Playing by the rules: the World Bank's failure to adhere to policy in the funding of large-scale hydropower projects.I. INTRODUCTION The World Bank (the Bank) approved its first loan to a developing nation in 1948, providing funding for a hydropower project in Chile. (1) Between 1944 and 1994, the Bank has provided approximately $58 billion in funding for six hundred dams in ninety-three countries. (2) For many of these borrowing countries, the largest single loan they have received has been for the construction of a large dam. (3) In the 1970s, however, observers began to recognize the devastating impacts of numerous large-scale infrastructure projects funded by the Bank. (4) These critics alleged that the Bank funded projects without considering the environmental devastation, social disruption, or negative impacts on the economies of the developing nations it intended to aid. (5) The pressure from these observers, often comprised of nongovernmental organizations and numerous World Bank donor nations, triggered the Bank's interest in becoming more environmentally responsible. (6) In an attempt to mitigate negative environmental and social impacts of Bank-funded projects, the Bank has developed a system of operational policies and procedures to aid in the preparation and implementation of Bank projects. (7) Prior to project approval, the Bank requires Environmental Assessments (EAs) to be performed by the borrower to ensure proposed projects are "environmentally sound and sustainable, and thus to improve decision making." (8) For hydropower projects, the Bank requires that the borrower select an independent expert to identify potential environmental impacts, determine the scope of the necessary environmental assessment, assess the borrower's ability to perform the EA process, and advise the borrower on the need for an independent advisory panel. (9) For projects with significant social components, such as many large-scale hydroprojects, the Bank and the borrower must also consult the Operational Directives on Indigenous Peoples (10) and Involuntary Resettlement (11) early in the project approval process. The policy on indigenous people requires the Bank to involve the local communities at the project development phase to ensure that the indigenous people will benefit from the project. (12) Likewise, the policy on involuntary resettlement "encourages" community participation in resettlement planning. (13) Although the Bank has developed a comprehensive set of policies to deal with the environmental and social impacts of large-scale hydropower projects, it has failed to implement them. (14) For example, the Sardar Sarovar project on the Narmada River in India required the resettlement of 240,000 people; however, the project failed to account for the resettlement of 100,000 of them. (15) If the Bank had followed the Involuntary Resettlement procedures and encouraged the Indian government to consult with the public, this devastating oversight could have been avoided. (16) No matter how comprehensive the Bank's environmental and social policies may be, if the Bank continues to disregard them, the policies will have little effect. The Bank's inability to adhere to its policies can be attributed to the absence of regular monitoring requirements and the inherent disincentives for policy compliance in Bank projects. (17) A lack of regular monitoring limits the public's access to project information and impairs accountability. (18) To improve accountability in Bankfunded projects, the Bank created the Inspection Panel (the Panel) (19) in 1993. (20) The Panel offers an opportunity for those who believe they are being adversely impacted by bank projects (or their representatives) to request an independent review of bank activities. (21) The Panel's first report, on the Arun III hydropower project in Nepal, found that, among other things, the Bank had failed to comply with its EA policy requirements by not preparing an adequate EA. (22) The Panel's report caused the Bank to withdraw support for the project. (23) Although the Panel may improve accountability and resolve concerns over the Bank's inability to adhere to its environmental and social policies, the problem of inherent disincentives for policy compliance remains. (24) For example, the Bank has historically rewarded the approval of large loans regardless of the possibility of devastating social and environmental impacts associated with such large projects. (25) To improve compliance, the Bank must establish a task force to monitor the implementation of Bank policies. (26) In addition, the Bank must impose sanctions for non-compliance against both Bank staff and member countries to create an incentive for compliance. (27) This Comment examines the World Bank's environmental and social policies and how these policies impact hydropower project development. Part II discusses the World Bank generally and its traditional role in funding global development projects. Part II also identifies the Bank's difficulties in funding large-scale hydropower projects, and the environmental and social policy that has developed as a result. Part III analyzes the Bank's environmental assessment policies as they relate to hydropower projects. Part IV analyzes the social policies, such as resettlement and indigenous people, as applied to hydropower projects. Part V determines whether the reformed information policy and creation of the Inspection Panel may be used to address the problems of Bank compliance and suggests further ways to improve hydropower projects. This Comment concludes that although the Bank has demonstrated growing environmental awareness by incorporating considerations of environmental impact, public health and safety, and resettlement of local populations into current Bank policy, actual projects fail to demonstrate change in World Bank practices. (28) While changes need to be made to Bank policy--including required public participation and accurately appraised alternatives--significant improvements in the quality of hydropower projects require that the Bank more diligently implement current operational policies and procedures. II. THE HISTORY OF THE WORLD BANK A. The Establishment and Structure of the World Bank On July 1, 1944, delegates from around the world gathered in Bretton Woods, New Hampshire, for the United Nations Monetary and Financial Conference. (29) Concerned about funding of post-war reconstruction in Europe and Japan, (30) the conference established the World Bank to "assist in the reconstruction and development of territories of members by facilitating the investment of capital for productive purposes." (31) As Europe began to recover, the Bank's focus shifted from reconstruction of devastated European communities toward poverty alleviation in developing nations. (32) The Bank is composed of member countries, now including one hundred eighty-three nations around the world, each represented by a governor who sits on the Bank's Board of Governors (the Board). (33) Although the Board possesses the ultimate power to govern the Bank, (34) a board of twenty-four executive directors, representing the governments of all of the member nations, meets several times per week to make decisions regarding the day-to-day business affairs of the Bank. (35) The Board's most important task is to approve every loan and major Bank policy, and, therefore, in many ways, is responsible for the success of projects and thus the success of the Bank. (36) However, the "pervasive secrecy" shrouding Bank operations--even Bank directors are denied access to some project documents weakens the accountability and validity of Bank management and practice. (37) B. The World Bank's Role in Global Development The World Bank is the largest development organization in the world. (38) The Bank lends $22 billion to projects annually, including $6 billion to the poorest countries in the world. (39) However, the Bank's ability to move money extends beyond its direct financial contributions. (40) The Bank's Office of Co-financing and Financial Advisory Services recruits additional funds from multilateral and bilateral agencies as well as commercial banks for the co-financing of hydropower projects. (41) Traditionally, the Bank has funded large-scale infrastructure projects in developing nations, including transportation, agricultural development, and electrical power projects such as hydropower dams. (42) The Bank began financing large dams in the 1950s, allocating over $1 billion per year for the development assistance of large-scale dams. (43) The Bank and developers anticipated not only generating inexpensive electricity for developing nations, but also contributing to those nations' national economies by increasing irrigation and tourism and, in turn, creating jobs in these sectors. (44) For the period between 1970 and 1985, the World Bank's financing of large dams reached a peak of $2 billion annually. (45) In the late 1980s and early 1990s, Bank funding of hydropower projects declined because of public criticism of the failure of Bank policies to consider the negative environmental and social consequences of these projects. (46) Damming rivers submerges rich forests, eradicates wildlife species, creates reservoirs that foster waterborne diseases such as malaria, water-logs lands decreasing agricultural efficiency, (47) and causes the physical and economic displacement of local communities. (48) The Bank's lending for large-scale projects increases the debt of the borrowing nations, making it more difficult for the developing nation to develop and succeed on its own, while providing lucrative contracts for donor nations' companies. (49) In response to public criticism and the Bank's growing concern for the environment, the Bank began to provide lending for entirely environmental projects as well as technical assistance to improve the environmental policies and enforcement procedures of developing nations. (50) In addition, the Bank made attempts to mitigate the potential environmental and social harms of Bank projects by developing policies and guidelines to aid staff in planning and implementing large-scale hydropower projects. (51) Initially, these policies and guidelines were merely discretionary. (52) However, in 1985, they were incorporated into the Bank's mandatory procedures document, the Operational Manual. (53) The Bank issued guidelines on dam safety in 1977 (54) and 1996, (55) on involuntary resettlement in 1980, (56) 1986, (57) and 1990, (58) on indigenous people in 1982 (59) and 1991, (60) on environmental aspects of dams and reservoirs in 1989, (61) and on environmental assessment in 1989, (62) 1991. (63) and 1999. (64) As a result of these reforms in Bank policy, the Bank has formulated, at least on paper, a comprehensive set of policies pertaining to large-scale dam projects. III. THE WORLD BANK'S ENVIRONMENTAL POLICIES A. Environmental Impacts of Hydropower Development Both the dam and reservoir of large-scale hydropower facilities cause irreversible damage across wide expanses of landscape, "from the upper limits of the reservoir to as far downstream as the estuarine, coastal, and offshore zones." (65) Therefore, such projects have the potential to cause significant negative impacts on ecosystems. (66) An obvious environmental impact of dam construction and operation includes blocking migration of aquatic organisms. (67) However, many environmental impacts may not be realized for hundreds of years after completion of a project, leaving many to regard these projects as "huge, long-term and largely irreversible environmental experiment[s] without ... control[s]." (68) 1. Flooding The land behind a dam must be flooded to create a reservoir. (69) Perhaps the most obvious impact of this permanent inundation is the loss of the agricultural, forest, range, and wetland lands. (70) Land along rivers and in floodplains is often fertile and home to a diversity of species and people. (71) Not only does inundation eliminate flora and fauna, but it also reduces wildlife habitat and disturbs migratory routes across valleys and rivers. (72) Reservoirs displace communities, forcing people to clear forests for farm land and new homes further up the sides of the valley, thereby increasing rates of deforestation and soil erosion. (73) Meanwhile, increased pressure on the land degrades existing farmland. (74) 2. Morphology All rivers gather and carry sediments as they move over rock and soil. (75) The deposition of these sediments impacts channel, floodplain, and delta formations used by humans and wildlife for agricultural production and habitat. (76) However, dams and reservoirs trap these sediments, thereby reducing the natural sediment flow downstream. (77) Coastline erosion occurs because sediment deposits from the river no longer counter the effect of ocean waves. (78) Likewise, the release of water from the dam with relatively little sediment load can result in the scouring of downstream river beds, as the river tries to recapture its sediment load. (79) In addition to the negative downstream effects, formation of sediment deposits at the reservoir entrance may also create a backwater effect, flooding and water-logging upstream lands. (80) The buildup of sediment in reservoirs also decreases the reservoir's storage capacity and lifetime. (81) For example, when the Nepalese built the Kulekhani dam in 1981, it was predicted to have a lifetime of seventy-five to one hundred years. (82) However, a single thirty-hour storm burst, scouring the upstream mountainsides, reduced the dam's storage capacity by one-tenth and left sediment along the slopes upstream to be carried eventually down toward the dam. (83) In addition to decreasing a dam's lifetime, sedimentation may also cause erosion to the dam's turbines. (84) 3. Water Quality Retaining water in a reservoir impacts the chemical, physical, and