Papua New Guinea: Oro Province Palm Oil

Bank Management submitted its First Progress Report on the implementation of the Management Action Plan (MAP). The report detailed bank actions in three key areas (a) information disclosure, consultation and broad community support; (b) environment; and (c) institutional sustainability.

World Bank management traveled to Oro Province to meet with claimants and other interested smallholders as part of its effort to bring SADP into compliance with bank policy. The bank presented its Action Plan and gave updates about the project’s status. Claimants and other smallholders then expressed their continuing concerns, which centered around the Road Maintenance Trust Fund and development of alternative livelihoods.

Accountability Counsel met with the World Bank Executive Director in charge of Papua New Guinea to request assistance in determining whether management was on track to complete its early 2012 commitments within the target timeframe.

Accountability Counsel and CELCOR sent a letter to World Bank management requesting a timeline for carrying out the action plan and addressing the project’s known policy violations. Bank management responded with expected timelines for completing some of the required actions and indicated that it would report back to the board in 12 months to update them on the implementation of the action plan items.

The panel’s investigation report and management’s response were released to the public. The Investigation Report confirmed violations of the bank’s policies regarding Indigenous Peoples (OP/BP 4.10), Environmental Assessment (OP 4.01), Forests (OP/BP 4.04), Project Appraisal (OMS 2.20), and Economic Evaluation of Investment Operations (OP 10.04). Most significantly, the panel found that the project fails to incorporate basic elements required to decrease poverty among project “beneficiaries” and was designed without consultation or study of indigenous landowners’ capacity to pay their proposed share of the road maintenance portion of the project.

Taken together, the action plan and annexes in management’s response addressed many, but not all, of the violations found by the Inspection Panel. Management’s commitments, approved by the board, included developing and implementing a consultation framework; improving documentation of consultations with affected communities; improving mill effluent processing and environmental monitoring; and ensuring that any levies imposed on smallholders to fund road works do not present an unsustainable burden.

Accountability Counsel’s summary of the actions the World Bank should take to bring the project into compliance is available here.

The World Bank board of directors met to discuss the Inspection Panel’s report and management’s response. The board approved management’s action plan and the commitments set forth in Annex 1, requiring management to carry out a number of actions to bring the project into compliance with bank policy.

Accountability Counsel distributed The World Bank’s Duty in PNG and An Environmental and Due Diligence Failure to all World Bank executive directors to ensure that the directors were informed about claimants’ concerns prior to the board vote.

Accountability Counsel met with the World Bank executive director in charge of Papua New Guinea about claimants’ ongoing concerns and the problems with the effluent study.

Accountability Counsel and CELCOR released a report, The World Bank’s Duty in PNG, which highlights the ongoing concerns of smallholders in Project-affected areas and the responses still required by the World Bank to bring the Project into compliance with its own policies. Accountability Counsel and CELCOR also released a critique of the effluent study, An Environmental and Due Diligence Failure, as an Annex to The World Bank’s Duty in PNG.

World Bank management issued a response to the Inspection Panel’s report, which included an action plan and annex listing actions management committed to undertaking in order to bring the project into compliance with bank policies. In violation of bank policy and practice, bank management unilaterally developed the action plan without any consultation with the claimants, their representatives, or the affected communities generally. Per the panel’s policy, the response was not released to the public at this time, nor was a copy released to the claimants or their representatives.

The Inspection Panel submitted its investigation report to the World Bank board of directors and management, giving management six weeks to respond. Per Panel rules, the report was not released to the public at this time, nor was a copy released to the claimants or their representatives.

World Bank management finally released the “Effluent Study,” which, per the bank’s own policies, should have been completed as a prerequisite to project approval in December 2007. In addition to being untimely, the effluent study was not sufficiently comprehensive to give bank management an adequate understanding of whether mills in the project area have the capacity adequately to treat increased palm oil mill effluent due to SADP, not to mention whether there will be health or environmental impacts from the project. Bank management itself recognized these problems and helped develop an action plan “to follow-up on the issues that have been raised in the SADP effluent study and ensure adequate mitigation measures are in place to deal with increased palm oil mill effluent due to the project.”

Bank Vice President James Adams sent a response letter promising the release of the effluent study by the end of July and assuring Accountability Counsel and CELCOR that infilling had not, in fact, begun under SADP.

Accountability Counsel and CELCOR sent a third letter to World Bank President Zoelick and Vice President Adams informing them that the effluent study had still not been released and that infilling had begun despite assurances in December 2010 that completion and disclosure of the effluent study would take place “prior to the commencement of any infill planting of oil palm under the SADP and thereby in time for implementation of mitigation measures, if any are called for by the study.”

