Multilateral Development Banks: Public Consultation on Environmental
Assessments (Chapter Report, 09/08/98, GAO/NSIAD-98-192).

Pursuant to a congressional request, GAO reviewed certain aspects of the
environmental assessment and information disclosure policies and
practices of the multilateral development banks, focusing on the: (1)
steps the banks have taken to ensure meaningful public consultation on
the environmental implications of proposed projects and timely public
access to relevant project documents; (2) quality of consultation that
occurs on bank-supported projects and the documentation on the
consultation that is provided to executive directors; and (3) extent to
which the banks provide broad, timely public access to project
information, including environmental assessment reports.

GAO noted that: (1) the multilateral development banks, led by the World
Bank, have taken significant steps to ensure that meaningful public
consultation takes place on the environmental implications of the
projects they fund; (2) GAO believes, however, that the banks can take
further steps to build on the progress that has been achieved by
ensuring that executive directors receive complete and accurate
documentation about the consultation practices that have been employed
in developing proposed projects, and by more consistently providing the
public with timely access to environmental information on these
projects; (3) the banks have adopted guidelines that require sponsors to
consult with the public in developing projects, and created systems to
provide worldwide public access to information about these
projects--including information on their environmental implications; (4)
generally, public consultation on the projects that GAO reviewed was
adequate or better, and bank intervention improved sponsor practices on
nearly every project; (5) several factors contributed to the quality of
consultation; (6) for example, good consultation was associated with
projects employing community-based approaches to project development, as
well as those having a high profile because of recent adverse publicity
on similar projects; (7) also, in general, World Bank-supported projects
received higher ratings than the projects supported by the other banks
GAO reviewed; (8) nevertheless, consultation on 25 percent (11 of 44) of
the projects, primarily projects supported by the International Finance
Corporation or sponsored by the government of China, was less than
adequate; (9) also, documentation given to the executive directors
provided incomplete or inaccurate information about the consultation
measures employed on many of the projects; and (10) the banks' Internet
home pages were inconsistent in meeting their own guidelines for
providing public information concerning project profiles and
environmental assessment reports.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-98-192
     TITLE:  Multilateral Development Banks: Public Consultation on 
             Environmental Assessments
      DATE:  09/08/98
   SUBJECT:  Environmental monitoring
             Environmental impact statements
             Public relations
             International organizations
             International economic relations
             Foreign economic assistance
             Lending institutions
             Foreign policies
             Developing countries
IDENTIFIER:  China
             Internet
             
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Cover
================================================================ COVER


Report to Congressional Requesters

September 1998

MULTILATERAL DEVELOPMENT BANKS -
PUBLIC CONSULTATION ON
ENVIRONMENTAL ASSESSMENTS

GAO/NSIAD-98-192

Multilateral Development Banks

(711230)


Abbreviations
=============================================================== ABBREV

  EA - environmental assessment
  NGO - Nongovernmental Organization

Letter
=============================================================== LETTER


B-280095

September 8, 1998

The Honorable Nancy Pelosi
The Honorable Barney Frank
House of Representatives

This report responds to your request that we review certain aspects
of the environmental assessment and information disclosure policies
and practices of the multilateral development banks. 

We are sending copies of the report to the Secretaries of the
Treasury and of State; the Administrator, U.S.  Agency for
International Development; the Presidents of the institutions we
included in our review (the World Bank and the International Finance
Corporation, the Asian Development Bank, and the Inter-American
Development Bank); and other interested parties.  Copies will also be
made available to others on request. 

Please contact me at (202) 512-4128 if you or your staff have any
questions concerning this report.  Major contributors to this report
are listed in appendix V. 

Benjamin F.  Nelson, Director
International Relations and Trade Issues


EXECUTIVE SUMMARY
============================================================ Chapter 0


   PURPOSE
---------------------------------------------------------- Chapter 0:1

The multilateral development banks, such as the World Bank, have in
the past been criticized for funding projects that imposed
unacceptably high environmental costs on borrowing countries. 
Critics linked decisions in favor of such projects to the banks'
relatively closed processes for developing project proposals. 
Specifically, the banks did not (1) require project sponsors
(borrowing government agencies or private companies) to consult with
local communities and take their concerns into account when preparing
project proposals or (2) provide the public with access to
information on proposed projects, including environmental assessment
reports. 

Congress responded to these concerns by enacting legislative measures
aimed at improving bank performance in both areas.  One such measure,
the "Pelosi Amendment," instructed the Secretary of the Treasury to
seek adoption of policies and procedures within the banks that would
(a) encourage public consultation on proposed projects' environmental
impacts and (b) provide concerned members of the public in bank
member countries with access to environmental assessment reports at
least 120 days before the banks' boards of executive directors voted
on funding proposed projects.  This legislation was adopted in 1989
and was amended in 1997 to clarify that it applies to bank projects
sponsored by private companies as well as government agencies. 

Noting that there had been no comprehensive, independent analysis of
bank performance in these areas, Representatives Nancy Pelosi and
Barney Frank requested that GAO

  -- describe the steps the banks have taken to ensure meaningful
     public consultation on the environmental implications of
     proposed projects and timely public access to relevant project
     documents;

  -- evaluate the quality of consultation that occurs on
     bank-supported projects and the documentation on the
     consultation that is provided to executive directors; and

  -- determine the extent to which the banks provide broad, timely
     public access to project information, including environmental
     assessment reports. 

GAO also sought to identify factors that help to account for
differences in the quality of the consultation practices employed in
different types of projects. 


   BACKGROUND
---------------------------------------------------------- Chapter 0:2

Project proposals for bank financing are developed by sponsors, with
bank staff providing guidance and oversight.  When the sponsor is a
public agency, the process generally calls for bank staff to assign
projects with significant environmental implications an environmental
category (A or B) as soon as the Bank and the borrower have agreed to
invest substantial effort in project design.  Category A projects
have "diverse and significant" impacts that may extend beyond the
immediate project area.  Category B projects have less severe,
site-specific, or more readily mitigated impacts.  Sponsors then
prepare project proposals, including environmental assessment
reports.  Bank staff members appraise sponsor proposals, negotiate
any changes needed, and prepare summary materials for executive
directors to consider before voting on whether to support the
project.  A similar process is followed when the sponsor is a private
company; however, private companies typically seek bank support only
after completing a substantial portion of the project design.  Within
the executive branch of the U.S.  government, the Department of the
Treasury has the lead role in working with U.S.  executive directors
to develop and implement U.S.  policies regarding the banks. 

In conducting this study, GAO analyzed public consultation on a
sample of 44 out of 256 category A and B projects in Latin America
and Asia that were approved during 1996 by the World Bank, the Asian
Development Bank, the Inter-American Development Bank, and the
International Finance Corporation.\1 GAO then developed rating
criteria based on the banks' guidance for public consultation and
environmental assessment.  Based on these materials, GAO rated
consultation as adequate if concerned members of the local public
were (a) informed about the project through town meetings or similar
methods, (b) given reasonable opportunities to express their concerns
in meetings with project sponsors, and
(c) provided with subsequent opportunities to review and comment on
the environmental assessment report.  Consultation that exceeded this
standard was rated more than adequate.  Consultation not meeting the
standard was rated less than adequate.  GAO developed a computational
matrix and applied it to rate the extent to which bank intervention
upgraded the consultation practices employed in these projects above
borrowing country norms.  GAO also assessed the quality of the
summary documentation provided to the banks' boards of executive
directors, using a rating methodology similar to that employed in
rating the consultation practices themselves.  For example,
documentation was rated adequate if it provided a complete and
accurate summation of the consultation steps employed, the concerns
raised by the public, and the measures undertaken to address the
concerns.  The results of GAO's analyses apply only to the projects
reviewed. 

The banks have created public information systems, including internet
home pages, to provide broad public access to key project documents,
including project profiles and environmental assessment reports.  GAO
obtained and analyzed data from the banks to assess the performance
of one element of these systems--the banks' home pages--in providing
access to profiles and information about environmental assessments
for projects under consideration between mid-1996 and mid-1997. 


--------------------
\1 The World Bank (officially known as the International Bank for
Reconstruction and Development) and the International Finance
Corporation are both members of the World Bank Group of
organizations. 


   RESULTS IN BRIEF
---------------------------------------------------------- Chapter 0:3

The multilateral development banks, led by the World Bank, have taken
significant steps to ensure that meaningful public consultation takes
place on the environmental implications of the projects they fund. 
GAO believes, however, that the banks can take further steps to build
on the progress that has been achieved by ensuring that executive
directors receive complete and accurate documentation about the
consultation practices that have been employed in developing proposed
projects and by more consistently providing the public with timely
access to environmental information on these projects. 

The banks have adopted guidelines that require sponsors to consult
with the public in developing projects and created systems to provide
worldwide public access to information about these
projects--including information on their environmental implications. 
Generally, public consultation on the projects that GAO reviewed was
adequate or better, and bank intervention improved sponsor practices
on nearly every project.  Several factors contributed to the quality
of consultation.  For example, good consultation was associated with
projects employing community-based approaches to project development,
as well as those having a "high profile" because of recent adverse
publicity on similar projects.  Also, in general, World
Bank-supported projects received higher ratings than the projects
supported by the other banks GAO reviewed.  Nevertheless,
consultation on 25 percent (11 of 44) of the projects, primarily
projects supported by the International Finance Corporation or
sponsored by the government of China, was less than adequate.  Also,
documentation given to the executive directors provided incomplete or
inaccurate information about the consultation measures employed on
many of the projects.  The banks' internet home pages were
inconsistent in meeting their own guidelines for providing public
information concerning project profiles and environmental assessment
reports. 


   PRINCIPAL FINDINGS
---------------------------------------------------------- Chapter 0:4


      BANKS HAVE TAKEN STEPS TO
      ENCOURAGE MEANINGFUL PUBLIC
      CONSULTATION AND ACCESS TO
      DOCUMENTS
-------------------------------------------------------- Chapter 0:4.1

Over the past decade, the banks have instituted wide-ranging reform
programs.  These programs acknowledge that meaningful public
consultation and increased transparency in designing and implementing
projects can make important contributions to improving the banks'
operational effectiveness.  Among other things, the banks have (1)
developed guidelines for consultation, including the preparation of
environmental assessments; (2) hired staff to improve their capacity
for ensuring that adequate consultation takes place; (3) developed
working relationships with nongovernmental organizations; and (4)
placed a higher priority on developing environmentally and socially
sustainable projects.  To improve transparency, the banks have
developed systems, including internet home pages, for making key
documents, such as environmental assessment reports, accessible to
the worldwide general public.  The World Bank has taken the lead in
these efforts.  The banks, particularly the International Finance
Corporation, recognize that their efforts are as yet incomplete, and
they continue to work on improving their procedures and systems. 


      CONSULTATION ADEQUATE OR
      BETTER ON MOST PROJECTS
-------------------------------------------------------- Chapter 0:4.2

GAO found that the public consultation practices that project
sponsors employed were adequate or better in 75 percent (33 of 44) of
the examined projects.  On these projects, for example, sponsors used
a variety of means to inform concerned members of the public about
the proposals, held community meetings to provide the public with
opportunities to voice their concerns while project preparation was
going on, and, finally, provided opportunities for concerned parties
to review and comment on draft environmental assessment reports.  On
one infrastructure project supported by the Inter-American
Development Bank, for example, project plans were announced in the
local media, an information office was created to respond to citizen
inquiries, a consultant was hired to ensure that affected people were
thoroughly consulted on resettlement issues, and public meetings were
held.  The measures employed to take public concerns into account
were adequate or better in all cases where concerns were raised. 


         BANK INTERVENTION
         GENERALLY IMPROVED THE
         QUALITY OF CONSULTATION
------------------------------------------------------ Chapter 0:4.2.1

In 40 of the 44 projects GAO examined, bank intervention resulted in
at least some improvement in sponsor consultation practices and/or in
the measures that were employed to respond to public concerns over
what might otherwise have been expected in the borrowing country. 
Bank impact on sponsor practices was great or very great in about 40
percent of the projects.  Among the projects where bank intervention
had a very great impact, for example, was a proposal for an energy
project in a locality where neither an environmental assessment nor
public consultation was legally required.  In this case,
International Finance Corporation policies prescribed a full
environmental assessment and provision of the draft results of the
assessment for public comment. 


         OTHER FACTORS ASSOCIATED
         WITH GOOD CONSULTATION
------------------------------------------------------ Chapter 0:4.2.2

Twelve of the projects that GAO examined employed community-based
approaches to project development.  On average, these projects
employed better consultation practices than the other projects GAO
reviewed.  By definition, such projects normally employ extensive
public consultation measures.  For example, on one such project that
was supported by the Asian Development Bank, consultants worked with
the community to ensure that all affected parties, including women
and ethnic minorities, were consulted.  The consultants also broadly
distributed the resulting environmental assessment report and
discussed it at community workshops. 

Five of the six projects in GAO's sample with a high profile because
of past adverse publicity on similar projects employed good or
exemplary consultation practices.  For example, one project taking
place in a location where both the borrowing government and the World
Bank had previously been criticized for poor consultation and adverse
environmental impacts in a similar project employed exemplary
measures to ensure that local people were actively consulted,
beginning with the earliest stages of project preparation. 

Among the different banks, projects supported by the World Bank
generally rated best, while International Finance
Corporation-supported projects generally rated lowest.  The World
Bank's performance stems from the fact that it has taken the lead
among the banks in developing participatory approaches to
development.  Among the banks, it has published the most
comprehensive guidance on environmental assessment and consultation
and has greater resources at its disposal to address such matters. 


         CONSULTATION LESS THAN
         ADEQUATE ON CERTAIN
         PROJECTS
------------------------------------------------------ Chapter 0:4.2.3

Of the 11 projects in GAO's sample that employed less than adequate
consultation practices, 5 were supported by the International Finance
Corporation, and 3 were sponsored by the government of China.\2
Private companies, including those that seek International Finance
Corporation financing, and the government of China typically submit
project proposals for bank consideration only after much of the
consultation and design are already complete.  This limits the banks'
opportunities to work with sponsors--particularly during the early
phases of project development when public consultation can have its
greatest impact on project design.  Bank officials noted that in
deciding whether to proceed with such projects, factors other than
consultation must also be considered, including the projects'
development benefits. 


