Environmental String Tied to Sri Lanka Loan

In a decision hailed by environmentalists, the World Bank for the first time has called for unprecedented environmental safeguards in granting a $20-million loan to Sri Lanka to help finance the island nation’s logging industry and to protect its dwindling tropical forests.

The bank sought and received assurances from Sri Lanka that it would suspend plans to log upward of 45,000 acres of some of the world’s oldest tropical forest land pending environmental review after concerns were raised by the United States and private environmental groups.

While the pledge is not part of the official loan agreement, the loan approval was delayed for two days at the United States’ request until the assurances were received by cable from the Sri Lankan government.

Under provisions of the loan, Sri Lanka will establish a new environmental unit in its forestry department--funded in part by loan proceeds--to enforce environmental protections, conduct environmental impact studies and develop forest management plans. The nation’s forestry education will also be expanded.

The Sri Lanka loan comes against a backdrop of rising international concern over global warming, acid rain and the thinning ozone layer, and amid renewed efforts by some nations to take strong action against these problems.

Greenhouse Effect

Deforestation is a major contributor accelerating the “greenhouse effect,” particularly when vast stretches of forest cover are burned to clear the land for expanding populations or for agricultural or ranching purposes. Such fires, which have been photographed from satellites in space, pump tons of carbon dioxide into the atmosphere, a major culprit in global warming.

But in the drive to increase their standard of living, Third World countries have often been reluctant to heed pleas by industrialized nations to protect their natural resources on grounds that global environmental quality was at stake. Developing countries have repeatedly pointed out that international environmental problems such as acid rain, depletion of the ozone layer and the greenhouse effect have largely been caused by industrialized nations.

During the last 30 years, about half of Sri Lanka’s tropical forests have been depleted and about 100,000 more acres of natural forest land is lost each year, according to environmental groups.

“It’s the first time the concerns of environmentalists have been addressed in a project before it was approved. . . . It looks as if the bank has finally seen the forest for the trees,” said Glenn Prickett of the Natural Resources Defense Council.

Environmentalists hope similar conditions will now be applied to World Bank loans to other nations, such as Brazil, and that other international lending institutions will impose similar requirements on credits.

World Bank spokesman Pastor Sison said Friday that he expects the loan’s environmental provisions to establish a precedent, and noted that Sri Lanka’s approach could become a model for forestry projects in Nepal, Bangladesh and South Korea.

“This would help spread this development pattern beyond those three countries,” Sison said in a telephone interview from Washington.

A U.S. Treasury official, who asked to remain anonymous, added: “This shows what the World Bank can do. I would imagine they can’t be less careful in the future. To step backward and do the usual kind of forestry loan would be highly objectionable to a number of stockholders of the World Bank, including the United States.”

As recently as last week, representatives of the U.S. government, the Natural Resources Defense Council, the Sierra Club and a Sri Lankan-based environmental organization opposed the Sri Lankan loan on grounds that it lacked environmental safeguards.

The Natural Resources Defense Council said that as a result of these concerns, the bank “rapidly executed” an agreement with the Sri Lankan government to suspend logging operations on remaining natural forests until environmental surveys are completed. The NRDC said Friday that could take as long as two years.

“This is the first time I have seen such extensive coverage of the environmental issues in a forestry project, and I commend the bank for it,” said Mark T. Cox IV, a U.S. government official and an alternate executive director of the bank.

He made it clear that U.S. support for the loan was based on assurances from the Sri Lankan government that the environmental impact assessments will be done in keeping with a new law the Sri Lankan government enacted last December.

Those assessments, both U.S. and Sri Lankan officials said, will reinforce a forestry master plan that was completed about four years ago.