United States General Accounting Office

GAO Report to Congressional Requesters

September 1998 MULTILATERAL

DEVELOPMENT BANKS

Public Consultation on

Environmental

Assessments

GAO/NSIAD-98-192

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-280095 

September 8, 1998

The Honorable Nancy Pelosi

The Honorable Barney Frank

House of Representatives

This report responds to your request that we review certain aspects of the environmental

assessment and information disclosure policies and practices of the multilateral development

banks.

We are sending copies of the report to the Secretaries of the Treasury and of State; the

Administrator, U.S. Agency for International Development; the Presidents of the institutions we

included in our review (the World Bank and the International Finance Corporation, the Asian

Development Bank, and the Inter-American Development Bank); and other interested parties.

Copies will also be made available to others on request.

Please contact me at (202) 512-4128 if you or your staff have any questions concerning this

report. Major contributors to this report are listed in appendix V.

Benjamin F. Nelson, Director

International Relations and Trade Issues
Executive Summary

Purpose The multilateral development banks, such as the World Bank, have in the

past been criticized for funding projects that imposed unacceptably high

environmental costs on borrowing countries. Critics linked decisions in

favor of such projects to the banks’ relatively closed processes for

developing project proposals. Specifically, the banks did not (1) require

project sponsors (borrowing government agencies or private companies)

to consult with local communities and take their concerns into account

when preparing project proposals or (2) provide the public with access to

information on proposed projects, including environmental assessment

reports.

Congress responded to these concerns by enacting legislative measures

aimed at improving bank performance in both areas. One such measure,

the “Pelosi Amendment,” instructed the Secretary of the Treasury to seek

adoption of policies and procedures within the banks that would

(a) encourage public consultation on proposed projects’ environmental

impacts and (b) provide concerned members of the public in bank

member countries with access to environmental assessment reports at

least 120 days before the banks’ boards of executive directors voted on

funding proposed projects. This legislation was adopted in 1989 and was

amended in 1997 to clarify that it applies to bank projects sponsored by

private companies as well as government agencies.

Noting that there had been no comprehensive, independent analysis of

bank performance in these areas, Representatives Nancy Pelosi and

Barney Frank requested that GAO

• describe the steps the banks have taken to ensure meaningful public

consultation on the environmental implications of proposed projects and

timely public access to relevant project documents;

• evaluate the quality of consultation that occurs on bank-supported

projects and the documentation on the consultation that is provided to

executive directors; and

• determine the extent to which the banks provide broad, timely public

access to project information, including environmental assessment

reports.

GAO also sought to identify factors that help to account for differences in

the quality of the consultation practices employed in different types of

projects.

Page 2 GAO/NSIAD-98-192 Multilateral Development Banks
Executive Summary

Background Project proposals for bank financing are developed by sponsors, with bank

staff providing guidance and oversight. When the sponsor is a public

agency, the process generally calls for bank staff to assign projects with

significant environmental implications an environmental category (A or B)

as soon as the bank and the borrower have agreed to invest substantial

effort in project design. Category A projects have “diverse and significant”

impacts that may extend beyond the immediate project area. Category B

projects have less severe, site-specific, or more readily mitigated impacts.

Sponsors then prepare project proposals, including environmental

assessment reports. Bank staff members appraise sponsor proposals,

negotiate any changes needed, and prepare summary materials for

executive directors to consider before voting on whether to support the

project. A similar process is followed when the sponsor is a private

company; however, private companies typically seek bank support only

after completing a substantial portion of the project design. Within the

executive branch of the U.S. government, the Department of the Treasury

has the lead role in working with U.S. executive directors to develop and

implement U.S. policies regarding the banks.

In conducting this study, GAO analyzed public consultation on a sample of

44 out of 256 category A and B projects in Latin America and Asia that

were approved during 1996 by the World Bank, the Asian Development

Bank, the Inter-American Development Bank, and the International

Finance Corporation.1 GAO then developed rating criteria based on the

banks’ guidance for public consultation and environmental assessment.

Based on these materials, GAO rated consultation as adequate if concerned

members of the local public were (a) informed about the project through

town meetings or similar methods, (b) given reasonable opportunities to

express their concerns in meetings with project sponsors, and

(c) provided with subsequent opportunities to review and comment on the

environmental assessment report. Consultation that exceeded this

standard was rated more than adequate. Consultation not meeting the

standard was rated less than adequate. GAO developed a computational

matrix and applied it to rate the extent to which bank intervention

upgraded the consultation practices employed in these projects above

borrowing country norms. GAO also assessed the quality of the summary

documentation provided to the banks’ boards of executive directors, using

a rating methodology similar to that employed in rating the consultation

practices themselves. For example, documentation was rated adequate if it

provided a complete and accurate summation of the consultation steps

1

The World Bank (officially known as the International Bank for Reconstruction and Development)

and the International Finance Corporation are both members of the World Bank Group of

organizations.

Page 3 GAO/NSIAD-98-192 Multilateral Development Banks
Executive Summary

employed, the concerns raised by the public, and the measures undertaken

to address the concerns. The results of GAO’s analyses apply only to the

projects reviewed.

The banks have created public information systems, including internet

home pages, to provide broad public access to key project documents,

including project profiles and environmental assessment reports. GAO

obtained and analyzed data from the banks to assess the performance of

one element of these systems—the banks’ home pages—in providing

access to profiles and information about environmental assessments for

projects under consideration between mid-1996 and mid-1997.

Results in Brief The multilateral development banks, led by the World Bank, have taken

significant steps to ensure that meaningful public consultation takes place

on the environmental implications of the projects they fund. GAO believes,

however, that the banks can take further steps to build on the progress

that has been achieved by ensuring that executive directors receive

complete and accurate documentation about the consultation practices

that have been employed in developing proposed projects and by more

consistently providing the public with timely access to environmental

information on these projects.

The banks have adopted guidelines that require sponsors to consult with

the public in developing projects and created systems to provide

worldwide public access to information about these projects—including

information on their environmental implications. Generally, public

consultation on the projects that GAO reviewed was adequate or better, and

bank intervention improved sponsor practices on nearly every project.

Several factors contributed to the quality of consultation. For example,

good consultation was associated with projects employing

community-based approaches to project development, as well as those

having a “high profile” because of recent adverse publicity on similar

projects. Also, in general, World Bank-supported projects received higher

ratings than the projects supported by the other banks GAO reviewed.

Nevertheless, consultation on 25 percent (11 of 44) of the projects,

primarily projects supported by the International Finance Corporation or

sponsored by the government of China, was less than adequate. Also,

documentation given to the executive directors provided incomplete or

inaccurate information about the consultation measures employed on

many of the projects. The banks’ internet home pages were inconsistent in

Page 4 GAO/NSIAD-98-192 Multilateral Development Banks
Executive Summary

meeting their own guidelines for providing public information concerning

project profiles and environmental assessment reports.

Principal Findings

Banks Have Taken Steps to

Encourage Meaningful

Public Consultation and

Access to Documents

Over the past decade, the banks have instituted wide-ranging reform

programs. These programs acknowledge that meaningful public

consultation and increased transparency in designing and implementing

projects can make important contributions to improving the banks’

operational effectiveness. Among other things, the banks have

(1) developed guidelines for consultation, including the preparation of

environmental assessments; (2) hired staff to improve their capacity for

ensuring that adequate consultation takes place; (3) developed working

relationships with nongovernmental organizations; and (4) placed a higher

priority on developing environmentally and socially sustainable projects.

To improve transparency, the banks have developed systems, including

internet home pages, for making key documents, such as environmental

assessment reports, accessible to the worldwide general public. The World

Bank has taken the lead in these efforts. The banks, particularly the

International Finance Corporation, recognize that their efforts are as yet

incomplete, and they continue to work on improving their procedures and

systems.

Consultation Adequate or

Better on Most Projects

GAO found that the public consultation practices that project sponsors

employed were adequate or better in 75 percent (33 of 44) of the examined

projects. On these projects, for example, sponsors used a variety of means

to inform concerned members of the public about the proposals, held

community meetings to provide the public with opportunities to voice

their concerns while project preparation was going on, and, finally,

provided opportunities for concerned parties to review and comment on

draft environmental assessment reports. On one infrastructure project

supported by the Inter-American Development Bank, for example, project

plans were announced in the local media, an information office was

created to respond to citizen inquiries, a consultant was hired to ensure

that affected people were thoroughly consulted on resettlement issues,

and public meetings were held. The measures employed to take public

concerns into account were adequate or better in all cases where concerns

were raised.

Page 5 GAO/NSIAD-98-192 Multilateral Development Banks
Executive Summary

Bank Intervention Generally

Improved the Quality of

Consultation

In 40 of the 44 projects GAO examined, bank intervention resulted in at

least some improvement in sponsor consultation practices and/or in the

measures that were employed to respond to public concerns over what

might otherwise have been expected in the borrowing country. Bank

impact on sponsor practices was great or very great in about 40 percent of

the projects. Among the projects where bank intervention had a very great

impact, for example, was a proposal for an energy project in a locality

where neither an environmental assessment nor public consultation was

legally required. In this case, International Finance Corporation policies

prescribed a full environmental assessment and provision of the draft

results of the assessment for public comment.

Other Factors Associated With

Good Consultation

Twelve of the projects that GAO examined employed community-based

approaches to project development. On average, these projects employed

better consultation practices than the other projects GAO reviewed. By

definition, such projects normally employ extensive public consultation

measures. For example, on one such project that was supported by the

Asian Development Bank, consultants worked with the community to

ensure that all affected parties, including women and ethnic minorities,

were consulted. The consultants also broadly distributed the resulting

environmental assessment report and discussed it at community

workshops.

Five of the six projects in GAO’s sample with a high profile because of past

adverse publicity on similar projects employed good or exemplary

consultation practices. For example, one project taking place in a location

where both the borrowing government and the World Bank had previously

been criticized for poor consultation and adverse environmental impacts

in a similar project employed exemplary measures to ensure that local

people were actively consulted, beginning with the earliest stages of

project preparation.

Among the different banks, projects supported by the World Bank

generally rated best, while International Finance Corporation-supported

projects generally rated lowest. The World Bank’s performance stems

from the fact that it has taken the lead among the banks in developing

participatory approaches to development. Among the banks, it has

published the most comprehensive guidance on environmental assessment

and consultation and has greater resources at its disposal to address such

matters.

Page 6 GAO/NSIAD-98-192 Multilateral Development Banks
Executive Summary

Consultation Less Than

Adequate on Certain Projects

Of the 11 projects in GAO’s sample that employed less than adequate

consultation practices, 5 were supported by the International Finance

Corporation, and 3 were sponsored by the government of China.2

 Private

companies, including those that seek International Finance Corporation

financing, and the government of China typically submit project proposals

for bank consideration only after much of the consultation and design are

already complete. This limits the banks’ opportunities to work with

sponsors—particularly during the early phases of project development

when public consultation can have its greatest impact on project design.

Bank officials noted that in deciding whether to proceed with such

projects, factors other than consultation must also be considered,

including the projects’ development benefits.

Documentation About

Consultation Often Less Than

Adequate

Providing a complete and accurate summary of the consultation practices

employed during project development is an important part of the process

and helps the executive directors to provide oversight of bank policies.

However, in nearly 40 percent of the projects that GAO reviewed, the

documents normally provided to the executive directors prior to their

voting on whether to fund the projects were either incomplete or

inaccurate about sponsor consultation practices. The documents did not

clearly describe the steps taken to consult with the public, the concerns

that were raised, and/or the measures intended to address these concerns.

Seven of the 11 projects in GAO’s sample that employed less than adequate

consultation also had documentation that was incomplete or inaccurate

about what consultation took place.

Banks Inconsistent in

Providing Access to Key

Documents

The banks have established information systems, including internet home

pages, to provide timely worldwide public access to information on

proposed projects. The banks’ home pages often did not provide timely

access to key project documents. For example, the Asian Development

Bank and Inter-American Development Bank home pages listed project

profiles for only about 50 percent of the projects that GAO examined. The

World Bank home page provided notice that environmental assessment

reports were available for only about 54 percent of its category A projects

and met its criteria for timeliness for only about 8 percent of these

projects.3

 The International Finance Corporation met its 60-day standard

for providing access to environmental assessment reports in every case.

2

One International Finance Corporation project was located in China.

3

The World Bank’s policy is that sponsors make environmental assessments available to the Bank

before proposed projects are appraised. When the Bank receives the assessment, it is made publicly

available.

Page 7 GAO/NSIAD-98-192 Multilateral Development Banks
Executive Summary

The majority of World Bank and International Finance Corporation

environmental assessment reports on category A projects were not

available via the internet for 120 days prior to board consideration.

Recommendations GAO recommends that the Secretary of the Treasury instruct the U.S.

executive directors on the boards of the multilateral banks to work with

other executive directors and bank management to improve the banks’

compliance with their own guidance on providing (a) executive directors

with a complete and accurate record regarding public consultation before

they vote on proposed projects with significant environmental

implications and (b) timely internet access to key project documents,

including environmental assessment reports.

Agency Comments The Department of the Treasury, the U.S. Agency for International

Development, and the President of the World Bank Group provided

written comments on a draft of this report. These organizations generally

concurred with GAO’s findings and conclusions. The Treasury stated that

the report provided a fair presentation and that the Department would

work with the U.S. executive directors, as well as bank management and

executive directors representing other bank member countries, to seek

implementation of GAO’s recommendations. The U.S. Agency for

International Development expressed its full agreement with the report’s

conclusions and recommendations. The President of the World Bank

Group commented that his organization had benefited from both the

positive comments and the criticisms contained in the report and

described a number of actions that are being pursued, both at the World

Bank and the International Finance Corporation, to improve consultation

and transparency.

The Treasury and the U.S. Agency for International Development also

provided technical comments, edits, and other suggestions that have been

incorporated in the report as appropriate. Written comments from all three

organizations are reprinted in appendixes II through IV, along with GAO’s

evaluation, where appropriate.

