The World Bank’s Indigenous Policy

By Kay Treakle, NACLA Report on the Americas, 18 April 1998, 12:51 PM

In early 1994, the Ecuadorian government announced the seventh round of oil leases to open up ten new areas of the Amazon for oil exploration and production. At the same time, the Ecuadorian Congress was discussing a legislative proposal developed with advice from the World Bank to allow private-sector participation in the oil sector. The Bank, meanwhile, was preparing a $20 million loan to the Ecuadorian government to privatize the state oil company Petroecuador, and implement other public-sector reforms.1

Both the oil leases and the new law were met with harsh criticism by indigenous groups from Ecuador’s Amazon region, who have suffered the negative consequences of oil development for decades. New oil expansion in the Amazon, they argued, would lead to greater encroachment into their territories and further pollute their environment. After learning of the Bank’s proposed loan, Ecuador’s most powerful indigenous organization, the Confederation of Indigenous Nationalities of Ecuador (CONAIE), along with other indigenous groups and non-governmental organizations (NGOs), sent a letter to the Bank, urging it to apply Operational Directives 4.01 and 4.20—the Bank’s established policies to mitigate the adverse effects of Bank projects on the environment and indigenous peoples, respectively. The Bank refused, arguing that the loan had no direct implications for the environment or indigenous peoples.

Indigenous organizations and NGOs have long criticized the World Bank for financing projects that destroy the lives and livelihoods of indigenous peoples around the globe. Dam projects have displaced entire indigenous populations, while road building has brought new agricultural settlers, loggers and miners into their territories. The Bank adopted its first policy toward indigenous peoples in 1982, in part as a response to violent indigenous opposition to a World-Bank funded dam project in the Philippines.2

The policy, which was updated in 1991, looks good on paper. The objective of the current policy, Operational Directive 4.20: Indigenous Peoples, is to provide policy guidance to (a) ensure that indigenous people benefit from development projects, and (b) avoid or mitigate potentially adverse effects on indigenous people caused by Bank-assisted activities. O.D. 4.20 recognizes the rights of indigenous peoples to natural and economic resources, and urges their informed participation in Bank activities that affect them. The Bank, it suggests, should assist borrowing governments in establishing legal recognition of the customary or traditional land tenure systems of indigenous peoples. When a proposed investment might harm indigenous concerns, borrowing governments should develop an Indigenous Peoples Development Plan that would commit resources for health care, productive infrastructure, education, or entitlement to natural resources. The policy includes mechanisms for the participation of indigenous peoples in developing such a plan, but indigenous communities cannot veto Bank projects. There is, however, a provision for stopping or postponing projects where adverse impacts are unavoidable and adequate mitigation plans have not been developed.

O.D. 4.20 is a valuable tool that can be used by indigenous peoples to avoid becoming victims of Bank-financed projects, says Cindy Buhl of the Bank Information Center. However, its practical value depends on implementation. The Bank does not routinely apply its indigenous policy to projects that have only an indirect negative impact on indigenous peoples. In fact, Operational Directive 4.20 is often not enforced in lending that directly affects indigenous peoples.3 For example, three of the five cases filed with the World Bank’s Inspection Panel since 1994 allege that the Bank violated, or did not apply appropriately, O.D. 4.20 in the projects. The Pangue dam on the Bio Bio River in Chile, financed by the Bank’s International Finance Corporation (IFC), was one such case. The claimants alleged that the IFC failed to consult adequately with Pehuenche leaders who opposed the dam, among other violations. The panel rejected the case because it does not have jurisdiction over the IFC, which lends to the private sector.

One problem with implementation of O.D. 4.20 is that many Bank task managers are unfamiliar with the policy, while others resist applying it to their projects. While some operations staff have been trained in how to apply the policy, implementation seems to depend largely on those few Bank staff in the Environment Department and regional technical departments that are interested in and concerned about indigenous peoples.4 Moreover, the policy is straightforward for projects with a territorial impact, like dams or roads, but it is less clear how the effects of sectoral lending might be addressed. O.D. 4.20 was not considered applicable in the case of Ecuador, even though privatizing the oil sector could have accelerated oil development in the Amazon with clear negative consequences for Amazonian indigenous peoples. Another central problem is that the Bank deals only with governments, who are often unconcerned about the implications of their development projects for indigenous populations.

Outside pressure, coupled with increased staff awareness, can sometimes lead to greater implementation of O.D. 4.20. For example, in 1994 the Bank began to apply the policy in a proposed loan to the Mexican government for aquaculture development, but only after NGOs brought to the Bank’s attention the existence of indigenous fishing communities that would be affected by the development of industrial fish ponds. The Bank responded by earmarking 7% of the loan for indigenous development.

The Bank is currently revising O.D. 4.20 to clarify which parts of the policy must be complied with and which parts are only advisory. Indigenous organizations have requested that the Bank hold consultations with them before formalizing the draft. While Bank staff have agreed, this consultation process has yet to be implemented.

Indigenous organizations have increasingly asserted their right to participate in Bank policy revisions and specific Bank projects. If more vigorously applied, the World Bank’s indigenous policy may help reduce the negative impact of Bank-funded projects. At the same time, however, O.D. 4.20 fails to address the impact of the neoliberal development model itself on indigenous peoples, which ultimately undermines their traditional economies and cultures.

FOOTNOTES

1. World Bank, Ecuador: Public Enterprise Reform Technical Assistance Loan, November 22, 1994.

2. See Marcus Colchester, Changing World Bank Policies on Indigenous Peoples, Third World Network Features 1093 (Malaysia), 1993.

3. Andrew Gray, Development Policy-Development Protest: The World Bank, Indigenous Peoples and NGOs, in Jonathan Fox and L. David Brown, eds., The Struggle for Accountability: Social Movements, NGOs and the World Bank, forthcoming from MIT Press, 1996.

4. Andrew Gray, Development Policy-Development Protest: The World Bank, Indigenous Peoples and NGOs.