Chairman's Statement on Chad Investigation

REMARKS OF THE CHAIRMAN OF THE INSPECTION PANEL TO THE BOARD OF THE EXECUTIVE DIRECTORS ON THE CHAD-CAMEROON PIPELINE PROJECTS – INSPECTION PANEL INVESTIGATION REPORT.

Edward S. Ayensu

3:00 p.m., September 12, 2002

1. Mr. Chairman, ladies and gentlemen of the Board. Before I make some introductory remarks on the Panel's Investigation Report, including those of Management's Report and Recommendations to it, I would like to make some brief comments about our overall impression of the projects which the Panel investigated.

2. After careful consideration and an in-depth study of the Pipeline Project and its implications to the region, the Panel is pleased to observe that the Project is fundamental to the development of Chad. The Panel also recognizes that Bank's participation in the Project is critical for its success especially in reducing poverty in Chad. This was clearly acknowledged in the Panel's Report. Furthermore, we believe that it is a credit to Management to embrace such a project, which is enmeshed in exceptionally complex environmental, developmental, political and social challenges.

3. In the light of these challenges, the Panel is pleased to note that the overall project design and implementation to date, reflect an impressive effort from Bank staff to 'get it right.' Starting with the original idea to have project revenues linked to targeted social expenditures, and the adoption of a number of external controls to monitor project implementation and compliance, we note that many innovative and ambitious steps have been taken to improve the situation, and these deserve to be emulated in similar future projects. The Panel is therefore in general agreement with Management's recommendations related to the Panel's findings, but we wish to draw the Board's attention to a number of key issues.

Regional Environmental Assessment

4. In the Panel's Report, we expressed some concern about the fact that Management did not require the Borrower to prepare a timely and appropriately scoped Regional Environmental Assessment in line with OD 4.01. Management responded with the following argument:

i. Since the relevant provisions only say that such an assessment may be used, the preparation of a Regional EA is not mandatory.

ii. Management decided to proceed first with a Regional Development Plan while preparing the key elements of a Regional Environmental Assessment, because appropriate elements of a Regional EA were to be part of the RDP. Thus, "the absence of a formal Regional EA is largely a semantic issue." The approach taken is also in conformity with the guidelines of the EA Source-Book Update. Incidentally, the Panel believes that these guidelines cannot supersede the Bank's stated policy.

iii. A formal agreement had been reached whereby future projects outside the Doba Oil Fields would conform to the relevant environmental assessment provisions.

Under the Resolution, Mr. Chairman, as the Board knows, the role of the Management Report is to inform the Board about the specific actions Management proposes to address the Panel's findings and not to dispute them. This is clearly stated in the 1999 Clarification to the Panel's Resolution, where the Inspection Panel is defined as "a fact-finding body on behalf of the Board." This was confirmed recently during Board discussions on the Lake Victoria Environmental Management Project. We, also, carry our duties impartially, and with the assistance of world-renowned experts in their fields.

We would like, therefore, to address some specific arguments raised by Management:

i. Firstly, Management's narrow interpretation of the word "may" as stated in the relevant Environmental Assessment directive, does not necessarily confer immunity from the need for a Regional Assessment in all situations. Sometimes the use of a Regional EA may only be partially indicated, but sometimes the situation on the ground makes its use essential. In the case of the Pipeline Project, the potential for cumulative and wide-ranging socio-economic and environmental impacts indicates that the use of a Regional EA is essential to proper evaluation of the Project. In fact, current Bank Environmental Assessment policy states, and I quote, that "when the project is likely to have sectoral and regional impacts, sectoral or regional EA is required."

ii. Secondly, notwithstanding the foregoing clarification, Management argues that one can start with a Regional Assessment which can serve as the basis for a Regional Plan or one can prepare a Regional Plan which incorporates a Regional Assessment. But the mere analysis of possible approaches that can be taken in the matter of a Regional Assessment does not constitute evidence for what was actually done or not done. Independent evidence must be forthcoming to support the approach which, it is claimed, was the one adopted. In this respect, the evidence gathered during the Investigation does not support the claims that a Regional Development Plan was being prepared in order to address larger regional and cumulative impacts. For example, the health concerns raised by the Panel in its Investigation Report constitute a clear indication of the lack of an appropriate consideration to such impacts.

iii. Thirdly, with regard to the last point, that a formal agreement had been reached whereby future energy projects outside the Doba region would conform to the relevant Environmental Assessment requirements, this only precisely demonstrates the need for a Regional EA. This would forestall the need for multiple assessments insofar as issues of regional impacts are involved. Of particular concern are future projects not formally subject to Bank policy.

In the light of the foregoing, the Panel stands by its finding of non-compliance with respect to the need for a Regional Assessment. One should ask a simple question, Mr. Chairman, how can you prepare and implement a Regional Development Plan without a prior Regional Assessment?

Capacity Building

5. Requesters and NGOs alike have questioned the ability of the Capacity Building Project to produce timely results, arguing that adequate institutional capacity should have been put in place before the construction of the pipeline. During interviews, Bank Staff recalled that for several years there was no certainty as to whether the Pipeline Project would materialize or not, and that Governments are understandably reluctant to borrow funds to reinforce their institutional capacity "in a vacuum". Herein lies the dilemma as the Panel sees it. On the one hand, institutions in developing countries have technical and operational limitations, as overwhelmingly demonstrated in the case of Chad. On the other hand, the Bank has an obligation to ensure that systems are in place to forestall or mitigate impacts and, generally, to ensure the realization of social and economic objectives of the Project. Specifically, Management's Report acknowledges that the required institutional capacity in Chad will be in place in 2004, while first-oil is predicted at the end of 2003. There is no simple way out of this dilemma, but we draw attention to it for what it is worth. A clear recognition of the problem will at least ensure that the basic elements in a capacity building component of any project, are accorded the highest possible priority in relation to project timing.

Project Alternatives

6. In regard to Management's comments about project alternatives, it is unfortunate that after a long period of investigation and several opportunities for Management to be transparent, the Panel was never informed of the existence of the assessment of such alternatives as referred to by Management in its comments to Finding No. 29 in Annex 1 of its Report. The Panel finds it disturbing that pieces of information that would have been critical to its findings were not provided to us. While we appreciate the value of proprietary and confidential information, we must note that within the framework of an investigation process, the Panel's Resolution requires Management to disclose to it all relevant information. This is covered by paragraph 21 which states that "the members of the Panel sh