Tuesday, August 17, 2010

Comments on draft Framework for Palm Oil Sector

A few weeks ago I wrote on this blog that the World Bank and IFC have released a Draft Framework for Palm oil sector for consultation.

Robert Goodland, a reader of my blog, has sent me his comments on the Framework that he has submitted to the World Bank Group. His comments are interesting and I am reproducing them here:

WBG Framework for Palm Oil”
(undated) Draft for Consultation

Comments for the consultation by R. Goodland (RbtGoodland@gmail.org) respectfully submitted on:17 August 2010

[Note: Pagination refers to the page numbers in the 46-page WBG Framework. The text of the Framework has been italicized. My comments are in bold.]

P.3: The World Bank Group, with its primary mission of poverty reduction, sees the palm oil sector as an important contributor to furthering economic development in many developing countries.

The Framework needs to make the case that palm oil projects reduce poverty more than a similar investment elsewhere. That case has not yet been made convincingly in the current draft.

P.3: The World Bank Group is aware of the sector’s negative environmental and social impacts, including deforestation, biodiversity loss, greenhouse gas emissions, land use conflicts, and questions over land tenure and human rights.

Such awareness must be very recent as IFC denied the sector’s negative impacts by categorizing the Wilmar, Bertin industrial cattle ranching, monoculture Maggi soy and other damaging projects as ESA Category “B” until brought to book by CAO and others.

P.3: Recent civil society organization complaints to the Office of the Compliance Advisor/Ombudsman in relation to IFC’s handling of four downstream investments (in a palm oil trader and a refinery), as well as a complaint to the Inspection Panel regarding a World Bank smallholder oil palm program have raised concerns about sustainability issues. The World Bank Group recognized the legitimacy of these concerns and in response temporarily suspended any new investments in the palm oil sector.

It should not need CAO reports, massive outcries and complaints for the WBG to ‘recognize the legitimacy of these concerns’. The Knowledge Bank should be aware of such basic facts in advance, especially if it is to offer advisory services. These negative impacts are all too well known worldwide, and have been known inside the WBG at least since US Congress (led by Rep. Henry Reuss) pressured WBG President Robert McNamara on Malaysia’s massive Jengka Triangle oil palm projects in the 1970s.

P.4: A Common Approach …. In particular, IFC will only invest in plantation operations that are certified for sustainable palm oil production according to an internationally-recognized certification scheme, or have a time-bound action plan to achieve such certification.

This is too risky. It is well known that development agencies have highest leverage up to and just before Board approval. Once approved, such pari passu leverage and interest wanes fast. Time-bound action plans to achieve certain standards usually fail in such cases. Only part of the action plan is divulged. How the client is progressing to meet action plans is never divulged by IFC.

P.5: World Bank Group Commitments Key actions could include: working with governments to implement land registration systems, build capacity for environmental and social impact assessment and regulation, strengthen forest and land governance and administration and increase productivity.

Commitments and key actions could include a lot of good stuff. That is inadequate at this stage. IFC has been caught violating its own policies. The time has come to clarify what specifics IFC will firmly commit to in order to prevent such social and environmental damage and violations in the future.

P.6: Concerns about sustainability-related issues in the sector were highlighted by the IFC’s Office of the Compliance Advisor, the World Bank’s inspection panel, and civil society organizations and prompted a temporary moratorium in November 2009 on new World Bank Group investments in the palm oil sector pending development of a more strategic approach to
engagement in the sector.

(a) Is this “Framework” document supposed to be the strategic approach mandated by President Zoellick, and fostered by the unprecedented moratorium? The document is entitled Framework, but in places a strategy is hinted at. The e-mail address for comments on the Framework is “Strategy”. Clearly a strategy or even a policy is required if the recent massive impacts of IFCs investments leading to the moratorium are to be prevented in the future.