--------------------
\2 One International Finance Corporation project was located in
China. 


         DOCUMENTATION ABOUT
         CONSULTATION OFTEN LESS
         THAN ADEQUATE
------------------------------------------------------ Chapter 0:4.2.4

Providing a complete and accurate summary of the consultation
practices employed during project development is an important part of
the process and helps the executive directors to provide oversight of
bank policies.  However, in nearly 40 percent of the projects that
GAO reviewed, the documents normally provided to the executive
directors prior to their voting on whether to fund the projects were
either incomplete or inaccurate about sponsor consultation practices. 
The documents did not clearly describe the steps taken to consult
with the public, the concerns that were raised, and/or the measures
intended to address these concerns.  Seven of the 11 projects in
GAO's sample that employed less than adequate consultation also had
documentation that was incomplete or inaccurate about what
consultation took place. 


      BANKS INCONSISTENT IN
      PROVIDING ACCESS TO KEY
      DOCUMENTS
-------------------------------------------------------- Chapter 0:4.3

The banks have established information systems, including internet
home pages, to provide timely worldwide public access to information
on proposed projects.  The banks' home pages often did not provide
timely access to key project documents.  For example, the Asian
Development Bank and Inter-American Development Bank home pages
listed project profiles for only about 50 percent of the projects
that GAO examined.  The World Bank home page provided notice that
environmental assessment reports were available for only about 54
percent of its category A projects and met its criteria for
timeliness for only about 8 percent of these projects.\3 The
International Finance Corporation met its 60-day standard for
providing access to environmental assessment reports in every case. 
The majority of World Bank and International Finance Corporation
environmental assessment reports on category A projects were not
available via the internet for 120 days prior to board consideration. 


--------------------
\3 The World Bank's policy is that sponsors make environmental
assessments available to the Bank before proposed projects are
appraised.  When the Bank receives the assessment, it is made
publicly available. 


   RECOMMENDATIONS
---------------------------------------------------------- Chapter 0:5

GAO recommends that the Secretary of the Treasury instruct the U.S. 
executive directors on the boards of the multilateral banks to work
with other executive directors and bank management to improve the
banks' compliance with their own guidance on providing (a) executive
directors with a complete and accurate record regarding public
consultation before they vote on proposed projects with significant
environmental implications and (b) timely internet access to key
project documents, including environmental assessment reports. 


   AGENCY COMMENTS
---------------------------------------------------------- Chapter 0:6

The Department of the Treasury, the U.S.  Agency for International
Development, and the President of the World Bank Group provided
written comments on a draft of this report.  These organizations
generally concurred with GAO's findings and conclusions.  The
Treasury stated that the report provided a fair presentation and that
the Department would work with the U.S.  executive directors, as well
as bank management and executive directors representing other bank
member countries, to seek implementation of GAO's recommendations. 
The U.S.  Agency for International Development expressed its full
agreement with the report's conclusions and recommendations.  The
President of the World Bank Group commented that his organization had
benefited from both the positive comments and the criticisms
contained in the report and described a number of actions that are
being pursued, both at the World Bank and the International Finance
Corporation, to improve consultation and transparency. 

The Treasury and the U.S.  Agency for International Development also
provided technical comments, edits, and other suggestions that have
been incorporated in the report as appropriate.  Written comments
from all three organizations are reprinted in appendixes II through
IV, along with GAO's evaluation, where appropriate. 


INTRODUCTION
============================================================ Chapter 1

In the 1980s, multilateral development bank-supported projects around
the world were criticized for imposing unacceptable environmental and
social costs on borrowing countries.  The World Bank, the oldest and
largest of the multilateral development banks, was the focal point
for much of this criticism.  Several World Bank projects became the
targets of highly publicized international campaigns aimed at
convincing officials to withdraw bank support.  Two examples--both
the subject of congressional inquiries--were the following: 

The Polonoroeste Project:  This project, which received major World
Bank support beginning in 1982, encouraged impoverished Brazilians to
take up farming in a previously inaccessible area of the Amazon
basin.  In 1985, the Bank suspended payments to Brazil when it became
clear that the region's soils could not actually support farming and
that, rather then alleviating poverty, the project was resulting in
environmental destruction and maltreatment of local indigenous
people.  Bank support for development in the region was renewed after
the adoption of measures to protect the environment and local
peoples. 

The Sardar Sarovar Dam:  In 1985, the World Bank committed to
supporting this project--a portion of a larger Indian government plan
for developing the Narmada River basin--even though a full assessment
of the project's likely environmental and social impacts had not been
completed.  The Bank ceased supporting the project in 1993, after
years of controversy centering on the forced relocation of tens of
thousands of people and the publication of an independent assessment
that found substantial flaws in both project preparation and
implementation.\1

Concern about such projects prompted Congress to convene a series of
hearings on the environmental impacts of bank-supported projects. 
One Senate report resulting from these hearings concluded that the
banks had not "adequately considered the potential unacceptable
environmental consequences of many of the projects that are selected
for funding" before deciding to proceed.\2 These inquiries and other
critiques provided the impetus for the introduction of bank policies
requiring environmental assessments (EA) on proposed projects. 
Figure 1.1 describes the EA process. 

   Figure 1.1:  What is
   Environmental Assessment?

   (See figure in printed
   edition.)


--------------------
\1 Sardar Sarovar:  Report of the Independent Review (1992), known as
the "Morse Commission Report." See also Sardar Sarovar Dam Project,
Committee on Science, Space, and Technology, Subcommittee on Natural
Resources, Agricultural Research and Environment, House Report 68
(101st Cong., 1st sess.) (Washington, D.C.:  U.S.  Government
Printing Office, Oct.  24, 1989). 

\2 Senate Report No.  99-167, on p.  33 (1985). 


   THE PROJECT DEVELOPMENT PROCESS
---------------------------------------------------------- Chapter 1:1

Throughout most of their existence, the banks imposed few
requirements on project sponsors (borrowing government agencies or
private companies) regarding public consultation on proposed
projects.  The banks also made few provisions themselves to permit or
elicit public involvement in bank decisions on whether to support
sponsor proposals.  The extent of public consultation in
decision-making was regarded as lying within the discretion of
individual borrowing governments.  The banks themselves did not, as a
rule, independently engage the public in dialogue on proposed
projects.  When working with private companies, the banks also cited
the need to safeguard information submitted by these companies so as
not to compromise their competitive positions as a reason for
limiting public involvement in project development.  Bank critics
said that the relatively closed nature of the processes the banks
used to develop projects was an important cause of unsatisfactory
project results.  While these processes differ in many details, the
banks employ a broadly similar procedure for developing project
plans.  This process is outlined in figure 1.2. 

   Figure 1.2:  The Process Banks
   Use to Develop Project
   Proposals

   (See figure in printed
   edition.)

Note:  This description is generally accurate for the banks included
in this review.  However, since private companies typically seek bank
financing only after they have already completed substantial
preparatory work, substantive bank involvement in private projects
may actually begin only at the appraisal stage. 

Bank critics raised two distinct but interrelated problems with the
banks' project development processes.  These were inadequate
consultation and a lack of transparency. 


      CONSULTATION
-------------------------------------------------------- Chapter 1:1.1

Bank critics believed that greater public consultation was needed
throughout project preparation.  They argued that public consultation
could improve the quality of the EA process, as well as decisions
deriving from it, by helping to ensure that (1) all important issues
raised by a proposal would be identified and examined from diverse
points of view and (2) alternatives and possible mitigation measures
would be fully explored. 

The critics' main concern was that the measures employed by project
sponsors to consult with local people--that is, those living in the
vicinity of proposed projects--while preparing project proposals for
bank consideration were inadequate.  Bank critics noted that project
sponsors often did not conduct meaningful consultations with those
who would likely be directly affected by the proposed project and
other concerned members of the public (for example, local
nongovernmental organizations--NGO).\3 The lack of consultation
during the early phases of project development (including EA
preparation) was of particular concern, as opportunities for the
public to affect project designs are greater in these early phases,
when alternative designs and approaches can still be explored at
comparatively little cost. 


--------------------
\3 The World Bank defines NGOs as "private organizations that pursue
activities to relieve suffering, promote the interests of the poor,
protect the environment, and provide basic social services or
undertake community development."


      TRANSPARENCY
-------------------------------------------------------- Chapter 1:1.2

The banks critics' main concern about bank transparency was that
there was almost no access to EA reports for proposed projects. 
Critics believed that interested members of the public, both within
borrowing countries and in the broader community, should have access
to these documents in advance of final action by the banks' boards of
executive directors.  This access would permit them to review the EA
reports' content and bring matters of concern to the attention of
bank staff, project sponsors, and/or executive directors. 

Bank guidelines did not provide for making such information available
for public review before projects were taken up by the executive
directors.  The banks did not require project sponsors to share
information on such matters, nor did the banks themselves provide
public access to EA reports or related documents through either their
headquarters offices or their field offices in borrowing countries. 
Critics contended that this limited the banks' accountability to the
public.  They said that because of this lack of transparency, neither
citizens in borrowing countries, international NGOs with expertise on
environmental and social issues, nor officials of the banks' member
countries were able to critique EA reports or raise concerns that may
not have been adequately examined or addressed. 


   CONGRESSIONAL ACTION
---------------------------------------------------------- Chapter 1:2

While the United States cannot unilaterally mandate changes in bank
policies and procedures, it has historically exercised considerable
influence over bank operations.  Within the executive branch, the
Department of the Treasury has the lead role in working with the
staffs of the U.S.  members of the banks' boards of executive
directors to develop and implement U.S.  policy regarding the banks. 
Since 1985, Congress has repeatedly called upon the Department and
the U.S.  executive directors to work for changes in bank policies
and procedures that would improve the manner in which environmental
impacts are taken into account during project development.  Among
other things, Congress instructed the U.S.  executive directors to
seek improvements in bank guidelines regarding
(a) the steps that project sponsors take to engage in meaningful
consultation with peoples whom the projects might affect and other
concerned members of the public during project preparation and (b)
the steps that the banks themselves take to improve transparency.  In
1987, Congress enacted legislation calling upon U.S.  executive
directors to vigorously promote participation by borrowing country
NGOs at all stages of preparation for loans that may have adverse
environmental or sociocultural impacts.\4

In 1989, the "Pelosi Amendment" instructed the Secretary of the
Treasury to seek, through negotiations with other bank member
countries and bank management, the adoption of policies and
procedures within the banks that would (a) provide interested members
of the public in all bank member countries with access to EA reports
on proposed projects (or summaries thereof) at least 120 days prior
to board action and
(b) encourage public participation in reviewing project-specific
environmental issues.\5

The amendment's legislative history emphasized the important role
that international NGOs play in facilitating thorough public review
of proposed bank projects.  (See fig.  1.3.)

   Figure 1.3:  The Role of
   International NGOs

   (See figure in printed
   edition.)

In commenting on a draft of this report, the U.S.  Agency for
International Development pointed out that Congress has also mandated
a substantial role for the Agency in identifying potential
environmental and social problems associated with projects being
prepared for consideration by the banks' boards of executive
directors.  The Agency's written comments, reproduced in appendix
III, provide details on the legal provisions in question and the
efforts that the Agency has undertaken in response. 

The Pelosi Amendment sought to bring U.S.  influence to bear in favor
of effective implementation of such policies by barring U.S. 
executive directors from voting in favor of certain proposed actions. 
U.S.  executive directors were called upon to refrain from supporting
projects that would have significant impacts on the environment
unless project sponsors had prepared EA reports and made the
reports--or summaries thereof--available for review by affected
groups and local NGOs, as well as bank staff and executive directors,
for at least 120 days before the executive directors vote on the
proposed actions.  It also required the Secretary of Treasury, in his
role as leader of the U.S.  government's interagency process for
reviewing proposed loans, to take public comments on environmental
matters into consideration in determining the position that the
United States should take on proposed loans. 

In November 1997, Congress amended the International Financial
Institutions Act to make clear that the Secretary of the Treasury
should regard the Pelosi Amendment as applying to U.S.  participation
in the International Finance Corporation--a member of the World Bank
Group that works exclusively with private sector partners--as well as
to U.S.  participation in the banks' lending programs for developing
country governments.  The amendment also instructed U.S.  executive
directors to "strongly encourage" systematic consultation with local
communities on proposed loans.\6


--------------------
\4 22 U.S.C.  262m-5. 

\5 The amendment, sponsored by Representative Nancy Pelosi (D-CA), is
codified at 22 U.S.C.  sec.  262m-7. 

\6 See The Foreign Operations, Export Financing and Related Programs
Appropriations Act, 1998
(P.L.  105-118, sec.  560[b] [1997]).  Previously, the Department of
the Treasury had taken the position that the Pelosi Amendment did not
apply with regard to U.S.  participation in the International Finance
Corporation. 


   OBJECTIVES, SCOPE, AND
   METHODOLOGY
---------------------------------------------------------- Chapter 1:3

In response to a request from Representatives Nancy Pelosi and Barney
Frank, we reviewed the multilateral development banks' record in
ensuring that meaningful public consultation takes place on the
projects they support.  Our specific objectives were to

  -- describe the steps the banks have taken to ensure meaningful
     public consultation on the environmental implications of
     proposed projects and timely public access to project documents;

  -- evaluate the quality of consultation that occurs on
     bank-supported projects and the documentation on the
     consultation that is provided to executive directors; and

  -- determine the extent to which the banks provide broad, timely
     public access to project information on proposed projects,
     including environmental assessment reports. 

We also sought to identify factors that help to account for
differences in the quality of the consultation practices employed in
different types of projects.  Our study included the World Bank, the
Inter-American and Asian Development Banks, and the International
Finance Corporation.\7 Together, these four institutions receive
approximately 90 percent of the amounts that Congress annually
appropriates for the support of the multilateral development banks.\8
As an agency of the United States, we have no direct authority to
review the operations of the multilateral development banks.  Through
the Department of the Treasury and the staffs of the U.S.  executive
directors in each institution, however, we interviewed bank staff at
all levels, including the presidents of the World and Inter-American
Development Banks, and obtained official bank documents and reports. 

