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Management Line Units

Three of the Banks have established line units to provide for a systematic and thorough review of projects affecting the environment and natural resources. As I indicated earlier, the World Bank has set up four regional units. The Asian Development Bank and the African Development Bank have established smaller units that need to be strengthened. The Inter-American Development Bank decided to create an inter-departmental Committee instead of a line unit. It reviews projects in both the preparation and implementation phases an d is advised by a senior environmental specialist. We are encouraging the Bank to establish an environmental unit in the project analysis area.

Involvement of Health and Environmental Ministers and Participation of non-Governmental Organizations

The management of the banks report that they have taken steps to emphasize the involvement of health and environmental ministries. The Asian Development Bank provides special briefing materials to its country programming teams on environmental and natural resource development projects. The environmental unit at the bank is also in contact with environmental agencies in borrowing countries regarding specific projects in the pipeline that may need assessment. The African Development Bank has issued instructions to staff for expanding consultations with health and environmental ministers.

Participation of non-governmental organizations is also being encouraged in all of the banks. In the World Bank, the focal point for relations with non-governmental organizations has been shifted from Public Affairs to Policy, Planning and Research. This shift has facilitated the exchange of views and discussions on substantive issues. A number of initiatives are also going forward on the involvement of indigenous people and local community groups. We expect to report to the Congress on some of these initiatives over the next two weeks.

In May 1987, the Inter-American Development Bank sponsored a conference on environmental issues in Latin America and the Caribbean. There was extensive participation by regional and non-regional NGOs. There was also very broad representation from public agencies throughout the region, responsible for environmental protection and natural resource conservation. A second conference is now being planned to follow up on the results of the first conference. The African Development Bank is also making plans to hold a meeting for the African NGOs during the second half of this year. Non-governmental organizations from this country with our strong endorsement and support are helping the Bank to prepare for this meeting.

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The Asian Development Bank has completed a working paper on cooperation with non-governmental organizations. The paper was based on consultation with a number of those organizations. A final report is expected shortly. All of the banks are seeking to involve NGOs in borrowing countries more actively in the project cycle and to see that local community groups and other organizations are fully informed of project planning at an early stage of the cycle. In agriculture, this has involved wider contacts with farmers organizations, water user associations and women's groups. Multidisciplinary Planning in Land Uses and

Rehabilitation and Management of Ecological Resources

All of these banks have sought to incorporate new technologies, including remote sensing techniques, into efforts to encourage more effective land use planning. The World Bank has begun preparation of comprehensive environmental action plans in a number of selected countries. It is also preparing terms of reference for consultants to identify areas where multidisciplinary support can help improve project preparation.

The multilateral development banks are providing funds for national and international agricultural research programs and for science and technology programs that support research into eco-system management. The World Bank is working with Harvard University and the Institute for International Environment and Development to assess alternative approaches to natural resource management. Task forces have also been organized within the World Bank to address desertification, deforestation, industrial accident risk avoidance, protection of critical eco-systems and mitigation of natural disasters in urban areas.

New Initiatives

We have begun a number of new initiatives as a result of the Continuing Resolution that was passed in December, 1987, Public Law 100-202.

On April 13, 1988, we submitted to the Congress a report that had been requested on debt for nature swaps. An Internal Revenue Service ruling that encourages participation in such swaps was released last December. The report recommends that the World Bank place additional emphasis on working with countries to establish priorities for conservation projects, possibly piggy-backing World Bank projects onto debt for nature programs. It also looks to the Bank to take a more active intermediary role in helping to arrange debt for nature swaps and to consider starting a pilot program in a country that has indicated that it is willing to establish one.

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We have been in contact with other developed countries regarding the possibility of providing environmental experts to work in the regional development banks. Environmental experts from developed countries have already been seconded to the African Development Bank. Our executive directors in all three regional banks have talked with management about how this approach might be used to enhance effectiveness on environmental issues.

We have held a series of meetings with representatives of other donor countries regarding improvements in the environmental performance of the multilateral development banks. Environmental issues were an important point of discussion at the Development Committee meeting at the World Bank in April. In May, we participated in an OECD meeting in Paris seeking agreement on common criteria for decisionmakers in evaluating environmental issues in the multilateral development banks. I am pleased to say that EPA took part in the OECD meeting and that agreement was reached on a checklist for decisionmakers in both bilateral and multilateral agencies. We are hopeful of making further progresss on this issue in the months ahead.

