by Odious Debts Online

August 6, 2004
To prevent corrupt regimes from siphoning revenue from extractive industries, the World Bank will now require resource companies and countries to disclose their revenues from oil-related projects. The move follows a recommendation by an independent review advising the Bank to phase out its investments in oil production by 2008 and devote its resources to funding cleaner, renewable energy. During this phasing out period, the review suggested Bank investments in oil should be “exceptional, limited only to poor countries with few alternatives.” Despite the review’s findings, the Bank announced this week it will continue funding oil, gas and mining projects but will demand greater transparency for oil-related loans. Rashad Kaldany, director of the Bank’s gas and mining department, told reporters the Bank will make public its assessment of corruption in a country before a loan for an oil or gas project is made and will require companies and countries to disclose oil payments. According to the NGO campaign Publish What You Pay, a lack of transparency has allowed resource revenues to be mismanaged and embezzled by corrupt governments in more than 50 developing countries around the world. In July, a U.S. Senate committee revealed American oil companies had made millions of dollars in questionable payments to relatives and friends of the president of Equatorial Guinea, which may have contributed to corrupt practices in that country. Acting on concerns World Bank support for the extraction of oil, coal, gold and natural gas in poor countries contributed to rather than alleviated poverty, the Bank commissioned an Extractive Industries Review to investigate. The review, made public this week, concluded such projects did not benefit the poorest people in these areas and also led to environmental degradation. On Tuesday, World Bank President James Wolfensohn said that energy and mining resources are essential to many development goals, and should not be excluded from the Bank’s remit. “The harsh reality is that some 1.6 billion people in the developing nations still do not have electricity, and some 2.3 billion people still depend on biomass fuels that are harmful to their health and the environment. That underscores the need for our continued but selective engagement in oil, gas, and coal investments,” he said in a statement. Social and environmental groups have denounced the Bank’s decision. Friends of the Earth campaigner Hannah Ellis said the Bank had “missed a historic opportunity to bring its lending more in line with its mission.” For investment in extractive industries to contribute to sustainable development, the review found the Bank would need to enhance its efforts in several areas. Its recommendations included identifying and tracking poverty reduction associated with Bank projects, the overall quality of governance in host countries, broader inclusion of local stakeholders, transparency of revenue management and project documents, and the promotion of renewable energy and cleaner fuel alternatives. It is estimated the World Bank provides nearly $3 billion per year to fossil fuel projects.¬†