History of the world economy|
Date: Wed, 1 Nov 1995 23:50:54 GMT
Sender: Activists Mailing List <ACTIV-L@MIZZOU1.missouri.edu>
Subject: Fact Sheet on the World Bank's IFC
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** Topic: IFC Fact Sheet **
** Written 10:47 AM Oct 26, 1995 by newsdesk in cdp:headlines **
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/* ---------- "IFC Fact Sheet" ---------- */
## author : firstname.lastname@example.org
## date : 19.10.95
Getting the Facts on the IFC:
Private Sector Lending of the World Bank
By Friends of the Earth
19 October 1995
WHAT IS THE IFC?
The International Finance Corporation is the private sector
lending arm of the World Bank, and is part of the World Bank
Group. It was established in 1956 "to foster economic
growth in developing member countries by promoting private
sector investment". It has become the world's single
largest source of direct project financing for private
investment in developing countries. In 1995, the IFC
approved $2.9 billion in loans, an increase of 17 percent
from the previous year, making it the fastest growing part
of the World Bank Group, after MIGA. In contrast, IBRD
loans have increased more slowly and IDA loan commitments
HOW DOES IT DIFFER FROM IDA AND IBRD OF THE WORLD BANK?
The other parts of the World Bank, the International
Development Association (IDA) and the International Bank for
Reconstruction and Development (IBRD), provide loans
directly to governments and their lending profiles are
But the IFC serves as a catalyst for investment worldwide.
The IFC's involvement is essentially a seal of good
investment and opens the door for other investors to decide
a project is not too risky to become involved. For every $1
in financing approved by the IFC in 1994, other investors
and lenders provide $5.43. While IFC's loan commitments are
relatively small, it mobilizes more than $20 billion of
investments in the private sector.
WHAT ARE IFC'S DISCLOSURE, ENVIRONMENT & SOCIAL POLICIES?
The IFC sets its own procedures which are weaker than the
rest of the World Bank. The information disclosure policy
involves the public less in its project development, and the
amount of information that is publicly available is limited.
There is little coordination within the IFC of environmental
information so that critical information is used in project
development in an attempt to reduce the negative impacts.
Environmental assessments are completed after the staff
appraisal stage and after the critical decisions about the
project have been made. The IFC argues that because it
lends to private corporations, it has certain
confidentiality rights to respect and cannot apply the World
Banks general information disclosure policy. However, in
the last year, the Inter-American Development Bank and the
Asian Development Bank have both adopted stronger disclosure
policies for their private sector windows, which includes
the release of loan agreements, earlier public notification
of projects in the works and a more thorough use of the
information that is avaiable.
As for the environmental and social policies of the IFC, on
principle the IFC is supposed to follow the same policies of
the World Bank. However, in practice we find that rigorous
application of these policies is lacking. In some cases,
the local communities were not brought into the project
development soon enough or at all. In other cases, local
indigenous populations are affected by an IFC loan, but the
indigenous peoples policy of the World Bank has not been
followed. In effect, what we see is that the environmental
and social issues will be addressed when convenient or not
too costly, but the failure to apply such policies will not
prevent a project from being financed.
WHAT IS THE IFC'S ENVIRONMENTAL RECORD?
The IFC's loans include large scale infrastructure projects,
privatization and development of the manufacturing sector
and extraction of natural resources. Between 1992-1993,
19.2 percent of the loans were in the energy sector for oil
and gas development and energy production, 16.9 percent of
the loans were in the chemicals, petrochemicals and
fertilizer sectors, 12.2 percent were in general
manufacturing and 22 percent for infrastructure.
One major infrastructure project in Chile typifies the kind
of environmental and social degradation that occurs without
strong policies or oversight in institutions like the IFC.
In 1993, the IFC approved the funding for the construction
of a large hydroelectric dam, the Pangue Dam on the Bio Bio
river, one of Chile's longest and considered most important
rivers. The Pangue is the first of six dams being proposed
for financing by the IFC.
The beauty of the Bio Bio's gorges and rapids has led the
area to be known as the "Grand Canyon of South America".
The area provides habitat for native forests, as well as
home to 5,000 native Pehuenche people, the only members of
Mapuche Indian society still living in traditional manner.
Construction of these dams will involve the forced
relocation of thousands Pehuenche people, as well as the
ecological destruction of a diverse valley and river.
The damming of the Bio Bio river became the first major
development project to arouse opposition in Chile. The
Peheunche people joined with environmentalists nationally
and internationally to organize against the construction of
these dams. The protest forced the Chilean Electric Power
Company to complete an environmental assessment, which was
later criticized by environmental groups for failing to
address the impact of the broad impacts of the construction
of the dams.
But despite the opposition locally in Chile and
internationally, the IFC decided to provide the loans to
begin the building of the first dam in the series.
FUTURE FOR THE IFC
There is a future for the IFC, but its role should not be to
do business as usual and support the private sector blindly
in its development. Its investments should make a
difference for communities, such as helping an industry
adopt pollution abatement equipment or finance the
development of environmental technologies. The IFC should
not finance power projects that are polluting or destructive
to the environment, but should instead invest in renewable
energy development and demand side management programs.
Most importantly, the IFC's definition of the private sector
must broaden. The amount of private investment in
developing countries in growing at a fast pace, reaching
over $200 billion last year. The IFC's should expand its
definition of the private sector to include micro and small
scale entrepreneurers, such as women, small farmers, and
members of the informal sector. Those are the sectors that
are currently not getting the support. The power, mining,
oil and gas companies are already competitive industries. It
is the majority of society that needs the help.
For more information, contact Andrea Durbin, Friends of the
Earth-US Telephone: (202) 783-7400; Fax: (202) 783-0444;