Amsterdam,

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WORLD BANK S MINING ACTIVITIES
Presentation to the Friends of the Earth
Raw Materials versus Poverty Conference
Amsterdam, The Netherlands September 12, 2001
John Strongman Mining Department The World Bank
Group
2

• Topics to be Covered
• The World Bank Group
• World Bank Mining Activities
• C. Mining Work in Poland, Romania and PNG
• D. World Bank Non-Lending Mining Activities
• World Bank Mining Activities - Other Examples
• F. Linkages to Poverty Alleviation
• Safeguard Policies
• Activities to reduce Greenhouse Gas Emissions
• H. The Extractive Industries Review (EIR)
• The Mining Challenge Summary

3
A. The World Bank Group
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The World Bank Group
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World Bank Strategy Comprehensive Development Fra
mework

• Country ownership for
• development goals
• Partnership
• Long-term vision
• Structural/social equal
• to macroeconomic/financial
• Focus on results

SOURCE 1999 Annual Report on Development
Effectiveness World Bank Operat
ions Evaluation Department
6
World Bank Group Lending Assistance to Implement
the CDF

• We lend money
• IBRD - lending to Governments for technical
  assistance and investment projects and for
  structural adjustment
  
• IFC financing (loans and equity) for private
  sector projects
  
• MIGA private sector promotion and loan
  guarantees
  

7
Lending by Sector, FY99
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• World Bank Group
• Mining Transactions and Operations CY 96 - 00

• Total Average
  Operations Value per
  
• Operation World Bank
  (USMillions)
  
• WB - Technical Assistance Lending 10 18
• WB - Investment/Adjustment Lending 8 320
• Total 18 150
• IFC Transactions 31 16

9
World Bank Group Non-lending Assistance to
Implement the CDF

• We undertake research, provide advice and
• facilitate consultation between governments,
  civil society and investors
  
• Economic management
• Poverty alleviation
• Environment and social guidelines and procedures
• Legal and fiscal reform
• Privatization of state enterprises
• Private sector development and promotion

10

• Key points (Section A)
• 1. Our mining work is anchored in the
• Comprehensive Development
• Framework
• 2. Our lending for mining is very modest
• Our TA and IFC projects average
• only US16-18 million per project
• Our large loans are only for sector reform
• mostly in Eastern Europe and Former
• Soviet Union
• We do a lot more than lending we have
• important non-lending activities

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B. World Bank Mining Activities
Lending and Non-Lending
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The Changing World of Mining
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World Bank Group Mining Transactions and
Operations CY 96 - 00

• IBRD/IDA
• WB Technical Assistance for Mining Sector Reform
  and environmentally and socially responsible
  mining development
  
• Adjustment lending for mining sector reform and,
  in particular, mine closure, environmental
  improvement and social mitigation
  
• IFC
• IFC Transactions to support responsible private
  mining investment and enhance its contribution
  especially to local communities
  
• MIGA
• MIGA guarantees and promotional services to
  support responsible private sector mining
  investment

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World Bank Mining Activities Working at the
interfaces
Governments
Create a responsive interface between Government
and Private Sector

Equip Government to deal with the legacy, and to
deal with communities

• Mine closure
• Poland
• Russia
• Ukraine
• Romania
• Local Economic Devt.
• Mozambique
• Mexico

• Legal/Regulatory Reform
• Argentina
• Institution Building
• Papua New Guinea
• Burkina Faso
• Tanzania
• Ghana
• Mali
• Environ. Management
• Zambia

Private Sector
Civil Society
Provide a voice for civil society in mining
development process through improved consultatio
n, and engagement with mining companies
Workshops on Mining and Community Social Charte
r Sustainable Development IFC and MIGA supported
private sector mining investments
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• Key points (Section B)
• 1. The mining world has changed greatly
• the past two decades with the private
• sector taking the lead for investment
• 2. Environmental protection is well integrated
• Social mitigation is becoming accepted
• These changes have helped shape our
• activities in the mining sector. We work at the
  
  
• interfaces between government, civil society
• and private investors.
• Our activities include sector reform loans
• technical assistance loans project financing
• and guarantees workshops publications etc.

