Palm | Kelapa Sawit

WASHINGTON-based World Growth (WG), a pro-development non-government group, said the World Bank is straying from its core purpose of poverty alleviation as it adopts narrowly-defined sustainability rules before it lends money for oil palm planting.

This is despite the fact that Malaysia and Indonesia are being represented in the World Bank and that Prime Minister Datuk Seri Najib Razak heads the Southeast Asian constituency in the bank's governing board.

When contacted by Business Times, WG chairman Alan Oxley noted that it would be natural for the World Bank's president, Robert Zoellick, to consult the governors, which include Najib and Indonesian president Susilo Bambang Yudhoyono, over palm oil funding given how important it is for the countries' drive to alleviate poverty.

Indonesia and Malaysia are the world's top producers of palm oil.

It seemed that World Bank staff listen more to donors and environmental activists rather than developing countries. Its private-sector lender, International Finance Corp (IFC), stopped funding the palm oil industry in 2009 after complaints from environmental and human rights non-governmental organisations prompted a review of its lending practices.

IFC's director of global manufacturing, agribusiness and services Atul Mehta reportedly said part of the World Bank's new strategy involves supporting the Roundtable on Sustainable Palm Oil (RSPO), of which it is a member.

Atul said if palm oil clients violate commitments to keep forests standing and engage with local communities, the IFC can refuse loans.

Last month, lawmakers in the US wrote to the World Bank president stating their concerns over the bank's "no land conversion policy and suspension of palm oil funding". 

Congressmen John Shadegg and Scott Garrett said the sustainability criteria will limit farmers in developing nations to benefit from private and public investment and undermine the World Bank's core mission of raising living standards.

In a document made available to Business Times the congressmen said, "the World Bank's reconsideration of its pro-agriculture policies is worrisome given the proven economic success of this development model".

When asked to comment, Oxley concurred with the congressmen that the World Bank should not overreach its priorities to set environmental standards, especially when it impacts its core mission, the jobs of millions and food offerings to billions.

"Zoellick's decision on the freeze of palm oil funding is a gross overreaction to a minor workplace infraction. Furthermore, this decision will lock in RSPO-style regulations and requirements on World Bank lending," he said.

"Why is the World Bank stepping into a role of an environmental regulator and enforcer instead of staying committed to its primary mission of poverty alleviation?" Oxley questioned.