Page 8 GAO/NSIAD-98-192 Multilateral Development Banks
Page 9 GAO/NSIAD-98-192 Multilateral Development Banks
Contents

Executive Summary 2

Chapter 1 

Introduction

12

The Project Development Process 13

Congressional Action 15

Objectives, Scope, and Methodology 18

Chapter 2 

Bank Efforts to

Ensure Consultation

and Transparency

22

Public Consultation Measures 22

Transparency Measures 26

Inspection Panels 28

Ongoing Efforts to Strengthen Bank Systems 29

Conclusions 32

Agency Comments 32

Chapter 3 

Meaningful Public

Consultation Occurs

on Most Projects

33

Consultation Adequate or Better in Most Cases 34

Factors Affecting the Quality of Consultation 37

Consultation on Some Projects Not Adequately Documented 45

Conclusions 47

Recommendation 48

Agency Comments and Our Evaluation 48

Chapter 4 

Banks Provided

Inconsistent Public

Access to Key Project

Documents

49

Project Documents 49

Project Profiles Often Not Available on the Internet 50

Timely Access to EA Reports Sometimes Not Provided 51

Conclusions 53

Recommendation 53

Agency Comments and Our Evaluation 53

Appendixes Appendix I: Methodology 56

Appendix II: Comments From the Department of the Treasury 65

Appendix III: Comments From the U.S. Agency for International

Development

68

Appendix IV: Comments From the World Bank 73

Appendix V: Major Contributors to This Report 78

Tables

Page 10 GAO/NSIAD-98-192 Multilateral Development Banks
Contents

Table 3.1: Examples of Consultation Practices From Exemplary

to Unacceptable

34

Table 4.1: Category A and Category B Project Profiles’

Availability

50

Table 4.2: Category A Project EA Reports: Access via Bank Home

Pages Relative to Bank Time Frames

52

Table 4.3: Category A Project EA Reports: Access via Bank Home

Pages Relative to 120-Day Time Frame

52

Table I.1: Multilateral Development Bank Projects Reviewed for

This Report

57

Table I.2: Rating Criteria for Evaluating Sponsor Consultation

Practices

61

Figures Figure 1.1: What is Environmental Assessment? 13

Figure 1.2: The Process Banks Use to Develop Project Proposals 14

Figure 1.3: The Role of International NGOs 17

Figure 1.4: What Are Category A and Category B Projects? 20

Figure 2.1: An Example of Strengthened Language in Revised

International Finance Corporation Policy

30

Figure 2.2: An Example of Strengthened Language in Draft World

Bank Policy

31

Figure 3.1: Quality of Public Consultation 35

Figure 3.2: Bank Impact on Consultation Practices 38

Figure 3.3: Community-based Development in Practice 40

Figure 3.4: Village Consultation in Practice 42

Figure 3.5: Consultation Practices in Public Sector Versus Private

Sector Projects

44

Abbreviations

EA environmental assessment

NGO nongovernmental organization

Page 11 GAO/NSIAD-98-192 Multilateral Development Banks
Chapter 1 

Introduction

In the 1980s, multilateral development bank-supported projects around the

world were criticized for imposing unacceptable environmental and social

costs on borrowing countries. The World Bank, the oldest and largest of

the multilateral development banks, was the focal point for much of this

criticism. Several World Bank projects became the targets of highly

publicized international campaigns aimed at convincing officials to

withdraw bank support. Two examples—both the subject of congressional

inquiries—were the following:

The Polonoroeste Project: This project, which received major World Bank

support beginning in 1982, encouraged impoverished Brazilians to take up

farming in a previously inaccessible area of the Amazon basin. In 1985, the

Bank suspended payments to Brazil when it became clear that the region’s

soils could not actually support farming and that, rather then alleviating

poverty, the project was resulting in environmental destruction and

maltreatment of local indigenous people. Bank support for development in

the region was renewed after the adoption of measures to protect the

environment and local peoples.

The Sardar Sarovar Dam: In 1985, the World Bank committed to

supporting this project—a portion of a larger Indian government plan for

developing the Narmada River basin—even though a full assessment of the

project’s likely environmental and social impacts had not been completed.

The Bank ceased supporting the project in 1993, after years of controversy

centering on the forced relocation of tens of thousands of people and the

publication of an independent assessment that found substantial flaws in

both project preparation and implementation.1

Concern about such projects prompted Congress to convene a series of

hearings on the environmental impacts of bank-supported projects. One

Senate report resulting from these hearings concluded that the banks had

not “adequately considered the potential unacceptable environmental

consequences of many of the projects that are selected for funding” before

deciding to proceed.2

 These inquiries and other critiques provided the

impetus for the introduction of bank policies requiring environmental

assessments (EA) on proposed projects. Figure 1.1 describes the EA

process.

1

Sardar Sarovar: Report of the Independent Review (1992), known as the “Morse Commission Report.”

See also Sardar Sarovar Dam Project, Committee on Science, Space, and Technology, Subcommittee

on Natural Resources, Agricultural Research and Environment, House Report 68 (101st Cong., 1st

sess.) (Washington, D.C.: U.S. Government Printing Office, Oct. 24, 1989).

2

Senate Report No. 99-167, on p. 33 (1985).

Page 12 GAO/NSIAD-98-192 Multilateral Development Banks
Chapter 1 

Introduction

Figure 1.1: What Is Environmental Assessment?

EA is a process that was first introduced, in the United States, in 1969. EAs are generally conducted as an 

integral part of project feasibility studies. EA reports identify and describe the likely environmental impacts of 

proposed projects and their alternatives so that these impacts may be taken into consideration by 

decisionmakers. The process is intended to improve project design by preventing, mitigating, or 

compensating for adverse impacts. However, the process does not ensure that only environmentally benign 

projects gain approval--decisionmakers may determine that other considerations outweigh a proposal's 

environmental costs. "Environmental" impacts are commonly defined as including not only effects on 

naturally occurring ecosystems, but also social consequences, such as forced resettlement or disruption of 

the lifestyles of indigenous peoples.

The Project

Development Process

Throughout most of their existence, the banks imposed few requirements

on project sponsors (borrowing government agencies or private

companies) regarding public consultation on proposed projects. The

banks also made few provisions themselves to permit or elicit public

involvement in bank decisions on whether to support sponsor proposals.

The extent of public consultation in decision-making was regarded as lying

within the discretion of individual borrowing governments. The banks

themselves did not, as a rule, independently engage the public in dialogue

on proposed projects. When working with private companies, the banks

also cited the need to safeguard information submitted by these

companies so as not to compromise their competitive positions as a

reason for limiting public involvement in project development. Bank

critics said that the relatively closed nature of the processes the banks

used to develop projects was an important cause of unsatisfactory project

results. While these processes differ in many details, the banks employ a

broadly similar procedure for developing project plans. This process is

outlined in figure 1.2.

Page 13 GAO/NSIAD-98-192 Multilateral Development Banks
Chapter 1 

Introduction

Figure 1.2: The Process Banks Use to Develop Project Proposals

Project development begns when bank staff and project sponsors identify a project idea. During the 

subsequent preparation phase project sponsors bear primary responsibility for examining all aspects of the 

proposed project, including environmental impacts, and for preparing a project plan for bank consideration. 

Bank staff provide guidance during this portion of the process.

After preparation is complete, the lead role passes to the bank. Bank staff appraise sponsor proposals 

(including EA reports), request additional information, if necessary; negotiate with project sponsors about the 

terms and conditions under which the bank will commit funds to the project; and finally, prepare a complete 

project proposal.

The final step in the process is board approval. The banks' boards of executive directors review and vote on 

whether to approve each proposed project and, in doing so, exercise oversight over the implementation of 

bank policies and procedures--including those that govern EA and public consultation.

Note: This description is generally accurate for the banks included in this review. However, since

private companies typically seek bank financing only after they have already completed

substantial preparatory work, substantive bank involvement in private projects may actually begin

only at the appraisal stage.

Bank critics raised two distinct but interrelated problems with the banks’

project development processes. These were inadequate consultation and a

lack of transparency.

Consultation Bank critics believed that greater public consultation was needed

throughout project preparation. They argued that public consultation

could improve the quality of the EA process, as well as decisions deriving

from it, by helping to ensure that (1) all important issues raised by a

proposal would be identified and examined from diverse points of view

and (2) alternatives and possible mitigation measures would be fully

explored.

The critics’ main concern was that the measures employed by project

sponsors to consult with local people—that is, those living in the vicinity

of proposed projects—while preparing project proposals for bank

consideration were inadequate. Bank critics noted that project sponsors

often did not conduct meaningful consultations with those who would

Page 14 GAO/NSIAD-98-192 Multilateral Development Banks
Chapter 1 

Introduction

likely be directly affected by the proposed project and other concerned

members of the public (for example, local nongovernmental

organizations—NGO).3

 The lack of consultation during the early phases of

project development (including EA preparation) was of particular concern,

as opportunities for the public to affect project designs are greater in these

early phases, when alternative designs and approaches can still be

explored at comparatively little cost.

Transparency The banks critics’ main concern about bank transparency was that there

was almost no access to EA reports for proposed projects. Critics believed

that interested members of the public, both within borrowing countries

and in the broader community, should have access to these documents in

advance of final action by the banks’ boards of executive directors. This

access would permit them to review the EA reports’ content and bring

matters of concern to the attention of bank staff, project sponsors, and/or

executive directors.

Bank guidelines did not provide for making such information available for

public review before projects were taken up by the executive directors.

The banks did not require project sponsors to share information on such

matters, nor did the banks themselves provide public access to EA reports

or related documents through either their headquarters offices or their

field offices in borrowing countries. Critics contended that this limited the

banks’ accountability to the public. They said that because of this lack of

transparency, neither citizens in borrowing countries, international NGOs

with expertise on environmental and social issues, nor officials of the

banks’ member countries were able to critique EA reports or raise

concerns that may not have been adequately examined or addressed.

Congressional Action While the United States cannot unilaterally mandate changes in bank

policies and procedures, it has historically exercised considerable

influence over bank operations. Within the executive branch, the

Department of the Treasury has the lead role in working with the staffs of

the U.S. members of the banks’ boards of executive directors to develop

and implement U.S. policy regarding the banks. Since 1985, Congress has

repeatedly called upon the Department and the U.S. executive directors to

work for changes in bank policies and procedures that would improve the

manner in which environmental impacts are taken into account during

3

The World Bank defines NGOs as “private organizations that pursue activities to relieve suffering,

promote the interests of the poor, protect the environment, provide basic social services or undertake

community development.”

Page 15 GAO/NSIAD-98-192 Multilateral Development Banks
Chapter 1 

Introduction

project development. Among other things, Congress instructed the U.S.

executive directors to seek improvements in bank guidelines regarding

(a) the steps that project sponsors take to engage in meaningful

consultation with peoples whom the projects might affect and other

concerned members of the public during project preparation and (b) the

steps that the banks themselves take to improve transparency. In 1987,

Congress enacted legislation calling upon U.S. executive directors to

vigorously promote participation by borrowing country NGOs at all stages

of preparation for loans that may have adverse environmental or

sociocultural impacts.4

In 1989, the “Pelosi Amendment” instructed the Secretary of the Treasury

to seek, through negotiations with other bank member countries and bank

management, the adoption of policies and procedures within the banks

that would (a) provide interested members of the public in all bank

member countries with access to EA reports on proposed projects (or

summaries thereof) at least 120 days prior to board action and

(b) encourage public participation in reviewing project-specific

environmental issues.5

The amendment’s legislative history emphasized the important role that

international NGOs play in facilitating thorough public review of proposed

bank projects. (See fig. 1.3.)

4

22 U.S.C. 262m-5.

5

The amendment, sponsored by Representative Nancy Pelosi (D-CA), is codified at 22 U.S.C. sec.

262m-7.

Page 16 GAO/NSIAD-98-192 Multilateral Development Banks
Chapter 1 

Introduction

Figure 1.3: The Role of International NGOs

According to the World Bank, international NGOs, among others, may have important information and 

resources at their disposal that can help improve project designs. Their involvement can help identify key 

concerns and opportunities and may provide differing points of view. International NGOs, like Friends of the 

Earth and The Bank Information Center, help their affiliates and associates in developing countries to obtain 

information on proposed projects so that these organizations can provide their own comments on proposed 

projects. They also apply their expertise on environmental issues in reviewing the adequacy of sponsor EA 

reports and pointing out omissions and other shortcomings and in monitoring the banks' compliance with their 

own policies and procedures. The U.S. government's interagency process for reviewing proposed loans 

relies heavily on international NGOs to flag issues on proposed projects that should be examined more 

closely before gaining U.S. support.

In commenting on a draft of this report, the U.S. Agency for International

Development pointed out that Congress has also mandated a substantial

role for the Agency in identifying potential environmental and social

problems associated with projects being prepared for consideration by the

banks’ boards of executive directors. The Agency’s written comments,

reproduced in appendix III, provide details on the legal provisions in

question and the efforts that the Agency has undertaken in response.

The Pelosi Amendment sought to bring U.S. influence to bear in favor of

effective implementation of such policies by barring U.S. executive

directors from voting in favor of certain proposed actions. U.S. executive

directors were called upon to refrain from supporting projects that would

have significant impacts on the environment unless project sponsors had

prepared EA reports and made the reports—or summaries

thereof—available for review by affected groups and local NGOs, as well as

bank staff and executive directors, for at least 120 days before the

executive directors vote on the proposed actions. It also required the

Secretary of the Treasury, in his role as leader of the U.S. government’s

interagency process for reviewing proposed loans, to take public

comments on environmental matters into consideration in determining the

position that the United States should take on proposed loans.