thermal quality of the water; degradation of water quality depends upon the retention time of the reservoir. (85) Just as reservoirs trap sediment, they also trap nutrients carried by the rivers. (86) Loss of nutrient replenishment resulting from reservoir impoundment is thought to contribute to the loss of fertility of downstream soils used for agriculture. (87) In addition, reservoir retention may dramatically change the temperature of the water behind the dam. (88) Fluctuations in temperature affect the amount of dissolved oxygen and other nutrients in the water, which affects the aquatic life in water bodies. (89) Finally, dams increase the surface area of water exposed to the sun, thereby increasing the rate of evaporation in hot climates and causing an increase in the salinity of the river. (90) 4. Hydrology By storing and diverting water, dams alter the timing and distribution of stream flows based on power demand cycles, rather than the hydrologic cycles to which downstream riparian environments are adapted. (91) Reducing the downstream annual flooding affects the natural productivity of riparian areas, floodplains, and deltas. (92) Rapid water-level fluctuations increase the erosion of downstream banks, washing away riparian vegetation that provides both shade for river habitat and shelter and food for river creatures. (93) In addition, many species depend on seasonal droughts or pulses of nutrients to signal the beginning of important lifecycle stages. (94) These systems are disrupted by the changes in flow caused by the damming operations. (95) B. The World Bank's Remedy: Environmental Assessment Policy The World Bank formally adopted mandatory environmental procedures in 1984 in the Operational Manual Statement 2.36 on Environmental Aspects of Bank Work. (96) The manual established eight principles intended to influence Bank activities with respect to the environment, including principles prohibiting the Bank from financing projects that would cause severe and irreversible environmental degradation or would displace people without mitigation measures acceptable to the Bank. (97) In 1991, the World Bank adopted the Operational Directive (OD) 4.01 on Environmental Assessment, which was then revised in 1999, forming three separate works: Operational Policy (OP), Bank Procedure (BP), and Good Practices (GP). (98) OP and BP are mandatory, whereas GP is discretionary. (99) The Bank intended the EA policy to ensure that proposed projects considered the potential for environmental and social impacts, thereby improving the quality of decision making. (100) 1. Environmental Screening At the beginning of the project cycle, the Bank's task team undertakes an environmental screening of each proposed project to determine the type, location, sensitivity, and scale of the project, as well as the nature and magnitude of the potential environmental impacts. (101) Based on these determinations, the task team assigns the project to one of three categories. (102) Category A projects require full EAs because such projects are "likely to have significant adverse impacts that are sensitive, diverse, irreversible, or unprecedented." (103) Typically, large-scale infrastructure projects, such as hydropower projects, fall under this category. (104) According to a study of the Bank's projects from 1990 to 1995, ten percent of all projects fell under Category A. (105) Category B projects have "potential adverse environmental impacts on human populations or environmentally important areas [that are] less adverse than those of Category A projects. These impacts are site-specific; few if any of them are irreversible." (106) Therefore, the EA required for Category B projects is far more limited than that performed under Category A. (107) Forty-one percent of all projects proposed for Bank financing are Category B projects. (108) The remainder of projects, classified under Category C, have "minimal or no adverse environmental impacts," and therefore require no environmental assessment. (109) 2. Environmental Assessment Following environmental screening, the Bank discusses with the borrower the scope of the EA and the procedures, schedule, and outline for any EA report required. (110) Bank EA policy requires evaluation of a project's potential environmental risks, examination of project alternatives, and identification of ways to prevent, minimize, or mitigate adverse impacts. (111) Requirements may be satisfied by performing environmental impact assessments (EIA), regional EAs, environmental audits, or risk assessments. (112) Ultimately, the borrower is responsible for performing the EA. (113) However, the Bank may be required to loan money to enable the borrower to successfully complete the requirements. (114) C. Inability of the Bank to Adhere to the Environmental Assessment Policies 1. Alternatives Analysis Bank EA policy requires the borrower to analyze alternatives to proposed projects, including alternatives in project selection, site, plans, design, and implementation, from an environmental perspective. (115) Analyzing such alternatives generates a number of economically and environmentally acceptable projects so as to prevent, minimize, or mitigate adverse environmental impacts, thereby enhancing project design. (116) However, the Bank itself determined that many EAs were characterized by "inadequate or barely adequate" analyses of alternatives. (117) Dams have traditionally been compared with alternatives such as potential dam projects at other sites or with alternative, large-scale, thermal-power generation projects. (118) However, these project alternatives fail to provide more cost-effective or environmentally sound options. For example, when the Bank was in the process of approving its loan for the Pak Mun Dam in Thailand, the International Institute for Energy Conservation released a study showing, for the same cost of building the dam, that fifteen times as much power could be made available through conservation efforts and efficiency improvements. (119) In addition, the Thai government's National Energy Administration prepared a plan which would have provided more power for less than one-quarter of the cost and would have been completed two years ahead of the dam. (120) However, the Bank ignored these alternatives, instead choosing to analyze only one alternative: a thermal power plant powered by burning coal. (121) Recent studies suggest "decentralized, small-scale options based on local renewable sources offer the greatest near-term and possible long-term potential in rural areas." (122) Not only are such small-scale projects environmentally appropriate and economically feasible, but such projects may be implemented by local groups at low cost and with low maintenance requirements. (123) However, those holding economic control and political influence do not stand to gain as much from these projects as they do from large-scale dam projects. (124) Therefore, small-scale alternatives do not receive adequate financial and political support and are unable to compete with the support large-scale projects receive. (125) In addition, the personal interests of donor nations and Bank staff may also contribute to the inadequacy of the alternatives analysis. (126) In many of the hydropower projects funded by the Bank, nearly half of the money borrowed returns to the developed nations who contract with the developing nation for labor and supplies. (127) Because many of the developed nations stand to gain from the Bank's funding of large-scale dam projects, a "building bias" emerges that interferes with the evaluation of the economic, social, and environmental consequences of the projects. (128) Despite the Bank's intention of alleviating poverty and providing project benefits for local people, the benefits of the Bank's projects are often not realized in the communities they are intended to serve. (129) Likewise, the Bank's emphasis on "timely" loan approval indicates a promotional, rather than objective, approach to project approval. (130) This "approval culture" places a premium on the approval of large loans without consideration for project quality. (131) Therefore, in both the building and funding contexts, personal interests are given greater consideration than technological, ecological, or economic feasibility. (132) As long as the Bank continues to accept these superficial comparisons as complying with Bank requirements, project developers will have little incentive to analyze alternatives meaningfully. Finally, the timing of EAs may also affect the adequacy of the alternatives analysis. (133) In many projects, the Bank becomes involved only after major decisions have already been made. (134) Developers merely make superficial comparisons of alternatives to meet the Bank's formal requirements or to justify a previously made decision. (135) 2. Public Consultation Projects receive greater public support and perceived legitimacy when project developers give equal weight to human, social, environmental, technical, and financial matters. (136) Public consultation is important to ensure that project developers consider each of these factors. (137) By obtaining the informed views of a diversity of project-affected groups, project developers can become familiar with the possible impacts of a proposed project on the human and physical environment. (138) Bank EA policy requires the borrower to consult with project-affected groups and local non-governmental organizations (NGOs) and take their views about the project's environmental impacts into account. (139) For Category A projects, consultation must occur as early as possible--shortly after environmental screening and the assignment of the EA category--as well as once a draft of the EA has been prepared. (140) To facilitate meaningful consultation, the policy requires the borrower to provide information in a timely manner prior to consultation in a form and language that is understandable to the groups being consulted. (141) In addition, the Bank's Disclosure of Information policy requires it to provide an EA to the borrowing country at some public place accessible to project-affected groups and local NGOs before the Bank proceeds to appraisal. (142) However, the scope and influence of a public consultation is severely restricted because the public consultation process often occurs late in the planning process, after major decisions have already been made. (143) As long as the Bank continues to disburse funds for projects whose sponsors do not consult the public early in project development, Bank staff and borrowers will have little incentive to treat public consultation requirements as anything other than mere formalities. (144) 3. Arun III: An Example of the Bank's Noncompliance The Arun River valley of Nepal contains more than 450,000 indigenous people, unique biological diversity, and some of the last remaining intact forests in the Himalayas. (145) The Arun III hydropower project would require building both a dam and a 122 kilometer road for project access. (146) The major environmental and social impacts of the project would largely be attributed to the building of the access road, and are less likely to be attributed to the hydropower facility itself. (147) On October 24, 1994, the Arun Concerned Group, a local Nepalese NGO, filed a request with the Bank's Inspection Panel for a review of the Arun III project because of perceived inadequacies in the consideration of project alternatives and failure to involve the public in consultation. (148) For example, the feasibility study of the original route (Hill Route) selected for the access road suggested that the road should avoid rivers where possible because the rivers in Nepal were violent, destructive, and caused excessive steepening of valley sides and consequently unstable slopes. (149) Therefore, the Hill Route road would be built to follow the contours of the hillsides and to avoid rivers and streams, so as to minimize negative environmental impacts. (150) However, the final project design took the opposite approach, selecting a route (Valley Route) in which more than fifty percent of the road would run close to the unstable slopes of the Arun River. (151) In addition, the environmental impact assessment of the Valley Route concluded that the impact on biological resources would be significant since the route traversed forested areas of high species diversity with rare, endemic, and endangered species of trees and other plants. (152) Nonetheless, Bank management supported this option, of which the Board of Directors approved. Upon investigation, the Panel concluded that the process of choosing the access road "created uncertainties of a serious nature with regard to [the Bank's] ability to follow OD 4.01 on environmental assessment." (153) In addition to finding an "absence of a close investigation of alternatives," the Panel found that, if a "less restrictive assessment, including a wider range of hydro resources, could be undertaken, it would result in expanding the number of economically and environmentally acceptable options." (154) The Panel also discovered efforts had been made to gather project information and release the information in Washington. (155) However, much of this information was not made available in Nepal, in contravention of the Bank's EA policy that requires the EA be made available in the borrowing country. (156) The Panel found that meeting the requirements of the Bank policy had been difficult and urged continued attention to the issue. (157) IV. THE WORLD BANK'S SOCIAL POLICIES A. Social Impacts of Hydropower Development Adverse social impacts, like environmental impacts, have been seriously underestimated. The societal costs associated with large-scale hydropower projects often outweigh the proposed benefits, even though these projects may benefit local communities by providing