TESTIMONY OF

WILLIAM A. NITZE

DEPUTY ASSISTANT SECRETARY OF STATE

BUREAU OF OCEANS AND INTERNATIONAL ENVIRONMENTAL

AND SCIENTIFIC AFFAIRS

JUNE 16, 1988

HEARINGS BEFORE THE SUBCOMMITTEE ON

HAZARDOUS WASTES AND TOXIC SUBSTANCES

COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

UNITED STATES SENATE

Thank you Mr. Chairman and good morning. I am pleased to

testify before your committee this morning on the subject of

applying the National Environmental Policy Act (NEPA)

authorities to U.S. participation in actions of international

financial institutions. The U.S. plays a strong leadership

role in the multilateral development banks (MDBs), and has made

substantial financial contributions to them since their

inception.

Clearly, the MDBS play a critical, if not primary role, in

the development process. In general, their lending has been

very beneficial for the recipient countries.

MDB-assisted

projects range from institution building in education and

health fields to large infrastructure projects such as roads

and electric power plants.

Development is, of course, the mandate. But we must

recognize and ensure that the development we achieve is

sustainable. If projects are not planned initially with a

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concern for environmental impacts and effective management of

natural resources, we may all suffer adverse impacts in the

future. We must minimize the possibility that a country's

resource base may suffer permanent damage, that adverse health

effects may occur, and that future development may be

undermined and costs significantly increased.

Poor planning, often caused by the pressure for short-term

economic benefits, can cause irreparable damage to soils and

forests or result in projects which cannot be sustained. There

is much scientific and economic evidence that truly sustainable

development can only be built on a foundation of careful

resource management which integrates environmental

considerations into overall planning efforts.

The Congress, in response to growing public concern, has

recently passed legislation intended to make the MDBS more

sensitive to environmental concerns. The State Department

strongly supports these efforts and is working closely with

congressional committees, the NGOs, and other federal agencies

to ensure that MDBS promote environmentally sound projects in

developing countries.

I would submit, Mr. Chairman, that there are a number of

international activities which show that there is strong and

growing momentum in this area. We have begun to see results

from our efforts to increase awareness through discussions in

international fora and bilaterally with other countries to

influence bank policies, as well as with MDB officials

themselves. These efforts have been mounted on a number of

levels.

At the project level, A.I.D.'s Early Project Notification

(EPN) system alerts 53 A.I.D. missions and U.S. embassies

around the world to proposed MDB projects. This notification

comes while these projects are still in the planning stages.

It is our conviction that this is the correct time and place to

begin assessing the effects of proposed projects.

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Mission assessments from the EPN system are passed by

A.I.D. and State to our colleagues in other agencies and to the

offices of our U.S. Executive Directors for their information.

Where necessary, mission suggestions and concerns are passed

along to Bank staffs. This process has proven tremendously

helpful in alerting the U.S. Government to environmental

concerns.

The principal forum for interagency deliberations is the

Working Group on Multilateral Assistance (WGMA). This working

group is charged with reviewing and commenting on individual

project proposals for MDB loans and related documents. It

meets weekly to identify problems and issues for resolution.

Through this process, the U.S. thoroughly assesses certain

categories of loans for adverse environmental impacts and

develops guidance to be followed by U.S. Executive Directors of

the banks in evaluating loan proposals. A separate working

level inter-agency group meets weekly to coordinate the U.S.

Government's strategy on MDB reform.