In November 1997, Congress amended the International Financial

Institutions Act to make clear that the Secretary of the Treasury should

regard the Pelosi Amendment as applying to U.S. participation in the

International Finance Corporation—a member of the World Bank Group

Page 17 GAO/NSIAD-98-192 Multilateral Development Banks
Chapter 1 

Introduction

that works exclusively with private sector partners—as well as to U.S.

participation in the banks’ lending programs for developing country

governments. The amendment also instructed U.S. executive directors to

“strongly encourage” systematic consultation with local communities on

proposed loans.6

Objectives, Scope,

and Methodology

In response to a request from Representatives Nancy Pelosi and Barney

Frank, we reviewed the multilateral development banks’ record in

ensuring that meaningful public consultation takes place on the projects

they support. Our specific objectives were to

• describe the steps the banks have taken to ensure meaningful public

consultation on the environmental implications of proposed projects and

timely public access to project documents;

• evaluate the quality of consultation that occurs on bank-supported

projects and the documentation on the consultation that is provided to

executive directors; and

• determine the extent to which the banks provide broad, timely public

access to project information on proposed projects, including

environmental assessment reports.

We also sought to identify factors that help to account for differences in

the quality of the consultation practices employed in different types of

projects. Our study included the World Bank, the Inter-American and

Asian Development Banks, and the International Finance Corporation.7

Together, these four institutions receive approximately 90 percent of the

amounts that Congress annually appropriates for the support of the

multilateral development banks.8

 As an agency of the United States, we

have no direct authority to review the operations of the multilateral

development banks. Through the Department of the Treasury and the

staffs of the U.S. executive directors in each institution, however, we

6

See The Foreign Operations, Export Financing and Related Programs Appropriations Act, 1998

(P.L. 105-118, sec. 560[b] [1997]). Previously, the Department of the Treasury had taken the position

that the Pelosi Amendment did not apply with regard to U.S. participation in the International Finance

Corporation.

7

In addition to the International Finance Corporation’s projects, we included six private sector

projects supported by the Inter-American or Asian Development Banks. The World Bank does not have

a private sector lending program directly analogous to those operated by these two institutions.

8

Congress appropriated an average of about $1.2 billion to support bank operations during fiscal 

years 1997 and 1998. The International Finance Corporation is a member of the World Bank Group of

legally distinct organizations that includes the original “World Bank”—formally known as the

International Bank for Reconstruction and Development. The United States is also a member of three

other major regionally focused multilateral banks—for Africa, Europe, and the Middle East.

Page 18 GAO/NSIAD-98-192 Multilateral Development Banks
Chapter 1 

Introduction

interviewed bank staff at all levels, including the presidents of the World

and Inter-American Development Banks, and obtained official bank

documents and reports.

To describe the banks’ steps to ensure consultation and transparency, we

reviewed bank documents and guidance and met with bank staff to gain an

understanding of their guidance with regard to public consultation and the

systems they have established to provide broad public access to bank

documents.

To evaluate the quality of public consultation, we developed rating criteria

based on the banks’ guidance on public consultation and environmental

assessment, as well as other relevant materials, such as bank studies on

best practices. These criteria provided a framework for assessing project

sponsor consultation practices, including the extent to which 

(a) concerned members of the public were informed about proposed

projects, (b) public concerns were identified, and, subsequently (c)

opportunities were provided for public comment on the manner in which

public concerns had been addressed. The criteria also provided a

framework for evaluating the measures that were adopted to respond to

public concerns identified through the consultation process. We applied

these criteria to a group of 44 out of 256 projects with significant

environmental implications (generally referred to as category A and B

projects) in Latin American and Asia that were submitted for approval by

the banks’ boards of executive directors during calendar year 1996. (See

fig. 1.4 for a description of project categories.)

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Introduction

Figure 1.4: What Are Category A and Category B Projects?

Except for the Inter-American Development Bank, which ceased doing so during 1997, the banks separate 

projects into categories for EA purposes. These categorization systems all resemble that employed by the World 

Bank, which differentiates between projects that are unlikely to have significant environmental impacts (and 

therefore do not require analysis) and two types of projects that do require study.

Category A projects are those that have the potential for "diverse and significant" impacts that may extend 

beyond the immediate project area, such as hydroelectric plants, mineral extraction projects, and large-scale 

irrigation schemes. Projects that require significant resettlement of local populations or have other important 

sociocultural impacts are also placed in this category. Such projects are deemed to require full investigation of 

possible environmental and social impacts.

Category B projects are those that have less severe, site-specific, or more easily mitigated impacts, such as 

rural water supply projects, small-scale agriculture, and electrical transmission projects. EAs conducted for such 

projects are more limited in scope and may focus only on certain environmental and social issues that need 

consideration.

Note: The Inter-American Development Bank now establishes EA requirements on a

case-by-case basis.

To evaluate the impact that the banks had on the consultation practices

employed on these projects, we employed a computational matrix that

took into consideration the extent to which these projects employed

practices that were upgraded from local norms and the extent to which

these improvements could be directly linked to bank involvement. Our

findings from this portion of the review apply only to the projects included

in the sample.

To assess bank transparency during project development—that is, the

extent to which the banks provide timely public access to information on

proposed projects—we obtained data on access to (a) project profiles and

(b) EA reports between mid-1996 and mid-1997 via the banks’ internet

home pages. Although the banks have adopted policies and procedures

that are intended to provide public access to project documents (in hard

copy) through their headquarters and field offices, we did not assess

document availability at these locations. Instead, we focused on the banks’

internet home pages to provide a single, unified overview of bank

Page 20 GAO/NSIAD-98-192 Multilateral Development Banks
Chapter 1 

Introduction

performance in providing worldwide access to information on proposed

projects.

The banks have each established their own requirements regarding

timeliness for providing public access to EA reports. We report each bank’s

performance against its own criteria. The Pelosi Amendment, a U.S. law,

does not create a direct legal obligation for the banks but does instruct the

Secretary of the Treasury to seek, through negotiation with other bank

member countries and bank management, the adoption of policies and

procedures that will result in interested members of the public in all bank

member countries having access to EA reports at least 120 days before

board consideration. Therefore, for comparative purposes, we also report

on whether the banks’ internet home pages met this time frame.

Our methodology is discussed in more detail in appendix I.

We conducted our work from January 1997 to June 1998 in accordance

with generally accepted government auditing standards.

We received written comments on a draft of this report from the

Department of the Treasury, the U.S. Agency for International

Development, and the World Bank. These organizations generally

concurred with the report. The Treasury stated that the report provided a

fair presentation and that it would work with U.S. executive directors,

bank management, and executive directors representing other bank

member countries to seek implementation of our recommendations. The

U.S. Agency for International Development expressed its full agreement

with the report’s conclusions and recommendations. The President of the

World Bank Group commented that his organization had benefited from

both the positive comments and the criticisms contained in the report and

described a number of actions that are being pursued, both at the World

Bank and the International Finance Corporation, to improve consultation

and transparency.

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Bank Efforts to Ensure Consultation and

Transparency

Over the past decade, the operations of the multilateral development

banks have been the object of a number of critical reviews,1

 and bank

management has responded by developing reform programs to improve

project effectiveness. Public consultation and increased transparency in

designing and implementing projects are acknowledged to be key

elements in improving project effectiveness. With the World Bank taking

the lead, the banks have taken steps in this direction. These steps have

included (1) developing guidelines for consultation, including the

preparation of environmental assessments; (2) hiring staff to improve the

banks’ capacity to undertake consultation; (3) developing working

relationships with NGOs; and (4) placing a priority on developing

environmentally and socially sustainable projects. To provide

transparency, the banks have developed guidelines for making key

documents on proposed projects available to the public and have set up

public information centers and internet home pages to make this

information broadly accessible. Finally, the banks—with the exception of

the International Finance Corporation—have created inspection panels to

investigate complaints about violation of their policies.

The banks recognize that their efforts are as yet incomplete, and they

continue to take steps to further strengthen consultation and advance

transparency. The International Finance Corporation, in particular, has

recently adopted revised procedures designed to improve performance in

both areas.

Public Consultation

Measures

Guided by various studies of the banks’ operations, the banks have

adopted measures aimed at improving guidance on consultation,

enhancing their capacity for ensuring adequate consultation, developing

better working relationships with NGOs, and placing a higher priority on

environmental and social sustainability in project design.

Adopting Consultation

Policies and Guidelines

The banks have devised policies, directives, and other guidance intended

to ensure that project sponsors identify public concerns about the

environmental impacts of proposed projects and take such concerns into

1

These reviews include the 1992 report of the World Bank’s Portfolio Management Task Force,

Effective Implementation: Key to Development; the 1993 report of the Inter-American Development

Bank’s Task Force on Portfolio Management, Managing for Effective Development; the Asian

Development Bank’s 1994 Report of the Task Force on Improving Project Quality; the 1996 report of

the Development Committee Task Force on Multilateral Development Banks, Serving a Changing

World; the 1996 GAO report, World Bank: U.S. Interests Supported, but Oversight Needed to Help

Ensure Improved Performance (GAO/NSIAD-96-212, Sept. 26, 1996); and the 1997 report of the Center

for Strategic and International Studies, The United States and the Multilateral Development banks.

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account in completing project designs. The World Bank, which issued its

initial EA policy in 1989, was the first to take steps in this direction. It

required sponsors to complete EAs when appropriate (that is, when the

nature and magnitude of a project’s potential impacts appear to require

systematic examination) as part of their project proposals. In doing such

assessments, and in implementing projects, the policy required project

sponsors to “take the views of affected groups and local NGOs fully into

account.”

The other banks subsequently adopted similar policies and procedures. In

1990, the International Finance Corporation adopted its first

environmental review procedure, which was intended to be consistent

with World Bank procedures. Also in 1990, the Inter-American

Development Bank adopted procedures calling for public consultation in

preparing the terms of reference for project EAs (that is, specifying the

assessment’s scope and objectives) and in reviewing the results of the EA

process. The Inter-American Development Bank also issued guidance that

established a policy framework for assessing the environmental and

sociocultural impacts of proposed projects, including the need for public

consultation on these issues. In 1997, the Inter-American Development

Bank adopted new procedures for evaluating social and environmental

impacts through an internal bank Committee on the Environment and

Social Impact.2

 In 1993, the Asian Development Bank adopted EA

procedures and requirements for public consultation similar to those

adopted by the World Bank. Each of the banks has added to these basic

policy statements with additional clarification and advice for both staff

and project sponsors.

Bank guidance generally advises project sponsors to provide concerned

members of the public with relevant information (for example, a

description of the project and its likely beneficial and adverse impacts)

before asking for comments. International Finance Corporation guidelines,

for example, note that truly meaningful public consultation can only take

place when project sponsors have first provided affected groups and other

interested parties with substantive information on the proposed project.

Finally, project sponsors are generally expected to provide feedback to

those consulted—for example, through making draft EA reports available

for local review prior to completing the report to be submitted to the bank.

2

This management-level committee reviews each proposed project to determine the level of analysis

needed on environmental issues and to ensure that the analysis is carried out in a satisfactory manner

and the resulting conclusions are incorporated into the final project design.

Page 23 GAO/NSIAD-98-192 Multilateral Development Banks
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Building Capacity for

Public Consultation

In addition to developing guidelines, the banks—especially the World

Bank—have improved their capacity for ensuring that meaningful

consultation takes place. As part of implementing the “Strategic Compact”

announced in early 1997, the World Bank has relocated staff, functions,

and authority to the field.3

 By mid-1997, 20 of the World Bank’s 49 country

directors were based in field missions. The World Bank also created an

internal Environmentally and Socially Sustainable Development Network,

including a corps of over 360 social development and environmental

specialists, a number of whom are now stationed overseas.

The Inter-American Development Bank has also taken some steps to

augment its consultation capabilities, including increasing the number of

staff dealing with these issues. As of September 1997, the Inter-American

Development Bank’s environmental unit had 12 professional staff, the

Indigenous Peoples and Community Development Unit had 4 staff, and the

Modernization of the State and Civil Society Division had 24 staff.

In 1995, the Asian Development Bank gave environmental and social

issues increased stature within the Bank by combining previously separate

units to create an Office of Environment and Social Development. The

office employs 24 environmental and social specialists, all located in

headquarters. Although its field presence is limited, the Asian

Development Bank has also strengthened representation in donor

countries and broadened access to its staff. In 1996, the Bank opened 2

representative offices and approved 2 new resident missions—bringing the

Bank’s total field presence to 10 resident missions, 3 representative

offices, and 1 regional mission.

The International Finance Corporation has a very limited field presence

but is working to better address environmental and social issues by adding

to its staff. In fiscal year 1997, the Corporation increased the number of

senior level staff in its Environment Division from 18 to 24 and added

1 social scientist. In fiscal year 1998, the Corporation plans to add six new

senior level staff to its Environmental Review Unit, including three new

environmental specialists and two social sector specialists.

All of the institutions we examined are developing ways to incorporate

social analysis and participatory approaches into projects and analytical

work. For instance, the World Bank has established the Social

Development Family—comprised of about 120 World Bank staff—to

3

The Strategic Compact summarized the World Bank’s broad reform measures, some of which had

been developed in response to the 1992 report of the World Bank’s Portfolio Management Task Force

and other criticisms of the Bank’s operations and effectiveness.

Page 24 GAO/NSIAD-98-192 Multilateral Development Banks
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increase community-based participation in its projects and to link social

and environmental assessments. The Asian Development Bank has issued

staff guidelines on mainstreaming participation in bank operations and

hosted seminars for its staff on participatory methods. It has also

established a regional technical assistance grant fund to catalyze the

implementation of participatory approaches to bank operations. In

commenting on a draft of this report, the Department of the Treasury

stated that the Asian Development Bank has also recently established

internal networks for staff with expertise in environmental and social

issues.

Forging Relations With

NGOs and Other Members

of the Public

Legislation passed by Congress in 1990 urged the World Bank to develop

and implement mechanisms to substantially improve the ability of bank

staff to interact with NGOs and other local groups that are affected by

bank-supported projects.4

 Among other things, Congress urged the World

Bank to assign at least one professional staff member in each field office

to be responsible for relations with local NGOs.5

 In 1997, the World Bank

completed appointing NGO liaison staff to all 72 World Bank resident

missions. More than half of these are full-time NGO specialists working to

strengthen communication and information-sharing between the World

Bank and NGOs. According to World Bank documents, nearly half of the

World Bank’s projects in fiscal year 1997 involved NGOs in some capacity.

