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Business / Economics

World Bank’s IFC under fire over alleged abuses at Liberian plantation it funded

todayApril 8, 2024 17

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  • An investigation into the International Finance Corporation’s handling of human rights abuses at a project it financed in Liberia, the Salala Rubber Corporation, is expected to severely incriminate the World Bank’s private lending arm.
  • The World Bank’s Compliance Advisory Ombudsman investigated whether the IFC did enough to address allegations of gender-based violence, land grabbing and unfair compensation by its client, Socfin, between 2008 and 2020.
  • It’s anticipated that the report will find the finance institution didn’t act to prevent Socfin from violating its legal obligations to local communities and protect the environment; this finding would follow closely on a damning report into similar failures to hold another IFC client, Bridge International Schools in Kenya, to account
  • The IFC missed a February deadline to respond to the CAO report and submit an action plan; the delay comes as a new remedial action framework for the IFC is due to be finalized and released

The World Bank’s independent watchdog, the Compliance Advisor Ombudsman (CAO), has finalized its investigation into a complaint filed five years ago, alleging grave human rights violations by communities living near the Salala Rubber Corporation in Liberia. The communities accuse the plantation, owned by Belgian multinational Socfin, of land grabbing and forced evictions, pollution of water sources, sexual abuse, and the destruction of ancestral graves and sacred sites. Publication of the CAO’s findings is being delayed by the International Finance Corporation, the World Bank body whose 2008 loan supported expansion of the plantation, which missed a February deadline to respond to the investigation and put forward an action plan to directly address the communities’ grievances.

The Salala plantation was originally established in 1959. Members of 22 communities within the concession’s 4,577 hectares (11,310 acres) in Bong and Margibi counties say they were evicted without their consent and have suffered severe disruption to their livelihoods and cultural and religious practices in the decades that followed.

Socfin acquired the plantation in 2007 as Liberia emerged from two decades of civil war. A $10 million loan from the World Bank’s International Finance Corporation a year later enabled the company to expand its concession. The financial institution’s loan disclosure included bold ambitions for the plantation’s role: “IFC’s support will encourage Salala to become a local industry leader with regard to environmental, safety, and social standards.”

Instead, the IFC’s own reports show Socfin was in violation of the institution’s social and environmental requirements from the outset. In July 2008, three months before the first loan disbursement, the IFC noted that Socfin’s policies weren’t in line with the requirements. In what it called a “corrective action plan,” the IFC listed 24 measures that the company was to implement by the end of 2008. These included developing and disseminating a compensation framework, documenting issues surrounding preservation/destruction of cultural heritage on the plantation, and putting in place a grievance resolution procedure in consultation with communities.

If, as expected, the CAO’s report finds the IFC didn’t act on evidence it gathered over the following decade that its client continued violating the institution’s social and environmental standards, the World Bank’s board may pressure its private lender to directly respond to the affected communities, potentially including providing them with financial compensation for harms they’ve suffered.

The IFC’s internal reporting and communications with Socfin flagged numerous violations of the IFC’s environmental and social standards between 2008 and 2019, including cases of company employees forcing women to engage in sexual activities to keep their jobs. Image by Ashoka Mukpo for Mongabay.

IFC standards: widely respected and broadly ignored

The IFC has been considered the industry leader when it comes to social and environmental principles guiding lending for development projects. Its sustainability policy believes that an important, comprehensive set of environmental and performance standards define how clients are required to manage physical and economic displacement, provide fair working conditions, or secure free, prior and informed consent when acquiring land from Indigenous peoples.

The guidelines were widely respected, even forming the foundation of the Equator Principles that have been broadly adopted by financial institutions worldwide to assess and mitigate the risk of environmental and social harm linked to their lending. In practice, however, the Compliance Advisor Ombudsman, the World Bank’s internal watchdog overseeing IFC-funded projects, has received almost 400 complaints — 238 of which were found eligible by the CAO — about IFC projects from communities and civil society organizations, alleging enormous damage to nature and communities.

A recently finalized CAO investigation of Bridge International Schools in Kenya concluded that the IFC systematically ignored cases of child abuse by its client for years. In 2013, a CAO investigation found that another IFC client, Corporación Dinant, was responsible for killings, kidnappings and land grabbing at its oil palm plantation in Honduras.

In both cases, the CAO concluded that the IFC was aware of human rights violations by its clients, but didn’t use its leverage to stop them.

In Liberia, the IFC visited the Salala plantation several times between 2009 and 2013, and again in 2019, to assess whether measures to address breaches of its principles had been taken by Socfin.

In its 2019 report, which Mongabay has seen, the IFC noted that while some improvements had been made, many issues remained: the company had not done enough to compensate villagers who had lost access to farmland; workers’ housing had not been renovated to meet minimum standards; no mapping of cultural heritage sites had been done; and the grievance mechanism was incomplete — a draft had finally been drawn up a few months before the IFC’s visit, 11 years after it should have been completed.

Flaws at Salala were also publicly documented by the media and other bodies. A 2009 U.N. Security Council report on post-war Liberia mentioned unresolved land disputes in the concession area which sparked protests, disputes and violence.

