World Bank OKs Loan for China; U.S. Opposed

The World Bank on Thursday approved a plan to relocate 58,000 destitute Chinese farmers to the area where the Dalai Lama was born, a poverty-fighting project that has turned into a diplomatic donnybrook for the global lender.

But bank officials, rattled by the rare U.S. opposition and fast-spreading controversy, said they will not start work on the $40-million development project in the western Chinese province of Qinghai, near Tibet, until they consider the findings of an independent review panel, a process that could take months.

Critics of the plan suggest that the bank is being used in a Chinese policy of resettlement designed to weaken Tibetan identity.

“This has been a particularly grueling project for all of us,” World Bank President James D. Wolfensohn said in a statement, adding he was “very happy” about official Chinese assurances that Beijing will cooperate with the independent review.

The farmers whom the World Bank seeks to move are among the world’s poorest people, eking out about $60 a year on eroded hillsides, according to a World Bank report that compared their farmland to “the surface of the moon.”

Under the plan, they would be relocated about 300 miles to the west, to a region where the traditional Tibetan and Mongolian populations have become minorities. About 40% of the farmers are ethnic Chinese, along with Hui Muslims and others, including some ethnic Tibetans.

Besides proving an embarrassment for the World Bank, the dispute has emerged as the latest tension in U.S.-Chinese relations that have been badly frayed since NATO’s accidental bombing of the Chinese Embassy in Yugoslavia in May, raising concerns about various ties between the two nations. Before Thursday’s approval, Chinese officials made clear their displeasure with U.S. criticism of the bank project, describing it as interference in internal Chinese matters.

U.S. Debated Fallout From Its Opposition

For their part, U.S. officials were miffed that the bank did not make important details public until this month, such as an environmental analysis in English, and more information about resettlement matters. As details became available in recent weeks, officials from the State and Treasury departments and the National Security Council engaged in intensive discussions about the loan and the possible fallout of U.S. opposition.

“I can only tell you that at the end of the day, my instructions were to oppose,” said Jan Piercy, U.S. executive director of the World Bank.

Germany also voted against the loan proposal, which was debated behind closed doors Thursday in the World Bank’s Washington headquarters. Canada abstained. The World Bank did not disclose any details of the vote except that the project was supported by the Chinese government and a majority of the 24 board members representing the bank’s 181 member nations.

The United States “voted against this loan because we believed it did not meet the appropriate high standards for loans of this type,” said a senior administration official, alluding to concerns about the environment, resettlement issues and timely disclosures by the bank. The official added, however, that he was pleased by the bank’s plan to support an independent review before disbursing any funds on the project.

The panel’s review was prompted by complaints from the International Campaign for Tibet and the Center for Environmental Law. Bank officials were uncertain how long the review would take, although one said it would be “months, not weeks.” The findings will be presented to the board, which will decide how to proceed.

The World Bank statement Thursday promised that the three-member inspection panel “will look at ways to strengthen and improve the project, and ensure that the bank has complied with its own rules and operating procedures.”

But China’s congressional critics expressed little confidence in the review process. Some questioned whether the bank tried to shortcut its own procedures to speed up the project because after Wednesday, China no longer will qualify for the cheapest loans because of its increasing national wealth.

Activists Pushed for Opposition to Loan

In particular, some took offense at China’s promises--much touted by the World Bank--to allow government officials and journalists access to the project area.

“In most countries, such access is considered normal, not a ‘concession,’ ” said Rep. Nancy Pelosi (D-San Francisco).

“This is only the latest in a series of World Bank affronts to environmental and human rights concerns,” said Rep. Christopher Cox (R-Newport Beach), adding that congressional scrutiny of the bank “will only intensify in the wake of this action.”

Under the resettlement project, the farmers would be given rights to arable land and receive a range of benefits, including health and education, according to World Bank officials.

The project is part of a $160-million plan to ease poverty in western China, most of which sparks no opposition. But in recent weeks, the proposal for Qinghai province became a cause celebre among Tibet activist groups, who publicized it on the Internet and rallied broader support, including 61 members of Congress who last week asked the administration to oppose the plan.

Besides concerns about Tibetan culture and questions about World Bank procedures, some opponents also have warned that the project would be located in a region of prison labor camps and questioned whether prison labor would be used.

Said one bank official: “I wouldn’t call it a compromise, I’d call it the first step in going about this the best way possible. I think everybody wants to see this done right.”

To China watchers, however, such details are less important than the broader tensions between the United States and China, which have affected much larger issues, such as Chinese accession to the World Trade Organization, which had been expected this year.

The World Bank dispute is “a huge mess,” said Greg Mastel, director of international trade studies at the Center for National Policy, a Washington think tank. “Everybody would prefer that it didn’t come up--but it did come up, and I’m not sure that the U.S. or China has much room to maneuver.”