In addition, the World Bank (1) approved special programs to provide

NGOs, as well as academics and others, with small grants (in the $10,000 to

$15,000 range) for conferences, publications, networking activities, and

other information-related activities; (2) recruited NGOs to help prepare the

Bank’s economic and sector work, country assistance strategies, and

poverty assessments; and (3) established partnerships with NGOs on a

variety of operational issues, including a program to monitor stakeholder

participation in bank projects.

The other banks have also taken a number of steps in this direction.

Beginning in 1995, for example, the Inter-American Development Bank

sponsored a series of country focus groups for civil society organizations,

government officials, and Bank staff. Through these groups, the

Inter-American Development Bank encouraged and supported efforts to

strengthen the capacity of civil society organizations in borrowing

4

The Foreign Operations Appropriations Act, 1991, Public Law 101-513, section 562 (1990).

5

This provision referred only to the World Bank; the other multilateral development banks were not

included.

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countries to become integrally involved in developing projects. The Asian

Development Bank has updated its policy on cooperation with NGOs and is

improving its outreach efforts, for example by inviting NGOs to comment

on draft policy proposals. The Bank has also appointed NGO liaisons in

each of its resident missions. In commenting on a draft of this report, the

Treasury Department stated that the Asian Development Bank has also

increased the number of projects with NGO involvement and is providing

technical assistance to help borrowers improve their own capacity for

performing environmental assessments.

Refocusing Bank

Operations

As part of their overall reform efforts, the banks have increased their

emphasis on ensuring that project designs are environmentally and

socially sustainable. This action has reinforced the heightened importance

placed on public consultation during project development. For example,

the members of the Inter-American Development Bank, on the occasion of

the eighth replenishment of the Bank’s resources (August 1994), agreed on

fundamental changes in the Bank’s operations. The members committed

the Bank to strengthening environmental institutions and legal

frameworks and fostering environmental awareness in borrowing member

countries and to improving the environmental quality of bank-financed

projects. The members also reaffirmed the Bank’s commitment to

meaningful public consultation on the environmental impacts of proposed

projects and greater transparency in Bank operations.

Asian Development Bank policies on public consultation have changed in

response to donor demands and internal evaluations and to accommodate

changes in lending structure. Senior Bank staff, for example, stated that

during recapitalization and replenishment of Asian Development Fund6

resources in the last few years, donor countries have mandated greater

consultation on project design and more consideration for the impact of

Bank activities on indigenous peoples. The Bank has also changed its

lending structure to increase its focus on environment and social

development projects, which often require participation of NGOs and local

residents for project implementation.

Transparency

Measures

The banks have (a) adopted policies that provide for public disclosure of

information on proposed projects and (b) created public information

systems to provide access to key project documents.

6

The Asian Development Fund is the Asian Development Bank’s concessional lending window.

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Adopting Disclosure

Policies

In August 1993, the World Bank approved an expanded disclosure policy,

providing for an increased number of operational documents to be made

available to the public. Among the documents the Bank determined should

be made public were basic project profiles and project EA reports. The

International Finance Corporation adopted its disclosure policy in 1994

and updated it in 1996 and 1998. The policy requires the Corporation to

“operate with a presumption of disclosure.” However, the availability of

timely information to the public is tailored to the requirements of the

private sector, including the confidentiality of some information and the

later disclosure of information.

In January 1995, the Inter-American Development Bank’s Policy on

Disclosure of Information became effective. Among other things, it

requires that draft EA reports be made locally available before Bank staff

conduct project analysis missions. According to the Department of the

Treasury, these missions typically occur more than 120 days before board

consideration. As for the Asian Development Bank, its Policy on

Confidentiality and Disclosure of Information became effective January 1,

1995. The policy emphasizes a presumption in favor of disclosure where

disclosure would not materially harm the interests of the Bank and its

member countries, borrowers, and private sector clients.

The banks have also required that information on EA efforts be made

available for the executive directors’ consideration before they vote on

project proposals. Since EA reports themselves are often very lengthy and

difficult to readily understand, the banks generally require that summaries

of the reports’ findings be made available for the executive directors’

consideration.

Establishing Public

Information Systems

Beginning with the World Bank in 1994, the banks have instituted systems

for providing public access to key project documents in their possession,

including EA reports. Generally speaking, these systems rely on public

information centers in the banks’ headquarters cities to provide interested

parties with copies of particular documents.7

 The World Bank established

its center in January 1994 to support its efforts to increase accountability

and transparency in Bank operations. The center attempts to make a more

extensive range of Bank information—including project documents, EA

reports, and other studies—available to a wider audience. In 1994, the

International Finance Corporation also began making certain information

7

The World Bank, the International Finance Corporation, and the Inter-American Development Bank

maintain their headquarters in Washington, D.C. The Asian Development Bank is located in Manila,

The Philippines.

Page 27 GAO/NSIAD-98-192 Multilateral Development Banks
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Bank Efforts to Ensure Consultation and

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available through the World Bank center. In February 1995, the

Inter-American Development Bank began making information available

through its newly established headquarters center. The Asian

Development Bank established a center within its existing Information

Office in 1996.

To extend these centers’ effective reach, the banks have established

internet home pages, which provide direct access to some (relatively

short) documents and list others that can be obtained by request. The

banks have also made provisions for public access to documents through

their field offices in developing countries, especially for those documents

pertaining to bank programs in the country in question. The banks

consider access through field offices to be important because many

residents of developing countries do not have access to the internet. The

World Bank and the Asian Development Bank also make documents

available through depository libraries in developing countries. The World

Bank center makes documents available through the Bank’s field offices in

Paris, London, and Tokyo and maintains relations with about 240

depository libraries worldwide. As of December 31, 1996, the Asian

Development Bank had 98 depository libraries in 38 member countries.

Publications sent to the libraries monthly include annual reports, country

and economic studies, and documents on loans and technical assistance

projects, including EA reports. During this review, international and

developing country NGOs expressed concern about uneven access to

documents through bank field offices in developing countries, as well as

through the banks’ headquarters public information centers.

Inspection Panels To ensure that bank operations adhere to each of the respective

institution’s own policies and procedures regarding project design and

implementation, three of the four banks we reviewed have established an

inspection panel. Any group of individuals who may be directly or

adversely affected by a bank-supported project can ask the panel to

investigate complaints that the bank has failed to abide by its policies and

procedures.

The World Bank established its inspection panel in September 1993, and it

became operational the following year. In 1994, the Inter-American

Development Bank approved its Independent Investigation Mechanism,

which received its first request for an investigation in 1996. The Asian

Development Bank adopted its inspection policy in late 1995 and

appointed an Inspection Committee as a standing committee of the board

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Bank Efforts to Ensure Consultation and

Transparency

of executive directors in March 1996. The inspection policy and panel of

experts became operational in October 1996. The International Finance

Corporation has not established an inspection panel.

Ongoing Efforts to

Strengthen Bank

Systems

Bank staff and officials of the U.S. executive directors’ offices in the banks

acknowledged that the banks’ efforts to ensure meaningful consultation

and public access to key documents are as yet incomplete. Despite the

banks’ commitments in this regard, staff still sometimes find it difficult to

ensure that sufficient time and resources are built into project schedules

to develop project-specific strategies for obtaining and addressing

comments. Bank staff, particularly those with responsibility for

environmental and social matters, also commented that some bank staff,

as well as project sponsor officials, had simply not yet fully appreciated

the value and importance of public consultation and transparency. These

views were confirmed at the World Bank and International Finance

Corporation by a number of recent studies showing that these institutions’

consultation and transparency systems continued to produce mixed

results.8

Since we initiated this review, the banks—particularly the International

Finance Corporation—have taken additional steps toward improved

consultation and transparency. In July 1998, the Corporation adopted

revised EA and information disclosure policies and procedures.9

 A primary

objective of this revision was to eliminate confusion by bringing the

Corporation’s policies into line with those applied by the World Bank, and

to clearly delineate differences in policy when the Corporation’s

private-sector orientation makes such differences appropriate. The revised

policies strengthen the Corporation’s consultation and transparency

provisions in a number of ways. Figure 2.1 provides an illustration. The

International Finance Corporation has also prepared a “Good Practices

Manual” to guide project sponsor consultation efforts.

8

See, for example, Effectiveness of Environmental Assessments and National Environmental Action

Plans: A Process Study, World Bank Operations Evaluation Department, June 1996; Policy on

Information Disclosure: Review of Implementation, World Bank Operations Policy and Strategy

Department, October 1997; Peter M. Higgins, An Assessment of the Environmental Review Procedure

of the International Finance Corporation (Washington, D.C.: International Finance Corporation, Sept.

1997); International Finance Corporation: Review of Public Consultation and Disclosure,

Environmental Resources Management Ltd., October 1997.

9

Implementation was postponed until September to permit Corporation staff to insure consistency

with new business procedures that the Corporation has been developing. According to Corporation

staff, this exercise will not result in any substantive changes in the EA policies and procedures

adopted in July.

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Figure 2.1: An Example of Strengthened Language in Revised International Finance Corporation Policy

Prior Policy: "(The Corporation) expects the project sponsor to take the views of 

affected groups and local interested parties into account in project design and 

implementation, and in particular in the preparation of EAs."

Revised Policy: "...the project sponsor is required to consult relevant 

stakeholders including affected groups, nongovernmental organizations (NGOs) 

and local authorities about the project's environmental and social aspects and 

take their views into account."

Among other things, the revised procedures bolster the Corporation’s local

consultation provisions by mandating proactive dissemination of EA

summaries for category A and B projects in local languages in borrowing

countries at least 60 days and 30 days, respectively, before the board

votes. They strengthen transparency provisions by eliminating

management’s authority to waive public disclosure of EA reports on

category A projects and specifying that the Corporation will suspend

further consideration of a project if the sponsor does not agree to public

release of EA reports. The revision also increases access to information on

projects that the Corporation’s board has approved—for example, through

the World Bank’s public information center making updated project

environmental action plans publicly available for the first time.

World Bank staff have also drafted revised EA policies and procedures, and

the draft is being discussed by members of the board of executive

directors. The draft strengthens existing policies and procedures regarding

public consultation on projects with significant environmental impacts

and eliminates ambiguity in the existing guidance by explicitly extending

most provisions to include category B projects. Figure 2.2 provides an

example of these changes.

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Figure 2.2: An Example of Strengthened Language in Draft World Bank Policy

Existing Policy: "The Bank expects the borrower to take the views of 

affected groups and local NGOs fully into account in project design and 

implementation and in particular in the preparation of EAs."

Draft Policy: "For all Category A and B projects proposed for (World 

Bank) funding, during the EA process, the borrower consults 

project-affected groups and local nongovernmental organizations (NGOs) 

about the project's environmental aspects and takes their views into 

account."

For category A projects, the draft also strengthens requirements regarding

staff reporting to the board on consultation matters. In addition, to

address shortcomings in making project profiles available, the Bank is

developing a computerized document flow system directed at ensuring

that project profiles, and updates to those profiles, are provided to the

Bank’s public information center as soon as Bank staff create them.

The Inter-American and Asian Development Banks also continue to refine

their guidelines and practices. For example, to provide the Inter-American

Development Bank public information center with a stronger mandate for

obtaining copies of EA reports, the Bank has just recently adopted a new

policy requiring staff to provide both the center and relevant bank field

offices with copies of EA reports as soon as sponsors submit them.

(Inter-American Development Bank staff informed us that they were not

previously required to provide EA reports to the center.) The

Inter-American Development Bank is also developing a policy on

consultation and transparency designed specifically for private sector

projects. Asian Development Bank staff are working with private sector

sponsors to eliminate business-confidential information from the final

reports of the President on project proposals so that these reports may be

released to the public upon board approval and has issued several such

public versions of final private sector project reports. The Asian

Development Bank has also installed a new computer system which,

according to Bank staff, should facilitate improved internet access to Bank

documents.

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Conclusions The banks have adopted guidelines and created systems to provide for

meaningful public consultation during project development,

complemented by efforts to enhance public access to relevant information

through bank public information centers. All of the institutions, led by the

World Bank, are taking steps to further improve their current procedures

and systems.

Agency Comments In commenting on this report, the President of the World Bank Group

discussed the measures that the World Bank and the International Finance

Corporation are pursuing to facilitate strengthened performance with

regard to both consultation and transparency. These include the

Corporation’s adoption of revised policies and procedures, and elements

of the Bank’s operational policy reform initiative, such as enhanced

training for staff and pursuit of comprehensive audits for environmentally

sensitive projects at critical stages in the project cycle.

Page 32 GAO/NSIAD-98-192 Multilateral Development Banks
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Meaningful Public Consultation Occurs on

Most Projects

As discussed in chapter 2, the banks have instituted a number of measures

over the past several years to improve the public consultation process for

environmentally sensitive projects. Using the rating criteria we developed

based on the banks’ guidelines on public consultation—the details of

which are explained in appendix I—we examined a sample of 44 of 256

projects in Latin America and Asia approved by the banks’ boards of

executive directors during 1996 and tested whether the measures

instituted by the banks had produced the consultation results they desired.

We found that the quality of consultation was adequate or better on

75 percent (33 of 44) of the projects we examined, and project sponsors

took positive steps to respond to public concerns, when raised. On such

projects, for example, sponsors used radio and print media to inform

nearby communities about the project and its potential impacts, held

community meetings to provide the public with opportunities to voice

their concerns during project preparation, and provided opportunities for

concerned parties to review and comment on draft EA reports. On almost

all projects, sponsors addressed public concerns through actions such as

relocating pipelines or modifying resettlement plans. Several factors

contributed to the quality of consultation on the projects we examined.

Bank intervention was an important factor and improved sponsor

practices beyond the country norm on nearly every project. Consultation

was particularly good on projects using a community-based approach to

project development and on projects with high visibility. World

Bank-supported projects also employed comparatively good consultation

practices.