inexpensive electricity and temporarily increasing local employment opportunities. (158) Those adversely affected by the development of hydropower projects include three categories of people: those who must relocate (relocatees), those whose communities must accommodate the relocatees (host communities), and those other project-affected people, which includes people living below the dam. (159) 1. Impacts of Resettlement Hydropower dams flood rich and fertile agricultural land along the river, thereby displacing the families and communities who live, farm, and fish in and around these river basins. (160) As the World Bank acknowledges, displacing people involuntarily causes production systems [to be] dismantled; productive assets and income sources [to be] lost; people [to be] relocated to environments where their productive skills may be less applicable and the competition for resources [and jobs is] greater; community structures and social networks [to be] weakened; kin groups [to be] dispersed; and cultural identity, traditional authority, and the potential for mutual help [to be] diminished. (161) This involuntary resettlement of local communities forces farmers into cash economies for which they have no training or experience, thereby not only causing social disruption, but also contributing to environmental degradation. (162) People who are poorly relocated and impoverished have little alternative but to over-utilize resources. (163) 2. Impacts on Indigenous Peoples Flooding disproportionately impacts the lives, livelihoods, and cultures of indigenous people who live in the rugged and remote areas where dams are frequently located. (164) These traditional communities have unique interests closely tied to the land and water. (165) Not only do indigenous people lose access to the resources upon which their economies are based due to involuntary resettlement, but they also risk losing their cultural identity. (166) Land-based rituals may never be re-established if they are not accepted by the host communities. (167) For many, "their remote mountain valley, forest or desert reservations are often their last refuge from cultural obliteration." (168) 3. Downstream Impacts In addition to the negative social impacts associated with the displacement of communities, hydropower projects also cause serious effects in the downstream communities. (169) Flood control was long believed to be a benefit of dam projects that would outweigh the adverse impacts; however, more recent information suggests such assumptions are wrong. (170) Changing the flood and flow patterns disturbs the farming patterns of people who have used the land for generations. (171) These behavioral patterns cannot easily be modified and are unique to the land on which these people live. (172) B. The World Bank's Remedy: Policy Addressing Social Impacts In an attempt to address the widely recognized adverse social impacts of Bank hydropower projects, the Bank developed a number of policies directed at the social problems attributed to large-scale hydropower infrastructure development. The Bank's resettlement policy, arguably the oldest and one of the most important of the Bank's social and environmental reform policies, dates back to 1980. (173) Now highly refined, the Involuntary Resettlement policy provides operational standards and benchmarks for Bank staff to assess resettlement issues and to ensure that those people displaced by development projects are afforded the necessary kinds of protections. (174) In addition, the Bank has adopted an Operational Directive on Indigenous People to ensure that indigenous peoples do not suffer adverse effects during project development and implementation, and to provide indigenous people with an opportunity to participate in the development process by including informed participation requirements. (175) 1. Involuntary Resettlement Policy Involuntary resettlement should be avoided or minimized where feasible. (176) In the event of resettlement, displaced persons should not only be compensated for their losses and assisted with their move, but should also be "assisted in their efforts to improve their former living standards, income earning capacity, and production levels, or at least to restore them." (177) In addition, the Bank's goal is to ensure that relocatees benefit from the development projects, (178) If a project requires resettlement, then it normally is classified as Category A, according to OP 4.01, and requires the environmental assessment to cover the potential environmental impacts of the resettlement, which may include deforestation, overgrazing, soil erosion, sanitation, and pollution. (179) In addition, the Bank "bears special responsibility for resettlement issues in the preparation and appraisal of projects because this period before signing loans is when the Bank has maximum involvement and leverage." (180) When large-scale displacement is unavoidable, the Bank policy requires that a detailed resettlement plan, timetable, and budget be prepared by the borrower. (181) Similar to the EA process, the Bank should inform the borrower of the Bank's resettlement policy. (182) The Bank's role in the resettlement planning includes assisting in designing and assessing the plans, providing financial assistance to aid the agencies involved in the resettlement, and directly financing the investment costs of resettlement. (183) According to OD 4.30, a project involving resettlement will not be approved without submission to the Bank of a resettlement plan and budget that conforms to Bank policy, as briefly described above. (184) 2. Indigenous Peoples Policy Although the Bank considers indigenous and tribal people in the Operational Directive on Involuntary Resettlement, (185) the Operational Directive on Indigenous Peoples affords tribal peoples additional protections. (186) The policy not only intends to protect indigenous peoples from the potentially adverse effects caused by Bank activities, but also requires the direct participation of and consultation with indigenous peoples to better understand and recognize their local needs. (187) The Bank policy also requires the preparation of Indigenous Peoples Development Plans (IPDPs) for all projects that affect indigenous people. (188) The IPDPs should include an assessment of the group's legal status, providing baseline data and strategies for local participation. (189) Ideally, if the Bank adhered to this policy, projects would not proceed without the approval of the indigenous peoples living in the lands to be flooded. (190) C. Inability of the Bank to Adhere to the Social Policies The Bank violated its own social policies, thereby causing problems for local communities and resettlement strategies. In 1994, the Bank's Resettlement Review (the Review) concluded that Bank resettlement plans have failed. (191) Although the goal of the Bank's Involuntary Resettlement policy includes avoiding, or minimizing where feasible, the displacement and resettlement of the local population, of 192 World Bank projects displacing 2.5 million people between 1986 and 1993, dam and reservoir projects caused sixty-three percent of those displacements. (192) In addition, as the review stated, "the number of people to be resettled is [forty-seven percent] higher, or an additional 625,000 people, than the estimate made at the time of [project] appraisal," (193) and most of the displacement statistics fail to account for the other project-affected people--those deprived of their land and livelihood. (194) The Review also found that half of all projects examined had no resettlement plan when they were approved by the directors, directly violating the Involuntary Resettlement policy that requires borrowers to submit to the Bank a time-bound resettlement plan and budget conforming to Bank policy as a condition of appraisal. (195) 1. Compensation Bank involuntary resettlement policy requires resettlement plans to compensate relocatees, by either improving or restoring the economic base of those relocated. (196) The policy deems cash compensation alone inadequate for restoring standards of living. (197) Cash compensation for land is often insufficient to purchase replacement land because compensation levels often are based on out-of-date tax assessments, the value of the land to be converted into a reservoir decreases, or corrupt officials take part of the compensation for themselves. (198) Bank involuntary resettlement policy, therefore, suggests using land-based resettlement strategies, such as providing displaced communities with replacement land, when feasible. (199) After all, for those displaced communities who wish to continue farming, the most appropriate resettlement strategy to protect their agrarian lifestyle is one which replaces land lost with new arable land. (200) However, the Review of resettlement plans found that, of those projects with resettlement plans, seventy percent of the plans provided for only cash compensation without replacing land or other assets necessary for survival. (201) Although the Bank believes that hydropower projects can help relocatees and host communities, the project record suggests that it is difficult to improve, and in some cases to even restore, the living standards of the majority of those resettled. (202) On paper, the Bank policies appear to address the problems associated with compensating numerous land users, not necessarily owners, for a variety of different land uses. However, the Bank has been ambivalent about enforcing policies through the suspension of disbursements and withdrawal of support. (203) As long as the Bank continues to disburse funds for projects without complete resettlement plans, in contravention of Bank policy, borrowing countries have no incentive to prepare such plans, much less prepare plans that adequately compensate people. For example, the Bank's Operational Directive on Involuntary Resettlement suggests that those adversely affected groups, including indigenous groups, ethnic minorities, and pastoralists, should be compensated even though they possess no legal title to the land. (204) In practice, however, resettlement plans only compensate landowners, leaving joint land owners and landless people who farm and graze without formal right, uncompensated. (205) In the Krishna subproject of the Maharashtra Irrigation II project, forty-five percent of the total number of families required to relocate received no land compensation. (206) Bank Policy also recognizes the need to provide adequate alternative access to community resources, such as forest areas or land used for fishing or grazing, because this type of loss cannot be easily evaluated or compensated in monetary terms. (207) However, resettlement plans fail to compensate for the common lands lost. (208) Beyond the problems attributed to the Bank's inability to adhere to its own policies, "attempts to merely restore incomes will end up further impoverishing what are, with few exceptions, already poor people." (209) Expenses for families increase during relocation, therefore, restoring income will not suffice in maintaining previous standards of living. (210) Income levels generally drop directly before and directly after development. (211) People in the reservoir area begin to suffer after a dam proposal, not only because of decreased property values, but also because investors are not interested in investing in an area that will eventually be flooded. (212) In addition, merely restoring income does not compensate for the cultural or emotional loss associated with resettlement. (213) 2. Public Participation Public participation has been widely accepted as an important component in the decision making and planning processes of large-scale dam projects. (214) The scope of international human rights law suggests that people should have the right to decide their own priority for development, as it affects their lives, and should have the right to participate in the formulation, implementation, and evaluation of plans that may directly affect them. (215) By involving local communities in the decision making and planning processes, communities develop a greater sense of pride and ownership in projects. (216) Increasing pride and ownership reduces conflicts and increases the likelihood that projects will be publicly acceptable and successful. (217) Bank involuntary resettlement policy recognizes the importance of public participation by encouraging resettlement plans to involve the community in planning and implementing resettlement. (218) Although the level of detail in resettlement plans may vary with circumstances, resettlement plans should include provisions for community participation (219) because the involvement of involuntary relocatees and host communities in planning prior to the move is "critical." (220) In addition, relocatees should be able to choose from a number of acceptable resettlement alternatives. (221) Although the involuntary resettlement policy includes public participation provisions, Bank practice fails to comply meaningfully with these requirements. (222) For example, in 1991, the Bank withdrew funding of the Sardar Sarovar project on the Narmada River in India after an independent review concluded that the Indian government had failed to produce a comprehensive environmental impact statement assessing the potential for environmental and social problems and solutions. (223) In addition, the local communities along the Narmada were never meaningfully consulted or given a chance to participate. (224) Some people directly affected by the dam learned that their villages would be submerged when the government arrived at their homes with land acquisition notices. (225) The Independent Review of the project noted that, as far as resettlement operations go, the problems of the Sardar Sarovar project were "more the rule than the