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C. Mining Projects in Poland, Romania
and Papua New Guinea (accounting for over 60
of World Bank and IFC mining operations by va
lue in past two years)
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World Bank Mining ProjectsPoland Coal Sector
Reform

• Objective support implementation of the
  Governments 1998 2002 Coal Sector Reform
  Program, including downsizing the sector in a
  socially acceptable manner, improving
  environmental and financial performance and
  preparing for the eventual privatization of the
  Polish coal industry
• Lending
• US 300 million (June 1999)
• US 100 million (August 2001)

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World Bank Mining Projects Poland Coal Sector
Reform

• Outcome (so far)
• 93,000 workers have left the industry (150,000
  remain) about half have taken early retirement
  and half of the remainder have found employment
  so far
• an attractive severance payment scheme has helped
  mitigate social impacts. As a miners wife said
  in response to a recent survey, The opportunity
  for her husband to take a miners leave social
  package helped to stabilize and secure the
  situation of the entire family
• 26 million tpy loss making, excess capacity has
  been closed (with 111 million tpy remaining)
  
• Production costs per ton of coal have been
  reduced by 26
  
• (in real terms)

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World Bank Mining ProjectsPoland Coal Sector
Reform

• Outcome (continued)
• Mine by mine environmental management plans have
  been prepared and are bring implemented
  
• Worst pollution, namely discharge of saline water
  and disposal of solid waste , reduced by 20 and
  29 respectively since 1998
  
• Coal industry is now making a profit on coal
  operations compared with a loss of about US650
  million in 1998
  
• One mine has been privatized
• A Privatization Strategy Framework has been
  prepared for the entire industry and is now being
  discussed with trade unions

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World Bank Mining Projects Romania Mine Closure
and Social Mitigation

• Objective to support the closure of 29
  uneconomic mines and environmental remediation of
  mine sites financing of social mitigation
  initiatives to help diversify the local economy
  in support of the Governments restructuring
  program for the mining sector and technical and
  institutional assistance for modernizing the
  administration of mineral rights and
  strengthening environmental protection
• Lending
• US 45.5 million (August 1999)

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World Bank Mining Projects Romania Mine Closure
and Social Mitigation

• Main Components
• Closure of 29 mines US 26.5 million
• Social Mitigation US 14 million
• Micro credit scheme
• Workspace centers
• Employment and Training Incentives
• Social dialogue
• Social Impact Monitoring
• Institutional Strengthening US 3 million
• Legal
• Environmental
• Project Implementation US 1 million

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World Bank Mining Projects Romania Mine Closure
and Social Mitigation

• Outcomes (so far)
• Mine closure manual prepared 8 mines under
  closer bidding documents well advanced for
  other 21 mines
  
• Training and employment incentives scheme under
  implementation to provide incentives for new job
  creation
  
• Micro finance law passed and scheme being
  established to provide micro finance for new
  business start ups
  
• Workspace centers being constructed for new jobs
• Sector Environmental Assessment completed and
  presented at stakeholder workshop
  
• New mining law drafted and discussed at
  stakeholder workshop

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World Bank Mining Projects Papua New Guinea
Mining Sector Institutional Strengthening TA

• Objective The main objective of the proposed
  project is to strengthen institutional capacity
  within the Department of Mining and the Internal
  Revenue Commission to administer and regulate
  exploration and mining projects and to thereby
  contribute to socially and environmentally
  sustainable private mineral investment in the
  Papua New Guinea mining sector.
• Lending
• US 10 million (June 2000)

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World Bank Mining Projects Papua New Guinea
Mining Sector Institutional Strengthening TA

• The project will provide technical assistance
  to
  
• review and develop mineral policy and
  regulations,
  
• improve the mining development contract
• strengthen the interface between public and
  private mining sectors, NGOs, and local
  communities
  