To describe the banks' steps to ensure consultation and transparency,
we reviewed bank documents and guidance and met with bank staff to
gain an understanding of their guidance with regard to public
consultation and the systems they have established to provide broad
public access to bank documents. 

To evaluate the quality of public consultation, we developed rating
criteria based on the banks' guidance on public consultation and
environmental assessment, as well as other relevant materials, such
as bank studies on best practices.  These criteria provided a
framework for assessing project sponsor consultation practices,
including the extent to which
(a) concerned members of the public were informed about proposed
projects, (b) public concerns were identified, and, subsequently (c)
opportunities were provided for public comment on the manner in which
public concerns had been addressed.  The criteria also provided a
framework for evaluating the measures that were adopted to respond to
public concerns identified through the consultation process.  We
applied these criteria to a group of 44 out of 256 projects with
significant environmental implications (generally referred to as
category A and B projects) in Latin American and Asia that were
submitted for approval by the banks' boards of executive directors
during calendar year 1996.  (See fig.  1.4 for a description of
project categories.)

   Figure 1.4:  What Are Category
   A and Category B Projects?

   (See figure in printed
   edition.)

Note:  The Inter-American Development Bank now establishes EA
requirements on a case-by-case basis. 

To evaluate the impact that the banks had on the consultation
practices employed on these projects, we employed a computational
matrix that took into consideration the extent to which these
projects employed practices that were upgraded from local norms, and
the extent to which these improvements could be directly linked to
bank involvement.  Our findings from this portion of the review apply
only to the projects included in the sample. 

To assess bank transparency during project development--that is, the
extent to which the banks provide timely public access to information
on proposed projects--we obtained data on access to (a) project
profiles and (b) EA reports between mid-1996 and mid-1997 via the
banks' internet home pages.  Although the banks have adopted policies
and procedures that are intended to provide public access to project
documents (in hard copy) through their headquarters and field
offices, we did not assess document availability at these locations. 
Instead, we focused on the banks' internet home pages to provide a
single, unified overview of bank performance in providing worldwide
access to information on proposed projects. 

The banks have each established their own requirements regarding
timeliness for providing public access to EA reports.  We report each
bank's performance against its own criteria.  The Pelosi Amendment, a
U.S.  law, does not create a direct legal obligation for the banks
but does instruct the Secretary of the Treasury to seek, through
negotiation with other bank member countries and bank management, the
adoption of policies and procedures that will result in interested
members of the public in all bank member countries having access to
EA reports at least 120 days before board consideration.  Therefore,
for comparative purposes, we also report on whether the banks'
internet home pages met this time frame. 

Our methodology is discussed in more detail in appendix I. 

We conducted our work from January 1997 to June 1998 in accordance
with generally accepted government auditing standards. 

We received written comments on a draft of this report from the
Department of the Treasury, the U.S.  Agency for International
Development, and the World Bank.  These organizations generally
concurred with the report.  The Treasury stated that the report
provided a fair presentation and that it would work with U.S. 
executive directors, bank management, and executive directors
representing other bank member countries to seek implementation of
our recommendations.  The U.S.  Agency for International Development
expressed its full agreement with the report's conclusions and
recommendations.  The President of the World Bank Group commented
that his organization had benefited from both the positive comments
and the criticisms contained in the report and described a number of
actions that are being pursued, both at the World Bank and the
International Finance Corporation, to improve consultation and
transparency. 


--------------------
\7 In addition to the International Finance Corporation's projects,
we included six private sector projects supported by the
Inter-American or Asian Development Banks.  The World Bank does not
have a private sector lending program directly analogous to those
operated by these two institutions. 

\8 Congress appropriated an average of about $1.2 billion to support
bank operations during fiscal
years 1997 and 1998.  The International Finance Corporation is a
member of the World Bank Group of legally distinct organizations that
includes the original "World Bank"--formally known as the
International Bank for Reconstruction and Development.  The United
States is also a member of three other major regionally focused
multilateral banks--for Africa, Europe, and the Middle East. 


BANK EFFORTS TO ENSURE
CONSULTATION AND TRANSPARENCY
============================================================ Chapter 2

Over the past decade, the operations of the multilateral development
banks have been the object of a number of critical reviews,\1 and
bank management has responded by developing reform programs to
improve project effectiveness.  Public consultation and increased
transparency in designing and implementing projects are acknowledged
to be key elements in improving project effectiveness.  With the
World Bank taking the lead, the banks have taken steps in this
direction.  These steps have included (1) developing guidelines for
consultation, including the preparation of environmental assessments;
(2) hiring staff to improve the banks' capacity to undertake
consultation; (3) developing working relationships with NGOs; and (4)
placing a priority on developing environmentally and socially
sustainable projects.  To provide transparency, the banks have
developed guidelines for making key documents on proposed projects
available to the public and have set up public information centers
and internet home pages to make this information broadly accessible. 
Finally, the banks--with the exception of the International Finance
Corporation--have created inspection panels to investigate complaints
about violation of their policies. 

The banks recognize that their efforts are as yet incomplete, and
they continue to take steps to further strengthen consultation and
advance transparency.  The International Finance Corporation, in
particular, has recently adopted revised procedures designed to
improve performance in both areas. 


--------------------
\1 These reviews include the 1992 report of the World Bank's
Portfolio Management Task Force, Effective Implementation:  Key to
Development; the 1993 report of the Inter-American Development Bank's
Task Force on Portfolio Management, Managing for Effective
Development; the Asian Development Bank's 1994 Report of the Task
Force on Improving Project Quality; the 1996 report of the
Development Committee Task Force on Multilateral Development Banks,
Serving a Changing World; the 1996 GAO report, World Bank:  U.S. 
Interests Supported, but Oversight Needed to Help Ensure Improved
Performance (GAO/NSIAD-96-212, Sept.  26, 1996); and the 1997 report
of the Center for Strategic and International Studies, The United
States and the Multilateral Development banks. 


   PUBLIC CONSULTATION MEASURES
---------------------------------------------------------- Chapter 2:1

Guided by various studies of the banks' operations, the banks have
adopted measures aimed at improving guidance on consultation,
enhancing their capacity for ensuring adequate consultation,
developing better working relationships with NGOs, and placing a
higher priority on environmental and social sustainability in project
design. 


      ADOPTING CONSULTATION
      POLICIES AND GUIDELINES
-------------------------------------------------------- Chapter 2:1.1

The banks have devised policies, directives, and other guidance
intended to ensure that project sponsors identify public concerns
about the environmental impacts of proposed projects and take such
concerns into account in completing project designs.  The World Bank,
which issued its initial EA policy in 1989, was the first to take
steps in this direction.  It required sponsors to complete EAs when
appropriate (that is, when the nature and magnitude of a project's
potential impacts appear to require systematic examination) as part
of their project proposals.  In doing such assessments, and in
implementing projects, the policy required project sponsors to "take
the views of affected groups and local NGOs fully into account."

The other banks subsequently adopted similar policies and procedures. 
In 1990, the International Finance Corporation adopted its first
environmental review procedure, which was intended to be consistent
with World Bank procedures.  Also in 1990, the Inter-American
Development Bank adopted procedures calling for public consultation
in preparing the terms of reference for project EAs (that is,
specifying the assessment's scope and objectives) and in reviewing
the results of the EA process.  The Inter-American Development Bank
also issued guidance that established a policy framework for
assessing the environmental and sociocultural impacts of proposed
projects, including the need for public consultation on these issues. 
In 1997, the Inter-American Development Bank adopted new procedures
for evaluating social and environmental impacts through an internal
bank Committee on the Environment and Social Impact.\2 In 1993, the
Asian Development Bank adopted EA procedures and requirements for
public consultation similar to those adopted by the World Bank.  Each
of the banks has added to these basic policy statements with
additional clarification and advice for both staff and project
sponsors. 

Bank guidance generally advises project sponsors to provide concerned
members of the public with relevant information (for example, a
description of the project and its likely beneficial and adverse
impacts) before asking for comments.  International Finance
Corporation guidelines, for example, note that truly meaningful
public consultation can only take place when project sponsors have
first provided affected groups and other interested parties with
substantive information on the proposed project.  Finally, project
sponsors are generally expected to provide feedback to those
consulted--for example, through making draft EA reports available for
local review prior to completing the report to be submitted to the
Bank. 


--------------------
\2 This management-level committee reviews each proposed project to
determine the level of analysis needed on environmental issues and to
ensure that the analysis is carried out in a satisfactory manner and
the resulting conclusions are incorporated into the final project
design. 


      BUILDING CAPACITY FOR PUBLIC
      CONSULTATION
-------------------------------------------------------- Chapter 2:1.2

In addition to developing guidelines, the banks--especially the World
Bank--have improved their capacity for ensuring that meaningful
consultation takes place.  As part of implementing the "Strategic
Compact" announced in early 1997, the World Bank has relocated staff,
functions, and authority to the field.\3 By mid-1997, 20 of the World
Bank's 49 country directors were based in field missions.  The World
Bank also created an internal Environmentally and Socially
Sustainable Development Network, including a corps of over 360 social
development and environmental specialists, a number of whom are now
stationed overseas. 

The Inter-American Development Bank has also taken some steps to
augment its consultation capabilities, including increasing the
number of staff dealing with these issues.  As of September 1997, the
Inter-American Development Bank's environmental unit had 12
professional staff, the Indigenous Peoples and Community Development
Unit had 4 staff, and the Modernization of the State and Civil
Society Division had 24 staff. 

In 1995, the Asian Development Bank gave environmental and social
issues increased stature within the Bank by combining previously
separate units to create an Office of Environment and Social
Development.  The office employs 24 environmental and social
specialists, all located in headquarters.  Although its field
presence is limited, the Asian Development Bank has also strengthened
representation in donor countries and broadened access to its staff. 
In 1996, the Bank opened 2 representative offices and approved 2 new
resident missions--bringing the Bank's total field presence to 10
resident missions, 3 representative offices, and 1 regional mission. 

The International Finance Corporation has a very limited field
presence but is working to better address environmental and social
issues by adding to its staff.  In fiscal year 1997, the Corporation
increased the number of senior level staff in its Environment
Division from 18 to 24 and added
1 social scientist.  In fiscal year 1998, the Corporation plans to
add six new senior level staff to its Environmental Review Unit,
including three new environmental specialists and two social sector
specialists. 

All of the institutions we examined are developing ways to
incorporate social analysis and participatory approaches into
projects and analytical work.  For instance, the World Bank has
established the Social Development Family--comprised of about 120
World Bank staff--to increase community-based participation in its
projects and to link social and environmental assessments.  The Asian
Development Bank has issued staff guidelines on mainstreaming
participation in bank operations and hosted seminars for its staff on
participatory methods.  It has also established a regional technical
assistance grant fund to catalyze the implementation of participatory
approaches to bank operations.  In commenting on a draft of this
report, the Department of the Treasury stated that the Asian
Development Bank has also recently established internal networks for
staff with expertise in environmental and social issues. 


--------------------
\3 The Strategic Compact summarized the World Bank's broad reform
measures, some of which had been developed in response to the 1992
report of the World Bank's Portfolio Management Task Force and other
criticisms of the Bank's operations and effectiveness. 


      FORGING RELATIONS WITH NGOS
      AND OTHER MEMBERS OF THE
      PUBLIC
-------------------------------------------------------- Chapter 2:1.3

Legislation passed by Congress in 1990 urged the World Bank to
develop and implement mechanisms to substantially improve the ability
of bank staff to interact with NGOs and other local groups that are
affected by bank-supported projects.\4 Among other things, Congress
urged the World Bank to assign at least one professional staff member
in each field office to be responsible for relations with local
NGOs.\5 In 1997, the World Bank completed appointing NGO liaison
staff to all 72 World Bank resident missions.  More than half of
these are full-time NGO specialists working to strengthen
communication and information-sharing between the World Bank and
NGOs.  According to World Bank documents, nearly half of the World
Bank's projects in fiscal year 1997 involved NGOs in some capacity. 

In addition, the World Bank (1) approved special programs to provide
NGOs, as well as academics and others, with small grants (in the
$10,000 to $15,000 range) for conferences, publications, networking
activities, and other information-related activities; (2) recruited
NGOs to help prepare the Bank's economic and sector work, country
assistance strategies, and poverty assessments; and (3) established
partnerships with NGOs on a variety of operational issues, including
a program to monitor stakeholder participation in bank projects. 

The other banks have also taken a number of steps in this direction. 
Beginning in 1995, for example, the Inter-American Development Bank
sponsored a series of country focus groups for civil society
organizations, government officials, and bank staff.  Through these
groups, the Inter-American Development Bank encouraged and supported
efforts to strengthen the capacity of civil society organizations in
borrowing countries to become integrally involved in developing
projects.  The Asian Development Bank has updated its policy on
cooperation with NGOs and is improving its outreach efforts, for
example by inviting NGOs to comment on draft policy proposals.  The
Bank has also appointed NGO liaisons in each of its resident
missions.  In commenting on a draft of this report, the Treasury
Department stated that the Asian Development Bank has also increased
the number of projects with NGO involvement and is providing
technical assistance to help borrowers improve their own capacity for
performing environmental assessments. 


--------------------
\4 The Foreign Operations Appropriations Act, 1991, Public Law
101-513, section 562, (1990). 

\5 This provision referred only to the World Bank; the other
multilateral development banks were not included. 


      REFOCUSING BANK OPERATIONS
-------------------------------------------------------- Chapter 2:1.4

As part of their overall reform efforts, the banks have increased
their emphasis on ensuring that project designs are environmentally
and socially sustainable.  This action has reinforced the heightened
importance placed on public consultation during project development. 
For example, the members of the Inter-American Development Bank, on
the occasion of the eighth replenishment of the Bank's resources
(August 1994), agreed on fundamental changes in the Bank's
operations.  The members committed the Bank to strengthening
environmental institutions and legal frameworks and fostering
environmental awareness in borrowing member countries and to
improving the environmental quality of bank-financed projects.  The
members also reaffirmed the Bank's commitment to meaningful public
consultation on the environmental impacts of proposed projects and
greater transparency in bank operations. 