In 2013, community protests against Salala over land issues, pollution of water sources, and unjust compensation for lost crops and territories were serious enough that then-president Ellen Johnson Sirleaf sent a mediation team to the concession.

That same year, a Liberian NGO, Green Advocates, released a report carefully documenting the desecration of sacred sites, loss of access to land and inadequate compensation, the displacement and demolition of towns, and the company’s failure to consult with communities before the expansion.

Villagers also told the NGO they were suffering from water shortages because of the chemicals from the plantation dispersing into rivers and creeks, making them unsuitable for drinking.

Civil society organizations also documented company contractors and headmen forcing women to engage in sexual activities to keep their jobs. This sexual abuse has since been confirmed by Socfin’s own investigator, the Earthworm Foundation.

The IFC’s internal reporting and communications with Socfin also flagged these incidents of sexual violence in 2019. “It was likely some GBV [gender-based violence] was happening as it happens everywhere — it is a global problem — and women do not very often report it because of the sensitivity and stigma attached,” the report says. It mentioned victims saying there was no procedure to raise complaints with the company.

Salala’s rubber trees crowding homes in Jorkpolorsue. The town is one of 15 that have lost farmland to the plantation since 1997 — 10 towns lost land in the same year the IFC grant was approved. Image by Ashoka Mukpo for Mongabay.

When none of the numerous reports over the years led to action, communities turned to the CAO in 2019.

Turning to the ombudsman

An independent body of the World Bank Group, the CAO was established in 1999 with the mandate to improve the environmental and social outcomes of the projects funded by the IFC and the World Bank’s Multilateral Investment Guarantee Agency; facilitate resolution of complaints by project-affected people; and strengthen public accountability.

However, civil society organizations representing communities, like Inclusive Development International, say it’s an uncertain path to redress for communities affected by World Bank projects. Cases accepted by the ombudsman often stall for years, and frequently fail to produce tangible outcomes such as financial compensation for injured communities.

With support from local and international organizations, the Salala communities were able to push their complaint forward, presenting the CAO not only with the grievances but also with a call for remedy, both financially and in the form of land or other non-monetary assets like land.

After finding the complaint eligible in 2020, an initial CAO field visit confirmed that most of the allegations were valid and occurred during the IFC’s financing of the company between 2008 and 2020.

The assessors suggested a dispute resolution process with the affected communities, a step intended to allow the company and communities to find mutually acceptable solutions to issues raised in the complaint or by the CAO’s assessment of it.

Following a pattern of refusing to enter a dialogue with communities, Socfin rejected this, accusing the CAO of bias against the company.

In a March 2020 email to the CAO, Seamus Gunton, Salala’s site manager at the time, wrote: “Due to the continued lack of impartiality … SRC will not proceed towards Dispute Resolution as we have no confidence of the CAO’s ability to act independently.”

Mongabay has documented cases in Cameroon and Sierra Leone where the Belgian investor has similarly opposed opportunities to engage with aggrieved communities. Instead, Socfin hired its own investigator to to assess grievances across the company’s portfolio in West and Central Africa and Southeast Asia.

Socfin’s refusal to take part in dispute resolution prompted the CAO to assess whether the allegations were grave enough to carry out a compliance investigation. “Considering the serious nature of the impacts alleged, CAO concluded that there are substantial concerns regarding the E&S [environmental and social] outcomes of IFC’s investment in the Company,” read the compliance appraisal.

A compliance investigation by the ombudsman aims to determine whether and how the IFC has contributed to harm. “Upon review of IFC’s documentation,” the appraisal reads, “it is unclear whether IFC adequately escalated ongoing performance concerns so as to ensure remedial action consistent with the requirements of the [performance standards].”

In its decision to pursue a compliance investigation, the CAO also challenged the IFC’s decision not to recognize the villagers as Indigenous people, denying them full rights to free, prior and informed consent.

Samuel Binda, a resident of Jorkporlorsue, at the site where his grandparents are buried. He says security guards prevent him and other residents from marking or visiting grave sites the plantation has expanded onto, accusing them of trying to steal latex. Image by Ashoka Mukpo for Mongabay.

Three years later, the final report was submitted to the IFC board. The IFC had 50 business days from Dec. 4, 2023 to prepare its response and a management action plan, but this deadline elapsed in February.

“IFC are still due to submit their Management Action Plan which is overdue and therefore IFC is out of compliance with the CAO Policy,” wrote CAO spokesperson Emily Horgan in an email to Mongabay.

The IFC has not responded to Mongabay’s questions regarding the reasons for the delay. The complainants prefer not to comment in order to not jeopardize the process: the CAO’s report remains embargoed until the institution submits its response to the World Bank’s board.

The IFC is currently developing a revised remedy framework, due to be finalized in the coming weeks. Advocates say cases like Salala, Dinant and Bridge International show the kinds of changes needed if the financial institution wants to show that its performance standards are more than just words and provide relief to aggrieved communities.

“The IFC needs to be much more hands-on in dispute resolution processes, both in terms of using its leverage with clients to push them to remediate harm and comply with their environmental and social requirements, but also by providing technical support and capacity building to solve problems,” David Pred, executive director and co-founder of Inclusive Development International, told Mongabay.

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