Following its Oil Palm Strategy Review, the World Bank announced the adoption of a new World Bank Group Framework and IFC Strategy for Engagement in the Palm Oil Sector.

Bank Vice President James Adams sent a response letter indicating that bank management was moving forward with its commitments and explaining that there were “no grounds for withholding disbursements.”

Accountability Counsel and CELCOR sent another letter to the World Bank President asking for an updated commitment for completing actions required to bring the SADP into compliance with World Bank policy. The dates that bank management had previously given for completing actions necessary to bring the project into compliance all passed with little progress being made. Project documents still had not been made available to affected people in their own language, promised consultations with affected people had not taken place, and the effluent study, which was initially required before project approval, still had not been completed.

Accountability Counsel and CELCOR continued to request, on behalf of the affected communities, that funding for the SADP be suspended until the project was brought into compliance with admitted bank policy violations.

The Inspection Panel traveled to Papua New Guinea to conduct a 2-week investigation into the violations alleged in the complaint. Accountability Counsel sent a delegation to Papua New Guinea during the panel’s visit to work alongside CELCOR to provide support to the communities during the investigation.

The panel held meetings with smallholders who would be affected by the project and with representatives from OPIC and the mill companies. By the end of its trip, the Inspection Panel had witnessed social harms, including alcoholism, overcrowding, sexual abuse, domestic violence, and lack of budgeting or financial skills, caused by previous oil palm projects in the region. The panel identified numerous issues and inadequacies with the design of SADP, as well as a failure to carry out several actions required for project approval.

Accountability Counsel and the Center for International Environmental Law (CIEL) submitted comments to the World Bank Group Palm Oil Strategy Review. The World Bank initiated the review to analyze the bank’s involvement in the palm oil industry, following criticism through the SADP complaint and the World Bank’s private sector Wilmar complaint to the CAO, that funding palm oil development was not a responsible or successful way to promote economic growth in developing countries.

At the same time, Accountability Counsel and CIEL authored a major report to inform the review: A Call for Reform of World Bank Group Agribusiness Policies and Practice: A Proposal to End Violations of Indigenous and Traditional Peoples’ Rights

The World Bank sent a response letter, refusing to suspend the project. It reasoned that oil palm planting under the project was not scheduled to begin until after the policy violations would be corrected. The response letter also provided target dates by which key improvements would be completed to help bring the project into compliance with bank policy.

Accountability Counsel sent a letter to the President of the World Bank requesting that the bank’s funding for the project be suspended until admitted policy violations are corrected.

The board approved the Inspection Panel’s recommendation and authorized the panel to conduct a full investigation into the issues raised in the complaint.

The Inspection Panel submitted a report and recommendation to the World Bank’s board of executive directors, finding the complaint eligible for review and recommending a full investigation into the matters raised in the complaint. Based on information gathered from its site visit, the Inspection Panel found that the complaint asserted serious violations of the bank’s operational policies. The Inspection Panel underscored the gravity of issues raised in the complaint, including the question of livelihood impacts on smallholders from oil palm production.

The Inspection Panel travelled to Papua New Guinea to meet with some of the complainants and other project-affected people, PNG-based NGO CELCOR, government officials, World Bank staff, and representatives of the Oil Palm Industry Corporation.

World Bank Management submitted its initial response to the complaint to the World Bank board of directors. The response denied many of the smallholders’ allegations, but admitted to noncompliance with bank policy in three areas: project documents were not translated into the local language; documentation of consultations with affected communities was lacking; and the environmental assessment required prior to project approval lacked information on milling companies’ capacity to treat the increased mill effluent, or liquid waste, that would result from the project. Management indicated specific steps that it would take to improve the project, including translating project documents into the local language and making them publicly available, and commissioning a study on the effects of effluent discharge on local rivers.

The World Bank Inspection Panel registered the complaint in its public registry.

Three weeks later, on November 25, 2009, President Zoellick responded, agreeing to extend the palm oil lending moratorium to the bank’s public sector investments.

On the same day, Accountability Counsel and CELCOR submitted a request (“complaint”) to the World Bank Inspection Panel regarding the Smallholder Agriculture Development Project (SADP).

Accountability Counsel, CELCOR, and partners authored a letter to World Bank President Robert Zoellick, commending a private sector moratorium bank on palm oil investment and requesting that the moratorium extend to public sector investments as well.