Asian Development Bank policies on public consultation have changed
in response to donor demands and internal evaluations and to
accommodate changes in lending structure.  Senior bank staff, for
example, stated that during recapitalization and replenishment of
Asian Development Fund\6 resources in the last few years, donor
countries have mandated greater consultation on project design and
more consideration for the impact of bank activities on indigenous
peoples.  The Bank has also changed its lending structure to increase
its focus on environment and social development projects, which often
require participation of NGOs and local residents for project
implementation. 


--------------------
\6 The Asian Development Fund is the Asian Development Bank's
concessional lending window. 


   TRANSPARENCY MEASURES
---------------------------------------------------------- Chapter 2:2

The banks have (a) adopted policies that provide for public
disclosure of information on proposed projects and (b) created public
information systems to provide access to key project documents. 


      ADOPTING DISCLOSURE POLICIES
-------------------------------------------------------- Chapter 2:2.1

In August 1993, the World Bank approved an expanded disclosure
policy, providing for an increased number of operational documents to
be made available to the public.  Among the documents the Bank
determined should be made public were basic project profiles and
project EA reports.  The International Finance Corporation adopted
its disclosure policy in 1994 and updated it in 1996 and 1998.  The
policy requires the Corporation to "operate with a presumption of
disclosure." However, the availability of timely information to the
public is tailored to the requirements of the private sector,
including the confidentiality of some information and the later
disclosure of information. 

In January 1995, the Inter-American Development Bank's Policy on
Disclosure of Information became effective.  Among other things, it
requires that draft EA reports be made locally available before bank
staff conduct project analysis missions.  According to the Department
of the Treasury, these missions typically occur more than 120 days
before board consideration.  As for the Asian Development Bank, its
Policy on Confidentiality and Disclosure of Information became
effective January 1, 1995.  The policy emphasizes a presumption in
favor of disclosure where disclosure would not materially harm the
interests of the Bank and its member countries, borrowers, and
private sector clients. 

The banks have also required that information on EA efforts be made
available for the executive directors' consideration before they vote
on project proposals.  Since EA reports themselves are often very
lengthy and difficult to readily understand, the banks generally
require that summaries of the reports' findings be made available for
the executive directors' consideration. 


      ESTABLISHING PUBLIC
      INFORMATION SYSTEMS
-------------------------------------------------------- Chapter 2:2.2

Beginning with the World Bank in 1994, the banks have instituted
systems for providing public access to key project documents in their
possession, including EA reports.  Generally speaking, these systems
rely on public information centers in the banks' headquarters cities
to provide interested parties with copies of particular documents.\7

The World Bank established its center in January 1994 to support its
efforts to increase accountability and transparency in bank
operations.  The center attempts to make a more extensive range of
bank information--including project documents, EA reports, and other
studies--available to a wider audience.  In 1994, the International
Finance Corporation also began making certain information available
through the World Bank center.  In February 1995, the Inter-American
Development Bank began making information available through its newly
established headquarters center.  The Asian Development Bank
established a center within its existing Information Office in 1996. 

To extend these centers' effective reach, the banks have established
internet home pages, which provide direct access to some (relatively
short) documents and list others that can be obtained by request. 
The banks have also made provisions for public access to documents
through their field offices in developing countries, especially for
those documents pertaining to bank programs in the country in
question.  The banks consider access through field offices to be
important because many residents of developing countries do not have
access to the internet.  The World Bank and the Asian Development
Bank also make documents available through depository libraries in
developing countries.  The World Bank center makes documents
available through the bank's field offices in Paris, London, and
Tokyo and maintains relations with about 240 depository libraries
worldwide.  As of December 31, 1996, the Asian Development Bank had
98 depository libraries in 38 member countries.  Publications sent to
the libraries monthly include annual reports, country and economic
studies, and documents on loans and technical assistance projects,
including EA reports.  During this review, international and
developing country NGOs expressed concern about uneven access to
documents through bank field offices in developing countries, as well
as through the banks' headquarters public information centers. 


--------------------
\7 The World Bank, the International Finance Corporation, and the
Inter-American Development Bank maintain their headquarters in
Washington, D.C.  The Asian Development Bank is located in Manila,
The Philippines. 


   INSPECTION PANELS
---------------------------------------------------------- Chapter 2:3

To ensure that bank operations adhere to each of the respective
institution's own policies and procedures regarding project design
and implementation, three of the four banks we reviewed have
established an inspection panel.  Any group of individuals who may be
directly or adversely affected by a bank-supported project can ask
the panel to investigate complaints that the Bank has failed to abide
by its policies and procedures. 

The World Bank established its inspection panel in September 1993,
and it became operational the following year.  In 1994, the
Inter-American Development Bank approved its Independent
Investigation Mechanism, which received its first request for an
investigation in 1996.  The Asian Development Bank adopted its
inspection policy in late 1995 and appointed an Inspection Committee
as a standing committee of the board of executive directors in March
1996.  The inspection policy and panel of experts became operational
in October 1996.  The International Finance Corporation has not
established an inspection panel. 


   ONGOING EFFORTS TO STRENGTHEN
   BANK SYSTEMS
---------------------------------------------------------- Chapter 2:4

Bank staff and officials of the U.S.  executive directors' offices in
the banks acknowledged that the banks' efforts to ensure meaningful
consultation and public access to key documents are as yet
incomplete.  Despite the banks' commitments in this regard, staff
still sometimes find it difficult to ensure that sufficient time and
resources are built into project schedules to develop
project-specific strategies for obtaining and addressing comments. 
Bank staff, particularly those with responsibility for environmental
and social matters, also commented that some bank staff, as well as
project sponsor officials, had simply not yet fully appreciated the
value and importance of public consultation and transparency.  These
views were confirmed at the World Bank and International Finance
Corporation by a number of recent studies showing that these
institutions' consultation and transparency systems continued to
produce mixed results.\8

Since we initiated this review, the banks--particularly the
International Finance Corporation--have taken additional steps toward
improved consultation and transparency.  In July 1998, the
Corporation adopted revised EA and information disclosure policies
and procedures.\9 A primary objective of this revision was to
eliminate confusion by bringing the Corporation's policies into line
with those applied by the World Bank--and to clearly delineate
differences in policy when the Corporation's private-sector
orientation makes such differences appropriate.  The revised policies
strengthen the Corporation's consultation and transparency provisions
in a number of ways.  Figure 2.1 provides an illustration.  The
International Finance Corporation has also prepared a "Good Practices
Manual" to guide project sponsor consultation efforts. 

   Figure 2.1:  An Example of
   Strengthened Language in
   Revised International Finance
   Corporation Policy

   (See figure in printed
   edition.)

Among other things, the revised procedures bolster the Corporation's
local consultation provisions by mandating proactive dissemination of
EA summaries for category A and B projects in local languages in
borrowing countries at least 60 days and 30 days, respectively,
before the board votes.  They strengthen transparency provisions by
eliminating management's authority to waive public disclosure of EA
reports on category A projects and specifying that the Corporation
will suspend further consideration of a project if the sponsor does
not agree to public release of EA reports.  The revision also
increases access to information on projects that the Corporation's
board has approved--for example, through the World Bank's public
information center making updated project environmental action plans
publicly available for the first time. 

World Bank staff have also drafted revised EA policies and
procedures, and the draft is being discussed by members of the board
of executive directors.  The draft strengthens existing policies and
procedures regarding public consultation on projects with significant
environmental impacts and eliminates ambiguity in the existing
guidance by explicitly extending most provisions to include category
B projects.  Figure 2.2 provides an example of these changes. 

   Figure 2.2:  An Example of
   Strengthened Language in Draft
   World Bank Policy

   (See figure in printed
   edition.)

For category A projects, the draft also strengthens requirements
regarding staff reporting to the board on consultation matters.  In
addition, to address shortcomings in making project profiles
available, the Bank is developing a computerized document flow system
directed at ensuring that project profiles, and updates to those
profiles, are provided to the Bank's public information center as
soon as bank staff create them. 

The Inter-American and Asian Development Banks also continue to
refine their guidelines and practices.  For example, to provide the
Inter-American Development Bank public information center with a
stronger mandate for obtaining copies of EA reports, the Bank has
just recently adopted a new policy requiring staff to provide both
the center and relevant bank field offices with copies of EA reports
as soon as sponsors submit them.  (Inter-American Development Bank
staff informed us that they were not previously required to provide
EA reports to the center.) The Inter-American Development Bank is
also developing a policy on consultation and transparency designed
specifically for private sector projects.  Asian Development Bank
staff are working with private sector sponsors to eliminate
business-confidential information from the final reports of the
President on project proposals so that these reports may be released
to the public upon board approval and has issued several such public
versions of final private sector project reports.  The Asian
Development Bank has also installed a new computer system which,
according to bank staff, should facilitate improved internet access
to bank documents. 


--------------------
\8 See, for example, Effectiveness of Environmental Assessments and
National Environmental Action Plans:  A Process Study, World Bank
Operations Evaluation Department, June 1996; Policy on Information
Disclosure:  Review of Implementation, World Bank Operations Policy
and Strategy Department, October 1997; Peter M.  Higgins, An
Assessment of the Environmental Review Procedure of the International
Finance Corporation (Washington, D.C.:  International Finance
Corporation, Sept.  1997); International Finance Corporation:  Review
of Public Consultation and Disclosure, Environmental Resources
Management Ltd., October 1997. 

\9 Implementation was postponed until September to permit Corporation
staff to insure consistency with new business procedures that the
Corporation has been developing.  According to Corporation staff,
this exercise will not result in any substantive changes in the EA
policies and procedures adopted in July. 


   CONCLUSIONS
---------------------------------------------------------- Chapter 2:5

The banks have adopted guidelines and created systems to provide for
meaningful public consultation during project development,
complemented by efforts to enhance public access to relevant
information through bank public information centers.  All of the
institutions, led by the World Bank, are taking steps to further
improve their current procedures and systems. 


   AGENCY COMMENTS
---------------------------------------------------------- Chapter 2:6

In commenting on this report, the President of the World Bank Group
discussed the measures that the World Bank and the International
Finance Corporation are pursuing to facilitate strengthened
performance with regard to both consultation and transparency.  These
include the Corporation's adoption of revised policies and
procedures, and elements of the Bank's operational policy reform
initiative, such as enhanced training for staff and pursuit of
comprehensive audits for environmentally sensitive projects at
critical stages in the project cycle. 


MEANINGFUL PUBLIC CONSULTATION
OCCURS ON MOST PROJECTS
============================================================ Chapter 3

As discussed in chapter 2, the banks have instituted a number of
measures over the past several years to improve the public
consultation process for environmentally sensitive projects.  Using
the rating criteria we developed based on the banks' guidelines on
public consultation--the details of which are explained in appendix
I--we examined a sample of 44 of 256 projects in Latin America and
Asia approved by the banks' boards of executive directors during 1996
and tested whether the measures instituted by the banks had produced
the consultation results they desired. 

We found that the quality of consultation was adequate or better on
75 percent (33 of 44) of the projects we examined, and project
sponsors took positive steps to respond to public concerns, when
raised.  On such projects, for example, sponsors used radio and print
media to inform nearby communities about the project and its
potential impacts, held community meetings to provide the public with
opportunities to voice their concerns during project preparation, and
provided opportunities for concerned parties to review and comment on
draft EA reports.  On almost all projects, sponsors addressed public
concerns through actions such as relocating pipelines or modifying
resettlement plans.  Several factors contributed to the quality of
consultation on the projects we examined.  Bank intervention was an
important factor and improved sponsor practices beyond the country
norm on nearly every project.  Consultation was particularly good on
projects using a community-based approach to project development and
on projects with high visibility.  World Bank-supported projects also
employed comparatively good consultation practices. 

Public consultation on 25 percent (11 of 44) of the projects was less
than adequate.  Most of these projects were supported by the
International Finance Corporation or sponsored by the government of
China.  On many of these projects, the banks became involved after
much of the project development process was already complete.  Thus,
their opportunity to influence the consultation practices
employed--particularly during the early stages of project development
when public consultation can have its greatest impact--was
diminished.  In deciding whether to proceed with such projects, bank
officials said they must balance the need for adequate consultation
against the development benefits of the proposed projects. 

Providing a complete and accurate summary of the consultation
practices employed during project development is an important part of
the process and helps the executive directors provide oversight of
bank policies.  However, in nearly 40 percent (17 of 44) of the
projects we reviewed, the documents provided to the executive
directors before voting were incomplete or inaccurate about the
consultation practices employed. 


   CONSULTATION ADEQUATE OR BETTER
   IN MOST CASES
---------------------------------------------------------- Chapter 3:1

Bank guidance generally calls for project sponsors to (1) inform
concerned groups about proposed projects and their potential
environmental impacts, (2) identify and clarify public concerns
through such means as community meetings, and (3) ensure that
concerned members of the public have meaningful opportunities to
comment on the results of the EA process.  Table 3.1 provides
examples of the types of consultation practices that we rated as
exemplary, good, adequate, borderline, and unacceptable. 



                               Table 3.1
                
                Examples of Consultation Practices from
                       Exemplary to Unacceptable

                    Types of activities undertaken to achieve each
Rating              rating
------------------  --------------------------------------------------
Exemplary           Exceptional measures undertaken to overcome
                    consultation barriers, e.g., inclusion of women
                    and ethnic minorities in the consultation process;
                    project development highly participatory; numerous
                    and frequent workshops; and community meetings
                    held to obtain public feedback.

Good                Numerous local meetings or seminars held to inform
                    people of project and obtain comments; feedback
                    from communities incorporated into design
                    modifications; comments sought on results of
                    consultation process; EA report easily accessible,
                    or made available even when local law does not
                    require it.

Adequate            Public informed about project through notice in
                    newspaper; public presentation of project;
                    involved parties have opportunities to express
                    concerns; EA results made available in an
                    accessible location and in the local language.

Borderline          Affected residents living near the project not
                    consulted until late in project design;
                    insufficient survey or consultative work done to
                    determine affected residents' concerns; EA results
                    not easily accessible to community.