• strengthen the Department of Mines and the
  Geological Survey
  
• conduct technical and safety field audits of
  exploration and mining projects
  
• improve environmental compliance and sustainable
  development benefits from mining
  
•      

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World Bank Mining Projects Papua New Guinea
Mining Sector Institutional Strengthening TA

•   continued
•         address the issue of mine closure and
  its impact on local communities,
  
•         improve mine safety and investigate
  accidents
  
•         improve the availability of geological
  data for potential mineral investors
  
•         conduct tax audits of mining and
  petroleum companies and
  
•         establish effective inter-relationships
  between different government agencies regarding
  tax collection, environment management, and
  industry oversight

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World Bank Mining Projects Papua New Guinea
Mining Sector Institutional Strengthening TA

• Drafting of a Mining Sector Sustainable
  Development Policy for Papua New Guinea
  
• The policy aims to identify all the elements of
  sustainable development relevant to the mining
  industry in Papua New Guinea and to bring them
  together under a cohesive framework.
• Key elements are
• Defining and measuring the economic
  sustainability of the industry.
  
• Defining the interface between the social and
  environmental impacts and taking measures to
  ensure that the sustainability of the social area
  is on par with that of the biophysical.
• Establishing effective arrangements for Benefits
  Distribution.

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World Bank Mining Projects Papua New Guinea
Mining Sector Institutional Strengthening TA
(cont)

• .
• Taking measures and developing systems or
  institutions to ensure that the development
  initiatives of a mining project can be sustained
  after mining ceases
• Income replacement and sustainable economic
  activity for communities after mine life,
  
• Sustaining the essential services provided by the
  mining company beyond mine life,
  
• Creation and management of long-term funds to
  provide resources for Sustainable Development
  activities which are to be carried out beyond
  mine life.
• The above elements are currently viewed as among
  the key building blocks for the process of
  creating a culture for sustainability.

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World Bank Mining Projects Indonesia Mining
Sector Reform

• Objective provide input to finalizing the draft
  Mining Law and preparing the associated
  implementing regulations.
  
• One day Symposium on Sustainable Mining
  Development (open to all) on October 8, 2001
  
• Two day International Workshop on Policy
  Priorities for the Indonesian Mining Sector
  (selected government, company and civil society
  representatives) on October 9 and 10, 2001
• Topics to be covered include legal, fiscal,
  social, environmental and decentralization-related
  issues

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• Key points (Section C)
• Over half our lending is to countries such as
  Poland
  
• for helping people losing their jobs in mining
• (social mitigation) and for environmental
  protection
  
• and clean up
• (is this really what you oppose?)
• In Romania the immediate focus is social
• mitigation and environmental clean up for closed
• mines the future focus is on better legal
• frameworks and improved environmental
  performance
  
• Our technical assistance, in countries such as
• Papua New Guinea, helps governments
• to develop and establish the frameworks for
• responsible and sustainable mining development.
  
  

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D. World Bank Non-Lending Mining Activities
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World Bank GroupNon Lending Activities in Mining

• Publications
• Latin America Study (1997)
• Small Scale Mining in Latin America (1999)
• Mining and Environment in Indonesia (1999)
• Mine Closure and Sustainable Development (2000)
  
  
• Poverty Strategy Reduction Toolkit (2001)
• Large Mines and the Community (2001)
• Review of the Legal and Fiscal Framework for
  Mining (2001)
  

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World Bank GroupNon Lending Activities in Mining

• Workshops
• Mining and Community Quito (1997) Mining and
  Community Madang (1998)
  
• Industry /NGO Workshop regarding ICME Social
  Charter (1998)
  
• Mine Closure and Sustainable Development (2000)
  
  
• China Investment Workshop (2000)
• Vietnam Investment Workshop (2001)
• Mining Taxation Seminar (2001)
• Finance, Mining and Sustainability (2001)

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World Bank GroupNon Lending Activities in Mining

