World Bank is between China and a hard place

By Abid Aslam, Asia Times, 5 October 1999

WASHINGTON - Members of a World Bank investigative unit are heading for China to investigate a politically troublesome transmigration project.

Jim MacNeill and Edward Ayensu, chairman and member of the bank's quasi-independent Inspection Panel, were due to leave Washington for Beijing on Saturday to probe the embattled China Western Poverty Reduction Project. The project fell prey to controversy earlier this year, twice forcing the bank's executive board to put off a decision on providing funds.

In June, representatives of the global lender's 182 member nations struck an unusual compromise. They approved the $160 million project but froze $40 million for the resettlement component in remote Qinghai province. This, they said, would allow the inspection group to investigate policy violations alleged by the International Campaign for Tibet, a non-governmental organization.

While in China, the investigators will talk with government and bank officials in Beijing but the main purpose of the visit is to meet local people who will be affected if the Qinghai portion of the project goes ahead, explained a panel statement.

MacNeill and Ayensu are scheduled to return to Washington October 20 or 21 to interview staff at bank headquarters and review project documents. Their final report is expected early next year.

The proposed transmigration generated intense criticism from the Dalai Lama's office, human rights and environmental groups and a number of leading bank shareholders. They warned that the envisaged resettlement of 58,000 peasants from severely eroded hillsides to arid plains in Qinghai province would dilute the Tibetan and Mongolian presence in the region. Bank project documents showed that Tibetans' share of the local population would fall from 22.7 percent to 14 percent and Mongolians', from 14.1 percent to 6.7 percent.

The bank described the resettlement area as adjacent to Tibet, which China annexed in 1959. Project opponents said the resettlement would increase competition for scarce resources and heighten ethnic tensions in a region already prone to outbreaks of violence.

Environmentalists accused the World Bank of falsely describing project plans - which included a dam, roads and irrigation - as having only minor ecological impacts. The agency then hid those findings from the public until project appraisal was complete, breaking its information disclosure rules.

Critics further alleged that project proposals lacked a compulsory Indigenous People's Development Plan and flouted a World Bank commitment to eco-friendly integrated pest management by allowing use of toxic pesticides on farms in the resettlement zone.

Executive directors from Germany and the United States in June opted to quash the planned project in a rare vote by the World Bank's 24-member board. Austria, Canada, France and the Nordic countries abstained while all other member states, most of them represented in blocs, voted yes.

Members of the US Congress were irked that the project was approved over US objections and this week proposed legislation to punish the World Bank. While the US executive director properly voted against this project, the World Bank will nevertheless use tax dollars from US citizens to make the loan, said House of Representatives Policy Committee chairman Christopher Cox.

Americans shouldn't be asked to subsidize such irresponsible conduct, said Cox, Republican chief sponsor of the proposed Ecosystem and Indigenous Peoples Protection Act. If passed, the law would require automatic reductions in US payments to the World Bank if the agency approved any project likely to result in substantial environmental harm or involuntary resettlement.

US payments would be reduced in proportion to the US share of the project's cost. Supporters of the bill said that rate was about 20 percent - the same as the United States share of World Bank capital and board votes.

Bank officials countered that the Qinghai resettlement plan was voluntary and oversubscribed, with many more peasants applying to move than could be accommodated under the project. Agency officials said the plan was the villagers' best hope of escaping destitution.

Poverty could be reduced at two other project sites - in Inner Mongolia and Gansu province - without moving people around but in Qinghai that option does not exist, said Jean-Michel Severino, World Bank vice president for East Asia and the Pacific.

The June compromise on the project followed multiple warnings from China - historically the World Bank's largest client - that it would re-evaluate its relationship with the lender if the project was defeated, agency sources told IPS at the time.

(Inter Press Service)