Public consultation on 25 percent (11 of 44) of the projects was less than

adequate. Most of these projects were supported by the International

Finance Corporation or sponsored by the government of China. On many

of these projects, the banks became involved after much of the project

development process was already complete. Thus, their opportunity to

influence the consultation practices employed—particularly during the

early stages of project development when public consultation can have its

greatest impact—was diminished. In deciding whether to proceed with

such projects, bank officials said they must balance the need for adequate

consultation against the development benefits of the proposed projects.

Providing a complete and accurate summary of the consultation practices

employed during project development is an important part of the process

and helps the executive directors provide oversight of bank policies.

However, in nearly 40 percent (17 of 44) of the projects we reviewed, the

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documents provided to the executive directors before voting were

incomplete or inaccurate about the consultation practices employed.

Consultation

Adequate or Better in

Most Cases

Bank guidance generally calls for project sponsors to (1) inform

concerned groups about proposed projects and their potential

environmental impacts, (2) identify and clarify public concerns through

such means as community meetings, and (3) ensure that concerned

members of the public have meaningful opportunities to comment on the

results of the EA process. Table 3.1 provides examples of the types of

consultation practices that we rated as exemplary, good, adequate,

borderline, and unacceptable.

Table 3.1: Examples of Consultation

Practices From Exemplary to

Unacceptable

Rating Types of activities undertaken to achieve each rating

Exemplary Exceptional measures undertaken to overcome

consultation barriers, e.g., inclusion of women and ethnic

minorities in the consultation process; project

development highly participatory; numerous and frequent

workshops; and community meetings held to obtain

public feedback.

Good Numerous local meetings or seminars held to inform

people of project and obtain comments; feedback from

communities incorporated into design modifications;

comments sought on results of consultation process; EA

report easily accessible, or made available even when

local law does not require it.

Adequate Public informed about project through notice in

newspaper; public presentation of project; involved

parties have opportunities to express concerns; EA

results made available in an accessible location and in

the local language.

Borderline Affected residents living near the project not consulted

until late in project design; insufficient survey or

consultative work done to determine affected residents’

concerns; EA results not easily accessible to community.

Unacceptable Affected residents and stakeholders not consulted about

project; no public discussion occurred, or a meeting held

only after the EA was completed; little or no effort made to

identify public concerns; EA report not made available to

local residents.

For our sample, consultation was adequate or better on 75 percent (33 of

44) of the projects. As shown in figure 3.1, consultation on 50 percent of

the projects (22 of 44) was exemplary or good, while it was adequate on

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25 percent (11 of 44) of the projects. The remaining 11 projects employed

practices that we found to be less than adequate.1

Figure 3.1: Quality of Public

Consultation

Adequate Less than adequate

Exemplary

Good

25% 25%

18%

32% (8 projects)

(11 projects) (11 projects)

(14 projects)

Source: GAO analysis.

A major infrastructure project supported by the Inter-American

Development Bank provides an example of the eight projects in which

consultation with the public was exemplary. In this case, project plans

were announced in local media, an information office was created with

full-time community liaisons to respond to citizen inquiries, a consultant

was hired to ensure that affected peoples were thoroughly consulted and

their views taken into account in planning resettlement, and public

meetings were held to discuss issues of public interest. The Bank retained

consultants to evaluate the project sponsor’s EA report and resettlement

plan in light of Bank standards, and the results were discussed in public

and made available for further public comment.

On the projects we rated as good, sponsors employed consultation

practices similar to the project described in the preceding paragraph,

though they were not as extensive. One World Bank-supported project that

we found to have employed good practices, for example, solicited public

input to project design through (a) two regional seminars for professionals

1

The distribution of project ratings was approximately the same for both the 27 category A and 17

category B projects in our sample.

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in relevant fields (including NGO representatives) and (b) an iterative series

of community meetings in affected areas.

An example of the 11 projects we found to have adequate consultation was

another Inter-American Development Bank project. Town meetings were

held to inform the public about the project. After completing a draft EA

report, the project sponsor made it available for public review at a site

accessible to local residents. A well-publicized public hearing was

subsequently held. The hearing was covered by the local media, and the

results were made available for public review.

Among the projects where we found consultation practices to be less than

adequate was an International Finance Corporation-supported project that

we visited in Asia. Consultation on this proposal was limited to local

traditional leaders. In accordance with local custom, women were not

invited to participate. In another, supported by the Asian Development

Bank, surveys were undertaken to identify public concerns. However,

project documents indicated that public participation for a major portion

of the project did not occur. In addition, local residents were not given an

opportunity to review or comment on the results of the EA process. In 8 of

the 11 projects where we found consultation to be less than adequate, the

first phase of the consultation process—informing the public about the

proposal—was also less than adequate.

Public Concerns Taken

Into Account

Bank guidance calls for sponsors to take public concerns fully into

account through such steps as undertaking additional studies to explore

previously unconsidered impacts and/or adopting measures to mitigate or

compensate for adverse impacts. We deemed the measures employed to

take public concerns into account to be adequate or better in the 39 cases

where concerns were raised. (On five projects we examined, we found no

evidence that the public raised substantive concerns.)

In most instances, members of the public were concerned about project

impacts that would directly affect their livelihood. On one Asian

Development Bank project, for example, proposed highway rights-of-way

were relocated in response to residents’ concerns that proposed routes

would adversely affect productive cropland. Additional interchanges were

also added in response to villagers’ requests for improved highway access.

The sponsor of another Asian Development Bank project responded to

local concerns by developing methods to mitigate adverse impacts on

migratory fish. In two private sector projects that we examined, one

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supported by the Inter-American Development Bank and the other by the

International Finance Corporation, pipelines were rerouted to avoid

agricultural and/or forested areas. In another International Finance

Corporation project in Asia, the sponsor made a number of alterations in

project design in response to concerns that villagers raised about adverse

impacts on fishing grounds, shrines, homes, and schools.

In some cases, there was no record of any NGO commentary or

involvement. However, when activist NGOs did offer comments, the banks

generally ensured that the issues raised were taken into account. For

example, information provided by an environmental NGO led the Asian

Development Bank to decline support for one proposed agricultural

development site in an environmentally sensitive forest region. In another

Asian Development Bank-supported project, NGO concerns about

protecting environmentally sensitive forest areas were addressed by

adding several features to the project design, including designation of a

portion of project proceeds to support conservation efforts.

Factors Affecting the

Quality of

Consultation

Several factors were associated with better or worse consultation on the

projects in our sample. Bank intervention generally improved sponsor

practices. Comparatively good consultation practices were also associated

with projects that (1) used community-based approaches in design and

implementation, (2) had a “high profile” because of recent adverse

publicity on similar projects, and (3) were supported by the World Bank.

Bank critics have suggested that the banks’ private sector projects were

less likely to employ good consultation practices than the banks’ public

sector projects. Our analysis indicated that this perception was true if

community-based development projects were included in the sample

universe. However, after removing community-based development

projects—which are generally not supported by private companies—from

our analysis, we found little difference in the quality of the practices

employed on private sector projects as compared with those sponsored by

the public sector.

Of the 11 projects where consultation was inadequate, 5 were supported

by the International Finance Corporation and 3 were sponsored by the

government of China.2

 In many of these cases, the Bank began working

2

Although consultation on many of the International Finance Corporation projects was less than

adequate, the distribution and average quality of all the banks’ private sector projects, including those

of the Asian and Inter-American Development Banks, was comparable to the public sector projects we

reviewed, once community-based projects were removed from the analysis.

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with project sponsors after much of the design and consultation work was

already complete.

Bank Intervention

Improved Sponsor

Practices

In all but four of the cases we examined, bank intervention, such as

insisting on public access to draft EA reports, resulted in at least a marginal

improvement in the sponsors’ consultation practices and/or in the

measures that sponsors employed to respond to public concerns.3

 As

shown in figure 3.2, bank impact on sponsor practices was great or very

great on 41 percent (18) of the projects and at least moderate in another

25 percent (11) of the projects. The banks had at least a marginal impact

on most of the remaining projects.

Figure 3.2: Bank Impact on

Consultation Practices

None

Marginal

Moderate

Great or very great

9%

25%

25%

41%

(4 projects)

(18 projects)

(11 projects)

Marginal 25%

(11 projects)

Source: GAO analysis.

One country that we visited provides an example of very great bank

impact on project development practices. Government officials, NGOs, and

others in this country credited the World Bank and the Inter-American

3

Three of the remaining four projects employed adequate or good practices without being prompted by

bank staff. A representative of one U.S. company receiving Inter-American Development Bank support,

for example, commented that the company simply applied the good practices that it normally

employed on U.S. projects in the developing country setting.

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Development Bank with fostering highly participatory approaches to

developing both the poverty alleviation and infrastructure projects that we

examined. Government officials and NGO representatives commented that

these practices contrasted dramatically with prior government approaches

that lacked any provision for public comment. Officials charged with

project implementation credited bank staff with introducing mechanisms

for engaging concerned members of the public that had not previously

been employed in their ministries but that worked very well in practice.

Project documents showed that International Finance Corporation

intervention in one project in rural Asia had a very great impact on both

the process and the measures taken to respond to identified concerns. In

this case, neither an EA nor consultation was required by the government.

However, the Corporation required that an EA be conducted and that the

results be made available for public review. The Corporation was also

instrumental in changing the proposed project site to avoid disrupting

existing cultivation sites.

On several projects, bank staff indicated that they had suggested

innovative approaches to overcome local barriers to effective

consultation. One example was a World Bank-supported effort directed at

providing small-scale infrastructure for a number of isolated communities

populated largely by illiterate people. This project employed a variety of

unconventional communication techniques, including dramatic

presentations, to effectively inform residents about the proposal.

In several instances, the banks placed conditions on loans to ensure that

the sponsors addressed the concerns raised by members of the public. For

example, on one of the projects we examined, the World Bank required

the borrowing government to take action to address outstanding claims of

persons adversely affected by a previous bank-financed project in the

same area. In another, the World Bank required the borrowing government

to address environmental and social risks on a proposed project by

implementing a separate bank-financed project. Satisfactory progress on

the latter project had to be demonstrated before the Bank would consider

financing the original proposal.

Limits on Bank Intervention

and Impact

Despite the banks’ impact in improving sponsor practices, public

consultation on 11 of the projects in our sample (25 percent) was less than

adequate. In many of these cases, the banks’ relatively late involvement in

the project development process limited their influence on sponsor

consultation practices—particularly those measures employed in the early

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phases of project development when public consultation can have its

greatest impact. Bank staff noted that they are generally involved in

guiding borrowing governments’ project planning efforts from the very

beginning of the project development process. This early entry gives the

banks the opportunity to influence the approach that sponsors take to

preparing project proposals and EA reports. In contrast, bank staff and

private sector representatives both noted that private sector projects are

typically submitted for bank consideration only after much project

planning has been completed. Bank officials also commented that, like

private companies, the government of China typically submits projects for

bank consideration that are already well on the way to having completed

designs ready for approval, placing bank staff in a position similar to that

which they occupy on many private projects.

Community-based Projects

Employed Good Practices

Development agencies, including the banks, have found that certain types

of objectives—like providing basic infrastructure, ensuring basic services

for poor communities, and managing natural resources—can be addressed

in a highly effective manner by using community-based approaches to

project design and implementation. By definition, control and

accountability in such projects are largely transferred to the communities

involved. Figure 3.3 describes one such project.

Figure 3.3: Community-based Development in Practice

One Asian Development Bank-supported project that we examined typifies the 

consultation measures employed in designing community-based projects. The 

project's aim was to conserve forest resources through the efforts of rural residents 

themselves. To ensure that residents would enthusiastically implement the project, 

extensive consultation took place during project preparation. To identify public 

concerns and to obtain ideas about how to implement the project, consultants 

carried out an extensive program of interviews with residents, including women 

and ethnic minorities. In addition to simply being made available for public review, 

the EA report (translated into the local language) was distributed to interested local 

NGOs and subsequently discussed at a public workshop. During this process, 

residents raised several substantive issues--all of which were addressed to their 

satisfaction.

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On average, the 12 community-based projects in our sample employed

consultation practices that we viewed as good.4

 These projects’ average

rating for taking public concerns into account was also good. In contrast,

the other projects in our sample received an average rating of adequate in

both dimensions. Seven of the community-based projects in our sample

(more than half) employed exemplary consultation practices, while only

1 of the 32 other projects in our sample achieved this high a rating.

High-profile Projects

Employed Comparatively

Good Practices

Six of the projects in our sample entered development shortly after similar

bank-financed projects in the same countries had generated substantial

adverse publicity because of environmental impacts and resettlement of

affected peoples. Five of these six employed consultation practices that

we viewed as good or exemplary. On these projects, sponsors and bank

staff were well aware of the adverse publicity and took steps to ensure

that consultation with the local residents on the new projects was good.

For example, one World Bank-supported infrastructure project took place

in a location where the borrowing government and the Bank had

previously been criticized for poor consultation practices and adverse

environmental impacts in a project in the same sector. On the new project,

the sponsors took extraordinary measures to ensure that affected persons

were actively engaged in extensive consultation early in the project design.

These steps included establishing public information centers at the project

site and, with NGO assistance, creating a development organization to

facilitate ongoing consultations among the stakeholders involved. Among

other things, these community consultations—one of which is shown in

figure 3.4—resulted in project design and engineering changes to minimize

resettlement of local people. World Bank staff had a very great impact on

the sponsor’s practices in this case. At the Bank’s behest, for example,

efforts to respond to public concerns were greatly expanded and

compensation rates for resettled persons were substantially increased.

4

As indicated in appendix I, most of the community-based development projects in our sample were

directed at alleviating poverty through providing basic infrastructure for poor communities or at

managing natural resources.

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Figure 3.4: Village Consultation in

Practice

Note: In this photo, a representative of a community development organization established to

serve as a liaison between the project sponsor and project-affected people meets with local

residents to discuss their concerns.

Source: Project sponsor.

