GFMC: World Bank Approved Loan To Abolished Unit Russian Forest Service Funding

World Bank Approved Loan To Abolished Unit Russian Forest Service Funding

Financial Times (London), 27 September 2000
By Stephen Fidler

The board of the World Bank approved a 60 million dollar loan in May to Russia’s federal forest service, six days after President Vladimir Putin signed a decree closing it down.

The bank never activated the loan, saying it would wait until it was satisfied with the new arrangements the government put in place.

But some bank critics expressed incredulity at the decision. “It’s the first time I’ve seen the bank approve a loan for an institution that no longer exists,” said Doug Norlen of Pacific Environment, a US campaigning group.

Bank officials said the decision to close down the federal forest service and fold it into the Ministry for Natural Resources was disclosed to the bank’s 24-strong board at the time of the decision. But the board decided to go ahead with the loan because the design of the programme supported by the loan was seen as sound.

The board gave the go-ahead for the loan on May 23, six days after the regulation abolishing the agency was signed and two days after it was published in the official gazette.

“Mr Putin’s decision to reorganise the structure did not affect the design of our forestry project, but it did require clarification of the implementation arrangements,” said Jan Pakulski, bank spokesman for Europe and Central Asia. He said soon afterwards the bank told the government that it would not sign the loan until it was satisfied with the arrangements it put in place.

Russian environmental campaigners in Prague for meetings with bank officials said they were worried about the implications of the subordination of the forest service, as well as the state environmental protection agency, to the pro-exploitation Natural Resources Ministry.

In September, the bank approved a further Dollars 200m guarantee programme aimed at encouraging forestry and coal mining investment, which was also dependent on new arrangements being put in place to satisfy the bank.

Bank officials point out that many countries to which it lends have no independent forestry or environmental agencies. The government has also pledged public consultations on its environmental assessment procedures. Mr Pakulski said there was a good chance that the arrangements that emerged would be better than those previously in place.

The forest service was widely regarded as a bloated bureaucracy, and Mr Putin’s decision has been interpreted as an effort to streamline government. Employees have orchestrated a campaign to get it reinstated.

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