exception." (226) As long as the Bank continues to approve projects that do not meaningfully consult with the project-affected groups, local communities will be threatened with the possibility that one day they may be forced to relocate without any notice or opportunity to be heard. In recognizing the importance of self-determination, Bank Indigenous Peoples policy recognizes that the strategy for addressing the issues pertaining to indigenous peoples must be based on the informed participation of indigenous people themselves. (227) Therefore, identifying local preferences through direct consultation and incorporating indigenous knowledge into project approaches are important in projects affecting indigenous people. (228) The IPDPs should include a strategy for local participation, which recognizes that traditional leaders play important roles in mobilizing people and should be involved in the planning process. (229) Nearly a decade after the Bank failed to comply meaningfully with the environmental and social policies in the Sardar Sarovar project, the Bank continues to have difficulty complying with its own policies. (230) Since it first provided assistance for its feasibility study in 1989, the Bank has been involved in the Nam Theun 2 Dam project, the largest and most controversial hydroelectric project planned for Laos. (231) The project will flood approximately 450 square kilometers of the Nakai Plateau, an area rich in biodiversity and populated by a variety of indigenous communities, and will require the resettlement of some 4500 people. (232) In addition, a greater number of people living along the banks of the river will be adversely impacted. (233) Despite the policy provisions requiring indigenous peoples' participation in decision making from a project's outset, studies and logging in the Nam Theun watershed began six years before the public was even informed of the prospective project. (234) Failure to adhere to public participation requirements may be attributed to the momentum and scale of large hydropower projects, as well as to the idea that projects are done for the "common good." (235) The simple fact that projects are done for the good of many people, regardless of the severe impact that they may have on a relative few, provides the projects with great momentum. (236) Likewise, by the time a project reaches the Bank's desk for funding consideration, the project has more than likely been underway informally for several years, not to mention the fact that the Bank may already have invested money in the project in the form of assistance for development and feasibility studies, as in the Nam Theun example. (237) Once a project has reached this stage of development, public participation often merely justifies a decision already made, instead of genuinely addressing the needs of people to be affected. (238) Although proponents of large-scale hydropower projects may argue that there is little accomplished by public participation at the initial stage of project development, these proponents are wrong. (239) If a project fails to include the participation of local communities, as Bank policy requires, then the project should be stopped until such requirements can be meaningfully met. The Bank must mandate in action, not just on paper, that public participation be included early in the project cycle, including project planning, implementation, management, and evaluation. (240) Only when the Bank begins to enforce its own policies, holding staff and borrowing nations accountable, will future projects comply with participation provisions early in project development. (241) V. IMPROVING WORLD BANK ACCOUNTABILITY, TRANSPARENCY, AND PROJECT QUALITY A. Pressure on the World Bank to Reform The Bank's environmental and social policies are premised on encouraging meaningful public participation and the consideration of project alternatives. (242) Historically, however, local communities affected by projects have been denied access to project information. (243) In addition, tax-paying citizens in donor nations are often kept in the dark, unaware that their money is being used to fund and guarantee many of the Bank's devastating projects. (244) Even the Bank's Executive Directors, who are expected to give final approval on Bank projects, have been denied access to important project information. (245) This failure to disclose has resulted in the absence of meaningful public consultation, community participation, and an increase in poorly planned projects. (246) The Sardar Sarovar project on the Narmada River in India became a catalyst for the reform of World Bank policy. (247) Although not among the worst Bank-funded hydropower projects, the Sardar Sarovar project gained attention because of the "remarkable alliance of determined villagers, local activists, and international groups that fought it." (248) In response to the public opposition of numerous environmental and human rights groups, the Bank agreed to commission an independent review of the Sardar Sarovar project, asking Bradford Morse to lead the review team. (249) For the first time, the Bank requested an outside critique of an entire Bank project. (250) After nine months of investigations, the Morse Report concluded that: the Sardar Sarovar Projects as they stand are flawed, that resettlement and rehabilitation of all those displaced by the Projects is not possible under prevailing circumstances, and that the environmental impacts of the Projects have not been properly considered or adequately addressed. Moreover, [the investigators] believe that the Bank shares responsibility with the borrower for the situation that has developed. (251) In addition, the independent reviewers found that most of the problems discovered had already been reported to the Bank by staff technicians and consultants and simply ignored by those higher up the chain of command. (252) The Morse Report suggested that the Bank should "step back" from the project. (253) After release of the Morse Report, NGOs in the Narmada campaign began to lobby the United States Congress to place "conditions" on Bank funding until the Bank developed mechanisms to improve the accountability and transparency of its procedures. (254) Increasing accountability and transparency in the Bank's practices would promote democracy and the development of alternatives and would result in fewer devastating projects. (255) The NGOs suggested that the Bank completely revise its information policy and create an independent citizen appeals panel. (256) By improving access to project information, problem projects could be removed from the Bank's agenda early, and developing an inspection panel would give teeth to some of the Bank's environmental and social policies. (257) While tensions were running high in Washington with the release of the Morse Report and the NGO lobbying on Capitol Hill, the "Wapenhans Report," the Bank's internal evaluation of its projects, estimated that thirty-seven percent of projects in the Bank's portfolio were unsatisfactory. (258) The Report suggested that the declining project quality could be attributed to the Bank's "approval culture," (259) a culture in which the "pressure to lend money overwhelmed all other considerations including project quality." (260) The increasing evidence of unsatisfactory projects and pressure from the public, the United States Congress, and the executive directors of several donor nations, eventually forced the Bank to respond with several policy reforms. (261) B. The World Bank's Response 1. Revision of the Disclosure of Information Policy Pursuant to the first Operational Directive on Disclosure of Information, published in 1989, the Bank presumed "in favor of disclosure ... in the absence of a compelling reason not to disclose." (262) However, in practice, the Bank restricted the disclosure of almost all documents. (263) To excuse the secrecy, the Bank claimed that the documents contained confidential information provided by the borrowing nations with the expectation that the Bank would not disclose the information to the public. (264) In 1993, the Bank adopted a new Operational Directive on Information Disclosure, (265) making public access to information on Bank policy and projects easier. (266) Under the new policy, the following documents were to be made available: Project Information Documents (PID), Factual Technical Information, Environmental Assessments and Environmental Analyses, Staff Appraisal Reports, and Operations Evaluation Department Precis. (267) After project identification, the task manager writes a PID. (268) The PID is a two-page factual summary of the main elements of the evolving project, written specifically for the public. (269) Once approved at the country department level, a draft of the PID is sent to the Public Information Center (PIC), where interested parties may obtain Bank documents. (270) Between the PID and project approval stages, the public may access factual technical information. (271) Such information includes feasibility studies, detailed project design plans, and technical studies underlying environmental impact analysis and poverty analysis. (272) Although taking significant steps to improve transparency, the Bank's disclosure process remains problematic. First, the information disclosure policy only requires selected documents to be released and does not apply retroactively. (273) The new policy does not cover projects approved or negotiated before September 1993. (274) Second, the PIDs have been criticized for being "sanitized" and misconstruing important project information., (275) Third, the field offices have been found less forthcoming than PIC in providing information to the public. (276) For example, in the Arun III project in Nepal, the Bank's Inspection Panel found that information made available in Washington was not available in Nepal. (277) Finally, the PIDs are supposed to be updated by the task managers as the project develops and evolves. (278) However, many PIDs contain only basic information and are not updated. (279) In the Arun III project, the Inspection Panel discovered that the PIDs had not been prepared in time nor updated according to Bank requirements. (280) The Bank's policy on Disclosure of Information required PID completion for the project by January 1, 1994. (281) However, the document was not available at PIC until March of 1994, and it was not updated or expanded thereafter. (282) The PID was missing critical information, including a background description of the country, region, [and] Arun Valley; justification for Bank involvement; background on the sector and sector strategy; how the project fit into overall planning for the energy sector in Nepal; and information on the Arun Valley, its unique ecosystem or risks and benefits of the project. (283) Thus, citizens were not receiving the information they needed to scrutinize the Arun III project, thereby impairing the transparency and accountability of the development process. 2. Creation of the Inspection Panel Improving accountability requires more than simply improving the public's access to information. (254) Therefore, as an additional attempt at improving its accountability, transparency, and project performance, the Bank passed a resolution on September 22, 1993, creating an independent Inspection Panel. (285) On August 1, 1994, the Inspection Panel officially opened, and on August 15, 1994 it issued its operating procedures. (286) The three-member panel provides an independent forum for affected parties to lodge complaints that the Bank has failed to follow its own policies and procedures. (287) Groups of citizens, including NGOs, (288) may file a claim as long as they are within the borrower's territory and have been, or are likely to be, directly and adversely affected by a Bank project. (289) In addition, the affected party must demonstrate that efforts have already been made to bring the problem to the Bank's attention and that Bank management did not adequately respond. (290) The Panel accepts claims alleging failure of the Bank to follow policies and procedures in the design, appraisal, and implementation of any Bank funded project. (291) Upon receiving a request for investigation, the Panel conducts a preliminary assessment of the claimant's request and submits the report to the Bank's Board, including a recommendation of whether or not the complaint should be investigated. (292) If the Panel recommends an investigation and the Board approves, then the Panel proceeds with a full investigation and submits a report of its findings to the executive directors and the president. (293) If the Panel recommends an investigation and the Board does not approve, the denial is the end of the request. (294) As of January 2001, the Panel had received only twenty-one requests for inspection. (295) Of these twenty-one requests, the Panel recommended investigation for nine of them, yet the Board only approved the investigation of five. (296) The Board approved an investigation of the Arun III hydropower project in Nepal, but limited the investigation to the Bank's substantial compliance with three policies: Environmental Assessment (4.01), Involuntary Resettlement (4.30), and Indigenous Peoples (4.20). (297) The Bank also approved an investigation of India's NTPC Power Generation Project, but limited it to a desk study to be conducted in Washington, D.C. (298) Although the Panel operates independently of the Board, making recommendations free from Board approval, the Board does affect the Panel's remedies. (299) Therefore, the Panel's recommendations cannot be implemented independently of the Board. (300) For example, the Panel received a request from an organization for investigation of the Ecodevelopment Project at the Rajiv Gandhi Nagarhole National Park. (301) In the preliminary investigation, the Panel found "prima facie