• Partnerships (ongoing)
• BPD (Mine Closure Indonesia)
  
  
• Mine Minister Forum (MMF)
• Mining, Minerals and Sustainable Development
  (MMSD)
  
• Consultative Group on Artisanal and Small Scale
  (CASM)
  

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Key points (section D) Our non-lending activi
ties address a broad range of social and environ
mental issues related to mining
and actively facilitate dialogue between
governments, civil society and private investors
on important issues
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• World Bank Mining Activities
• Other Examples

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World Bank Mining ActivitiesFour areas of Focus
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World Bank Mining ActivitiesPoverty Alleviation

• examples
• Increase the sustainability of large scale mining
  activities by improving delivery of services
  (health, education, etc.) (Zambia)
  
• Support mining spin-off businesses and local
  economic development (Mozambique)
  
• Establish social mitigation activities to help
  communities when they are impacted by mine
  closure. (Poland)
  
• Establish job creation incentives (Romania)

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World Bank Mining ActivitiesEnvironmental
Protection

• examples
• Establish modern environmental laws and
  standards. (Zambia)
  
• Prepare and implement mine by mine environmental
  management plans (Poland)
  
• Strengthen environmental monitoring and
  enforcement capabilities (Romania)
  
• Support Clean Coal initiatives (China)
• Ensure adequate provision for mine closure and
  post-closure environmental monitoring (Romania)
  
• Help clean up past environmental legacy
  (Zambia).
  

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World Bank Mining ActivitiesMacro-economic and
Fiscal

• examples
• Eliminate operating subsidies to state owned
  companies. (Russia)
  
• Close loss making mines mines (Ukraine)
• Improve management of mining sector revenues
  including distribution of taxes to sub national
  agencies (Argentina)
  
• Help strengthen tax collection capabilities
  (PNG)
  

40
World Bank Mining ActivitiesBusiness
Environment/Governance

• examples
• Introduce modern mining legislature with sound
  licensing procedures and minimal discretionary
  powers of government (Argentina)
  
• Improve governance of state mining enterprises
  (Mongolia)
  
• Support privatization of state mining assets in a
  transparent, socially responsible,
  corruption-free way (Peru).
  
• o

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Leveraging our Knowledge Impacting US25
billion Annual Global Mining Investment

• Direct Impacts
• Country Level TA for sector regulatory
  /institutional reform
  
• Industry Level SECALS/SILS for reform and
  closure
  
• Project Level IFC transactions (mobilizing
  investment in frontier situations and
  demonstrating good practice)
  
• Indirect Impacts
• Country Level World Mine Minister Forum
  /Regional Groups
  
• Industry Level Workshops/Partnerships with
  Industry Associations and work on codes of
  conduct /voluntary standards
  
• Project Level Individual private sector
  companies follow WBG guidelines on a voluntary
  basis.

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• Key points (Section E)
• We can demonstrate important benefits from our
• projects relating to poverty alleviation,
  governance,
  
• environmental sustainability, macro/fiscal
  aspects
  
• 2. Examples are given here from Zambia,
• Mozambique, Poland, Romania and China
• but many more exist in other projects
• Typically each project has several such
• attributes
• 4. Our support for private mining investments
• helps improve the social and environmental
• performance of such operations and helps
• provide demonstration projects
• Many private sector companies are starting to
• use World Bank/IFC social and environmental
• Guidelines on a voluntary basis

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F. Linkages to Poverty Alleviation
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Main Linkages of Mining to Poverty Alleviation
Positive Linkages (from WB Poverty Sourcebook)

• Economic Opportunity
• Fiscal income and foreign exchange
• Employment generation
• Investment in local infrastructure
• Spin off developments
• Source of energy (coal mining) for economic
  growth
  
• Security
• If coal Life-line for heating in severe
  climates
  
•   

• Capability
• Training and education, with spill-over to
  community and suppliers (SMEs)
  
• Strengthening of local government capacity
• Investment in health /education with universal
  access
  
• Empowerment
• Public Consultation
• Capacity Building for civil society organizations