Bank Affiliation Made a

Difference

On average, World Bank-supported projects’ consultation practices rated

highest among the four banks included in our study. More than half of the

World Bank projects we examined employed good or exemplary

consultation practices. On average, the World Bank also had a great

impact on improving sponsor practices compared to a moderate impact on

improving sponsor practices by the other banks. The World Bank also

provided the most complete information for the executive directors’

consideration. (Documentation quality is discussed later in this chapter).

International Finance Corporation-supported projects had the lowest

average rating on consultation and the other dimensions we examined.

The average ratings for Inter-American- and Asian Development

Bank-supported projects fell between the World Bank and International

Finance Corporation averages.

The World Bank’s better performance on consultation stems from the fact

that, among the multilateral banks, it was the lead institution in developing

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participatory approaches to development. Among the banks, it has

published the most comprehensive guidance on environmental assessment

and consultation and has the greatest resources at its disposal to address

such matters. For instance, it has over 360 environmental and social

development staff, a number of whom are assigned to overseas missions.

In selected overseas missions, such as one that we visited in Jakarta,

Indonesia, the World Bank has a fully staffed environmental and social

impact unit. The resident mission in New Delhi, India, which we also

visited, has a social development unit. The International Finance

Corporation has relatively few staff in these fields, and none of them are

assigned to overseas missions.

Type of Sponsor Not

Associated With

Consultation Quality

Bank critics have expressed concern about the quality of consultation

practices employed on the banks’ private sector projects as compared with

those employed on public sector projects. However, when we removed

community-based development projects (which are generally not

supported by private companies) from the analysis, we found little

difference between the quality of the practices employed on public and

private sector-sponsored projects. This observation applies when we

include all private sector projects in our analysis. But as will be discussed

in the next section, many of the projects supported by the International

Finance Corporation employed less than adequate consultation. Figure 3.5

compares the quality of consultation on private and public sector projects,

absent community-based development projects.

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Figure 3.5: Consultation Practices in Public Sector Versus Private Sector Projects (Excluding Community-Based Projects)

38%

25%

38%

Public

44%

25%

31%

Private

More than adequate Adequate Less than adequate

(4 projects)

(6 projects)

(4 projects)

(5 projects)

38%

(6 projects)

44%

(7 projects)

Source: GAO analysis.

Consultation Less Than

Adequate on Some

Projects Sponsored by the

International Finance

Corporation and the

Government of China

Each of the four banks included in our review supported at least one

project that we found to have employed less than adequate consultation

practices. However, 8 of the 11 projects in our sample where we found

consultation to be less than adequate were supported by the International

Finance Corporation or sponsored by the government of China. Five of the

10 International Finance Corporation projects (including one in China)

and 3 of the 5 projects in our sample sponsored by the government of

China had less than adequate consultation. The median rating for

consultation on the projects supported by the Corporation or sponsored

by the government of China was less than adequate compared to the

median rating of good for all other projects.

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As noted previously, substantive bank involvement in project development

generally begins relatively late in the process for private sector projects,

including those supported by the International Finance Corporation, and

for projects sponsored by the government of China. International Finance

Corporation and other bank officials acknowledged that consultation

sometimes is not as good as they would like in such circumstances.

However, in deciding whether to proceed with proposed projects, these

officials observed that other factors also had to be considered, including

the beneficial development impacts that the project promised to deliver.

Another factor in deciding to proceed with a project, according to

International Finance Corporation officials, is the opportunity to remedy

or ameliorate attendant environmental problems that might never be

corrected if the project proceeded without bank sponsorship. In these

cases, bank officials said that governments or private firms might find

alternative financing without conditions.5

Consultation on Some

Projects Not

Adequately

Documented

We examined whether key documents presented for executive directors’

consideration before they voted on proposed projects provided complete

and accurate information about consultation on the projects. These

documents included, for example, summaries of EA reports and project

appraisal reports prepared by bank staff. Adequate documentation

summarized the consultation steps, the concerns raised, and the measures

taken to address them. Unacceptable documentation provided little or no

information other than a brief statement that consultation occurred.

Documentation submitted to the executive directors was adequate or

better for 61 percent (27 of 44) of the projects we reviewed.6

 For example,

documents submitted for executive directors’ review on several

infrastructure projects in Asia described in detail the public consultation

processes employed at each step in project development. In one project

supported by the Asian Development Bank, the documents provided a

detailed discussion on consultation activities—listing where meetings

were held, who attended, the issues that were discussed, and how the

issues were handled.

5

This occurred on two highly controversial hydroelectric development proposals—China’s Three

Gorges Project and India’s plan for development in the Narmada River basin. In both of these cases,

severe international criticism focusing on environmental and consultation issues prompted the banks

to withdraw support, but this failed to have any real impact as the governments in question proceeded

with the projects, using their own resources.

6

Although bank guidelines generally require more information on category A proposals, we found no

significant difference between the quality of the documentation provided for category A versus

category B projects.

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On the other hand, we found that 39 percent (17 of 44) of the projects

provided less than adequate information. Shortcomings were particularly

evident in project documents presented for board consideration at the

Asian Development Bank and the International Finance Corporation.

Documentation was less than adequate for more than half (12 of 22) of the

projects we examined at these two institutions. A number of the EA report

summaries submitted to the Asian Development Bank executive directors,

for example, contained only short statements that the residents had been

consulted and all were in favor of the project. They contained no

discussion of what, if any, concerns had been raised, or how they were

addressed. Seven of 10 International Finance Corporation projects had

less than adequate documentation about consultation. We generally found

that the documentation on these projects forwarded to the board members

contained little, if any, mention of the actual steps taken to consult with

the public, the parties consulted, the concerns raised, and/or the measures

intended to address these concerns.

In a few instances, materials submitted for the consideration of the

International Finance Corporation and Asian Development Bank boards

presented the consultation measures in an excessively favorable light. In

one project, for example, the report submitted to the board asserted that

the sponsoring company had undertaken a comprehensive public

consultation program. However, the report did not provide details of such

a consultation program, and other documents and interviews with staff did

not indicate such consultation had actually taken place. For another

project that consisted of four subprojects, the summary EA report stated

that the residents were informed about the subprojects and were generally

in favor of them. However, the consultant’s report (which is not routinely

submitted to the executive directors but is available to them upon request)

stated that half of the residents affected by two of these subprojects had

no knowledge of them and that participation was lacking throughout the

design of another subproject. Furthermore, the report mentioned some

residents’ concerns that were not reflected in the EA report summary.

Documentation Important

to Executive Directors’

Role

According to officials at the U.S. executive directors’ offices, providing

good summary information is a key point in the consultation process. It

provides an official record of what happened and helps executive

directors exercise effective oversight of U.S. policy and law—ensuring that

meaningful public participation and consultation take place during project

development. U.S. officials also indicated that, while they rely on several

sources of information before making decisions, reliable documentation

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helps them by summarizing relevant information on consultation in one

convenient place.

Other officials of the U.S. executive directors’ offices said that tracking

down information is time-consuming and that, in some instances, they are

faced with spending considerable time collecting and analyzing

information that should already be prepared for them. For example,

officials of the U.S. executive director’s office at the Asian Development

Bank had to spend considerable effort getting information on a project in

which resettlement was to take place. (The documentation provided for

the executive directors was incomplete and did not discuss the

consultation steps taken.) The information obtained ultimately revealed

that the project sponsor had not consulted with the residents until after

bank officials required it. By then, decisions on resettling the residents had

already been made, according to project documents. The U.S. executive

director decided not to vote in favor of this project. Officials of the

executive director’s office expressed concern because this investigative

effort cannot be made on all projects where information is incomplete.

Our analysis of sample projects supports this concern. Several of the

poorly documented projects that we reviewed had in fact employed

consultation practices that were adequate or better. However, in

65 percent of the projects we examined where consultation was

inadequate (7 of 11), the summary documentation for executive directors

was incomplete or inaccurate.

Conclusions The banks have taken significant steps toward ensuring that meaningful

public consultation becomes an integral part of their project development

processes. Meaningful consultation occurred on most of the projects we

examined, and bank intervention nearly always improved sponsor

practices. Nonetheless, consultation on some projects was not adequate.

In many of these cases the sponsors asked the banks to fund the projects

only after the sponsors had completed much of the project preparation

and consultation. In these instances, the executive directors are presented

with a dilemma. Critical to their decision in these cases is complete and

accurate information on the projects, including a description of the public

consultation that has taken place. Given that the executive directors must

balance multiple factors in considering these projects, the lack of a

complete record of the consultation that has taken place is a distinct

disadvantage to efficient and effective decision-making.

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Recommendation We recommend that the Secretary of the Treasury instruct the U.S.

executive directors at the banks to work with other executive directors

and bank management to seek improvements that will result in executive

directors being provided with a complete and accurate record of public

consultation on all proposed projects with significant environmental

implications.

Agency Comments

and Our Evaluation

The Department of the Treasury agreed with our findings regarding

consultation and committed to continuing its efforts to work with U.S.

executive directors, bank management, and executive directors

representing other member countries to ensure rigorous and consistent

implementation of bank public consultation policies. The Treasury also

said that, as we recommended, it would work with U.S. executive

directors, bank management, and other executive directors to ensure that

executive directors are provided with complete and accurate records of

public consultation on proposed projects with significant environmental

implications.

The U.S. Agency for International Development also agreed with our

findings and noted that there is room for improvement in the consultation

practices employed in preparing bank-supported projects. The Agency also

pointed out that good implementation of environmental and social

mitigation measures during the active life of a project is another important

indicator of bank commitment to sustainable development.

The President of the World Bank Group commented that the World Bank

and the International Finance Corporation are continuing their efforts to

improve performance in this area. He noted that the Bank will shortly be

undertaking the third in a series of evaluations of EA practices on

bank-supported projects (including both impacts during implementation

and the quality of the public consultation practices employed.)7

 With

regard to our findings on the consultation practices employed on

International Finance Corporation-supported projects, the President

acknowledged our recognition of the different circumstances faced by

Corporation staff as compared with their counterparts in the World Bank’s

public sector lending programs but reiterated that there should be no

qualitative difference in the consultation standards employed on public or

private sector projects.

7

See The Impact of Environmental Assessment: The World Bank’s Experience, World Bank

Environment Department, November 1996.

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Banks Provided Inconsistent Public Access

to Key Project Documents

The banks have established information systems, including public

information centers and internet home pages, to provide timely public

access to information on proposed projects. We focused on the

performance of one part of these systems—the bank’s home pages. We

determined whether, as expected by the banks, their home pages provided

timely internet access to key documents on proposed projects, including

EA reports.1 We found that the home pages often did not provide timely

access to these documents.

Project Documents Bank public information systems are generally expected to provide public

access to two key documents.2

 These are the following:

Project profiles: The purpose of project profiles is to provide “as much

information to the public as early as possible” so that proposed project

designs can benefit from consultation with all concerned parties,

beginning at the projects’ formative stages. These profiles are expected to

include an outline of the main environmental issues raised by proposed

projects and are to be posted on the banks’ home pages and made

available in hard copy at headquarters public information centers.

According to bank guidelines, field offices are also supposed to make

profiles available for borrowing country residents to review. Profiles

should be periodically updated through board approval.

EA reports: As explained in chapter 1, the banks generally assign projects

with significant environmental implications to a category for assessment

purposes. The banks inform the worldwide general public that EA reports

for category A projects are available by listing them on internet home

pages. These listings are sometimes accompanied by a summary of the

report’s contents. The full reports—which may be several hundred pages

long—are made available on request from public information centers and

field offices.3

 The banks also generally require that environmental

1

The projects used for this chapter were not the same projects used to evaluate consultation. In

cooperation with the banks, we selected more recent projects to avoid including projects that were

processed under information disclosure guidelines that have since been superseded. Appendix I

describes our methodology.

2

The various banks produce a number of documents that may contain relevant information. We

concentrated on those that bank officials agreed were of interest and that were available in all four of

the banks we reviewed.

3

The Asian Development Bank provides copies of full EA reports free of charge. The World Bank and

the International Finance Corporation charge $20 to cover the cost of photocopying these documents

but provide copies free of charge to nationals of the borrowing country in question. Like the World

Bank and the Corporation, the Inter-American Development Bank charges nominal fees to cover

photocopying costs.

Page 49 GAO/NSIAD-98-192 Multilateral Development Banks
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Banks Provided Inconsistent Public Access

to Key Project Documents

information on category B projects be accessible through their home

pages. Sometimes this information is directly available on the home pages.

In other cases, relevant documents are listed on the home page and may

be obtained by request. As noted in chapter 1, the Inter-American

Development Bank no longer assigns projects to categories for EA

purposes. Bank policy is to provide broad access to all sponsor EA reports

by listing them as available on the Bank’s home page.

Project Profiles Often

Not Available on the

Internet

Project profiles for category A and B projects are supposed to be directly

available on the banks’ home pages. As shown in table 4.1, profiles were

available for all of the International Finance Corporation projects for

which we obtained data, but this was not the case at the other banks.

Profiles were available for about 71 percent of World Bank projects and

for about half of Inter-American and Asian Development Bank projects.

For example, profiles were provided for 10 of the 20 Asian Development

Bank projects for which we obtained data.

Table 4.1: Category A and Category B

Project Profiles’ Availability

Bank

Percentage of projects with profiles

available on bank home pages

World Bank 71

Asian Development Bank 50

Inter-American Development Banka 56

International Finance Corporation 100

aWe included all Inter-American Development Bank projects for which EA reports had been

prepared.

Source: GAO analysis of bank data.

With regard to timeliness, World Bank, Inter-American Development Bank,

and Asian Development Bank guidelines specify that project profiles

should be made available early on in project development—that is, when

projects are identified and enter the bank’s “pipeline” of projects under

development. The International Finance Corporation, in contrast, ties

issuance of project profiles to the end, rather than to the beginning, of the

project development cycle. Corporation policy states that profiles should

be made available at least 30 days before board consideration. Corporation

staff explained that their guidelines were designed with private sector

concerns about limiting access to information about prospective projects

in mind. Private companies we interviewed were concerned that

widespread disclosure of project information could provide competitors

Page 50 GAO/NSIAD-98-192 Multilateral Development Banks
Chapter 4 

Banks Provided Inconsistent Public Access

to Key Project Documents

with financial and other data to develop or strengthen a competing

proposal after they had invested heavily in project preparation.

