“the logic was sound, but reality...

The World Bank Group and

the Chad-Cameroon Oil & Pipeline Project

“The logic was sound, but reality interfered”

IEG Program Assessment Report, page 26

Korinna Horta,Ph.D.

Joint Session IEG-Urgewald-Relufa

World Bank/IMF Spring Meetings

April 22,2010

Initial cost estimate in 2000: US $ 3.5 Billion

Cost estimate in 2008: US $ 6.5 Billion

U.S. Statement to the World Bank’s Board of Executive Directors

June 6, 2000“On a broader plane we must expect that it [the Chad/Cameroon Pipeline Project] will also unquestionably be a prism through which the world views this institution and, it is likely, development assistance more broadly. The stakes could not be higher.”

“The project provides a unique opportunity for IFC and the Bank to play a significant complementary role in reducing poverty in one of Africa’s poorest regions.” (Project Appraisal Document, April 20, 2000, page 12)

“Chad has successfully put in place democratic political institutions.” (Project Appraisal Document, April 20, 2000,

page 121)

“…an unprecedented framework to transform oil wealth into benefits for the poor” (World Bank press release June 6, 2000)

WBG Management Arguments:

A Model Project

• According to the PAD, one of the project’s key goals was that it “provide a model for analyzing and mitigating environmental and social impacts for petroleum operations, as well as large-scale infra-structure and other investments.” (Project Appraisal Document, April 20, 2000, p. 8 )

IEG’s Program Performance Assessment Report – November 2009

-Examines all of the WBG supported investments

and capacity-building efforts

-Provides valuable insights and should generate

compulsory lessons for all future investments in

extractive industries and in other high risk ventures

“The logic was textbook perfect – except for the

revealed weakness of every link in the chain.”

(IEG report,p.38)

IEG evaluation is first project-based

joint assessment by IEG-WB and

IEG-IFC.

The World Bank withdrew from the

project in 2008 citing Chad’s

violations of loan agreements.

IFC continues to be engaged in

the project until today.

Private sector in Chad not immune

to political interference.

Some of IEG’s Findings

•Fundamental objective of reducing poverty

has not been met.

•Furthermore “…the oil revenue windfall was

associated with resurgence of civil conflict

and a worsening of governance.” p.35

•Deterioration of non-oil economy after the

project became operational.

“Poverty developments were not adequately monitored, a serious

shortcoming for a program whose main objective was poverty

reduction through the use of oil revenue.” (IEG report, p. 23)

The Achilles Heal: Capacity-Building:

“…the attempt to support capacity-

building activities concurrently with

the main project proved

unsuccessful.” (IEG report, p. xvi)

IEG Report Inconsistency:“…WBG involvement was critical for the satisfactory

handling of the direct environmental and social impact of the oil development and pipeline construction.”

IEG Report p.9

Indigenous Peoples

OD 4.20 requires their

informed participation and

the development of an

indigenous peoples plan.

The IEG report recognizes that financial and management

problems at FEDEC, the foundation set up to comply with OD 4.20,

is likely to have serious negative impacts on indigenous peoples.

Critical Lesson

“…investment decisions have been insufficiently

responsive to genuine community-driven demands,

and improving such responsiveness should be a

major objective in the future.” IEG Report p. 21

The Extractive Industries Review (EIR)-Commissioned in early 2001-EIR Report published in late 2003

Central EIR recommendation:

No World Bank promotion of increased private investment in Extractive Industries where governance is inadequate.

Key EIR criteria for investments in EI:

-Quality of the rule of law;

-Absence of armed conflict or risk of such conflict;

-Respect for labor and human rights;

-Protection of the rights of indigenous peoples

Operations Evaluation Department

“…the Bank should not support increased EIinvestment on the assumption that the Bank’s parallel efforts to strengthen governancewill mitigate current risks” (OED, January 2003)

The World Bank Group should adopt a phased

approach: Ensure that government capacity to

address environmental impacts and to

equitably manage revenues exist BEFORE

investing in EI.

IEG Report argues for continued WBG involvement in extractive industries “however risky it may be”

IEG Report p.viii

NEED TO

EXAMINE WHOSE

RISKS WE ARE

REFERRING TO

HERE!

World Bank loans have been repaid through a special escrow account,

Bank management and staff responsible for the project have advanced in their

careers or are enjoying well-financed retirement.