evidence that the Bank has failed to observe its policy on Indigenous Peoples in the design and appraisal phases. In [the Panel's] view, there [wa]s a significant potential for serious harm although, given the processes [were] now underway, it [might] not become evident for some time." (302) Although the Panel found the project implementation flawed and recommended that the Board authorize an investigation into this case, the Board did not do so, and the denial was the end of the request. (303) The small number of requests for inspections may be attributed to local populations having difficulty accessing the Panel. (304) For example, in some developing nations, communities are unaware of the existence of the Inspection Panel. (305) For the local communities who are aware of the Panel, the Bank generally assumes a defensive attitude, challenging their eligibility. (306) The Panel will only accept claims when a claimant can demonstrate failed attempts at recourse through Bank management and will not accept claims filed after the closing date of the loan. (307) In addition, the operational procedures of the Panel do "not reflect the principles of transparency [and] public participation ... that are at the core of the [P]anel's mandate." (308) First, the Bank President nominates, and the Executive Directors appoint, the three Panel members. (309) These members may then be removed for cause by a decision of these same Executive Directors. (310) Second, the Bank must issue a copy of the Panel's final report to the claimant or the public within two weeks after the Board considers the report. (311) If the Board waits the full two weeks, this delay limits the opportunity for public participation by offering little time for the public to comment on the report and a large amount of time for the managers to misrepresent it. (312) C. Additional Steps to Improve Bank Practice: Improving Monitoring and Enforcement Despite the Bank's attempts at reform, the poor outcomes and public distrust of Bank-funded projects may be attributed to a lack of clear monitoring and effective sanctions. (313) As it currently stands, the Bank's inability to adhere to its policies, and the lack of repercussions for not doing so, create a disincentive for Bank staff to comply with environmental and social policies. The "approval culture" within the Bank rewards the approval of large loans without regard to project quality. (314) Therefore, the Bank members stand to "gain financially from their own failures and negligence at the expense of their clients." (315) To remedy this compliance disincentive, the Bank should implement a system that monitors compliance and sanctions violations. 1. Monitoring Compliance Bank projects typically receive infrequent environmental supervision, thus monitoring Bank staff and borrowers' compliance becomes extremely difficult. (316) With virtually no threat of being discovered for noncompliance, Bank staff and borrowers have little incentive to adhere to stringent Bank policies. (317) Furthermore, without effective monitoring, the public cannot scrutinize projects. This limits the Bank's accountability, decreases necessary public feedback in the decision-making process, and increases the likelihood that projects will fail. (318) The Bank must, therefore, create a monitoring system that creates a disincentive for noncompliance while maintaining the transparency and accountability of a process that encourages public feedback. In order to do so, the Bank must form independent task forces to oversee the implementation of Bank policies and to monitor compliance throughout all phases of a project. Monitoring should occur not only at the planning and construction phases, but also should continue during the operation of the project. The task forces should be project specific and independent of Bank operations, so as to ensure reliable and unbiased feedback on compliance efforts. Furthermore, the task force should include experts from local NGOs as well as experts in hydropower development and compliance monitoring to ensure not only a sophisticated understanding of the project operations but also to ensure the consideration of environmental and social implications of such development. By instituting a task force and affirmatively requiring compliance with Bank policies, the Bank staff and borrowing nations will be forced to comply or risk the repercussions for their failure to comply. 2. Sanctions for Violations With the extensive policy requirements and the lack of financial repercussions for failure to comply, it is not surprising that the Bank and borrowing nations have not chosen to adhere to Bank policies in the past. While monitoring begins effectively to realign the incentive to comply, imposing a system of sanctions for noncompliance provides the monitoring system with "teeth." To sanction violations effectively, the Bank must first establish a hierarchy of sanctions and make the consequences of failing to act known amongst the staff and borrowers. Clearly, the severity of the penalty should depend on the severity of the offense. For example, a nation that fails to adhere to policy requirements may lose its funding priority, or for a more egregious offense, may lose all present and future funding opportunities; whereas, a staff member who fails to act according to Bank policy may receive a formal letter or public reprimand. For more egregious offenses, a staff member may be demoted, or in the most extreme cases terminated. The Bank should create an independent investigation panel to work with the monitoring task forces described above to respond to compliance problems. The Panel should provide staff and borrowers with an opportunity to be heard. Ultimately, the Panel should administer penalties and levy sanctions against those parties who have not complied with the Bank's policies. The Panel should determine the extent of the penalties based on the egregiousness of the action or inaction and the number of offenses. With a stringent task force monitoring project compliance and an independent panel administering a system of sanctions, the Bank would encourage a transparent process in which staff and borrowers will be more likely to comply with established policies. VI. CONCLUSION The World Bank's environmental and social policies have evolved into policies that seek to ensure the development of large-scale infrastructure projects, such as hydropower development, that do not significantly impair the social structures and the natural resources providing life for many people in developing countries. However, personal interests of the Bank management, donor nations, and a small number of the persons with political power in the developing nations have competed with the Bank's fundamental goal of alleviating poverty. This competition has resulted in a failure to meaningfully apply these important policies and has resulted in the devastation of the environment and societies of some of the poorest nations in the world. Pressure on the Bank to become more accountable has led to numerous Bank reforms. However, only when the World Bank begins to play by its own rules and requires others to do the same will the Bank successfully improve portfolio performance and accountability. (1) LEONARD SKLAR & PATRICK MCCULLY, DAMMING THE RIVERS: THE WORLD BANK'S LENDING FOR LARGE DAMS 12 (Int'l Rivers Network Working Paper No. 5, 1994). The Bank's first loan to a developing nation--its fifth loan overall--provided funding for the construction of three large hydroelectric schemes in Chile: Cipreses Dam (La Invernada), Molles Dam, and Pilmaiquen Dam. Id. at 67. (2) PATRICK MCCULLY, SILENCED RIVERS: THE ECOLOGY AND POLITICS OF LARGE DAMS 258 (1996). (3) SKLAR & MCCULLY, supra note 1, at 13. For example, the $670 million loaned to China in 1994 for the Xiaolangdi Dam on the Yellow River was the largest loan package for any single Bank-funded project. Id.; see also International Rivers Network, The World Bank's Legacy: $75 Billion Has Funded Misery and Destruction Worldwide (2000), at http://www.irn.org/wcd/worldbank.shtml (last visited Jan. 6, 2001) (discussing the devastation attributed to Bank projects). (4) DAVID HUNTER ET AL., INTERNATIONAL ENVIRONMENTAL LAW & POLICY 1462 (1998). (5) Id.; see discussion infra Parts III.C.3, IV.C.2, V.A, V.B.2 (discussing Sardar Sarovar and Arun III). (6) HUNTER ET AL., supra note 4, at 1464. This change in Bank policy is often termed the "greening" of the bank. Robert Wade, Greening the Bank: The Struggle Over the Environment, 1970-1995, in 2 THE WORLD BANK: ITS FIRST HALF CENTURY 611-734 (Devesh Kapur et al. eds., 1997) (discussing the development of the Bank's environmental assessment program and the Bank's new interest in projects with environmental objectives). (7) HUNTER ET AL., supranote 4, at 1465. (8) WORLD BANK, OPERATIONAL MANUAL: ENVIRONMENTAL ASSESSMENT OP 4.01 [paragraph] 1 (1999) [hereinafter OP 4.01]. The nature, scale, and potential to cause adverse environmental impacts on the proposed project determines the extent and type of EA required. Id. [paragraph] 2. (9) WORLD BANK, OPERATIONAL MANUAL: APPLICATION OF EA TO DAM AND RESERVOIR PROJECTS BP 4.01, ANNEX B [paragraph] 1(a)-(d) (1999) [hereinafter BP 4.01 ANNEX B]; see also OP 4.01, supra note 8, [paragraph] 4 (requiring Category A borrowers to retain independent EA experts not affiliated with the project to perform the EA as well as to engage an advisory panel of international specialists to advise on all aspects of the EA). (10) WORLD BANK, OPERATIONAL MANUAL: INDIGENOUS PEOPLES OD 4.20 (1991) [hereinafter OD 4.20]. (11) WORLD BANK, OPERATIONAL MANUAL: INVOLUNTARY RESETTLEMENT OD 4.30 (1990) [hereinafter OD 4.30]. (12) OD 4.20, supra note 10, [paragraph] 8. (13) OD 4.30, supra note 11, [paragraph] 3(c); see also Ibrahim F.I. Shihata, The World Bank and Human Rights: An Analysis of the Legal Issues and the Record of Achievements, 17 DENV. J. INT'L L. & POL'Y 39, 63-65 (1988) (discussing the difficulties associated with resettling entire groups of indigenous peoples). (14) WORLD COMMISSION ON DAMS, DAMS AND DEVELOPMENT: A NEW FRAMEWORK FOR DECISION-MAKING 188 (2000) [hereinafter WCD REPORT] (suggesting, although the Bank has written a number of policies regarding the mitigation of environmentaland social harm, the policies have little effect on the devastating impacts of the dams because they focus on the project-planning phase as opposed to the operation phase or alternatives assessment). (15) REPORT OF THE INDEPENDENT REVIEW, SARDAR SAROVAR xiv (1992) [hereinafter THE MORSE REPORT]. (16) Id. at 23-28 (describing the World Bank's published operational manual statement on "Social Issues Associated with Involuntary Resettlement in Bank-Financed Projects"). See generally OD 4.30, supra note 11 (directive providing guidance on Bank policy and procedures on involuntary resettlement). (17) "An important reason why World Bank staff are keen on dams is that promotion within the institution has historically been based on the volume of money which an employee shifts out the door--and dams allow a lot of money to move." MCCULLY, supra note 2, at 258. Therefore, the Bank staff has little incentive to ensure that the projects meet the environmental and social policy requirements. Id. (18) WCD REPORT, supra note 14, at 192. (19) The World Bank Inspection Panel, Res. No. 93-10, World Bank (Sept. 22, 1993) [hereinafter Inspection Panel Resolution], reprinted in WORLD BANK INSPECTION PANEL, OPERATING PROCEDURES ANNEX 1 (1994) [hereinafter IP OPERATING PROCEDURES]. (20) Melanne A. Civic, Prospects for the Respect and Promotion of Internationally Recognized Development Practices: A Case Study of the World Bank Environmental Guidelines and Procedures, 9 FORDHAM ENVTL. L.J. 231, 243 (1998). (21) Richard Bissel, Recent Practice of the Inspection Panel of the World Bank, 91 AM. J. INT'L L. 741, 741 (1997). (22) WORLD BANK INSPECTION PANEL, REPORT AND RECOMMENDATION, NEPAL: ARUN III PROPOSED HYDROELECTRIC PROJECT & RECONSTRUCTING OF IDA CREDIT 2029-NP [paragraph] 45 (1994) [hereinafter REPORT AND RECOMMENDATION: NEPAL]. (23) Bissel, supra note 21, at 741. (24) REPORT OF THE PORTFOLIO MANAGEMENT TASK FORCE, EFFECTIVE IMPLEMENTATION: KEY TO DEVELOPMENT IMPACT iii-iv (1992) [hereinafter WAPENHANS REPORT]. (25) Id.; see discussion infra Part III.C. 1. (26) See generally ROBERT V. PERCIVAL ET AL., ENVIRONMENTAL REGULATION: LAW, SCIENCE, AND POLICY 986-96 (2000) (discussing the monitoring and detecting of environmental policies). (27) See WCD REPORT, supra note 14, at 192 (determining the poor outcomes and public distrust of Bank funded projects result from, among other things, a lack of monitoring and sanctions). (28) See generally Patti Waldmeir & Mark Suzman, World Bank `Fails to Learn from Past Mistakes,' FIN. TIMES, Dec. 13, 1997, at A3 (discussing an internal review of the Bank's lending policies). Two examples of recent projects that demonstrate the World Bank's continued inability to adhere to its policies are India's Ecodevelopment Project and China's Western Poverty Reduction Project. See WORLD BANK INSPECTION PANEL, REPORT AND RECOMMENDATION, INDIA ECODEVELOPMENT PROJECT (1998) [hereinafter REPORT AND RECOMMENDATION: INDIA] (describing inability to adhere to Bank policies); WORLD BANK INSPECTION PANEL, REPORT AND RECOMMENDATION, CHINA: WESTERN POVERTY REDUCTION PROJECT (2000) [hereinafter REPORT AND RECOMMENDATION: CHINA] (same). (29) BRUCE RICH, MORTGAGING THE EARTH: THE WORLD BANK, ENVIRONMENTAL IMPOVERISHMENT, AND THE CRISIS OF DEVELOPMENT 54 (1994). (30) HUNTER ET AL., supra note 4, at 1460-61. (31) WORLD BANK, INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT: ARTICLES OF AGREEMENT art. I(i) (1989) [hereinafter IBRD ARTICLES OF AGREEMENT]. The conference in Bretton Woods established the International Bank for Reconstruction and Development (IBRD or World Bank) and the International Monetary Fund (IMF). RICH, supra note 29, at 55-58. IBRD encourages nations to help one another in economic development and the alleviation of poverty. IMF focuses on the promotion of macroeconomic stability. HUNTER ET AL., supra note 4, at 1461. Since the establishment of IBRD in 1944, several other institutions have become affiliated with the Bank's mission, forming the World Bank Group. In addition to IBRD, the World Bank Group includes the International Development Association (IDA), the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA). IDA loans money to the poorest countries for public sector projects, IFC makes loans to support private sector projects, and MIGA provides insurance against the political risks for private investors. Id. See generally Bretton Woods Agreements Act, Pub. L. No. 79-171, 59 Stat. 512 (1945) (authorizing the President to accept membership for the United States into IMF and IBRD). (32) HUNTER ET AL., supra note 4, at 1461; see also RICH, supra note 29, at 68 (discussing that much of Europe's successful reconstruction is attributed to the Marshall Plan which supplied $41.3 billion in aid, compared with the total contribution of the World Bank of $1.75 billion). (33) IBRD ARTICLES OF AGREEMENT, supra note 31, art. V, [section] 2(a). (34) Id. (35) Id. art. V, [section] 4(a). Originally, there were "twelve executive directors of the Bank, representing its forty-four founding member countries." RICH, supra note 29, at 58. (36) RICH, supra note 29, at 58. Each director votes based on the percentage of financial contributions the member countries they represent have made. IBRD ARTICLES OF AGREEMENT, supra note 31, art. V, [section] 4(b)(i)-(ii). Each of the five largest contributors, including the United States, which maintains 17 percent of the voting share, elects its own director. The remaining countries are divided between remaining directors, such that these directors represent more than one country. Id. (37) SKLAR & MCCULLY, supra note 1, at 13. (38) HUNTER, supra note 4, at 1462. (39) Id. (40) SKLAR & MCCULLY, supra note 1, at 10. (41) Id. The Bank's co-financing typically increases funds for dam construction by 50 to 70 percent. Id. For example, in 1992 the Bank arranged for $13.2 billion in contributions for overall project co-financing to supplement their $21.7 billion that year (an increase of 61 percent). 1993 WORLD BANK ANN. REP. 70. (42) RICH, supra note 29, at 72. The Bank's Articles of Incorporation explicitly required the Bank to consider only economic interests in making loan decisions so as to prevent political influence in Bank decisions. Civic, supra note 20, at 239. (43) WCD REPORT, supra note 14, at 171. (44) See generally id. at 120-29 (identifying the anticipated benefits of large dams in a number of case studies). (45) Id. at 171. Bank lending for large-scale dam development is often supplemented by additional multilateral and bilateral development bank funding, thus funding reached its peak at 84 billion per year between 1975 and 1984. Id. (46) The Independent Review of the Sardar Sarovar project in India and the Bank's Inspection Panel investigation of the Arun III project in Nepal brought public attention to the Bank's failure to adequately assess the environmental impacts and to provide for adequate resettlement of local communities. THE MORSE REPORT, supra note 15, at xiv; Alfred Escher, World Bank Withdraws from Arun III Project at Inspection Panel's Recommendation, 3 HUM. RTS. BRIEF 1, 1 (1995), http://www.wcl.american.edu/pub/humright/brief/v3i1/wldbank31.btm(last visited Sept. 15, 2000). (47) Project benefits are often overestimated. For example, in India, the World Bank estimates that approximately 5 to 13 percent of newly irrigated land is lost to reservoirs and drainage infrastructure. However, many believe these figures underestimate the amount of land that remains suitable for production because the area that actually receives adequate irrigation is often underestimated and much of the land cannot be used due to soil degradation. MCCULLY, supra note 2, at 167. In addition, saline wastewater draining back into the river decreases water quality of water users downstream. Id. at 169. (48) See generally RICH, supra note 29, at 45 (discussing the problems experienced in the building and operating of the Chandil dam in India); WCD REPORT, supra note 14, at 122 (discussing the negative implications of a large-scale hydropower project in Brazil). (49) Jaroslava Colajacomo, World Bank Financing for Large Dams, Address Before the World Commission on Dams [subsection] 2, 4 (Jan. 18, 2000). Often, construction companies hired to construct large hydropower projects in developing nations come from developed nations, thereby increasing the borrower's debts while stimulating the economy of the developed nation hired for the development work. In many Bank projects, over half of the money borrowed returns to industrialized nations contracted for the development work. Memorandum, Bruce Rich, Environmental Defense Fund, The World Bank: Institutional Problems and Possible Reforms (Mar. 1995) (on file with author) [hereinafter Rich Memo]. A "building bias" develops because developed nations stand to gain from the funding of large-scale dam projects. Therefore, developed nations will likely encourage the World Bank to fund such projects, regardless of potential economic, environmental, or social consequences. MCCULLY, supra note 2, at 101. (50) HUNTER ET AL., supra note 4, at 1464. For example, the Bank has contributed "over $10 billion in 137 projects that focus exclusively or primarily on the environments of developing countries." Id. The Bank has also assisted the developing nations in establishing strategies for identifying the environmental priorities in need of foreign assistance. Such plans are often referred to as Environmental Action Plans and may be required to qualify for certain environmental project lending. Id. at 1464-65; WORLD BANK, OPERATIONAL MANUAL: ENVIRONMENTAL ACTION PLANS OP 4.02 [paragraphs] 4-5 (2000) [hereinafter OP 4.02]. (51) HUNTER ET AL., supra note 4, at 1465. (52) Sue Mahony, World Bank's Policies and Practice in Environmental Impact Assessment, 12 ENVTL. & PLAN. L.J. 97, 99 (1995). (53) Id. (54) WORLD BANK, OPERATIONAL MANUAL STATEMENT: SAFETY OF DAMS 3.80 (1977). (55) WORLD BANK, OPERATIONAL MANUAL: SAFETY OF DAMS OP 4.37 (1996). (56) WORLD BANK, OPERATIONAL MANUAL STATEMENT: SOCIAL ISSUES ASSOCIATED WITH INVOLUNTARY RESETTLEMENT IN BANK-FINANCED PROJECTS 2.33 (1980) [hereinafter OMS 2.33]. (57) WORLD BANK, OPERATIONAL MANUAL: INVOLUNTARY RESETTLEMENT OP 4.30 (1986). (58) OD 4.30, supra note 11. (59) WORLD BANK, OPERATIONAL MANUAL STATEMENT: TRIBAL PEOPLE IN BANK-FINANCED PROJECTS 2.34 (1982) [hereinafter OMS 2.34]. (60) OD 4.20, supra note 10. (61) WORLD BANK, OPERATIONAL MANUAL: ENVIRONMENTAL POLICY FOR DAM AND RESERVOIR PROJECTS OD 4.00, ANNEX B (1989). (62) WORLD BANK, OPERATIONAL MANUAL: ENVIRONMENTAL ASSESSMENT OD 4.00, ANNEX A (1989) [hereinafter OD 4.00]. See generally Mahony, supra note 52, at 100 (discussing the initial version of the Bank's Operational Directive on Environmental Assessment). (63) WORLD BANK, OPERATIONAL MANUAL: ENVIRONMENTAL ASSESSMENT OD 4.01 (Oct. 1991) [hereinafter OD 4.01]. See generally Mahony, supra note 52, at 100 (discussing the revised version of the Operational Directive on Environmental Assessment). (64) OP 4.01, supra note 8 (replacing both OD 4.00 and OD 4.01). See generally World Bank, World Bank Lending for Large Dams: A Preliminary Review of Impacts (Sept. 1, 1996) (on file with author) (evaluating the Bank funding of large dams in the precis of the Operations Evaluation Department (OED)). (65) WORLD BANK, TECHNICAL PAPER NO. 154, ENVIRONMENTAL ASSESSMENT SOURCE BOOK VOL. III: GUIDELINES FOR ENVIRONMENTAL ASSESSMENT OF ENERGY AND INDUSTRY PROJECTS 63 (1991) [hereinafter WBTP 154]. (66) Id. (67) See WCD REPORT, supra note 14, at 82 (discussing the impacts of the physical barrier to the movement of species). (68) MCCULLY, supra note 2, at 31. (69) WCD REPORT, supra note 14, at 75. (70) WBTP 154, supra note 65, at 69. In 1994, it was estimated that at least 400,000 square kilometers of land had been lost worldwide. MCCULLY, supra note 2, at 32. (71) MCCULLY, supra note 2, at 32. (72) Id.; WBTP 154, supra note 65, at 70. (73) MCCULLY, supra note 2, at 32. (74) WBTP 154, supra note 65, at 73. (75) MCCULLY, supra note 2, at 33. See generally Everett V. Richardson, Sedimentation, in WATER RESOURCES: ENVIRONMENTAL PLANNING, MANAGEMENT, AND DEVELOPMENT 73 (1997) (discussing sedimentation as both a benefit and detriment to the environment). (76) Richardson, supra note 75, at 73; see also WCD REPORT, supra note 14, at 81 (discussing the impacts of trapping sediments and nutrients behind a dam). (77) MCCULLY, supra note 2, at 33. (78) WCD REPORT, supra note 14, at 81. (79) WBTP 154, supra note 65, at 65. (80) Id. at 71. (81) Id. at 65; WCD REPORT, supra note 14, at 65 ("It is estimated that some 0.5 to 1% of the world reservoir volume is lost from sedimentation annually."). (82) MCCULLY, supra note 2, at 109. (83) Id. (84) WCD REPORT, supra note 14, at 65. (85) MCCULLY, supra note 2, at 36-37. (86) Id. at 37. (87) WCD REPORT, supra note 14, at 83. (88) MCCULLY, supra note 2, at 37 ("Water released from deep in a reservoir behind a high dam is usually cooler in summer and warmer in winter than river water, while water from outlets near the top of a reservoir will tend to be warmer than river water all year round."). (89) Id. at 37. (90) Id. at 40. (91) WBTP 154, supra note 65, at 64. Usually, dams reduce flows during natural flood periods and increase flows during dry periods. WCD REPORT, supra note 14, at 83. (92) WCD REPORT, supra note 14, at 83. (93) MCCULLY, supra note 2, at 47. Many aquatic species require certain temperature levels. Riparian vegetation provides needed shade to keep the river from becoming too hot in the summer. Id. (94) Id. Lifecycles dependent on seasonal fluctuations include reproduction, hatching, and migration. For example, natural flooding carries fish eggs and fry into backwaters and lakes to hatch and grow before returning to the river. Id. Likewise, eucalyptus forests in Australia depend upon periodic flooding for seed germination. WCD REPORT, supra note 14, at 83. (95) MCCULLY, supra note 2, at 47. (96) WORLD BANK, OPERATIONAL MANUAL STATEMENT: ENVIRONMENTAL ASPECTS OF BANK WORK 2.36 (1984) [hereinafter OMS 2.36]. (97) OMS 2.36 paragraph 9 lists eight principles that should guide Bank work: 1) ensure that each project affecting renewable resources does not exceed regenerative capacities of the environment, 2) do not finance projects that cause severe or irreversible environmental deterioration, 3) do not finance projects that unduly compromise the public's health and safety, 4) do not finance projects that displace people or seriously disadvantage certain vulnerable groups without undertaking mitigatory measures acceptable to the bank, 5) do not finance projects that contravene any international environmental agreement concerning the member country, 6) do not finance projects that could significantly affect the environment of a neighboring country without consent, 7) do not finance projects that could significantly modify natural areas designated by international conventions or national legislation, 8) endeavor to ensure that projects with unavoidable consequences for the environment are sited in areas where the environmental damage is minimized, even at somewhat greater costs. (98) Civic, supra note 20, at 246. (99) Id. at 247. (100) OP 4.0 l, supra note 8, [paragraph] 2. (101) WORLD BANK, OPERATIONAL MANUAL: ENVIRONMENTAL ASSESSMENT BP 4.01 [paragraph] 2 (1999) [hereinafter BP 4.01]. (102) See OP 4.01, supra note 8, [paragraph] 8 (policy on environmental screening). (103) Id. [paragraph] 8(a). (104) WORLD BANK, TECHNICAL PAPER 363: ENVIRONMENTAL ASSESSMENT 9 (1995) [hereinafter WBTP 363]. (105) Id. at 3. As the recognition of the benefits associated with EAs grows within the Bank, the Bank claims the percentage of Category A projects will continue to increase. Id. at 9-11. (106) OP 4.01, supra note 8, [paragraph] 8(b). (107) WBTP 363, supra note 104, at 2. (108) Id. at 3. (109) OP 4.01, supra note 8, [paragraph] 8(c). (110) BP 4.01, supra note 101, [paragraph] 6. (111) OP 4.01, supra note 8, [paragraph] 2. (112) Id. [paragraph] 7. (113) Id. [paragraph] 4. (114) Mahony, supra note 52, at 102. (115) OP 4.01, supra note 8, [paragraph] 2. See generally WBTP 363, supra note 104, at 30 (discussing alternatives analysis pursuant to OD 4.01 (the EA policy prior to OP 4.01)). (116) See OP 4.01, supra note 8, [paragraph] 2 (discussing ways of improving project implementation). (117) WBTP 363, supra note 104, at 104. The WBTP suggests the reason for the inadequacy of alternatives analysis might be attributed to the complex and arguably more proactive nature of such an analysis compared with the option of merely avoiding or minimizing negative impacts. Id. at 30. (118) WCD REPORT, supra note 14, at 178. (119) SKLAR & MCCULLY, supra note 1, at 17 (discussing the economics behind Bank-funded dams). (120) Id. (121) Id. (122) WCD REPORT, supra note 14, at 164. Small-scale projects include photovoltaic solar home systems, wind turbines for household systems, wind turbines for household and small enterprise use, small hydroelectric generators, and biomass energy systems. Daniel M. Kammen, Bringing Power to the People: Promoting Appropriate Energy Technologies in the Developing World, 41 ENV'T 11, 12 (1999); see also Teodoro Sanchez, Small Hydro as an Energy Option for Rural Areas, Address Before the World Commission on Dams (Aug. 1999) (on file with author) (discussing the benefits of small-scale hydropower in rural Peruvian communities, including