On average, project profiles for the World, Asian, and Inter-American

banks were available on these institutions’ home pages about 2-1/2 years

prior to board votes. On average, International Finance Corporation

project profiles were available about 68 days before board consideration.

Timely Access to EA

Reports Sometimes

Not Provided

The banks have different requirements for when, and where, public access

to EA reports is to be provided. The World Bank specifies that sponsors

should provide category A project EA reports to the Bank and make them

available in the borrowing country before Bank staff appraise the

proposals. When the EA report has been officially received by the Bank, a

copy is sent to the public information center and its availability noted on

the Bank’s home page. Asian Development Bank criteria state that

category A project reports must be provided to the executive directors at

least 120 days prior to scheduled board consideration of the project. Bank

officials added that Bank practice is for public access to these reports to

be simultaneously provided via the Bank’s public information center and

their availability posted on the Bank’s home page. The International

Finance Corporation requires that these reports must be made available to

the public (via the Corporation’s home page and the World Bank’s public

information center) at least 60 days before board consideration.

The Inter-American Development Bank requires that EA reports be made

available in the borrowing country before appraisal missions begin.

Though Bank policy is for broad access to be provided to these reports

through their posting on the Bank’s home page, the Bank did not, during

the period for which we collected data, require staff to also send these

reports to the public information center, nor did the Bank systematically

record these reports’ arrival at the public information center or the date of

their posting on the Bank’s home page. We could not, therefore, report on

access to EA reports via the Inter-American Development Bank home page.

We did, however, obtain data on when these reports were made available

in the borrowing countries.

As shown in table 4.2, the banks’ home pages sometimes did not provide

notice that category A project EA reports were available or did not provide

such notice within the banks’ expected time frames. About 8 percent of

the reports for category A World Bank projects in our sample were posted

on the Bank’s home page in the required time. Forty-six percent were not

Page 51 GAO/NSIAD-98-192 Multilateral Development Banks
Chapter 4 

Banks Provided Inconsistent Public Access

to Key Project Documents

posted at all. Most Asian Development Bank reports for category A

projects were posted in the required time. The International Finance

Corporation met its 60-day standard for the sample of category A projects

we examined. EA reports for Inter-American Development Bank projects

were made available in the borrowing country in all cases, though about

33 percent of the reports were not made available for the required time.

Table 4.2: Category A Project EA

Reports: Access Via Bank Home

Pages Relative to Bank Time Frames

Percentage of reports

Bank

Access in required

time

Access but not in

required time No access

World Bank 8 46 46

Asian Development

Bank

87 0 13

International Finance

Corporation

100 0 0

Source: GAO analysis of bank data.

Table 4.3 shows the performance of the banks’ internet home pages in

providing access to EA reports for proposed category A projects, using the

120-day time frame advanced by the Pelosi Amendment for comparative

purposes.4

Table 4.3: Category A Project EA

Reports: Access Via Bank Home

Pages Relative to 120-Day Time Frame

Percentage of reports

No Access

Less than

60 days

61 to

119 days

120 days or

longer

World Bank 46 15 15 23

Asian

Development

Bank

13 0 0 87

International

Finance

Corporation

0 0 62 38

Source: GAO analysis of bank data.

The banks generally met their own requirements with regard to providing

access to information on EA reports on category B projects. However,

4

As explained in chapter 1, the Pelosi Amendment instructs the Secretary of the Treasury to seek,

through negotiation with other bank member countries and bank management, the adoption of

policies and procedures that will result in interested members of the public in all bank member

countries having access to EA reports at least 120 days before board consideration of the projects

under review. The amendment, a U.S. law, does not create a direct legal obligation for the banks.

Page 52 GAO/NSIAD-98-192 Multilateral Development Banks
Chapter 4 

Banks Provided Inconsistent Public Access

to Key Project Documents

these requirements contain several features that limit the timeliness of

public access to this information. For example, the Asian Development

Bank divides category B projects into “sensitive” and “non-sensitive”

subcategories. No information on EA results is provided on “non-sensitive”

projects until after the board has voted. The International Finance

Corporation does not require that information on the results of category B

project EA reports be posted until 30 days before board votes.

Conclusions The banks are not consistently meeting their goal of providing the public

with timely access to key project information through the internet. The

information that has been made publicly accessible is useful, and the

banks have clearly taken the initial steps in providing worldwide access to

project information. However, the banks are not fully meeting their

commitments on a regular basis.

Recommendation We recommend that the Secretary of the Treasury instruct the U.S.

executive directors at the banks to work with other executive directors

and bank management to have the banks improve compliance with their

guidelines on providing timely public access to project profiles and EA

reports through their internet home pages.

Agency Comments

and Our Evaluation

In commenting on a draft of this report, the U.S. Agency for International

Development noted that its experiences in attempting to monitor bank

projects reflect our findings regarding difficulties in obtaining access to

project profiles and EA reports. The Agency reiterated the importance of

the banks’ ensuring timely public access to these documents.

The Treasury Department agreed with our findings and said that the

Department would work with U.S. executive directors, bank management,

and executive directors representing other member countries to ensure

timely access to project information for concerned members of the public,

particularly affected populations, via the banks’ information centers, the

internet, and local venues in borrowing countries.

The President of the World Bank Group agreed with our conclusion that

performance in this area should be improved. He said that performance

had improved since the completion of our review5

 but that the Bank and

5

For example, the Bank reports substantially improved performance in providing public access to

project profiles.

Page 53 GAO/NSIAD-98-192 Multilateral Development Banks
Chapter 4 

Banks Provided Inconsistent Public Access

to Key Project Documents

the Corporation both need to perform even better. Because the actions

described by the President of the World Bank Group have only recently

begun to take effect, we did not attempt to verify their impact.

Page 54 GAO/NSIAD-98-192 Multilateral Development Banks
Page 55 GAO/NSIAD-98-192 Multilateral Development Banks
Appendix I 

Methodology

This appendix provides additional information on the methodology we

used to evaluate (a) the consultation processes employed on projects

supported by the multilateral development banks and (b) access to key

documents on proposed projects through the banks’ internet home pages.

Analysis of the

Consultation Process

To analyze the consultation process, we evaluated a judgmental sample of

44 projects that the 4 banks in our review approved during 1996.1

 In

selecting projects for analysis, we included those supported by the banks’

market-rate lending programs, as well as those supported by their

concessional-rate lending operations.2

 The sample included 11 projects

supported by the World Bank, 13 by the Asian Development Bank, 10 by

the Inter-American Development Bank, and 10 by the International

Finance Corporation. The sample was equivalent to approximately

20 percent of the 114 Inter-American and Asian Development Bank

category A and B projects approved during 19963

 and included about the

same percentage of the 53 relevant World Bank projects in these same

regions (that is Latin America and Asia) during that year. While our

International Finance Corporation sample included approximately the

same number of projects as we examined for the other banks, this

amounted to only about 11 percent of the 89 eligible Corporation projects.

The sample was selected to represent the wide variety of sectors and legal

and sociocultural situations that bank staff encounter as they develop

project proposals for board consideration. It includes projects in a number

of sectors (for example, power plants, natural resources management,

road building, agriculture, and poverty reduction) and projects being

carried out in very different circumstances (for example, rural areas in

Laos and Bangladesh, large cities in Argentina and Brazil.) The

1

Three of the 44 projects were approved during 1995. Two of these were included because they were

located in countries where other projects of interest, approved during 1996, were also located.

Including them expanded the number of projects that we could reasonably expect to visit. The third

was included because the documentation available to us during the planning phase of our review

indicated that the project had been approved during 1996. However, additional documents obtained

some months later showed that the financing approved during 1996 represented an additional

investment in the project. The original proposal had been approved the previous year.

2

The World Bank, the Asian Development Bank, and the Inter-American Development Bank each make

both market-rate loans (supported primarily through bank borrowing on world financial markets) and

concessional-rate loans (supported primarily through contributions from member countries.) Access

to the latter category of funds is limited to the poorer developing countries. In the World Bank,

concessional financing is provided through the International Development Association. The Asian and

Inter-American Development Banks provide their concessional lending through the Asian

Development Fund and the Fund for Special Operations, respectively.

3

As noted in chapter 1, the Inter-American Development Bank no longer assigns projects to categories

for EA purposes. However, the Bank’s categorization system was still in effect during 1996.

Page 56 GAO/NSIAD-98-192 Multilateral Development Banks
Appendix I 

Methodology

Inter-American and Asian Development Bank samples also included 6 of

the 11 private sector projects that these institutions supported in 1996.4

 We

examined projects from 15 countries in all. Table I.1 lists the projects we

selected.

Table I.1: Multilateral Development Bank Projects Reviewed for This Report

Dollars in millions

Project name Country A/B Project focus Estimated cost Public/private

World Bank

Coal sector environmental and social

mitigationa

India A Environmental

mitigation

$ 84 Public

Flood protection Argentina A Infrastructure,

institutional

development

420 Public

Ghazi-Barothab Pakistan A Hydroelectric power 1,864 Public

Henan (Qinbei) thermal power China A Coal-fired power 1,161 Public

Kerinci Seblat integrated conservation

and developmenta

Indonesia A Natural resource

management

46 Public

Native forests and protected areasa Argentina B Natural resource

management

30 Public

Power development Vietnam A Gas-fired power 230 Public

Rural water supply and sanitationa Nepal B Rural infrastructure 21 Public

Sierra natural resources and poverty

alleviationa

Peru B Poverty reduction 93 Public

Strategic urban roads infrastructure Indonesia A Roads 168 Public

Yunnan environment China A Pollution abatement 308 Public

Asian Development Bank

Anhui industrial pollution China A Pollution abatement 266 Public

Anhui municipal wastewater China B Pollution abatement 70 Public

Bahawalpur rural developmenta Pakistan B Poverty reduction 65 Public

Chonqing expressway China A Roads 348 Public

Fauji Kabirwala Pakistan A Gas-fired power 170 Private

Forestry sectora Bangladesh B Natural resources

management

92 Public

Integrated pest managementa Indonesia B Agriculture 80 Public

Jamuna bridge access roads Bangladesh B Roads 196 Public

Kali Gandaki Nepal A Hydroelectric power 453 Public

Nam Leuk hydropower Lao P.D.R. A Hydroelectric power 113 Public

(continued)

4

The Inter-American Development Bank made six private sector loans during 1996. The Asian

Development Bank made five. The World Bank sponsors small private sector risk and credit guarantee

programs but does not have a directly analogous lending program.

Page 57 GAO/NSIAD-98-192 Multilateral Development Banks
Appendix I 

Methodology

Dollars in millions

Project name Country A/B Project focus Estimated cost Public/private

Banjarmasin Agrojaya Mandiri Indonesia A Plantation agriculture 183 Private

Second road improvement Vietnam A Roads 237 Public

South Java flood control Indonesia A Infrastructure,

institutional

development

184 Public

Inter-American Development Bankc

Aguaytia Peru A Natural gas

extraction,

processing; power

generation,

transmission

253 Private

Barrio improvementa Argentina B Poverty reduction 170 Public

DECOPAZa Guatemala B Poverty reduction 56 Public

Edenor Argentina B Energy distribution 508 Private

FONCODESa,d Peru B Poverty reduction 430 Public

Mexico valley sanitation Mexico B Pollution abatement 1,035 Public

Peten sustainable developmenta Guatemala B Natural resources

management

22 Public

Port modernization Argentina B Infrastructure 208 Public

Termovalle Colombia B Gas-fired power 156 Private

Yellow line toll road Brazil A Road 161 Private

International Finance Corporation

Basic petroleum Guatemala A Oil production 73 Private

Upper Bhote Koshi Nepal A Hydroelectric power 98 Private

Caltex Ocean China A Petrochemical,

shipping

146 Private

Green Line Thailand A Urban mass transit 1,648 Private

Jalalabad gas Bangladesh A Natural gas

production

80 Private

Kalimantan Sanggar Pusaka Indonesia A Plantation agriculture 162 Private

Thai Petrochemical Inc. Thailand A Petrochemical,

shipping

2,028 Private

Uch power Pakistan A Gas-fired power 630 Private

Vina Kyoei Vietnam B Steel processing 71 Private

Western access tollway Argentina A Road 272 Private

(Table notes on next page)

Page 58 GAO/NSIAD-98-192 Multilateral Development Banks
Appendix I 

Methodology

Note: Cost includes projected bank and project sponsor financing as of 1996, in then-year

dollars.

aCommunity-based development project.

bThe Asian Development Bank assisted in funding this project, but the World Bank took the lead

in negotiating with the borrower.

cOur sample included the only two category A projects submitted for consideration by the

Inter-American Development Bank board of executive directors during 1996.

dThe World Bank assisted in supporting this project.

Sources: World Bank, International Finance Corporation, Inter-American Development Bank, and

Asian Development Bank.

To determine what actually occurred on these projects, we interviewed

bank project managers and environmental personnel and examined

project documents at bank headquarters in Washington, D.C. (site of the

World Bank, International Finance Corporation, and Inter-American

Development Bank) and Manila, The Philippines (site of the Asian

Development Bank), and solicited comments via telephone and/or E-mail

from nongovernmental organizations (NGO) active in relevant sectors

and/or regions. We supplemented this examination with field visits to 20 of

the 44 projects, travelling to 9 countries to discuss relevant matters with

bank staff in the field; project sponsors (including government agencies

and private companies); and concerned members of the public, including

private citizens living in affected areas and officials of concerned NGOs. To

broaden our understanding of the private sector perspective on relevant

issues, we interviewed officials from selected private firms who were not

involved in the projects we included in our sample but who nonetheless

could offer informed observations (for example, international bankers,

multinational corporations, and consultants and attorneys specializing in

relevant matters).

