to put some of the region's most delicate cultures and ecosystems at great risk. There is no assurance that any of these projects will be appropriate or sustainable. Worse still, the EIB/IDB memorandum goes on to say that project preparation will generally be delegated to the sponsors. This means that both financial institutions absolve themselves of any environmental and social responsibility.

Just a few of EIB projects that have caused grave impacts on the world's communities and forests in the past decade include Shell's Brazil-Bolivia Gas Pipeline (55 million in 1998), Exxon's Chad-Cameroon Pipeline (134 million to in 2001), Veracel's Brazilian Eucalyptus Plantation and Pulp Mill (98 million in 2003) and the Nam Theun II Dam in Laos (40 million in 2004.

The main problems identified in European Investment Bank activities include:

  • Confusing status as both an EU institution and an independent entity;

  • Unclear mandate for operations in the global south;

  • Continued secrecy around its operations;

  • Lack of clear environmental and social guidelines;

  • Lack of consultation with affected communities;

  • Small number of and inadequately directed staff;

  • No proactive environmental protection lending;

  • No implementation of environmental objectives.

As the European Investment Bank starts to move around the world, so will we. Civil society recently launched a web site where all projects financed by the EIB in the past ten years can be traced. With the 'no' to the European constitution, there is now renewed space for civil protest in the European political area. And we can use it by exposing the secrets of the European finance activities around the world. Organise, mobilise, protest and propose in the name of our forests, our dignity and our lives. Visit www.eibprojects.org and inform yourself.

By Janneke Bruil, FoE International, e-mail: janneke@foei.org

Read more at: www.foei.org/ifi/eib.html, www.eibprojects.org, www.eib.org

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WORLD RAINFOREST MOVEMENT
MOVIMIENTO MUNDIAL POR LOS BOSQUES
International Secretariat
Maldonado 1858; Montevideo, Uruguay
E-Mail: wrm@wrm.org.uy 
Web page: http://www.wrm.org.uy 
Editor: Ricardo Carrere