Unacceptable        Affected residents and stakeholders not consulted
                    about project; no public discussion occurred, or a
                    meeting held only after the EA was completed;
                    little or no effort made to identify public
                    concerns; EA report not made available to local
                    residents.
----------------------------------------------------------------------
For our sample, consultation was adequate or better on 75 percent (33
of 44) of the projects.  As shown in figure 3.1, consultation on 50
percent of the projects (22 of 44) was exemplary or good, while it
was adequate on 25 percent (11 of 44) of the projects.  The remaining
11 projects employed practices that we found to be less than
adequate.\1

   Figure 3.1:  Quality of Public
   Consultation

   (See figure in printed
   edition.)

Source:  GAO analysis. 

A major infrastructure project supported by the Inter-American
Development Bank provides an example of the eight projects in which
consultation with the public was exemplary.  In this case, project
plans were announced in local media, an information office was
created with full-time community liaisons to respond to citizen
inquiries, a consultant was hired to ensure that affected peoples
were thoroughly consulted and their views taken into account in
planning resettlement, and public meetings were held to discuss
issues of public interest.  The Bank retained consultants to evaluate
the project sponsor's EA report and resettlement plan in light of
bank standards, and the results were discussed in public and made
available for further public comment. 

On the projects we rated as good, sponsors employed consultation
practices similar to the project described in the preceding
paragraph, though they were not as extensive.  One World
Bank-supported project that we found to have employed good practices,
for example, solicited public input to project design through (a) two
regional seminars for professionals in relevant fields (including NGO
representatives) and (b) an iterative series of community meetings in
affected areas. 

An example of the 11 projects we found to have adequate consultation
was another Inter-American Development Bank project.  Town meetings
were held to inform the public about the project.  After completing a
draft EA report, the project sponsor made it available for public
review at a site accessible to local residents.  A well-publicized
public hearing was subsequently held.  The hearing was covered by the
local media, and the results were made available for public review. 

Among the projects where we found consultation practices to be less
than adequate was an International Finance Corporation-supported
project that we visited in Asia.  Consultation on this proposal was
limited to local traditional leaders.  In accordance with local
custom, women were not invited to participate.  In another, supported
by the Asian Development Bank, surveys were undertaken to identify
public concerns.  However, project documents indicated that public
participation for a major portion of the project did not occur.  In
addition, local residents were not given an opportunity to review or
comment on the results of the EA process.  In 8 of the 11 projects
where we found consultation to be less than adequate, the first phase
of the consultation process--informing the public about the
proposal--was also less than adequate. 


--------------------
\1 The distribution of project ratings was approximately the same for
both the 27 category A and 17 category B projects in our sample. 


      PUBLIC CONCERNS TAKEN INTO
      ACCOUNT
-------------------------------------------------------- Chapter 3:1.1

Bank guidance calls for sponsors to take public concerns fully into
account through such steps as undertaking additional studies to
explore previously unconsidered impacts and/or adopting measures to
mitigate or compensate for adverse impacts.  We deemed the measures
employed to take public concerns into account to be adequate or
better in the 39 cases where concerns were raised.  (On five projects
we examined, we found no evidence that the public raised substantive
concerns.)

In most instances, members of the public were concerned about project
impacts that would directly affect their livelihood.  On one Asian
Development Bank project, for example, proposed highway rights-of-way
were relocated in response to residents' concerns that proposed
routes would adversely affect productive cropland.  Additional
interchanges were also added in response to villagers' requests for
improved highway access.  The sponsor of another Asian Development
Bank project responded to local concerns by developing methods to
mitigate adverse impacts on migratory fish.  In two private sector
projects that we examined, one supported by the Inter-American
Development Bank and the other by the International Finance
Corporation, pipelines were rerouted to avoid agricultural and/or
forested areas.  In another International Finance Corporation project
in Asia, the sponsor made a number of alterations in project design
in response to concerns that villagers raised about adverse impacts
on fishing grounds, shrines, homes, and schools. 

In some cases, there was no record of any NGO commentary or
involvement.  However, when activist NGOs did offer comments, the
banks generally ensured that the issues raised were taken into
account.  For example, information provided by an environmental NGO
led the Asian Development Bank to decline support for one proposed
agricultural development site in an environmentally sensitive forest
region.  In another Asian Development Bank-supported project, NGO
concerns about protecting environmentally sensitive forest areas were
addressed by adding several features to the project design, including
designation of a portion of project proceeds to support conservation
efforts. 


   FACTORS AFFECTING THE QUALITY
   OF CONSULTATION
---------------------------------------------------------- Chapter 3:2

Several factors were associated with better or worse consultation on
the projects in our sample.  Bank intervention generally improved
sponsor practices.  Comparatively good consultation practices were
also associated with projects that (1) used community-based
approaches in design and implementation, (2) had a "high profile"
because of recent adverse publicity on similar projects, and (3) were
supported by the World Bank.  Bank critics have suggested that the
banks' private sector projects were less likely to employ good
consultation practices than the banks' public sector projects.  Our
analysis indicated that this perception was true if community-based
development projects were included in the sample universe.  However,
after removing community-based development projects--which are
generally not supported by private companies--from our analysis, we
found little difference in the quality of the practices employed on
private sector projects as compared with those sponsored by the
public sector. 

Of the 11 projects where consultation was inadequate, 5 were
supported by the International Finance Corporation and 3 were
sponsored by the government of China.\2

In many of these cases, the Bank began working with project sponsors
after much of the design and consultation work was already complete. 


--------------------
\2 Although consultation on many of the International Finance
Corporation projects was less than adequate, the distribution and
average quality of all the banks' private sector projects, including
those of the Asian and Inter-American Development Banks, was
comparable to the public sector projects we reviewed, once
community-based projects were removed from the analysis. 


      BANK INTERVENTION IMPROVED
      SPONSOR PRACTICES
-------------------------------------------------------- Chapter 3:2.1

In all but four of the cases we examined, bank intervention, such as
insisting on public access to draft EA reports, resulted in at least
a marginal improvement in the sponsors' consultation practices and/or
in the measures that sponsors employed to respond to public
concerns.\3 As shown in figure 3.2, bank impact on sponsor practices
was great or very great on 41 percent (18) of the projects and at
least moderate in another 25 percent (11) of the projects.  The banks
had at least a marginal impact on most of the remaining projects. 

   Figure 3.2:  Bank Impact on
   Consultation Practices

   (See figure in printed
   edition.)

Source:  GAO analysis. 

One country that we visited provides an example of very great bank
impact on project development practices.  Government officials, NGOs,
and others in this country credited the World Bank and the
Inter-American Development Bank with fostering highly participatory
approaches to developing both the poverty alleviation and
infrastructure projects that we examined.  Government officials and
NGO representatives commented that these practices contrasted
dramatically with prior government approaches that lacked any
provision for public comment.  Officials charged with project
implementation credited bank staff with introducing mechanisms for
engaging concerned members of the public that had not previously been
employed in their ministries but that worked very well in practice. 

Project documents showed that International Finance Corporation
intervention in one project in rural Asia had a very great impact on
both the process and the measures taken to respond to identified
concerns.  In this case, neither an EA nor consultation was required
by the government.  However, the Corporation required that an EA be
conducted and that the results be made available for public review. 
The Corporation was also instrumental in changing the proposed
project site to avoid disrupting existing cultivation sites. 

On several projects, bank staff indicated that they had suggested
innovative approaches to overcome local barriers to effective
consultation.  One example was a World Bank-supported effort directed
at providing small-scale infrastructure for a number of isolated
communities populated largely by illiterate people.  This project
employed a variety of unconventional communication techniques,
including dramatic presentations, to effectively inform residents
about the proposal. 

In several instances, the banks placed conditions on loans to ensure
that the sponsors addressed the concerns raised by members of the
public.  For example, on one of the projects we examined, the World
Bank required the borrowing government to take action to address
outstanding claims of persons adversely affected by a previous
bank-financed project in the same area.  In another, the World Bank
required the borrowing government to address environmental and social
risks on a proposed project by implementing a separate bank-financed
project.  Satisfactory progress on the latter project had to be
demonstrated before the Bank would consider financing the original
proposal. 


--------------------
\3 Three of the remaining four projects employed adequate or good
practices without being prompted by bank staff.  A representative of
one U.S.  company receiving Inter-American Development Bank support,
for example, commented that the company simply applied the good
practices that it normally employed on U.S.  projects in the
developing country setting. 


         LIMITS ON BANK
         INTERVENTION AND IMPACT
------------------------------------------------------ Chapter 3:2.1.1

Despite the banks' impact in improving sponsor practices, public
consultation on 11 of the projects in our sample (25 percent) was
less than adequate.  In many of these cases, the banks' relatively
late involvement in the project development process limited their
influence on sponsor consultation practices--particularly those
measures employed in the early phases of project development when
public consultation can have its greatest impact.  Bank staff noted
that they are generally involved in guiding borrowing governments'
project planning efforts from the very beginning of the project
development process.  This early entry gives the banks the
opportunity to influence the approach that sponsors take to preparing
project proposals and EA reports.  In contrast, bank staff and
private sector representatives both noted that private sector
projects are typically submitted for bank consideration only after
much project planning has been completed.  Bank officials also
commented that, like private companies, the government of China
typically submits projects for bank consideration that are already
well on the way to having completed designs ready for approval,
placing bank staff in a position similar to that which they occupy on
many private projects. 


      COMMUNITY-BASED PROJECTS
      EMPLOYED GOOD PRACTICES
-------------------------------------------------------- Chapter 3:2.2

Development agencies, including the banks, have found that certain
types of objectives--like providing basic infrastructure, ensuring
basic services for poor communities, and managing natural
resources--can be addressed in a highly effective manner by using
community-based approaches to project design and implementation.  By
definition, control and accountability in such projects are largely
transferred to the communities involved.  Figure 3.3 describes one
such project. 

   Figure 3.3:  Community-based
   Development in Practice

   (See figure in printed
   edition.)

On average, the 12 community-based projects in our sample employed
consultation practices that we viewed as good.\4 These projects'
average rating for taking public concerns into account was also good. 
In contrast, the other projects in our sample received an average
rating of adequate in both dimensions.  Seven of the community-based
projects in our sample (more than half) employed exemplary
consultation practices, while only
1 of the 32 other projects in our sample achieved this high a rating. 


--------------------
\4 As indicated in appendix I, most of the community-based
development projects in our sample were directed at alleviating
poverty through providing basic infrastructure for poor communities
or at managing natural resources. 


      HIGH-PROFILE PROJECTS
      EMPLOYED COMPARATIVELY GOOD
      PRACTICES
-------------------------------------------------------- Chapter 3:2.3

Six of the projects in our sample entered development shortly after
similar bank-financed projects in the same countries had generated
substantial adverse publicity because of environmental impacts and
resettlement of affected peoples.  Five of these six employed
consultation practices that we viewed as good or exemplary.  On these
projects, sponsors and bank staff were well aware of the adverse
publicity and took steps to ensure that consultation with the local
residents on the new projects was good.  For example, one World
Bank-supported infrastructure project took place in a location where
the borrowing government and the Bank had previously been criticized
for poor consultation practices and adverse environmental impacts in
a project in the same sector.  On the new project, the sponsors took
extraordinary measures to ensure that affected persons were actively
engaged in extensive consultation early in the project design.  These
steps included establishing public information centers at the project
site and, with NGO assistance, creating a development organization to
facilitate ongoing consultations among the stakeholders involved. 
Among other things, these community consultations--one of which is
shown in figure 3.4--resulted in project design and engineering
changes to minimize resettlement of local people.  World Bank staff
had a very great impact on the sponsor's practices in this case.  At
the Bank's behest, for example, efforts to respond to public concerns
were greatly expanded and compensation rates for resettled persons
were substantially increased. 

   Figure 3.4:  Village
   Consultation in Practice

   (See figure in printed
   edition.)

Note:  In this photo, a representative of a community development
organization established to serve as a liaison between the project
sponsor and project-affected people meets with local residents to
discuss their concerns. 

Source:  Project sponsor. 


      BANK AFFILIATION MADE A
      DIFFERENCE
-------------------------------------------------------- Chapter 3:2.4

On average, World Bank-supported projects' consultation practices
rated highest among the four banks included in our study.  More than
half of the World Bank projects we examined employed good or
exemplary consultation practices.  On average, the World Bank also
had a great impact on improving sponsor practices compared to a
moderate impact on improving sponsor practices by the other banks. 
The World Bank also provided the most complete information for the
executive directors' consideration.  (Documentation quality is
discussed later in this chapter).  International Finance
Corporation-supported projects had the lowest average rating on
consultation and the other dimensions we examined.  The average
ratings for Inter-American- and Asian Development Bank-supported
projects fell between the World Bank and International Finance
Corporation averages. 

The World Bank's better performance on consultation stems from the
fact that, among the multilateral banks, it was the lead institution
in developing participatory approaches to development.  Among the
banks, it has published the most comprehensive guidance on
environmental assessment and consultation and has the greatest
resources at its disposal to address such matters.  For instance, it
has over 360 environmental and social development staff, a number of
whom are assigned to overseas missions.  In selected overseas
missions, such as one that we visited in Jakarta, Indonesian, the
World Bank has a fully staffed environmental and social impact unit. 
The resident mission in New Delhi, Indian, which we also visited, has
a social development unit.  The International Finance Corporation has
relatively few staff in these fields, and none of them are assigned
to overseas missions. 


      TYPE OF SPONSOR NOT
      ASSOCIATED WITH CONSULTATION
      QUALITY
-------------------------------------------------------- Chapter 3:2.5

Bank critics have expressed concern about the quality of consultation
practices employed on the banks' private sector projects as compared
with those employed on public sector projects.  However, when we
removed community-based development projects (which are generally not
supported by private companies) from the analysis, we found little
difference between the quality of the practices employed on public
and private sector-sponsored projects.  This observation applies when
we include all private sector projects in our analysis.  But as will
be discussed in the next section, many of the projects supported by
the International Finance Corporation employed less than adequate
consultation.  Figure 3.5 compares the quality of consultation on
private and public sector projects, absent community-based
development projects. 

   Figure 3.5:  Consultation
   Practices in Public Sector
   Versus Private Sector Projects
   (Excluding Community-Based
   Projects)

   (See figure in printed
   edition.)