To develop criteria for evaluating project practices, we consulted the

policy statements and associated guidance on environmental assessment

(EA) and public consultation issued by the four banks we included in our

review, as well as other relevant materials prepared by recognized

Page 59 GAO/NSIAD-98-192 Multilateral Development Banks
Appendix I 

Methodology

authorities on such matters.5 Using these materials—especially the

relatively extensive guidance on relevant topics issued by the World 

Bank6

—we developed a scale ranging from exemplary to unacceptable and

rated each project on three dimensions of the consultation process. The

three dimensions of the consultation process were the following:

• Sponsor consultation practices. Each project received one overall rating,

derived by averaging ratings on the extent to which project sponsors 

(a) informed potentially affected groups and local NGOs about the

proposed project, (b) identified public concerns, and (c) provided

opportunities for public comment on the manner in which such concerns

had been addressed.

• Measures adopted to take public concerns into account.

• Documentation normally provided to the banks’ executive directors so

that they may evaluate the consultation practices used and the measures

employed to take public concerns into account.

Evaluating Sponsor

Consultation Practices

Table I.2 displays the scale that we applied in rating the consultation

practices that sponsors employed in completing project EAs. To obtain a

single overall rating for each project, we averaged the ratings each project

received in the three rating dimensions.

5

See, for example, Asit K. Biswas and S.B.C. Agarwal, eds., Environmental Impact Assessment for

Developing Countries, sponsored by Pollution Control Research Institute, United Nations Industrial

Development Organization, United Nations Environment Programme et al. (Boston: ButterworthHeinemann, 1992); Environmental Impact Assessment: Basic Procedures for Developing Countries,

United Nations Environment Programme, (London: Environmental Resources United, 1988); Stephen

G. Hildebrand and Johnie B. Cannon, eds., Environmental Analysis: The NEPA Experience (Boca

Raton, Florida: Lewis Publishers, 1990); Frank Vanclay and Daniel Bronstein, eds., Environmental and

Social Impact Assessment, sponsored by the International Association for Impact Assessment (New

York: John Wiley and Sons, 1995).

6

See, for example, Environmental Assessment Sourcebook: Volume I, 1991, World Bank Environment

Department, World Bank Technical Paper #139 (Washington D.C. 1991).

Page 60 GAO/NSIAD-98-192 Multilateral Development Banks
Appendix I 

Methodology

Table I.2: Rating Criteria for Evaluating Sponsor Consultation Practices

Rating Informing the public

Identifying public

concerns

Providing opportunities

for comment

Exemplary Extraordinary measures

employed to overcome

local barriers, ensure that

all concerned parties fully

informed.

Extraordinary measures

employed to ensure that

local concerns fully

identified and clarified

through meaningful,

informed consultation.

Extraordinary measures

employed to ensure that all

concerned members of the

public were fully informed of

EA results and that

remaining concerns were

fully clarified.

Good Program adopted, taking

local conditions into

account, to ensure that all

concerned parties could

become fully informed

about major impacts.

Local conditions taken into

account, program adopted

to ensure that all elements

of concerned public could

express informed

comments.

In addition to simply making

information available,

sponsors actively sought

comments on EA results.

Adequate Standard measures (e.g.,

public meetings) employed

to inform concerned parties

about major impacts.

After being provided with

substantive information,

interested parties given

opportunities to express

their concerns.

Meaningful information on

EA results made available

in an accessible location, or

other steps (e.g., public

meetings) taken to provide

information on EA results.

Borderline Some steps taken to inform

potentially affected

communities and

concerned NGOs, but

efforts had substantial

shortcomings.

Some steps taken to identify

concerns and obtain views

of affected communities

and concerned NGOs, but

efforts had substantial

shortcomings.

Information on EA results

(e.g., draft report) made

available for review, but

significant obstacles

reduced the usefulness of

this step. No other

meaningful steps taken to

inform the public about EA

results.

Unacceptable Little or no effort invested in

informing local people or

interested NGOs until after

draft EA report completed.

Little or no effort made to

identify public concerns

prior to publication of a

complete EA report.

Concerned elements of the

public provided with little or

no opportunity to review or

comment on EA results.

Evaluating Measures Employed

to Take Public Concerns Into

Account

We rated each project on the extent to which project sponsors addressed

(in the final project plan) the issues raised by the public during

identification of public concerns, public comment on the results of the EA

process, and additional public commentary obtained through general

posting of project information. When rating each project’s performance,

we considered (a) whether or not members of the public raised any

substantive concerns, and the nature of these concerns; (b) the steps that

were taken to respond to these concerns; and (c) changes in project

design or implementation plans that were developed as a result. Each

project was given a rating based on a 5-point scale ranging from exemplary

Page 61 GAO/NSIAD-98-192 Multilateral Development Banks
Appendix I 

Methodology

measures employed in addressing public concerns to unacceptable

measures where little or nothing was done to address public concerns.

Evaluating Documentation

Provided to Bank Executive

Directors

We rated the extent to which the documents normally provided to each

bank’s executive directors prior to voting on proposed projects provided

them with a basis for arriving at informed judgments about the quality of

the consultation process. To conduct our assessment, we obtained the

documents normally provided to the executive directors at each bank and

reviewed them to determine whether or not these documents provided

information that was complete and accurate about (a) steps taken to

obtain public comment, (b) parties responding, (c) concerns raised, and

(d) steps taken to respond to concerns. Documentation for each project

was then given a rating based on a 5-point scale ranging from exemplary

documentation with detailed accounts of public consultation efforts and

results to unacceptable documentation with little or no information about

the public consultation process.

Evaluating Bank Impact on

Project Processes

To evaluate bank impact on the consultation processes employed on the

projects in our sample, we did the following:

(1) We reviewed each project to determine the extent to which the

consultation processes used, and the measures employed to take public

concerns into account in finalizing project designs, were upgraded from

prevailing practices in the localities where the projects we examined were

situated. In conducting this portion of our review, we took into account

the legal frameworks and customary norms in effect in project areas. We

then gave each project a rating ranging from a substantial upgrade in

prevailing practices to no upgrade in practices.

(2) We determined if such upgrading as occurred could be clearly linked to

the need to meet bank requirements and/or to the active intervention of

bank staff members. In conducting this portion of our analysis, we

attempted to separate bank influence from the impact of other actors. In

some instances, for example, project practices were upgraded over local

norms because of the intervention of international NGOs or because

sponsoring companies employed practices that exceeded local

expectations.

(3) We rated the banks’ overall impact on a project, based on a

computational matrix that took into consideration the extent to which

practices were upgraded on the project and the extent to which bank

intervention was directly linked to the upgrade in practices.

Page 62 GAO/NSIAD-98-192 Multilateral Development Banks
Appendix I 

Methodology

Transparency Analysis We assessed timely access to key project documents (project profiles and

EA reports) through the banks’ internet home pages. To test performance

against the banks’ own guidelines on making such documents available, as

well as the Pelosi Amendment’s 120-day time frame for EA reports, we

obtained and analyzed data on whether—and when—relevant documents

became available on each bank’s home page. We did not attempt to

independently verify the accuracy of the data that the banks provided on

this matter, though we did review it for internal consistency. With the

exception of the Inter-American Development Bank, each of the banks

provided us with separate data sets for category A and category B

projects. As already noted, the Inter-American Development Bank stopped

employing a categorization system during 1997. Data obtained from that

institution therefore did not differentiate among projects on the basis of

their EA category.

The time periods covered by the data employed for this analysis varied

among the banks and in no case matched the time period reflected in our

analysis of consultation practices (that is, calendar year 1996.) In each

case, we coordinated with bank staff to ensure that the time frames

selected were (1) recent enough to avoid including projects that were

processed under information disclosure guidelines that have since been

superseded and (2) of sufficient duration to include enough projects to

reach reasonable conclusions about performance under updated

guidelines. The following discussion describes the time frames employed

and the numbers of projects involved in our analyses of information from

each bank.

World Bank The project profile sample included all 4 category A and 10 category B

projects whose review dates for developing project concepts occurred

between April 1, 1997, and June 30, 1997. (Bank approval at this point in

the process adds the project to the Bank’s pipeline of projects under

development.)

The EA report sample included all 13 category A projects whose EA report

arrived at the Bank during the period July 1, 1996, through June 30, 1997,

and all 15 category B projects with appraisal missions that began during

the period April 1, 1997, through June 30, 1997.

Asian Development Bank The project profile sample included all 4 category A and 16 category B

projects for which Technical Assistance Fact Finding Missions (which

Page 63 GAO/NSIAD-98-192 Multilateral Development Banks
Appendix I 

Methodology

occur near the beginning of the project cycle) took place during the period

October 1, 1996, through March 31, 1997.7

The EA report sample included all 15 of the category A projects considered

by the Bank’s executive directors during the period October 1, 1996,

through September 30, 1997, and all of the 4 category B projects approved

by the Bank’s executive directors during the first half of calendar year

1997.

Inter-American

Development Bank

We employed one comprehensive data collection instrument for this bank,

which included all of the 77 projects approved by the executive directors

during the period October 1, 1996, through September 30, 1997. Since the

Bank did not systematically record when (or if) EA reports were provided

to the Bank’s public information center—or when they were posted on the

Bank’s home page—we obtained data on when these reports were made

available in the borrowing countries, as required under Bank guidance.

International Finance

Corporation

The project profile sample included all 5 category A and 102 category B

projects that the International Finance Corporation executive directors

considered during the time period April 1, 1997, through June 30, 1997.

The EA report sample included all 8 of the category A projects considered

by the executive directors during the period July 1, 1996, through June 30,

1997, and all 100 category B projects considered by the executive directors

during the period April 1, 1997, through June 30, 1997.

7

The project profile data sets provided by the Asian Development Bank and the International Finance

Corporation each contained one category B project that fell slightly outside of the indicated time

frames. We decided to retain these projects in our analyses.

Page 64 GAO/NSIAD-98-192 Multilateral Development Banks
Appendix II 

Comments From the Department of the

Treasury

Note: GAO comments

supplementing those in the

report text appear at the

end of this appendix.

Page 65 GAO/NSIAD-98-192 Multilateral Development Banks
Appendix II 

Comments From the Department of the

Treasury

See comment 1.

See comment 2.

See comment 3.

See comment 4.

Page 66 GAO/NSIAD-98-192 Multilateral Development Banks
Appendix II 

Comments From the Department of the

Treasury

The following are GAO’s comments on the Department of the Treasury’s

letter dated July 31, 1998.

GAO Comments 1. Our review was directed at assessing the overall quality of the

consultation practices employed on bank-supported projects, rather than

the strengths or weaknesses of individual projects.

2. Our review of project consultation practices, the results of which are

presented in chapter 3, included an assessment of the extent to which

concerned members of the public were informed about proposed projects

before being asked to comment. The Objectives, Scope, and Methodology

section of chapter 1 has been revised to make this clear. The quality of the

information on these projects that was provided to the public was a key

element in our evaluation of performance in this area. As already noted in

chapter 3, we found that in 8 of the 11 projects where consultation was

less than adequate, the measures employed in informing the public about

the proposed project were also less than adequate.

3. We have updated the report to reflect several of these points.

4. Chapter 2 acknowledges that the International Finance Corporation has

strengthened its environmental assessment policies and is otherwise

working to improve its performance in relevant areas.

Page 67 GAO/NSIAD-98-192 Multilateral Development Banks
Appendix III 

Comments From the U.S. Agency for

International Development

Note: GAO comments

supplementing those in the

report text appear at the

end of this appendix.

Page 68 GAO/NSIAD-98-192 Multilateral Development Banks
Appendix III 

Comments From the U.S. Agency for

International Development

Page 69 GAO/NSIAD-98-192 Multilateral Development Banks
Appendix III 

Comments From the U.S. Agency for

International Development

See comment 1.

Now on pp. 15-18.

See comment 2.

Page 70 GAO/NSIAD-98-192 Multilateral Development Banks
Appendix III 

Comments From the U.S. Agency for

International Development

Now on p. 57.

See comment 3.

Now on p. 43.

See comment 4.

Page 71 GAO/NSIAD-98-192 Multilateral Development Banks
Appendix III 

Comments From the U.S. Agency for

International Development

The following are GAO’s comments on the U.S. Agency for International

Development’s letter dated August 5, 1998.

GAO Comments 1. This is useful background information, and we have inserted a brief

reference to the Agency’s legislatively mandated role in chapter 1.

However, we did not evaluate the Agency’s efforts in this area.

2. Our review was directed at assessing the overall quality of the

consultation practices employed on bank-supported projects rather than

the strengths or weaknesses of individual projects.

3. We agree that a follow-up study would be useful and will take the

Agency’s suggestion into consideration when planning future work.

4. While the World Bank clearly employs a substantially greater number of

environmental and social development staff than the other banks, precise

comparisons are difficult because of differences in the personnel systems

used by the institutions we reviewed. We could not present the type of

precise analysis suggested without substantial additional data collection

and analysis, which would delay publication of the report.

Page 72 GAO/NSIAD-98-192 Multilateral Development Banks
Appendix IV 

Comments From the World Bank

Page 73 GAO/NSIAD-98-192 Multilateral Development Banks
Appendix IV 

Comments From the World Bank

Page 74 GAO/NSIAD-98-192 Multilateral Development Banks
Appendix IV 

Comments From the World Bank

Page 75 GAO/NSIAD-98-192 Multilateral Development Banks
Appendix IV 

Comments From the World Bank

Page 76 GAO/NSIAD-98-192 Multilateral Development Banks
Appendix IV 

Comments From the World Bank

Page 77 GAO/NSIAD-98-192 Multilateral Development Banks
Appendix V 

Major Contributors to This Report

National Security and

International Affairs

Division, Washington,

D.C.

Harold J. Johnson

Tetsuo Miyabara

Michael McAtee

Joy Labez

R.G. Steinman

Richard Boudreau

Venecia Kenah

Elizabeth Nyang

Office of the General

Counsel, Washington,

D.C.

Mark Speight

Los Angeles Field

Office

Joyce Akins

Denver Field Office Arturo Holguin

(711230) Page 78 GAO/NSIAD-98-192 Multilateral Development Banks
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