The World Bank Group (WBG) has the potential to improve the contribution of extractive industries (EI) to sustainable development and poverty reduction. However, this report by the WBG’s operations evaluation departments finds that although its EI projects have produced positive economic and financial results, it has not been successful in ensuring compliance to environmental and social safeguards. The paper examines the World Bank, the IFC and MIGA, to assess their performance in moving away from a focus on economic benefits towards sustainable development, addressing the governance challenges associated with resource-rich countries, and mitigating environmental and social costs of the extractive industry.The paper finds that the WBG has not devoted enough attention to the developmental needs of poorly performing resource-abundant countries, and can do much to improve its performance. In particular it recommends that the WBG should:Formulate an integrated strategy that starts with the presumption that successful projects should not only provide returns to investors but should also provide revenues for governments, mitigate negative environmental and social effects and benefit local communities. To this they mustformulate a WBG sector strategy: that encourages sustainable development and the reliable mitigation of adverse environmental and social impacts. The WBG should not support sector expansion unless it can mitigate these risksaddress EI in Country Assistance Strategies (CAS): CAS should explicitly discuss the sector’s current and potential economy-wide linkages in order to guide future project design, facilitate monitoring and evaluation and provide a framework for WBG-wide coordination and collaboration in the sectorpromote governance improvements: by devoting greater management attention and administrative budget for advisory and analytical activities aimed at improving the policy, institutional, and governance framework for EI for resource-rich countries with weak macro and sectoral governancesupport private sector development and environmental sustainability: by continuing to support closure of uneconomic mines, reform and privatise state-owned enterprises, and mitigate pre-existing environmental and social problemsStrengthen project implementation: rigorous implementation of safeguard policies by the WBG is a minimum requirement for it to operate sustainably. The WBG needs to more systematically define, monitor, document, and report on the economic, social and environmental impacts of its projects. Specifically, the distribution of benefits needs to be explicitly monitored and evaluated:improve project screening and monitoring: by providing clear and consistent guidance for categorising projects, identifying applicable safeguards, the appropriate scope and nature of instruments, and reporting and evaluation of safeguards implementationinvolve specialists throughout: by providing adequate resources and incentives for the participation of qualified environmental and social specialists at the preparation, appraisal and supervision of all projects likely to have adverse impactsenhance reporting of results: by strengthening reporting of its results by ensuring that project completion reports includeex posteconomic rate of return or net present valueevaluate the sharing of benefits: by estimating the distribution of project benefits among different stakeholder groups (government, private companies, local communities), the acceptability of benefit sharing should be discussed with key stakeholder groupsEngage with stakeholders:the WBG has played an important convening role bringing different stakeholders together, but it has inadequately addressed some areas – notably governance and revenue management. The WBG’s performance in these areas can be enhanced through improved consultation with stakeholders (including local communities) and by systematically and transparently reporting on key sustainability indicatorsupdate policy framework: by consulting with stakeholders to periodically adjust the policy framework to reflect evolving industry practice and to address identified gaps such as those related to consultation and disclosure, community development, social issues of mine closure, security, hazardous materials management and gas flaring. It should also recognise the expanding awareness of the human rights dimensions of WBGs policiespromote disclosure of fiscal revenues from EI: by vigorously pursuing country- and industry- wide disclosure of government revenues from EI. The Bank should work toward and support disclosure of EI revenues and their use in resource-rich countries. The IFC and MIGA should also consider requiring their private sector clients to publish their payments to governmentsdevelop and monitor sustainability indicators: by consulting with stakeholders to develop indicators of economic, social and environmental sustainability, establish baseline data, provide adequate monitoring, and report and evaluate the results during supervision and in project completion reports. The WBG should encourage independent outside monitoring, ideally using local capacityincrease local community participation: throughout the life cycle of EI-projects. The WBG should assist countries to increase community involvement in EI decision-making processes, and ongoing consultation throughout the project life cycle, including closure
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