Source:  GAO analysis. 


      CONSULTATION LESS THAN
      ADEQUATE ON SOME PROJECTS
      SPONSORED BY THE
      INTERNATIONAL FINANCE
      CORPORATION AND THE
      GOVERNMENT OF CHINA
-------------------------------------------------------- Chapter 3:2.6

Each of the four banks included in our review supported at least one
project that we found to have employed less than adequate
consultation practices.  However, 8 of the 11 projects in our sample
where we found consultation to be less than adequate were supported
by the International Finance Corporation or sponsored by the
government of China.  Five of the 10 International Finance
Corporation projects (including one in China) and 3 of the 5 projects
in our sample sponsored by the government of China had less than
adequate consultation.  The median rating for consultation on the
projects supported by the Corporation or sponsored by the government
of China was less than adequate compared to the median rating of good
for all other projects. 

As noted previously, substantive bank involvement in project
development generally begins relatively late in the process for
private sector projects, including those supported by the
International Finance Corporation, and for projects sponsored by the
government of China.  International Finance Corporation and other
bank officials acknowledged that consultation sometimes is not as
good as they would like in such circumstances.  However, in deciding
whether to proceed with proposed projects, these officials observed
that other factors also had to be considered, including the
beneficial development impacts that the project promised to deliver. 
Another factor in deciding to proceed with a project, according to
International Finance Corporation officials, is the opportunity to
remedy or ameliorate attendant environmental problems that might
never be corrected if the project proceeded without bank sponsorship. 
In these cases, bank officials said that governments or private firms
might find alternative financing without conditions.\5


--------------------
\5 This occurred on two highly controversial hydroelectric
development proposals--China's Three Gorges Project and India's plan
for development in the Narmada River basin.  In both of these cases,
severe international criticism focusing on environmental and
consultation issues prompted the banks to withdraw support, but this
failed to have any real impact as the governments in question
proceeded with the projects, using their own resources. 


   CONSULTATION ON SOME PROJECTS
   NOT ADEQUATELY DOCUMENTED
---------------------------------------------------------- Chapter 3:3

We examined whether key documents presented for executive directors'
consideration before they voted on proposed projects provided
complete and accurate information about consultation on the projects. 
These documents included, for example, summaries of EA reports and
project appraisal reports prepared by bank staff.  Adequate
documentation summarized the consultation steps, the concerns raised,
and the measures taken to address them.  Unacceptable documentation
provided little or no information other than a brief statement that
consultation occurred. 

Documentation submitted to the executive directors was adequate or
better for 61 percent (27 of 44) of the projects we reviewed.\6 For
example, documents submitted for executive directors' review on
several infrastructure projects in Asia described in detail the
public consultation processes employed at each step in project
development.  In one project supported by the Asian Development Bank,
the documents provided a detailed discussion on consultation
activities--listing where meetings were held, who attended, the
issues that were discussed, and how the issues were handled. 

On the other hand, we found that 39 percent (17 of 44) of the
projects provided less than adequate information.  Shortcomings were
particularly evident in project documents presented for board
consideration at the Asian Development Bank and the International
Finance Corporation.  Documentation was less than adequate for more
than half (12 of 22) of the projects we examined at these two
institutions.  A number of the EA report summaries submitted to the
Asian Development Bank executive directors, for example, contained
only short statements that the residents had been consulted and all
were in favor of the project.  They contained no discussion of what,
if any, concerns had been raised, or how they were addressed.  Seven
of 10 International Finance Corporation projects had less than
adequate documentation about consultation.  We generally found that
the documentation on these projects forwarded to the board members
contained little, if any, mention of the actual steps taken to
consult with the public, the parties consulted, the concerns raised,
and/or the measures intended to address these concerns. 

In a few instances, materials submitted for the consideration of the
International Finance Corporation and Asian Development Bank boards
presented the consultation measures in an excessively favorable
light.  In one project, for example, the report submitted to the
board asserted that the sponsoring company had undertaken a
comprehensive public consultation program.  However, the report did
not provide details of such a consultation program, and other
documents and interviews with staff did not indicate such
consultation had actually taken place.  For another project that
consisted of four subprojects, the summary EA report stated that the
residents were informed about the subprojects and were generally in
favor of them.  However, the consultant's report (which is not
routinely submitted to the executive directors but is available to
them upon request) stated that half of the residents affected by two
of these subprojects had no knowledge of them and that participation
was lacking throughout the design of another subproject. 
Furthermore, the report mentioned some residents' concerns that were
not reflected in the EA report summary. 


--------------------
\6 Although bank guidelines generally require more information on
category A proposals, we found no significant difference between the
quality of the documentation provided for category A versus category
B projects. 


      DOCUMENTATION IMPORTANT TO
      EXECUTIVE DIRECTORS' ROLE
-------------------------------------------------------- Chapter 3:3.1

According to officials at the U.S.  executive directors' offices,
providing good summary information is a key point in the consultation
process.  It provides an official record of what happened and helps
executive directors exercise effective oversight of U.S.  policy and
law--ensuring that meaningful public participation and consultation
take place during project development.  U.S.  officials also
indicated that, while they rely on several sources of information
before making decisions, reliable documentation helps them by
summarizing relevant information on consultation in one convenient
place. 

Other officials of the U.S.  executive directors' offices said that
tracking down information is time-consuming and that, in some
instances, they are faced with spending considerable time collecting
and analyzing information that should already be prepared for them. 
For example, officials of the U.S.  executive director's office at
the Asian Development Bank had to spend considerable effort getting
information on a project in which resettlement was to take place. 
(The documentation provided for the executive directors was
incomplete and did not discuss the consultation steps taken.) The
information obtained ultimately revealed that the project sponsor had
not consulted with the residents until after bank officials required
it.  By then, decisions on resettling the residents had already been
made, according to project documents.  The U.S.  executive director
decided not to vote in favor of this project.  Officials of the
executive director's office expressed concern because this
investigative effort cannot be made on all projects where information
is incomplete.  Our analysis of sample projects supports this
concern.  Several of the poorly documented projects that we reviewed
had in fact employed consultation practices that were adequate or
better.  However, in 65 percent of the projects we examined where
consultation was inadequate (7 of 11), the summary documentation for
executive directors was incomplete or inaccurate. 


   CONCLUSIONS
---------------------------------------------------------- Chapter 3:4

The banks have taken significant steps toward ensuring that
meaningful public consultation becomes an integral part of their
project development processes.  Meaningful consultation occurred on
most of the projects we examined, and bank intervention nearly always
improved sponsor practices.  Nonetheless, consultation on some
projects was not adequate.  In many of these cases the sponsors asked
the banks to fund the projects only after the sponsors had completed
much of the project preparation and consultation.  In these
instances, the executive directors are presented with a dilemma. 
Critical to their decision in these cases is complete and accurate
information on the projects, including a description of the public
consultation that has taken place.  Given that the executive
directors must balance multiple factors in considering these
projects, the lack of a complete record of the consultation that has
taken place is a distinct disadvantage to efficient and effective
decision-making. 


   RECOMMENDATION
---------------------------------------------------------- Chapter 3:5

We recommend that the Secretary of the Treasury instruct the U.S. 
executive directors at the banks to work with other executive
directors and bank management to seek improvements that will result
in executive directors being provided with a complete and accurate
record of public consultation on all proposed projects with
significant environmental implications. 


   AGENCY COMMENTS AND OUR
   EVALUATION
---------------------------------------------------------- Chapter 3:6

The Department of the Treasury agreed with our findings regarding
consultation and committed to continuing its efforts to work with
U.S.  executive directors, bank management, and executive directors
representing other member countries to ensure rigorous and consistent
implementation of bank public consultation policies.  The Treasury
also said that, as we recommended, it would work with U.S.  executive
directors, bank management, and other executive directors to ensure
that executive directors are provided with complete and accurate
records of public consultation on proposed projects with significant
environmental implications. 

The U.S.  Agency for International Development also agreed with our
findings and noted that there is room for improvement in the
consultation practices employed in preparing bank-supported projects. 
The Agency also pointed out that good implementation of environmental
and social mitigation measures during the active life of a project is
another important indicator of bank commitment to sustainable
development. 

The President of the World Bank Group commented that the World Bank
and the International Finance Corporation are continuing their
efforts to improve performance in this area.  He noted that the Bank
will shortly be undertaking the third in a series of evaluations of
EA practices on bank-supported projects (including both impacts
during implementation and the quality of the public consultation
practices employed.)\7 With regard to our findings on the
consultation practices employed on International Finance
Corporation-supported projects, the President acknowledged our
recognition of the different circumstances faced by Corporation staff
as compared with their counterparts in the World Bank's public sector
lending programs but reiterated that there should be no qualitative
difference in the consultation standards employed on public or
private sector projects. 


--------------------
\7 See The Impact of Environmental Assessment:  The World Bank's
Experience, World Bank Environment Department, November 1996. 


BANKS PROVIDED INCONSISTENT PUBLIC
ACCESS TO KEY PROJECT DOCUMENTS
============================================================ Chapter 4

The banks have established information systems, including public
information centers and internet home pages, to provide timely public
access to information on proposed projects.  We focused on the
performance of one part of these systems--the Bank's home pages.  We
determined whether, as expected by the banks, their home pages
provided timely internet access to key documents on proposed
projects, including EA reports.\1 We found that the home pages often
did not provide timely access to these documents. 


--------------------
\1 The projects used for this chapter were not the same projects used
to evaluate consultation.  In cooperation with the banks, we selected
more recent projects to avoid including projects that were processed
under information disclosure guidelines that have since been
superseded.  Appendix I describes our methodology. 


   PROJECT DOCUMENTS
---------------------------------------------------------- Chapter 4:1

Bank public information systems are generally expected to provide
public access to two key documents.\2 These are the following: 

Project profiles:  The purpose of project profiles is to provide "as
much information to the public as early as possible" so that proposed
project designs can benefit from consultation with all concerned
parties, beginning at the projects' formative stages.  These profiles
are expected to include an outline of the main environmental issues
raised by proposed projects and are to be posted on the banks' home
pages and made available in hard copy at headquarters public
information centers.  According to bank guidelines, field offices are
also supposed to make profiles available for borrowing country
residents to review.  Profiles should be periodically updated through
board approval. 

EA reports:  As explained in chapter 1, the banks generally assign
projects with significant environmental implications to a category
for assessment purposes.  The banks inform the worldwide general
public that EA reports for category A projects are available by
listing them on internet home pages.  These listings are sometimes
accompanied by a summary of the report's contents.  The full
reports--which may be several hundred pages long--are made available
on request from public information centers and field offices.\3

The banks also generally require that environmental information on
category B projects be accessible through their home pages. 
Sometimes this information is directly available on the home pages. 
In other cases, relevant documents are listed on the home page and
may be obtained by request.  As noted in chapter 1, the
Inter-American Development Bank no longer assigns projects to
categories for EA purposes.  Bank policy is to provide broad access
to all sponsor EA reports by listing them as available on the Bank's
home page. 


--------------------
\2 The various banks produce a number of documents that may contain
relevant information.  We concentrated on those that bank officials
agreed were of interest and that were available in all four of the
banks we reviewed. 

\3 The Asian Development Bank provides copies of full EA reports free
of charge.  The World Bank and the International Finance Corporation
charge $20 to cover the cost of photocopying these documents but
provide copies free of charge to nationals of the borrowing country
in question.  Like the World Bank and the Corporation, the
Inter-American Development Bank charges nominal fees to cover
photocopying costs. 


   PROJECT PROFILES OFTEN NOT
   AVAILABLE ON THE INTERNET
---------------------------------------------------------- Chapter 4:2

Project profiles for category A and B projects are supposed to be
directly available on the banks' home pages.  As shown in table 4.1,
profiles were available for all of the International Finance
Corporation projects for which we obtained data, but this was not the
case at the other banks.  Profiles were available for about 71
percent of World Bank projects and for about half of Inter-American
and Asian Development Bank projects.  For example, profiles were
provided for 10 of the 20 Asian Development Bank projects for which
we obtained data. 



                               Table 4.1
                
                   Category A and Category B Project
                         Profiles' Availability

                                           Percentage of projects with
                                            profiles available on bank
Bank                                                        home pages
----------------------------------------  ----------------------------
World Bank                                                          71
Asian Development Bank                                              50
Inter-American Development Bank\a                                   56
International Finance Corporation                                  100
----------------------------------------------------------------------
\a We included all Inter-American Development Bank projects for which
EA reports had been prepared. 

Source:  GAO analysis of bank data. 

With regard to timeliness, World Bank, Inter-American Development
Bank, and Asian Development Bank guidelines specify that project
profiles should be made available early on in project
development--that is, when projects are identified and enter the
Bank's "pipeline" of projects under development.  The International
Finance Corporation, in contrast, ties issuance of project profiles
to the end, rather than to the beginning, of the project development
cycle.  Corporation policy states that profiles should be made
available at least 30 days before board consideration.  Corporation
staff explained that their guidelines were designed with private
sector concerns about limiting access to information about
prospective projects in mind.  Private companies we interviewed were
concerned that widespread disclosure of project information could
provide competitors with financial and other data to develop or
strengthen a competing proposal after they had invested heavily in
project preparation. 

On average, project profiles for the World, Asian, and Inter-American
banks were available on these institutions' home pages about 2-1/2
years prior to board votes.  On average, International Finance
Corporation project profiles were available about 68 days before
board consideration. 


   TIMELY ACCESS TO EA REPORTS
   SOMETIMES NOT PROVIDED
---------------------------------------------------------- Chapter 4:3

The banks have different requirements for when, and where, public
access to EA reports is to be provided.  The World Bank specifies
that sponsors should provide category A project EA reports to the
Bank and make them available in the borrowing country before bank
staff appraise the proposals.  When the EA report has been officially
received by the Bank, a copy is sent to the public information center
and its availability noted on the Bank's home page.  Asian
Development Bank criteria state that category A project reports must
be provided to the executive directors at least 120 days prior to
scheduled board consideration of the project.  Bank officials added
that bank practice is for public access to these reports to be
simultaneously provided via the Bank's public information center and
their availability posted on the Bank's home page.  The International
Finance Corporation requires that these reports must be made
available to the public (via the Corporation's home page and the
World Bank's public information center) at least 60 days before board
consideration. 