the fact that small-scale hydropower projects can be built with local material and labor, and surplus energy may be used to develop the local villages). (123) Sanchez, supra note 122, at 3. (124) WCD REPORT, supra note 14, at 180 (identifying political economy and intellectual barriers as obstacles to consideration of project options). (125) Id.; see also Kammen, supra note 122, at 11-12 (referring to the decentralized systems as "mundane" technologies). (126) WCD REPORT, supra note 14, at 191. Those who have political influence may be seeking to protect their own interests. Id. at 180. (127) Rich Memo, supra note 49, at 5. This problem is exacerbated by the fact that the borrowing nations then become increasingly reliant on outside help without developing the internal capacity for project development and implementation. Id. (128) MCCULLY, supra note 2, at 101; see Kammen, supra note 122, at 39 (recommending that funding be provided to institutions rather than to specific projects because specific projects merely promote technologies selected by donors and fail to promote development of the institutional capacity of local communities or to further local sustainability). (129) WCD REPORT, supra note 14, at 120 (discussing that the dam projects in the WCD's case studies demonstrate the benefits of the hydropower dams often accrue to groups other than those who bear the economic and social costs of the projects). For example, almost all of the power generated by the Nam Theun 2 Dam in Laos will be exported to Thailand, while the environment and livelihoods of the people living along the Theun River basin will be devastated. International Rivers Network, Beyond Big Dams - An NGO Guide to the WCD, Nam Theun 2 Dam, Theun River, Laos (2000) [hereinafter IRN: Nam Theun], at http://irn.org/wcd/nt2.shtml (last visited Jan. 9, 2001). (130) WAPENHANS REPORT, supra note 24, at iii (the Bank's internal evaluation of its projects). (131) MICHELLE MILLER-ADAMS, THE WORLD BANK: NEW AGENDAS IN A CHANGING WORLD 5 (1999). (132) See generally id. (discussing the "approval culture" within Bank operations); WCD REPORT, supra note 14, at 191. (133) WBTP 363, supra note 104, at 30, 32. (134) Id. at 30. (135) Id. (136) WCD REPORT, supra note 14, at 222. (137) Id. (138) WORLD BANK, TECHNICAL PAPER NO. 139, ENVIRONMENTAL ASSESSMENT SOURCEBOOK VOL. I: POLICIES, PROCEDURES, AND CROSS-SECTORAL ISSUES 195 (1991) [hereinafter WBTP 139]. For example, men are usually ignorant of environmental resources women use for income or domestic purposes. The rich are usually ignorant about the environmental resources upon which the poor and powerless depend for their livelihood. Shopkeepers, farmers and traders in contact with indigenous peoples may appear knowledgeable to an outsider, but only the indigenous people themselves have accurate information about social changes which affect them and the natural resources they use. Id. (139) OP 4.01, supra note 8, [paragraph] 15. Policy only requires consultation when the Bank determines the project is likely to pose a significant adverse environmental threat, i.e., Categories A and B. Id. [paragraph] 8. (140) Id. [paragraph] 15. (141) Id. [paragraph] 16; WORLD BANK, OPERATIONAL MANUAL: DISCLOSURE OF OPERATIONAL INFORMATION BP 17.50 [paragraph] 12 (1993) [hereinafter BP 17.50]. Much of the challenge in public consultation is developing effective methods of communication so as to inform people about their role in decisions that will affect them. For some rural people, "they may not know what a hydroproject is, much less its implications for them." WBTP 139, supra note 138, at 195. (142) BP 17.50, supra note 141, [paragraph] 12. This requirement applies to Category A projects. For category B projects, the environmental analysis must be summarized in an annex to the Project Information Document (PID). If the environmental analysis results in a separate report, then the Bank must make the report available in the borrowing country, as outlined in the text, before the Bank proceeds to appraisal. Id. [paragraph] 13; see also discussion infra Part V.B.1 (discussing Disclosure of Information policy). (143) WCD REPORT, supra note 14, at 191-92. (144) See SKLAR & MCCULLY, supra note 1, at 27 ("Since the EA enters the process long after the decision has effectively been made to build the dam, at best only token mention is made of alternatives."). (145) Lori Udall, Arun III Hydroelectric Project In Nepal: Another World Bank Debacle? (1995) [hereinafter Bank Debacle], at http://www.hartfordhwp.com/archives/52/054.html (last visited Sept. 11, 2000). (146) REPORT AND RECOMMENDATION: NEPAL, supra note 22. (147) Bank Debacle, supra note 145, [paragraph] 41. (148) REPORT AND RECOMMENDATION: NEPAL, supra note 22, [paragraph] 63. The NGO claimed that "factual technical information was requested during project preparation to enable the Requesters to have an input into the design and promotion of alternatives, but such information was received too late (after appraisal) to allow input. In particular it noted that the study of alternatives was not released until after appraisal and the completion of loan negotiations." Id. See generally Bank Debacle, supra note 145 (discussing problems associated with the Arun III hydroelectric project in Nepal and its larger implications as a "battle ground" for environmental and human rights activists). (149) REPORT AND RECOMMENDATION: NEPAL, supra note 22, [paragraph] 39. (150) Id. (151) Id. [paragraph] 40. (152) Id. [paragraph] 44. (153) Id. [paragraph] 45. (154) Id. [paragraph] 23. (155) Id. [paragraph] 62. (156) Id.; see also discussion infra Part V.B.2 (discussing the use of the Inspection Panel to increase the Bank's accountability). (157) REPORT AND RECOMMENDATION: NEPAL, supra note 22, [paragraph] 70. (158) See WCD REPORT, supra note 14, at 99-102 (discussing the benefits and costs of building large dams). In terms of employment, large dams may create opportunities not only in construction of the dam, but also in the new opportunities that arise as a result of the newly generated source of power. Id. at 101. (159) Thayer Scudder, Social Impacts, in WATER RESOURCES: ENVIRONMENTAL PLANNING, MANAGEMENT, AND DEVELOPMENT 626 (1997)[hereinafter Scudder, Social Impacts]. (160) Displacement is caused not only by the flooding of the reservoir behind the dam, but also by the installation of numerous project facilities, including roads. REPORT AND RECOMMENDATION: NEPAL, supra note 22, [paragraph] 36 (discussing major social and environmental impacts attributed to road building and not to the hydropower generating facility itself). (161) OD 4.30, supra note 11, [paragraph] 2. (162) Thayer Scudder, Resettlement, in WATER RESOURCES: ENVIRONMENTAL PLANNING, MANAGEMENT, AND DEVELOPMENT 669 (1997) [hereinafter Scudder, Resettlement]. (163) Id. Although dam operations may create jobs, relocatees often do not have the necessary skills or education to build or operate the infrastructure. Immigrants often move into the community to take advantage of job opportunities and benefit disproportionately. Id. at 694. (164) WCD REPORT, supra note 14, at 110. The indigenous peoples often bear a disproportionate share of the burden while receiving little if any of the anticipated benefit of the project. For example, in India, 40 to 50 percent of those displaced by development projects were tribal people, yet tribal people comprise only eight percent of the population in India. Id. (165) H. BRODY, ADDRESSING THE PROJECT--SOCIAL IMPACTS AND LARGE DAMS 24 (World Comm'n on Dams, Thematic Reviews Social Issues I.1, Working Paper, 1999).(166) Id. (167) Scudder, Resettlement, supra note 162, at 669. (168) MCCULLY, supra note 2, at 70. (169) Id. at 68. (170) Scudder, Resettlement, supra note 162, at 634. (171) See id. at 634-35 (discussing the utilization of flood plains). (172) See BRODY, supra note 165, at 26 (identifying the difficulty of relocating because the native people are attached to the land in "inflexible ways"). (173) Jonathan A. Fox, When Does Reform Policy Influence Practice? Lesson from the Bankwide Resettlement Review, in THE STRUGGLE FOR ACCOUNTABILITY: THE WORLD BANK, NGOs, AND GRASSROOTS MOVEMENTS 303, 304 (1998). See generally OMS 2.33, supra note 56 (discussing the social issues associated with involuntary resettlement). (174) See generally OD 4.30, supra note 11 (desribing policy and procedure of involutary resettlement); see BRODY, supra note 165, at 16-17 (discussing the Bank's social policies at the time the Bank became involved with the Sardar Sarovar project in 1985). (175) OD 4.20, supra note 10, [paragraphs] 2, 8. OD 4.20 broadened the definition of indigenous peoples established under World Bank, Operational Manual Statement 2.34: Tribal People in Bank-Financed Projects (1982). The definition was broadened to include "indigenous peoples," "indigenous ethnic minorities," "tribal groups," and "scheduled tribes." Andrew Gray, Development Policy--Development Protest, in THE STRUGGLE FOR ACCOUNTABILITY: THE WORLD BANK, NGOS, AND GRASSROOTS MOVEMENTS 267, 287 (1998). The criteria was expanded to "include attachment to ancestral territories, self-identification, distinct language, and subsistence production activities." Id. (176) OD 4.30, supra note 11, [paragraph] 3(a). See generally HUNTER ET AL., supra note 4, at 1467 (discussing OD 4.30). (177) OD 4.30, supra note 11, [paragraph] 3(b)(iii). (178) Id. [paragraph] 3. (179) Id. [paragraph] 20. (180) Fox, supra note 173, at 317. (181) OD 4.30, supra note 11, [paragraph] 4 (resettlement planning). The World Bank defines "large-scale displacement" as being the displacement of more than 100 to 200 individuals. Id. at n.8. (182) Id. [paragraph] 24. The Bank's task manager is also required to assess the government's own policies, experiences,institutions, and legal framework pertaining to resettlement. Id. (183) Id. [paragraph] 23. (184) Id. [paragraph] 30. (185) See id. [paragraphs] 16, 3(e) (recognizing that indigenous people, as well as landless and semi-landless people, may not be protected through compensation programs and that the absence of legal title should not be a bar to recovering compensation). (186) See generally OD 4.20, supra note 10. "The center of the directive is to ensure that indigenous peoples do not suffer adverse effects during the development process ... and that they receive culturally compatible social and economic benefits." Id. [paragraph] 6. (187) Id. [paragraphs] 6, 8. OMS 2.34 included a veto provision that was left out of the most recent OD 4.20. However, indigenous people "need the right to veto any development project taking place on their lands. Without the informed consent of indigenous peoples, any project is an intrusion and encroachment on their lands and lives." Gray, supra note 175, at 296. (188) OD 4.20, supra note 10, [paragraphs] 14, 15. (189) Id. [paragraph] 15(a), (b), (d). (190) BRODY, supra note 165, at 26; see also discussion infra Part IV.C.2 (discussing International Human Rights Law and the importance of public participation). (191) WORLD BANK, RESETTLEMENT AND DEVELOPMENT: THE BANKWIDE REVIEW OF PROJECTS INVOLVING INVOLUNTARY RESETTLEMENT 1986-1993, at vii (1994) [hereinafter RESETTLEMENT AND DEVELOPMENT]. Unlike the Bank's denial of the accusations of noncompliance with environmental reform policies, this review by the Bank's own resettlement specialists has documented how the Bank staff and borrower governments have ignored the involuntary resettlement policy provisions. Colajacomo, supra note 49, [section] 7. (192) RESETTLEMENT AND DEVELOPMENT, supra note 191, at ix. (193) Id. at 88. (194) MCCULLY, supra note 2, at 67. Although the hydropower projects adversely affect these people, resettlement plans rarely contemplate compensating them. Id. (195) RESETTLEMENT AND DEVELOPMENT, supra note 191, at 138; OD 4.30, supra note 11, [paragraph] 30. (196) OD 4.30, supra note 11, [paragraph] 4. (197) Id. (198) MCCULLY, supra note 2, at 77. (199) OD 4.30, supra note 11, [paragraph] 4. "Preference should be given to land-based resettlement strategies for people dislocated from agricultural settings. If suitable land is unavailable, nonland-based strategies built around opportunities for employment or self-employment may be used." Id. (200) Scudder, Resettlement, supra note 162, at 701. (201) MCCULLY, supra note 2, at 82-83. See generally Colajacomo, supra note 49, [section] 7 (assessing forced resettlement performance of the World Bank's large dam projects). (202) Scudder, Resettlement, supra note 162, at 679. (203) Id. at 688. The author suggests that inadequate implementation impedes dam resettlement. In addition, timing and financial constraints also impede the successful implementation of resettlement projects. Often resettlement projects extend well beyond the completion of the infrastructure project, once monitoring and enforcement efforts have relaxed. Id. at 688-91. In addition, the cost of resettlement projects may exceed ten percent of total project costs. Id. Therefore, funding for such projects may be difficult. Id. (204) OD 4.30, supra note 11, [paragraph] 3(e). In addition, Bank policy recognizes the indigenous, landless, and semi-landless as vulnerable groups whose needs should be protected. Id. [paragraph] 16. (205) Shihata, supra note 13, at 63. (206) Scudder, Resettlement, supra note 162, at 678. (207) OD 4.30, supra note 11, [paragraph] 15. (208) MCCULLY, supra note 2, at 79. (209) Scudder, Resettlement, supra note 162, at 684. (210) Id. (211) MCCULLY, supra note 2, at 72. (212) Id. For example, communities do not receive new schools or health centers. Id. (213) Shihata, supra note 13, at 63. (214) Shalmali Guttal, Public Consultation and Participation in the Nam Theun 2 Hydroelectric Project in the Lao PDR, Address Before the World Commission on Dams 3 (Feb. 26-27, 2000) (on file