(b) IFC’s Compliance Adviser’s evaluation of IFC’s oil palm investments was kept secret for months before they were only partially released. CAO convincingly showed that corporate pressures had repeatedly trumped social and environmental concerns, starting with what is commonly IFCs weakest point, miscategorization for the Environmental and Social Assessment (ESA). Categorization as the ESA Category “B” of any project a priori likely to impact fairly intact tropical forest, likely to impact Indigenous Peoples, likely to emit significant GHG from forest removal, burning or peats, involuntary displacement—all should be systematically categorized as “A”. IFC’s AMaggi soy monoculture investment in the Amazon forest region, IFC’s Bertin industrial cattle ranching in Amazon forest region, and most, if not all oil palm projects, should routinely be classified as “A”. IFC categorized them all as “B” and refused to categorize them prudently without prolonged pressures, complaints, CAO investigations etc. All branches of the WBG should be enhancing prudentiary measures, rather than struggling to lower the standards.

(c) In addition, the CAO’s reports, the Inspection Panels reports and the complaints need to be included in full in the new oil palm Framework as annexes, or at least with easy-to-use links.

(d) CAOs findings -- that IFC systematically violated its own standards and policies -- need to rectified and stringently prevented in the future. Therefore, this Framework needs to specify precisely how the CAO-identified policy violations will be prevented in future.

P.6: The World Bank Group’s engagement in the palm oil sector is consistent with its mission to fight poverty without compromising economic, environmental and social sustainability.

Clearly not, or not yet. This claim is worrying. The Framework seeks to make WBG’s engagement consistent etc., but it’s a long way from achieving that as yet. The moratorium was commendably imposed on IFC precisely because IFC was refusing to follow its own standards and normal precautions. The CAO, IP and other evaluations showed that IFCs projects were exacerbating poverty and wreaking much environmental damage.

P.15: Table 1: A Summary of Possible World Bank Group Interventions under the Four Themes and Their Relation to Feedback from Consultations.

A menu of possible options is not what is needed at this stage. This Framework has been drafted precisely because IFC has been caught violating its own policies and standards. At this stage, firm commitments are needed, not “possible interventions.”

P.18: IFC may invest in oil palm plantation operations and other palm oil sector companies even if the public sector legal/regulatory enabling environment is less than ideal, if IFC is convinced that the project will have strong and measurable development impacts and that any risks can be mitigated through other governmental or non-governmental programs, including other World Bank Group operations, if present.

This has been tried by IFC and has failed. Post-approval leverage to foster compliance with pari passu action plans is weak at best. IFC needs to ensure that the design of projects it supports is as prudent as possible in advance, and that it has reduced all possible risks to a low or acceptable state. See comment on P.4 (above) on the risks of resorting to such pari passu aspirations.

P. 18: ….any risks can be mitigated through other governmental or non-governmental programs, including other World Bank Group operations, if present.

Up until now this statement is false. IFC has failed to mitigate risks such as destruction of forest, impacts in Indigenous and other poor people, harming GHG sequestration and forest fires etc, that’s why the moratorium was imposed on IFC. The moratorium is IBRD/IDA’s way of stopping IFC from creating more damage until their procedures are upgraded, fully agreed upon and conscientiously implemented by IFC, preferably with independent third party verification. The Framework as currently drafted could reduce risks further, but that would be insufficient. At this stage, in view of IFCs violations and irreversible damage as exposed by the CAO and others, the new strategy must ensure that: (a) no more forest is destroyed; (b) no more Indigenous People or poor re harmed; (c) no more GHG sequestration is impaired; (d) no more water is polluted. Clarifications and emphases on these basic priorities must be added to the next draft.

P.18: Last para: For the World Bank, the final selection of indicators will follow as activities are selected.

Despite all the Framework’s rhetoric about enhanced coordination between IFC and the rest of the WBG, this para suggests IFC prepared this Framework mainly on their own, but hopes IBRD/IDA will come in later.

P.23: Issue regarding how companies and government agencies obtained consent for land use changes was a strong theme. ….. Full adherence to the concept of Free Prior Informed Consent by investors in the palm oil sector was seen as essential by many of the stakeholders.