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Main Linkages of Mining to Poverty Alleviation
Negative Linkages (from WB Poverty Sourcebook)

• Security
• Environmental and social risks, and related
  health impacts
  
• Threats to indigenous peoples land ownership
  and use
  
• Work-related health risks
•  Income security of non-miners at risk
•  Sudden end of economic opportunities and
  employment in the context of mine closure
  
• Risks to political stability/peace
• Empowerment
• Local communities often lack information and
  participation in key decision making processes

• Economic Opportunity
• Corruption
• Macro-economy Dutch disease effect on non-mining
  sectors
  
•  Poor governance of State mining enterprises
•  Reduced opportunities for non-mining sectors
  who compete for use of natural resources and
  infrastructure
  
• Capability
• Health risks
• culture of dependency

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Key points (Section F) We are using these link
ages (economic opportunity, capability, security
and
Empowerment) in designing our projects
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G. Safeguard Policies
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Main Thrust Proactively Identifying and
Managing Environmental and Social Risks

• Proactive strategy, anchored in precautionary
  principle, using environmental and social
  assessment to
  
• Identify and anticipate risks --- consultation
  ensures EA and SA addresses issues of concern to
  stakeholders
  
• develop processes for including stakeholders in
  plan/program design to address risks and to
  ensure benefits to local communities
  
• agree implementation mechanisms, responsibilities
  and funding arrangements to minimize and mitigate
  risks
  
• monitor implementation through environmental
  management systems and make corrections as needed

49
World Bank Policies and Guidelines
Environmental Assessment, Consultation and
Disclosure

• Environmental and Rural
• Policies
• Environmental Assessment
• Natural Habitats
• Forestry
• Pest Management
• Safety of Dams

• Social Policies
• Involuntary Resettlement
• Indigenous Peoples
• Cultural Property

• Legal Policies
• Disputed Areas
• International Waterways

Guidelines Pollution Prevention and Abatement Han
dbook Occupational Health and Safety Guidelines
Environmental Assessment Sourcebook (and
updates) WB Participation Sourcebook (1996)
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Objectives of Safeguard Policies

• OP 4.01 Environmental Assessment
• ensure that projects proposed for Bank financing
  are environmentally sound and sustainable
  
• inform decision makers of the nature of
  environmental risks (e.g. provisions to ensure
  compliance and prevent likely non-compliance)
  
• OP 4.36 Forestry
• prevent encroachment upon significant natural
  forest areas support local communities
  traditional use of forests not support logging
  in tropical forest.

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• OD 4.12 Involuntary Resettlement
• avoid or minimize involuntary resettlement and
  related disruption and, where necessary, to
  resettle people in a manner that provides them
  with sufficient resources and opportunities to
  share in project benefits.
• OP4.11 Cultural Property
• cultural property is identified and protected
• national laws governing the protection of
  cultural property are complied with
  
• capacity to identify and protect cultural
  property is enhanced

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• OD 4.20 Indigenous peoples
• are afforded full respect for their dignity,
  human rights and cultural uniqueness in the
  development process
  
• do not suffer adverse effects
• receive culturally-compatible social and economic
  benefits
  
• benefit from provision of informed participation
  in the project
  
• OP 4.37 Safety of dams
• ensure due consideration is given to the safety
  of dams1 in projects involving construction of
  new dams, or that may be affected by the safety
  or performance of an existing dam or dams under
  construction
• 1Dams include hydropower projects, water supply
  projects, irrigation projects, mining (tailings
  dams) projects etc.

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• OP 4.04 Natural Habitats
• ensure due consideration is given to the
  conservation of natural habitats
  
• safeguard their biodiversity
• ensure the sustainability of the services and
  products which natural habitats provide to human
  society

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• Key points (Section G)
• Our approach is evolving from do no harm
• to proactively identifying and managing both
• environmental and social risks
• 2. We have five environmental and rural
• safeguard policies, three social safeguard
• policies, two legal safeguard policies as well
• as four guideline/source books
• Oversight and review are provided by two
• independent bodies the IFC Ombudsman or the
• World Bank Inspection Panel.