The Inter-American Development Bank requires that EA reports be made
available in the borrowing country before appraisal missions begin. 
Though bank policy is for broad access to be provided to these
reports through their posting on the Bank's home page, the Bank did
not, during the period for which we collected data, require staff to
also send these reports to the public information center, nor did the
Bank systematically record these reports' arrival at the public
information center or the date of their posting on the Bank's home
page.  We could not, therefore, report on access to EA reports via
the Inter-American Development Bank home page.  We did, however,
obtain data on when these reports were made available in the
borrowing countries. 

As shown in table 4.2, the banks' home pages sometimes did not
provide notice that category A project EA reports were available or
did not provide such notice within the banks' expected time frames. 
About 8 percent of the reports for category A World Bank projects in
our sample were posted on the Bank's home page in the required time. 
Forty-six percent were not posted at all.  Most Asian Development
Bank reports for category A projects were posted in the required
time.  The International Finance Corporation met its 60-day standard
for the sample of category A projects we examined.  EA reports for
Inter-American Development Bank projects were made available in the
borrowing country in all cases, though about 33 percent of the
reports were not made available for the required time. 



                               Table 4.2
                
                 Category A Project EA Reports: Access
                  via Bank Home Pages Relative to Bank
                              Time Frames

                        (Percentage of reports)

                                             Access but
                               Access in         not in
Bank                       required time  required time      No access
-------------------------  -------------  -------------  -------------
World Bank                             8             46             46
Asian Development Bank                87              0             13
International Finance                100              0              0
 Corporation
----------------------------------------------------------------------
Source:  GAO analysis of bank data. 

Table 4.3 shows the performance of the banks' internet home pages in
providing access to EA reports for proposed category A projects,
using the 120-day time frame advanced by the Pelosi Amendment for
comparative purposes.\4



                               Table 4.3
                
                 Category A Project EA Reports: Access
                via Bank Home Pages Relative to 120-Day
                               Time Frame

                        (Percentage of reports)

                                     Less than       61 to    120 days
                         No Access     60 days    119 days   or longer
----------------------  ----------  ----------  ----------  ----------
World Bank                      46          15          15          23
Asian Development Bank          13           0           0          87
International Finance            0           0          62          38
 Corporation
----------------------------------------------------------------------
Source:  GAO analysis of bank data. 

The banks generally met their own requirements with regard to
providing access to information on EA reports on category B projects. 
However, these requirements contain several features that limit the
timeliness of public access to this information.  For example, the
Asian Development Bank divides category B projects into "sensitive"
and "non-sensitive" subcategories.  No information on EA results is
provided on "non-sensitive" projects until after the board has voted. 
The International Finance Corporation does not require that
information on the results of category B project EA reports be posted
until 30 days before board votes. 


--------------------
\4 As explained in chapter 1, the Pelosi Amendment instructs the
Secretary of the Treasury to seek, through negotiation with other
bank member countries and bank management, the adoption of policies
and procedures that will result in interested members of the public
in all bank member countries having access to EA reports at least 120
days before board consideration of the projects under review.  The
amendment, a U.S.  law, does not create a direct legal obligation for
the banks. 


   CONCLUSIONS
---------------------------------------------------------- Chapter 4:4

The banks are not consistently meeting their goal of providing the
public with timely access to key project information through the
internet.  The information that has been made publicly accessible is
useful, and the banks have clearly taken the initial steps in
providing worldwide access to project information.  However, the
banks are not fully meeting their commitments on a regular basis. 


   RECOMMENDATION
---------------------------------------------------------- Chapter 4:5

We recommend that the Secretary of the Treasury instruct the U.S. 
executive directors at the banks to work with other executive
directors and bank management to have the banks improve compliance
with their guidelines on providing timely public access to project
profiles and EA reports through their internet home pages. 


   AGENCY COMMENTS AND OUR
   EVALUATION
---------------------------------------------------------- Chapter 4:6

In commenting on a draft of this report, the U.S.  Agency for
International Development noted that its experiences in attempting to
monitor bank projects reflect our findings regarding difficulties in
obtaining access to project profiles and EA reports.  The Agency
reiterated the importance of the banks' ensuring timely public access
to these documents. 

The Treasury Department agreed with our findings and said that the
Department would work with U.S.  executive directors, bank
management, and executive directors representing other member
countries to ensure timely access to project information for
concerned members of the public, particularly affected populations,
via the banks' information centers, the internet, and local venues in
borrowing countries. 

The President of the World Bank Group agreed with our conclusion that
performance in this area should be improved.  He said that
performance had improved since the completion of our review \5 but
that the Bank and the Corporation both need to perform even better. 
Because the actions described by the President of the World Bank
Group have only recently begun to take effect, we did not attempt to
verify their impact. 


--------------------
\5 For example, the Bank report substantially improved performance in
providing public access to project profiles. 


METHODOLOGY
=========================================================== Appendix I

This appendix provides additional information on the methodology we
used to evaluate (a) the consultation processes employed on projects
supported by the multilateral development banks and (b) access to key
documents on proposed projects through the banks' internet home
pages. 


   ANALYSIS OF THE CONSULTATION
   PROCESS
--------------------------------------------------------- Appendix I:1

To analyze the consultation process, we evaluated a judgmental sample
of 44 projects that the 4 banks in our review approved during 1996.\1
In selecting projects for analysis, we included those supported by
the banks' market-rate lending programs, as well as those supported
by their concessional-rate lending operations.\2 The sample included
11 projects supported by the World Bank, 13 by the Asian Development
Bank, 10 by the Inter-American Development Bank, and 10 by the
International Finance Corporation.  The sample was equivalent to
approximately 20 percent of the 114 Inter-American and Asian
Development Bank category A and B projects approved during 1996\3 and
included about the same percentage of the 53 relevant World Bank
projects in these same regions (that is Latin America and Asia)
during that year.  While our International Finance Corporation sample
included approximately the same number of projects as we examined for
the other banks, this amounted to only about 11 percent of the 89
eligible Corporation projects. 

The sample was selected to represent the wide variety of sectors and
legal and sociocultural situations that bank staff encounter as they
develop project proposals for board consideration.  It includes
projects in a number of sectors (for example, power plants, natural
resources management, road building, agriculture, and poverty
reduction) and projects being carried out in very different
circumstances (for example, rural areas in Laos and Bangladesh, large
cities in Argentina and Brazil.) The Inter-American and Asian
Development Bank samples also included 6 of the 11 private sector
projects that these institutions supported in 1996.\4 We examined
projects from 15 countries in all.  Table I.1 lists the projects we
selected. 



                                    Table I.1
                     
                      Multilateral Development Bank Projects
                             Reviewed for This Report

                              (Dollars in millions)

                                                        Estimated        Public/
Project name    Country        A/B   Project focus           cost        private
--------------  -------------  ----  -------------  -------------  -------------
World Bank
--------------------------------------------------------------------------------
Coal sector     India          A     Environmental           $ 84         Public
environmental                        mitigation
and social
mitigation\a

Flood           Argentina      A     Infrastructur            420         Public
protection                           e,
                                     institutional
                                     development

Ghazi-          Pakistan       A     Hydroelectric          1,864         Public
Barotha\b                            power

Henan (Qinbei)  China          A     Coal-fired             1,161         Public
thermal power                        power

Kerinci Seblat  Indonesia      A     Natural                   46         Public
integrated                           resource
conservation                         management
and
development\a

Native forests  Argentina      B     Natural                   30         Public
and protected                        resource
areas\a                              management

Power           Vietnam        A     Gas-fired                230         Public
development                          power

Rural water     Nepal          B     Rural                     21         Public
supply and                           infrastructur
sanitation\a                         e

Sierra natural  Peru           B     Poverty                   93         Public
resources and                        reduction
poverty
alleviation\a

Strategic       Indonesia      A     Roads                    168         Public
urban roads
infrastructure

Yunnan          China          A     Pollution                308         Public
environment                          abatement


Asian Development Bank
--------------------------------------------------------------------------------
Anhui           China          A     Pollution                266         Public
industrial                           abatement
pollution

Anhui           China          B     Wastewater                70         Public
municipal                            treatment
wastewater

Bahawalpur      Pakistan       B     Poverty                   65         Public
rural                                reduction
development\a

Chonqing        China          A     Roads                    348         Public
expressway

Fauji           Pakistan       A     Gas-fired                170        Private
Kabirwala                            power

Forestry        Bangladesh     B     Natural                   92         Public
sector\a                             resources
                                     management

Integrated      Indonesia      B     Agriculture               80         Public
pest
management\a

Jamuna bridge   Bangladesh     B     Roads                    196         Public
access roads

Kali Gandaki    Nepal          A     Hydroelectric            453         Public
                                     power

Nam Leuk        Lao P.D.R.     A     Hydroelectric            113         Public
hydropower                           power

Banjarmasin     Indonesia      A     Plantation               183        Private
Agrojaya                             agriculture
Mandiri

Second road     Vietnam        A     Roads                    237         Public
improvement

South Java      Indonesia      A     Infrastructur            184         Public
flood control                        e,
                                     institutional
                                     development


Inter-American Development Bank\c
--------------------------------------------------------------------------------
Aguaytia        Peru           A     Natural gas              253        Private
                                     extraction,
                                     processing;
                                     power
                                     generation,
                                     transmission

Barrio          Argentina      B     Poverty                  170         Public
improvement\a                        reduction

DECOPAZ\a       Guatemala      B     Poverty                   56         Public
                                     reduction

Edenor          Argentina      B     Energy                   508        Private
                                     distribution

FONCODES\a,d    Peru           B     Poverty                  430         Public
                                     reduction

Mexico valley   Mexico         B     Water                  1,035         Public
sanitation                           pollution

Peten           Guatemala      B     Natural                   22         Public
sustainable                          resources
development\a                        management

Port            Argentina      B     Infrastructur            208         Public
modernization                        e

Termovalle      Colombia       B     Gas-fired                156        Private
                                     power

Yellow line     Brazil         A     Road                     161        Private
toll road


International Finance Corporation
--------------------------------------------------------------------------------
Basic           Guatemala      A     Oil                       73        Private
petroleum                            production

Upper Bhote     Nepal          A     Hydroelectric             98        Private
Koshi                                power

Caltex Ocean    China          A                              146        Private
                                     Petrochemical
                                     shipping

Green Line      Thailand       A     Urban mass             1,648        Private
                                     transit

Jalalabad gas   Bangladesh     A     Natural gas               80        Private
                                     production

Kalimantan      Indonesia      A     Plantation               162        Private
Sanggar Pusaka                       agriculture

Thai            Thailand       A     Petrochemical          2,028        Private
Petrochemical                        , shipping
Inc.

Uch power       Pakistan       A     Gas-fired                630        Private
                                     power

Vina Kyoei      Vietnam        B     Steel                     71        Private
                                     processing

Western access  Argentina      A     Road                     272        Private
tollway
--------------------------------------------------------------------------------
Note:  Cost includes projected bank and project sponsor financing as
of 1996, in then-year dollars. 

\a Community-based development project. 

\b The Asian Development Bank assisted in funding this project, but
the World Bank took the lead in negotiating with the borrower. 

\c Our sample included the only two category A projects submitted for
consideration by the Inter-American Development Bank board of
executive directors during 1996. 

\d The World Bank assisted in supporting this project. 

Sources:  World Bank, International Finance Corporation,
Inter-American Development Bank, and Asian Development Bank. 

To determine what actually occurred on these projects, we interviewed
bank project managers and environmental personnel and examined
project documents at bank headquarters in Washington, D.C.  (site of
the World Bank, International Finance Corporation, and Inter-American
Development Bank) and Manila, The Philippines (site of the Asian
Development Bank), and solicited comments via telephone and/or E-mail
from nongovernmental organizations (NGO) active in relevant sectors
and/or regions.  We supplemented this examination with field visits
to 20 of the 44 projects, travelling to
9 countries to discuss relevant matters with bank staff in the field;
project sponsors (including government agencies and private
companies); and concerned members of the public, including private
citizens living in affected areas and officials of concerned NGOs. 
To broaden our understanding of the private sector perspective on
relevant issues, we interviewed officials from selected private firms
who were not involved in the projects we included in our sample but
who nonetheless could offer informed observations (for example,
international bankers, multinational corporations, and consultants
and attorneys specializing in relevant matters). 

To develop criteria for evaluating project practices, we consulted
the policy statements and associated guidance on environmental
assessment (EA) and public consultation issued by the four banks we
included in our review, as well as other relevant materials prepared
by recognized authorities on such matters.\5 Using these
materials--especially the relatively extensive guidance on relevant
topics issued by the World
Bank\6 --we developed a scale ranging from exemplary to unacceptable
and rated each project on three dimensions of the consultation
process.  The three dimensions of the consultation process were the
following: 

  -- Sponsor consultation practices.  Each project received one
     overall rating, derived by averaging ratings on the extent to
     which project sponsors
     (a) informed potentially affected groups and local NGOs about
     the proposed project, (b) identified public concerns, and (c)
     provided opportunities for public comment on the manner in which
     such concerns had been addressed. 

  -- Measures adopted to take public concerns into account. 

  -- Documentation normally provided to the banks' executive
     directors so that they may evaluate the consultation practices
     used and the measures employed to take public concerns into
     account. 


--------------------
\1 Three of the 44 projects were approved during 1995.  Two of these
were included because they were located in countries where other
projects of interest, approved during 1996, were also located. 
Including them expanded the number of projects that we could
reasonably expect to visit.  The third was included because the
documentation available to us during the planning phase of our review
indicated that the project had been approved during 1996.  However,
additional documents obtained some months later showed that the
financing approved during 1996 represented an additional investment
in the project.  The original proposal had been approved the previous
year. 

