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Sierra Club Charges World Bank with Violating Environmental Policies

FOR IMMEDIATE RELEASE
January 9, 1995

FOR MORE INFORMATION CONTACT:
Stephen Mills (202) 675-6691 or Roni Lieberman (202) 675-7903

Washington, D.C.... Citing recent reports which reveal the World Bank's attempts to conceal investigation results of a proposed venture in Nepal, the Sierra Club today called for the colossal Arun Dam project to be canceled, and for smaller, less environmentally destructive projects to be considered.

The Sierra Club is supporting Nepalese environmentalists who believe that the Bank is pressuring their government to sign off on the $764 million project in an attempt to circumvent the World Bank's Inspection Panel findings and to preempt a comprehensive investigation.

The World Bank, Asian Development Bank and several bilateral aid agencies are proposing to finance the million-dollar project, costing more than Nepal's entire annual budget, in an isolated, biologically-rich and ethnically diverse mountain valley near the base of Mt. Everest.

"This dam represents precisely the kind of foreign aid rat hole that has caused some members of the new Congressional leadership to support sharp reductions in U.S. contributions to the World Bank," said Stephen Mills of Sierra Club's International Program. "One would think that after years of local and worldwide opposition to such environmentally destructive projects that the Bank would have learned a few things. Maybe 50 years is enough," continued Mills, referring to World Bank's 1994 50-year anniversary.

Nepalese citizen organizations have proposed a more sustainable approach to hydropower development, based on local knowledge and indigenous capacity. This alternative approach is based on decentralized, smaller-scale hydropower development, and emphasizes public participation and practical projects that take advantage of local knowledge, skills, materials, and equipment. This approach would result in much greater social and economic benefits for the Nepalese, while providing sufficient electricity for the country, starting with those who need it most in rural areas.

On December 20, 1994 World Bank management issued an internal update to staff which stated that the Bank's internal Inspection Panel "does not recommend that further work be done on exploring alternatives". The memorandum directly contradicts a December 16 Inspection Panel report which found policy violations in the Bank's alternative project evaluation.

The panel memorandum clearly states that the World Bank has not demonstrated "that equivalent levels of effort were devoted to an alternative economic analysis," and that there was an "absence of a close examination of alternatives." "For Bank management to come into compliance with its own policies, a full investigation of viable alternatives must be a part of the project analysis," said Mills.

The World Bank has a long history of excluding indigenous people, non- governmental organizations, local experts and government officials from its decision-making process. In this case, the Nepalese government, which is still prepared to consider alterative energy projects, has repeatedly asked the Bank for more time to review the project proposal. The Bank is unyielding and is pressuring the Nepalese government to immediately indicate whether it wants to proceed.

Last year in an effort to further reform the lending practices of the Bank, Rep. Barney Frank (D-MA) former Chair of the House Subcommittee with jurisdiction over development banks, insisted on an exchange. In return for U.S. funding of the World Bank's International Development Assistance fund (IDA), the Committee required the Bank to increase its "transparency" or openness to public review and to create a new independent inspection panel to review controversial projects.

"The World Bank is attempting to subvert the work of its own panel. A unanimous Bank board vote is required for an inspection to even occur," said Larry Williams, Director of Sierra Club's International Program. "These guys aren't even willing to play by their own rules when the risk is they may lose one of their pet projects," he continued.

"This represents the antithesis of sustainable development: a mega-project in a small country for the benefit of a small urbanized elite of industry, government officials and foreign contractors," said Mills. "In Nepal, the rural taxpayers and the environment will bear the burden."

Approximately 450,000 people from 10 ethnic groups would be adversely affected if the project is funded. The Arun III hydroelectric project will also directly impact the area's forests and wildlife because the forests surrounding the site would be cleared. A Nepalese NGO, the King Mahendra Trust has said that total deforestation is likely to occur in the Arun basin in less than 15 years because new roads would make access to the forest easier. And the World Bank itself recognizes the dam will block the movement of migratory fish, although no studies have been done regarding those impacts and the economic and social implications.