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H. World Bank Activities to help
reduce Greenhouse Gas Emissions
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World Bank Group Activities to Help Reduce
Greenhouse Gas Emmissions

• With regard to the GHGs produced by developing
  countries we help by
  
• Mining
• lowering emissions per unit of energy produced by
  encouraging production of higher quality coal
  where possible
  
• reducing methane release by coal mines (one of
  worst gases)
  
• Power plants
• Introducing clean coal burning technology
• increasing thermal efficiency
• substituting gas for coal in power generation
• supporting gas trade
• Carbon trading and offsets
• Carbon trading pilot and support for private
  sector trading
  
• But about 15 of the worlds population in
  industrialized countries produce more than two
  thirds of world GHGs

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• Key points (Section H)
• We are actively working to help reduce
• Greenhouse gas (GHG) emissions
• 2. But our clients, developing countries,
• account for less than one third of GHG
  emissions
  
• 3. Over two thirds of GHG emissions are generated
  by
  
• the 15 of the worlds population that live in
• industrialized countries

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I. The Extractive Industries Review (EIR)
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EIR - How it started

• James Wolfensohn at an NGO Briefing at Prague
  last September
  
• "What I am prepared to do is to do with you in a
  way that I think we should explore what I have
  done on dams. . take a look on whether we've
  got it wrong or whether we've got it right , and
  what it is we should do and what it is we
  shouldn't do.
• I would be perfectly happy to sit down with you
  and with your colleagues to try to see if there
  is some mechanism that we can stand back and take
  a look at the actualities of this extractive
  industry, the pros, the cons, the pluses, the
  minuses, and see if together we can come up with
  something that will either lead to an exclusion
  or to an inclusion on certain terms of what we
  are doing.

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EIR - Roadmap and Timetable
ECA
WBG Issues Paper September 2001
Final Consultation Workshop June 2002
Baseline Workshop October 2001
Consultation Report
Draft Report
LAC
Other Stakeholders Issues Paper
AFR
ASIA
Other forms of contributions from stakeholders
Management Recommendations
OED/OEG Report
OED/OEG Review
61
J. The Mining Challenge Summary
62
The Challenge of Mining We are working to better
manage the environmental, social, economic and
governance risks

• Mining can have significant negative
  environmental and social impacts
  
• Mining can leave a negative legacy for future
  generations
  
• For small economies over dependence on mining can
  harm other sectors
  
• Large wealth creation can result in governance
  problems (misuse of funds, abuse of power)

63
The Challenge of MiningIf managed well mining
can bring significant benefits

• Mankind needs minerals and energy and demand will
  continue to grow
  
• Many developing countries are well endowed with
  mineral resources and can help meet the demand
  
• Mining can make a positive contribution to
  economic development and poverty reduction
  
• Mining contributes significantly to the economies
  of many developing countries (as well as several
  industrialized countries)

64
The Challenge of MiningMining can be an engine
of economic growth

• Countries with larger mining sectors
• USA Australia Canada South Africa China
  India Brazil
  
• Countries with smaller mining sectors
• LAC Chile, Peru, Mexico, Bolivia
• Africa Botswana, Ghana, Guinea, Mauritania,
  Jordan
  
• Europe Poland, Romania, Russia, Kazakstan,
  Uzbekistan
  
• Asia Indonesia, Philippines, Papua New Guinea,
  Mongolia
  
• Counties with emerging mining sectors
• Argentina, Mali, Tanzania, Uganda, Ecuador

65
The Challenge of MiningMining contributes
significantly to many developing counties
Positive impacts of Mining
Based on case studies in nine emerging markets
66

• Key points (Section J)
• We are working to better manage the
• environmental, social, economic and
• governance risks associated with mining
• 2. When managed well mining can bring
• significant benefits and can be an engine
• of economic growth

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END