If FPIC is considered essential, where is IFC’s response? As FPIC is so important to RSPO and many other stakeholders, does the WBG propose to follow the United Nations Declaration (UNDRIP) and accept FPIC, or will it persist in debasing the UN Declaration into FPIConsultation? IFC is supposed to be a member of RSPO in good standing. As IFC apparently does not accept FPIC, it is violating RSPO’s membership criteria of accepting FPIC.

P.31 & 32: These projects are not discussed in the review because at the time of the research, the projects were missing from the Bank’s information depository (Business Warehouse) due to a problem with the internal sector coding system.

I respectfully suggest the missing projects be found and their lessons learned be integrated into this Framework while still in draft. I suspect the comment on P.3 (above) refers to these or similar projects.

P.44: All World Bank projects are categorized on the basis of the environmental and social risks associated with the project. Depending on the assessment of environmental and social
impacts and risks, projects may require Environmental Assessments and/or Environmental Management Plans to be prepared and implemented.

In fact, as already mentioned, IFC rarely finds a project worthy of an ESA Category “A”. IFC classifies practically all of its forest-, Indigenous Peoples- and GHG emitting projects as Category “B” at least until the CAO or others show how imprudent IFCs classification is. If IFC wants to promote sustainability and prudence, while reducing risks to environment or humans, it will classify any proposed project as a Category “A” that may impact or otherwise affect Indigenous Peoples, forest or GHG sequestration capacity, or any projects needing involuntary resettlement.

Conclusion: Three Gaps in the Draft Framework

1. Definition of ‘degraded’ sites: The Strategy or Framework should emphasize clearly that the WBG will decline to finance (or otherwise encourage) destruction of tropical, high conservation value, critical natural habitat, old-growth forest, secondary forest, hi-graded or selectively logged forest or other ecosystems, and impacts on Indigenous People. Further, that human displacement will be avoided or minimized, and that GHG emissions will be fully accounted beforehand, compensated for, and minimized.

The sites on which oil palm, soy or other projects may be located must be scrupulously defined. Brazil’s commendable policy is to select ‘abandoned’ or ‘degraded’ sites only. That’s a good first step. In the WBG’s case how a proposed site was found to be suitably abandoned or sufficiently degraded needs to be explicitly described. There have been far too many cases in which nomadic ethnic groups have hidden from development officials or are in another part of their customary ambits during a visit. Similarly, some officials may opine that a forest from which some mature trees of one species have been removed – selective logging -- is sufficiently altered to be called ‘degraded’. The basic premise, now that climate risks have intensified, is that most forest still standing is providing GHG sequestration services which are more valuable than more oil palm.

2. Use of Vegetable Oils: This is a tricky one akin to claiming: “guns don’t kill people.” On the one hand, IFC will garner much support if they can show that oil palm investments directly reduce poverty, create jobs for the poor etc, while not causing environmental and social damage. On the other hand, if the main benefit of oil palm production is to fuel vehicles, IFC won’t get much support. Between these two extremes, if oil palm production makes corporations more profitable and a fraction of this profit eventually trickles down to the poor, support for IFC also is likely to be weak (except from multinationals). If oil palm based industries are created in-country, thus diversifying products and expanding refining and processing benefits to the producing country, that would be a benefit. IFC should encourage domestic processing and value-added to the fullest extent possible. Indonesia rejected WBG advice a few years ago by thoughtfully imposing a ban on the export of crude undressed logs. As a result, Indonesia now has a thriving plywood, veneer, particle-board and finished wood products industry, along with massive wood processing jobs. As an ecologist, I haven’t a ready solution, but the problems are real and should be tackled.

3. Water Use and Pollution: Now that fresh water has become scarcer than at any time in history, its conservation has risen in priority. It may have been understandable in the 1950s and 1960s for palm oil producers to dispose of their extremely high BOD oil palm wastewater into the nearest creek. That era has long gone. Now even untreated sewage outfalls from coastal cities into the ocean are increasingly being banned. The time has come for IFC to lead palm oil producers into closed-cycle water management. This would conserve the supplies of water, while preventing the pollution of waterways below the oil palm factory. In addition, it would create secondary industries in recycling and use of waste products regained form wastewaters.

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