\2 The World Bank, the Asian Development Bank, and the Inter-American
Development Bank each make both market-rate loans (supported
primarily through bank borrowing on world financial markets) and
concessional-rate loans (supported primarily through contributions
from member countries.) Access to the latter category of funds is
limited to the poorer developing countries.  In the World Bank,
concessional financing is provided through the International
Development Association.  The Asian and Inter-American Development
Banks provide their concessional lending through the Asian
Development Fund and the Fund for Special Operations, respectively. 

\3 As noted in chapter 1, the Inter-American Development Bank no
longer assigns projects to categories for EA purposes.  However, the
Bank's categorization system was still in effect during 1996. 

\4 The Inter-American Development Bank made six private sector loans
during 1996.  The Asian Development Bank made five.  The World Bank
sponsors small private sector risk and credit guarantee programs but
does not have a directly analogous lending program. 

\5 See, for example, Asit K.  Biswas and S.B.C.  Agarwal, eds.,
Environmental Impact Assessment for Developing Countries, sponsored
by Pollution Control Research Institute, United Nations Industrial
Development Organization, United Nations Environment Programme et al. 
(Boston:  Butterworth-Heinemann, 1992); Environmental Impact
Assessment:  Basic Procedures for Developing Countries, United
Nations Environment Programme, (London:  Environmental Resources
United, 1988); Stephen G.  Hildebrand and Johnie B.  Cannon, eds.,
Environmental Analysis:  The NEPA Experience (Boca Raton, Florida: 
Lewis Publishers, 1990); Frank Vanclay and Daniel Bronstein, eds.,
Environmental and Social Impact Assessment, sponsored by the
International Association for Impact Assessment (New York:  John
Wiley and Sons, 1995). 

\6 See, for example, Environmental Assessment Sourcebook:  Volume I,
1991, World Bank Environment Department, World Bank Technical Paper
#139 (Washington D.C.  1991). 


         EVALUATING SPONSOR
         CONSULTATION PRACTICES
----------------------------------------------------- Appendix I:1.0.1

Table I.2 displays the scale that we applied in rating the
consultation practices that sponsors employed in completing project
EAs.  To obtain a single overall rating for each project, we averaged
the ratings each project received in the three rating dimensions. 



                               Table I.2
                
                 Rating Criteria for Evaluating Sponsor
                         Consultation Practices

                                          Identifying    Providing
                           Informing the  public         opportunities
Rating                     public         concerns       for comment
-------------------------  -------------  -------------  -------------
Exemplary                  Extraordinary  Extraordinary  Extraordinary
                           measures       measures       measures
                           employed to    employed to    employed to
                           overcome       ensure that    ensure that
                           local          local          all concerned
                           barriers,      concerns       members of
                           ensure that    fully          the public
                           all concerned  identified     were fully
                           parties fully  and clarified  informed of
                           informed.      through        EA results
                                          meaningful,    and that
                                          informed       remaining
                                          consultation.  concerns were
                                                         fully
                                                         clarified.

Good                       Program        Local          In addition
                           adopted,       conditions     to simply
                           taking local   taken into     making
                           conditions     account,       information
                           into account,  program        available,
                           to ensure      adopted to     sponsors
                           that all       ensure that    actively
                           concerned      all elements   sought
                           parties could  of concerned   comments on
                           become fully   public could   EA results.
                           informed       express
                           about major    informed
                           impacts.       comments.

Adequate                   Standard       After being    Meaningful
                           measures       provided with  information
                           (e.g., public  substantive    on EA results
                           meetings)      information,   made
                           employed to    interested     available in
                           inform         parties given  an accessible
                           concerned      opportunities  location, or
                           parties about  to express     other steps
                           major          their          (e.g., public
                           impacts.       concerns.      meetings)
                                                         taken to
                                                         provide
                                                         information
                                                         on EA
                                                         results.

Borderline                 Some steps     Some steps     Information
                           taken to       taken to       on EA results
                           inform         identify       (e.g., draft
                           potentially    concerns and   report) made
                           affected       obtain views   available for
                           communities    of affected    review, but
                           and concerned  communities    significant
                           NGOs, but      and concerned  obstacles
                           efforts had    NGOs, but      reduced the
                           substantial    efforts had    usefulness of
                           shortcomings.  substantial    this step. No
                                          shortcomings.  other
                                                         meaningful
                                                         steps taken
                                                         to inform the
                                                         public about
                                                         EA results.

Unacceptable               Little or no   Little or no   Concerned
                           effort         effort made    elements of
                           invested in    to identify    the public
                           informing      public         provided with
                           local people   concerns       little or no
                           or interested  prior to       opportunity
                           NGOs until     publication    to review or
                           after draft    of a complete  comment on EA
                           EA report      EA report.     results.
                           completed.
----------------------------------------------------------------------

         EVALUATING MEASURES
         EMPLOYED TO TAKE PUBLIC
         CONCERNS INTO ACCOUNT
----------------------------------------------------- Appendix I:1.0.2

We rated each project on the extent to which project sponsors
addressed (in the final project plan) the issues raised by the public
during identification of public concerns, public comment on the
results of the EA process, and additional public commentary obtained
through general posting of project information.  When rating each
project's performance, we considered (a) whether or not members of
the public raised any substantive concerns, and the nature of these
concerns; (b) the steps that were taken to respond to these concerns;
and (c) changes in project design or implementation plans that were
developed as a result.  Each project was given a rating based on a
5-point scale ranging from exemplary measures employed in addressing
public concerns to unacceptable measures where little or nothing was
done to address public concerns. 


         EVALUATING DOCUMENTATION
         PROVIDED TO BANK
         EXECUTIVE DIRECTORS
----------------------------------------------------- Appendix I:1.0.3

We rated the extent to which the documents normally provided to each
bank's executive directors prior to voting on proposed projects
provided them with a basis for arriving at informed judgments about
the quality of the consultation process.  To conduct our assessment,
we obtained the documents normally provided to the executive
directors at each bank and reviewed them to determine whether or not
these documents provided information that was complete and accurate
about (a) steps taken to obtain public comment, (b) parties
responding, (c) concerns raised, and (d) steps taken to respond to
concerns.  Documentation for each project was then given a rating
based on a 5-point scale ranging from exemplary documentation with
detailed accounts of public consultation efforts and results to
unacceptable documentation with little or no information about the
public consultation process. 


         EVALUATING BANK IMPACT ON
         PROJECT PROCESSES
----------------------------------------------------- Appendix I:1.0.4

To evaluate bank impact on the consultation processes employed on the
projects in our sample, we did the following: 

(1) We reviewed each project to determine the extent to which the
consultation processes used, and the measures employed to take public
concerns into account in finalizing project designs, were upgraded
from prevailing practices in the localities where the projects we
examined were situated.  In conducting this portion of our review, we
took into account the legal frameworks and customary norms in effect
in project areas.  We then gave each project a rating ranging from a
substantial upgrade in prevailing practices to no upgrade in
practices. 

(2) We determined if such upgrading as occurred could be clearly
linked to the need to meet bank requirements and/or to the active
intervention of bank staff members.  In conducting this portion of
our analysis, we attempted to separate bank influence from the impact
of other actors.  In some instances, for example, project practices
were upgraded over local norms because of the intervention of
international NGOs or because sponsoring companies employed practices
that exceeded local expectations. 

(3) We rated the banks' overall impact on a project, based on a
computational matrix that took into consideration the extent to which
practices were upgraded on the project and the extent to which bank
intervention was directly linked to the upgrade in practices. 


   TRANSPARENCY ANALYSIS
--------------------------------------------------------- Appendix I:2

We assessed timely access to key project documents (project profiles
and EA reports) through the banks' internet home pages.  To test
performance against the banks' own guidelines on making such
documents available, as well as the Pelosi Amendment's 120-day time
frame for EA reports, we obtained and analyzed data on whether--and
when--relevant documents became available on each bank's home page. 
We did not attempt to independently verify the accuracy of the data
that the banks provided on this matter, though we did review it for
internal consistency.  With the exception of the Inter-American
Development Bank, each of the banks provided us with separate data
sets for category A and category B projects.  As already noted, the
Inter-American Development Bank stopped employing a categorization
system during 1997.  Data obtained from that institution therefore
did not differentiate among projects on the basis of their EA
category. 

The time periods covered by the data employed for this analysis
varied among the banks and in no case matched the time period
reflected in our analysis of consultation practices (that is,
calendar year 1996.) In each case, we coordinated with bank staff to
ensure that the time frames selected were (1) recent enough to avoid
including projects that were processed under information disclosure
guidelines that have since been superseded and (2) of sufficient
duration to include enough projects to reach reasonable conclusions
about performance under updated guidelines.  The following discussion
describes the time frames employed and the numbers of projects
involved in our analyses of information from each bank. 


      WORLD BANK
------------------------------------------------------- Appendix I:2.1

The project profile sample included all 4 category A and 10 category
B projects whose review dates for developing project concepts
occurred between April 1, 1997, and June 30, 1997.  (Bank approval at
this point in the process adds the project to the Bank's pipeline of
projects under development.)

The EA report sample included all 13 category A projects whose EA
report arrived at the Bank during the period July 1, 1996, through
June 30, 1997, and all 15 category B projects with appraisal missions
that began during the period April 1, 1997, through June 30, 1997. 


      ASIAN DEVELOPMENT BANK
------------------------------------------------------- Appendix I:2.2

The project profile sample included all 4 category A and 16 category
B projects for which Technical Assistance Fact Finding Missions
(which occur near the beginning of the project cycle) took place
during the period October 1, 1996, through March 31, 1997.\7

The EA report sample included all 15 of the category A projects
considered by the Bank's executive directors during the period
October 1, 1996, through September 30, 1997, and all of the 4
category B projects approved by the Bank's executive directors during
the first half of calendar year 1997. 


--------------------
\7 The project profile data sets provided by the Asian Development
Bank and the International Finance Corporation each contained one
category B project that fell slightly outside of the indicated time
frames.  We decided to retain these projects in our analyses. 


      INTER-AMERICAN DEVELOPMENT
      BANK
------------------------------------------------------- Appendix I:2.3

We employed one comprehensive data collection instrument for this
bank, which included all of the 77 projects approved by the executive
directors during the period October 1, 1996, through September 30,
1997.  Since the Bank did not systematically record when (or if) EA
reports were provided to the Bank's public information center--or
when they were posted on the Bank's home page--we obtained data on
when these reports were made available in the borrowing countries, as
required under bank guidance. 


      INTERNATIONAL FINANCE
      CORPORATION
------------------------------------------------------- Appendix I:2.4

The project profile sample included all 5 category A and 102 category
B projects that the International Finance Corporation executive
directors considered during the time period April 1, 1997, through
June 30, 1997. 

The EA report sample included all 8 of the category A projects
considered by the executive directors during the period July 1, 1996,
through June 30, 1997, and all 100 category B projects considered by
the executive directors during the period April 1, 1997, through June
30, 1997. 




(See figure in printed edition.)Appendix II
COMMENTS FROM THE DEPARTMENT OF
THE TREASURY
=========================================================== Appendix I



(See figure in printed edition.)

See comment 1. 

See comment 2. 

See comment 3. 

See comment 4. 


The following are GAO's comments on the Department of the Treasury's
letter dated July 31, 1998. 


   GAO COMMENTS
--------------------------------------------------------- Appendix I:3

1.  Our review was directed at assessing the overall quality of the
consultation practices employed on bank-supported projects, rather
than the strengths or weaknesses of individual projects. 

2.  Our review of project consultation practices, the results of
which are presented in chapter 3, included an assessment of the
extent to which concerned members of the public were informed about
proposed projects before being asked to comment.  The Objectives,
Scope, and Methodology section of chapter 1 has been revised to make
this clear.  The quality of the information on these projects that
was provided to the public was a key element in our evaluation of
performance in this area.  As already noted in chapter 3, we found
that in 8 of the 11 projects where consultation was less than
adequate, the measures employed in informing the public about the
proposed project were also less than adequate. 

3.  We have updated the report to reflect several of these points. 

4.  Chapter 2 acknowledges that the International Finance Corporation
has strengthened its environmental assessment policies and is
otherwise working to improve its performance in relevant areas. 




(See figure in printed edition.)Appendix III
COMMENTS FROM THE U.S.  AGENCY FOR
INTERNATIONAL DEVELOPMENT
=========================================================== Appendix I



(See figure in printed edition.)



(See figure in printed edition.)

See comment 1. 

Now on pp.  25-16. 

See comment 2. 



(See figure in printed edition.)

Now on p.  57. 

See comment 3. 

Now on p.  43. 

See comment 4. 


The following are GAO's comments on the U.S.  Agency for
International Development's letter dated August 5, 1998. 


   GAO COMMENTS
--------------------------------------------------------- Appendix I:4

1.  This is useful background information, and we have inserted a
brief reference to the Agency's legislatively mandated role in
chapter 1.  However, we did not evaluate the Agency's efforts in this
area. 

2.  Our review was directed at assessing the overall quality of the
consultation practices employed on bank-supported projects rather
than the strengths or weaknesses of individual projects. 

3.  We agree that a follow-up study would be useful and will take the
Agency's suggestion into consideration when planning future work. 

4.  While the World Bank clearly employs a substantially greater
number of environmental and social development staff than the other
banks, precise comparisons are difficult because of differences in
the personnel systems used by the institutions we reviewed.  We could
not present the type of precise analysis suggested without
substantial additional data collection and analysis, which would
delay publication of the report. 




(See figure in printed edition.)Appendix IV
COMMENTS FROM THE WORLD BANK
=========================================================== Appendix I



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)


MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix V


   NATIONAL SECURITY AND
   INTERNATIONAL AFFAIRS DIVISION,
   WASHINGTON, D.C. 
--------------------------------------------------------- Appendix V:1

Harold J.  Johnson
Tetsuo Miyabara
Michael McAtee
Joy Labez
R.G.  Steinman
Richard Boudreau
Venecia Kenah
Elizabeth Nyang


   OFFICE OF THE GENERAL COUNSEL,
   WASHINGTON, D.C. 
--------------------------------------------------------- Appendix V:2

Mark Speight


   LOS ANGELES FIELD OFFICE
--------------------------------------------------------- Appendix V:3

Joyce Akins


   DENVER FIELD OFFICE
--------------------------------------------------------- Appendix V:4

Arturo Holguin

*** End of document. ***