We placed particular emphasis on environmental issues at the annual meeting of the Inter-American Development Bank in Venezuela in March, at the annual meeting of the Asian Development Bank in Manila in April and at the annual meeting of the African Development Bank in Abidjan earlier this month. All of these initiatives have been meant to involve the governments of other countries more effectively in our own efforts to improve environmental performance in the banks. I would like to provide for the record copies of the statements that we made at these meetings.

During the past year, we have worked closely with our colleagues at AID in implementing the early warning system for identifying problematic projects. We believe we can continue to enhance this system and become more influential in shaping the environmental aspects of individual loan proposals in the banks. I am hopeful that EPA participation will increase our effectiveness at this early stage of the project cycle. We are also cooperating with Greenpeace and other interested organizations in forming an informal working group to examine integrated pest management issues.

At the end of this month we will report to Congress on our discussions regarding establishment of a grassroots program to promote participation by indigenous people and local community groups in MDB project formulation. Later this Summer, we will collaborate with State and AID in analyzing more comprehensive strategies that can address natural resource problems through the multilateral development banks and in our bilateral aid program.

Application of NEPA Standards

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It has been suggested that an amendment might be offered on the application of NEPA standards to multilateral development bank lending. As I understand the suggestions that have been made, they would require the preparation of environmental impact statements or environmental assessments. In the absence of such statements, it is my understanding that we would have to oppose any MDB loan that might come up for consideration.

I support strict environmental review of MDB projects. However, I would strongly oppose enacting the application of NEPA standards. We are most effective in the Banks when we have latitude and can work to enlist the support of other countries on specific issues. I believe the application of NEPA standards would paralyze our ability to act cooperatively and constructively with other member countries. It would reduce our effectiveness in promoting environmental reform in the banks and prevent us from making further progress toward environmental objectives set forth in the legislation. It could also set back some of the progress we have already made and that I outlined earlier.

NEPA is, in large part, a process designed to fit into the administrative and legal systems of the United States. It does not take account of legal and administrative differences between the United States, other countries, and international organizations. It does not consider the legal and administrative structures within which we operate in these organizations. It does not reflect the reality under which the United States has to conduct its relations with other countries and organizations.

The difficulty of applying NEPA standards to international activities was first recognized when Executive Order 12114 was signed by President Carter in 1979. This Executive Order specifically excluded from any form of NEPA standards "U.S. Government votes and other actions in international conferences and organizations." I believe that exemption should be continued.

U.S. voting power varies widely in the multilateral development banks. We have 18 percent in the World Bank, 34.5 percent in the IDB, 16.6 percent in the ADB; and 5.8 percent in the AFDB. I am particularly concerned about how NEPA dictated U.S. votes would be perceived in the AFDB, where our voting share is lowest.

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Africa has the most pressing developmental problems in the world. Hundreds of thousands of its people perished in the famines of the the early 1980s. More than a million people are now thought to be at risk again. Africa also has very serious environmental problems: over-grazing, deforestation, desertification and threats to wildlife and their habitat.

Obviously, development and environment are linked very closely together. The focus of our efforts should be on finding the innovative and creative approaches that are needed to achieve substainable development objectives. A stream of automatic abstentions on environmental grounds would not help us in these efforts in the African Development Bank. Yet, the application of NEPA standards might well require blanket opposition to AFDB projects if data were not available or if a particular standard could not be met at a certain time.

I am not arguing against objecting to MDB loans on environmental grounds. As I said earlier, we have already done so on a number of occasions. Those actions were very helpful in focusing attention on specific environmental issues and in promoting positive changes. However, a stream of automatic U.S. abstentions because of failure to meet NEPA standards for environmental assessments would send a different message to the AFDB and its member countries and it would produce a different result. We would, in effect, be opting out of the action, not only on environmental issues but on other critical issues as well.

To sum up, Mr. Chairman, I am all in favor of strict environmental review, aimed at sustainable growth and development, for MDB projects in developing countries. That is what we have been trying to accomplish under existing legislation and I believe we have made substantial progress. The application of NEPA standards would not advance that progress. In my view, it could very likely set back the progress that has already been made.

There is extensive environmental legislation on the books. We have supported that legislation and made a strong effort to see that its provisions are implemented in the multilateral development banks. I believe we need to give that legislation a chance to work.

Our immediate objective is further progress on environmental reforms in the multilateral development banks. Beyond that, we look to strengthening the systems for environmental review in borrowing countries. A cooperative and constructive approach that gets support from other countries is the most productive way for us to proceed.