with the author). Public participation requires local communities' "active involvement, from the leadership to the base of indigenous communities, at the beginning of the process right through to the end, in order to give affected people the opportunity to identify potential impacts, create their own development plans, and propose alternatives." Kay Treakle, Ecuador: Structural Adjustment and Indigenous and Environmental Resistance, in THE STRUGGLE FOR ACCOUNTABILITY: THE WORLD BANK, NGOS, AND GRASSROOTS MOVEMENT 255 (1998). (215) Convention Concerning Indigenous and Tribal Peoples in Independent Countries, Sept. 5, 1991, I.L.O. No. 169, 72 I.L.O. Official Bull. 59, art. 1, [section] 1; see also International Covenant on Economic, Social and Cultural Rights, 993 U.N.T.S. 3, art. 7, [section] 1 (declaring "[a]ll peoples have the rights of self determination"). (216) DOR BAHADURBISTA, FATALISM AND DEVELOPMENT: NEPAL'S STRUGGLE FOR MODERNIZATION 144(1994).If local communities are not involved in all stages of project development and implementation, local people will not take pride or ownership in projects viewed as belonging to foreign partners and not themselves. For example, a bridge was built in a Nepali village; however, the Nepali people continued to ford the river, because they lacked the necessary connection to and sense of ownership in the bridge. Id. (217) Id. (218) OD 4.30, supra note 11, [paragraph] 3(c). (219) Id. [paragraph] 5(b). (220) Id. [paragraph] 8. (221) Id. (222) In looking at multilateral banks, in particular the World Bank, the World Commission on Dams found that there is a "generalized failure to include and recognise affected people and empower them to participate in decision making." WCD REPORT, supra note 14, at 191. (223) THE MORSE REPORT, supra note 15, at xiv. The Bank appointed an independent review, headed by former Republican Congressman Bradford Morse, to review the Sardar Sarovar project in response to environmental and human rights groups' protest over the project. MCCULLY, supra note 2, at 259. The groups claimed the Bank directors were not receiving an accurate accounting of the project from the Bank's India Operations Department. See discussion infra Part V.A. (identifying Sardar Sarovar and the controversy surrounding the project as a catalyst for World Bank reform). (224) NARMADA INTERNATIONAL HUMAN RIGHTS PANEl., INTERIM REPORT 3 (1992) [hereinafter NARMADA HUMAN RIGHTS]. (225) Id. (226) THE MORSE REPORT, supra note 15, at 53. (227) OD 4.20, supra note 10, [paragraph] 8. (228) Id. (229) Id. [paragraph] 15(d). (230) Guttal, supra note 214, at 3-6. (231) Id. at 1. (232) IRN: Nam Theun, supra note 129, at 1. (233) Id. Estimates suggest that up to 40,000 people living along the banks could be adversely affected due to changes in flood patterns and decreased fish stocks. Id. (234) Guttal, supra note 214, at 1; OD 4.20, supra note 10, [paragraph] 15(d). (235) BRODY, supra note 165, at 26. "The larger the dam, the more costly the project, the greater its construction momentum. The greater this momentum, the more important it is to balance the development process with social impact assessments prior to any finalization of plans or commencement of actual construction." Id. at 29. (236) Id. at 20. (237) Guttal, supra note 214, at 1. (238) Id. at 3. (239) Id. at 3-7. (240) Scudder, Social Impacts, supra note 159, at 648. (241) Gray, supra note 175, at 291. (242) Lori Udall, The World Bank and Public Accountability: Has Anything Changed?, in THE STRUGGLE FOR ACCOUNTABILITY: THE WORLD BANK, NGOs, AND GRASSROOTS MOVEMENTS 391 (1998). (243) RICH, supra note 29, at 306. (244) Udall, supra note 242, at 392. (245) SKLAR & MCCULLY, supra note 1, at 13. (246) Id. (247) Udall, supra note 242, at 394. (248) CATHERINE CAUFIELD, MASTERS OF ILLUSION: THE WORLD BANK AND THE POVERTY OF NATIONS 24 (1996). (249) MCCULLY, supra note 2, at 259. Bradford Morse had been a Republican Congressman for six terms before becoming the Administrator of the United Nations Development Program. Id. (250) CAUFIELD, supra note 248, at 24. (251) THE MORSE REPORT, supra note 15, at xxv. (252) Id. (253) Id. Although the Morse Report suggested the Bank should "step back" from the project, the Bank continued to move forward. Ten weeks after receiving the Morse Report, the Bank responded in a document, titled Narmada: Next Steps, assuring the Executive Directors that adequate changes had been made in the project to remedy the problems described in the Morse Report. Letter from Bradford Morse, Chairman, & Thomas Berger, Deputy Chairman, to Lewis T. Prestor, President of World Bank (Oct. 13, 1992) (on file with author). Members of the Review team were angered by the false representation of the report: "The Bank may reject our findings that its incremental strategy has furled ... [b]ut it should not seek to reshape our report to support such decisions." Id. (254) Udall, supra note 242, at 394. In the past, the United States Congress has been used to aid in the reform of the World Bank. For example, the Pelosi Amendment requires the United States Executive Director to obtain an assessment of environmental impacts of a project before a favorable vote on the action and requires that the assessment be made available to the public 120 days before the vote. U.S. International Development and Finance Act of 1989, 22 U.S.C. [section] 262m-7(b) (1994 & Supp. III 1997). In addition, a proposed amendment to Title XIII of the International Financial Institutions Act, the Ecosystem and Indigenous Peoples Protection Act, seeks "to prevent United States funds from being used for environmentally destructive projects or projects involving the involuntary resettlement funded by an institution of the World Bank Group." Ecosystem and Indigenous Peoples Protection Act, H.R. 2969, 106th Cong. (1999) (introduced by Mr. Cox). The proposed amendment would require that the World Bank apply its social and environmental policies. Id. [section] 2(b)(3). (255) Udall, supra note 242, at 391. (256) Id. at 401. (257) Id. at 393. (258) WAPENHANS REPORT, supra note 24, at iii. The Report finds a gradual deterioration in the quality of Bank-funded projects. The number of projects judged unsatisfactory rose from 15 percent in 1981 to 30 percent in 1989 and to 37 percent in 1991. Id. at iv. (259) See id. at [paragraph] vii (discussing the Bank's emphasis on loan approval). (260) Udall, supra note 242, at 402; see discussion supra Part III.C. 1 (discussing the failure to evaluate alternatives). (261) Udall, supra note 242, at 394. (262) WORLD BANK, ADMINISTRATIVE MANUAL: DIRECTIVE ON DISCLOSURE OF INFORMATION 1.10 [paragraph] 3 (1989). (263) Udall, supra note 242, at 404. (264) RICH, supra note 29, at 306. (265) BP 17.50, supra note 141, [paragraph] 1. (266) MILLER-ADAMS, supra note 131, at 81. Although the reform of the Bank's policies can be attributed to the work of many NGOs, only 2 percent of PIC's requests for information came from NGOs. Such a figure suggests that many NGOs receive their information from unofficial contacts with the Bank. Id. (267) Shihata, supra note 13, at 226-27. (268) Udall, supra note 242, at 406. The task manager is the Bank staff responsible for the project. Id. (269) BP 17.50, supra note 141, [paragraph] 3. (270) Id. (271) Id. [paragraph] 5. (272) Udall, supra note 242, at 407. (273) MILLER-ADAMS, supra note 131, at 81. (274) For example, when a request was made to the Inspection Panel claiming that the Bank violated the BP 17.50 on Disclosure of Operational Information in the Lesotho Highland Water Project in South Africa, the Bank's response was that the policy requirements did not apply to this project because the loan was granted prior to September 1993; however, the staff advised the requesters to contact PIC to obtain any information that was available for release to the public. 1999 WORLD BANK INSPECTION PANEL ANN. REP. 23 [hereinafter IP 1999]. The Panel was not satisfied with Management's compliance with the provisions of BP 17.50. Id. (275) Udall, supra note 242, at 406. (276) MILLER-ADAMS, supra note 131, at 81. (277) REPORT AND RECOMMENDATION: NEPAL, supra note 22, [paragraph] 66. The Panel "notes a gap in the availability of information in Washington, on the one hand, and in the country where the project is located on the other--in particular the actual project area." Id. (278) BP 17.50, supra note 141, [paragraph] 4 ("[A]s an investment project develops, Bank staff update the PID and send the update to the PIC, through which interested panics may obtain it. For all operations, the PID is updated before the Bank's formal project appraisal."). (279) Udall, supra note 242, at 406. (280) REPORT AND RECOMMENDATION: NEPAL, supra note 22, [paragraph] 11. (281) Id. [paragraph] 57. (282) Id. (283) Udall, supra note 242, at 431 n.51. (284) See REPORT AND RECOMMENDATION: NEPAL, supra note 22, at [paragraph] 69 ("Disclosure is not an end in itself, according to Bank policy, but rather a means of enhancing the ability of affected people to participate in the design and consideration of alternatives."). (285) See Inspection Panel Resolution, supra note 19. This was the first time that an international institution had provided a means for citizen appeal in the event that the institution's standards were not met. 1998 WORLD BANK INSPECTION PANEL ANN. REP. V [hereinafter IP 1998]. (286) David B. Hunter & Lori Udall, The World Bank's New Inspection Panel, 36 ENV'T 2, 2 (1994); WORLD BANK INSPECTION PANEL, OPERATING PROCEDURES 3 (1994). (287) IP OPERATING PROCEDURES, supra note 19, at Purpose. (288) Individuals may not file a request for inspection with the Inspection Panel. See id. [paragraph] 4 (allowing "any group of two or more people" to file). Access to the Panel is offered, however, to project beneficiaries and their representatives. Bissel, supra note 21, at 741. (289) IP OPERATING PROCEDURES, supra note 19, [paragraph] 4; see The Inspection Panel: Role of the Inspection Panel in the Preliminary Assessment of Whether to Recommend Inspection--A Memorandum of the Senior Vice President and General Counsel (January 3, 1995) [hereinafter Memo of Senior Vice President], reprinted in IBRAHIM F.I. SHIHATA, THE WORLD BANK IN A CHANGING WORLD II 691-92 (1995) (discussing the establishment of standing of the complaint). (290) IP OPERATING PROCEDURES, supra note 19, [paragraph] 4. Note that although the Panel is not a judicial body, its assessment of whether an inspection should be granted is similar to the process a tribunal may use to determine whether it has jurisdiction and whether the claim is admissible. Memo of Senior Vice President, supra note 289, at 690. (291) IP OPERATING PROCEDURES, supra note 19, [paragraph] 1. The Panel will only accept requests for inspections "which claim that an actual or threatened material adverse effect on the affected party's rights or interests arises directly out of an action or omission of the Bank to follow its own operational policies and procedures during the design, appraisal and/or implementation of a Bank-financed project." Id. (292) IP OPERATING PROCEDURES, supra note 19, [paragraph] 30. (293) Id. [paragraphs] 39, 42, 53. (294) See id. [paragraph] 39 (describing the process). (295) IP 1999, supra note 274, at 10; World Bank Inspection Panel, Summary of Requests for Inspection, at http://www.wb1n0018.worldbank.org/ipn/ipnweb.nsf (last visited Sept. 9, 2001). (296) World Bank Inspection Panel, supra note 295. (297) WORLD BANK INSPECTION PANEL, INVESTIGATION: NEPAL PROPOSED ARUN III HYDROELECTRIC PROJECT (Initial Work Plan, Feb. 1995), available at http://www.worldbank.org/html/ins-panel/secm9550.html (last visited Sept. 9, 2001). (298) IP 1998, supra note 285, at 17. (299) Udall, supra note 242, at 424. (300) Id.; see also Memo of a Senior Vice President, supra note 289, at 697 (discussing implementation); INSPECTION PANEL RESOLUTION, supra note 19, [paragraphs] 19, 20 (same). (301) REPORT AND RECOMMENDATION: INDIA, supra note 28, at 23. (302) IP 1999, supra note 274, at 29. (303) REPORT AND RECOMMENDATION: INDIA, supra note 28, at 26, 27. (304) Udall, supra note 242, at 422. (305) MILLER-ADAMS, supra note 131, at 5. (306) Udall, supra note 242, at 422. (307) INSPECTION PANEL RESOLUTION, supra note 19, [paragraphs] 13, 14(c). (308) Hunter & Udall, supra note 286, at 3. (309) INSPECTION PANEL RESOLUTION, supra note 19, [paragraphs] 2. (310) Id. [paragraph] 8. (311) Id. [paragraphs] 23, 25. (312) Udall, supra note 242, at 423. (313) WCD REPORT, supra note 14, at 192. (314) See generally WAPENHANS REPORT, supra note 24, [paragraph] vii (discussing the emphasis on loan approval). (315) Rich Memo, supra note 49, at 13 (quoting Kunibert Raffer, economist at the University of Vienna). For example, if a project fails because of Bank staff, the country must still repay the loan and may have to use additional loan(s) to repair the damages. Id. (316) WBTP 363, supra note 104, at 73 ("For example, when short missions are scheduled only once per year for a particular project, it is difficult to determine if the day-to-day construction works are in accordance with environmental covenants, particularly since the mission has to investigate a wide range of issues related to the project."). (317) See generally id. (indicating that major damage may occur during unsupervised periods and that this damage may not be discovered). (318) WCD REPORT, supra note 14, at 192. ERIN K. MACDONALD, Student, J.D. and Certificate in Environmental and Natural Resources Law expected May 2002, Northwestern School of Law of Lewis & Clark College; B.A. 1998, Trinity College (Psychology). The author thanks Professor Chris Wold for his time and encouragement in completing the work. The author also thanks her husband for his patience and support throughout the drafting process. |
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