New York Times
July 7, 2000

The World Bank announces their withdrawal from the sensitive “anti-poverty” project.

WASHINGTON, July 7 — Under heavy pressure from
the United States and several other wealthy nations, the World Bank
today scrapped a sensitive antipoverty project that critics argued
might have reinforced China’s claims to Tibetan lands, people informed
of the outcome said.

The plan, part of which would have spent $40 million to resettle 58,000
ethnic Chinese in Qinghai province, an area once dominated by nomadic
Tibetan herders, divided some of the bank’s leading borrowers,
including China, from several major donor nations, including the United
States.

Rarely has any World Bank project aroused as much internal dissent and outside protest.

This morning, China withdrew the project from consideration after it
became clear that the bank’s board would have required a lengthy
environmental and social impact study and another board review before
providing full funding, the people said. The World Bank planned to
issue a formal announcement of the outcome shortly.

The proposal, which was medium-size by World Bank standards, became a
test of the power of developing nations to resist pressure from rich
countries and some private lobbying groups when allocating World Bank
money. But it also tested the bank’s internal procedures for approving
projects and the power of rich donor nations to insist on strict
compliance with those rules.

An internal World Bank inspection panel reported last month that the
bank violated its own guidelines when it approved the Chinese proposal
to aid poverty-stricken farmers in Qinghai. The bank’s board, which
consists of both rich donor nations and poor borrowers from the bank,
ordered the inspection panel to examine the way the project was handled
last year.

China’s decision to withdraw the project is a defeat for James D.
Wolfensohn, the bank’s president, who had pushed the board to approve
funding. Mr. Wolfensohn favored the project despite efforts by the
Clinton administration to kill it. President Clinton recently backed
Mr. Wolfensohn for a second term as World Bank president, a job
traditionally filled by an American.

Supporters of the Dalai Lama, the exiled spiritual leader of Tibet, who
was born in the proposed resettlement region, have argued that the
World Bank would contribute to the sinification of the Tibetan region
by agreeing to help move mostly Han Chinese farmers into a largely
unsettled area of western Qinghai, which some Tibetans claim is part of
their homeland. The Dalai Lama himself called the project a “source of
problems.”

Several protesters from the Campaign for Tibet have camped out in front
of the bank’s steel-and-glass headquarters in downtown Washington for
several days running, calling for cancellation of the project. But the
main arguments inside the board’s chambers were about the World Bank’s
own procedures.

China and other developing companies have argued that rich nations are
trying to dictate terms for loans based on political considerations.
Critics of the project, including the United States, Japan and several
European nations, argued that the bank sometimes ignores its own
guidelines for assessing the social, political and environmental impact
of loans to developing nations, according to people involved in the
debate.

The 160-page inspection panel report, a copy of which was provided to
The New York Times by a person critical of the project, said the bank
originally classified the project as needing a relatively low level of
review when in fact it should have required the highest level of
scrutiny. The report strongly implied that China intimidated bank
managers to expedite approval.

Because China’s per capita income has risen rapidly, the Qinghai
project is the last antipoverty effort in that country eligible for
bank’s most subsidized loans.

Bank officials have argued that China has an excellent track record of
using World Bank loans to lift its people out of poverty. The Qinghai
project, part of which would move farmers who live in arid eastern
Qinghai to irrigated lands in an underpopulated part of the same
province, is a sound way to better the lives of a small number of
desperately poor people, bank officials said.

People who favor the project have also argued that Qinghai, which was
part of China even before the 1951 Chinese invasion of Tibet, is
already predominantly Han Chinese.

But opponents say that Beijing is less interested in helping poor
people than in securing its historic claim to areas on the Tibetan
plateau. They say the project serves to dilute Tibetan influence in a
rural part of Qinghai once inhabited largely by roaming herdsman from
Tibet.

“It’s like moving people from Denver to a native American reservation
in Colorado,” said John Ackerly, president of the International
Campaign for Tibet, which has fought the project. “This is an area
where Tibetans have lived for generations.”

The United States, Japan and the United Kingdom, among others, were
critical of the way the bank handled the project. They demanded that if
the project were to go forward, it should first be subjected to a
rigorous test of the social impact and then resubmitted to the board
12-15 months later for a new vote.

China and Mr. Wolfensohn objected to those terms, arguing that the bank
could ensure proper compliance with its rules. When it became clear
that they did not have enough votes under the board’s complex voting
structure to ensure that outcome, China withdrew the project for
consideration, people involved in the deliberation said.