World Rainforest Movement

Papua New Guinea: Local NGOs challenge World Bank loan for oil palm scheme

Papua New Guinea has a communal land system that has allowed most rural communities to make a decent living from the free and easy access to land, clean water and the abundance of natural resources. However, the introduction of cash crop plantations undermines their customary systems and structures bringing up negative environmental and social impacts.

Oil palm is a case in point. Typically pushed from outside and export-oriented, it counts on funding by the World Bank. However, the project has encountered local opposition. Small landowners have warned oil palm interests to stay out of their land (see WRM Bulletin Nº 74). Now, facing the forthcoming World Bank Board meeting that will deal with approval for disbursement of Papua New Guinea Smallholder Agriculture Development P079140 loan, several Papua New Guinean NGOs are strongly opposing it and have circulated a letter for endorsement, addressed to the Board of Executive Directors of the World Bank Group asking them not to approve any more loans for oil palm plantations and processing.

This kind of scheme will not render any good for the people. Their demand is well grounded, as the letter exposes: “Oil palm is risky: We are opposed to having more oil palm projects in Papua New Guinea because of the adverse social and environmental problems found in existing oil palm areas. Oil palm price is highly dependent on the world commodity price which can be volatile. Given the massive oil palm expansion program in other countries especially Indonesia, the risk of a slump in price is very high.”

“Oil palm is environmentally destructive: The World Bank project document downplays the environmental impact of oil palm. Our country has already suffered the adverse impacts from oil palm in those provinces where it is grown. PNG’s track record in ensuring environmental sustainability is abysmal. The Department of Environment and Conservation’s monitoring capacity is limited by a chronic lack of resources. It has neither the capacity nor the required expertise to monitor the wide ranging and relatively complex environmental issues related to oil palm.”

“Oil palm is bad development: Over two decades of oil palm growing in Papua New Guinea has resulted in little if any real development outcomes for our country. In fact we see a regression of living conditions and standards in places where oil palm is grown. Our Government offers tax breaks and tax credits for the oil palm industry operators but this considerably limits the economic benefits to PNG. Growers who toil and sweat in the hope of better living standards -as promised by those who got them into oil palm growing- are disappointed and angry that they have been given mere empty promises whilst the resources on which they are dependent for survival are now degraded and polluted. Much of their oil palm income goes back to paying for costs incurred in the establishment of their oil palm plots.”

“Oil palm is forced upon our people: Oil palm growers inform us that they only grow oil palm because they need money to pay for the ever increasing school fees so that their children can be educated. Ironically, school fees have been imposed on us precisely because our Government heeds advice from a foreign power such as the World Bank to adopt the user-pay system so that revenue is directed to repay debt. For a developing nation like PNG, education and basic health care are essential services which should be priority areas for revenue PNG gets from other sectors. The World Bank should exert pressure on our leaders to fulfil these fundamental needs and responsibilities, and not on ordinary PNGeans to sacrifice fertile land, pristine forests and healthy waterways for a cash crop which no rich industrialised nation in the world wants to have in its own backyard. It is obvious that rich nations are merely pushing oil palm growing in countries like PNG because it is a labour intensive, nutrient hungry and polluting crop, so that their industry can have access to cheap oil.”

The project is also bad for the country: “Oil palm increases balance of payments problem for PNG: Growers become too reliant upon a monocultural cash crop. What is left of their hard earned cash income from oil palm merely ends up enriching foreign corporations, owing to the widespread consumption of imported rice from Australia, tinned fish, tinned meat and a range of other poor quality consumer products from Indonesia and China. This increases our balance of payments. PNG should be assisted and supported to produce food and other sought-after domestic necessities internally, so that cash is circulated within the country for the benefits of our communities and to reduce our country’s precarious balance of payments.”

“Increase national indebtedness: This loan, if approved, will increase the debt burden of Papua New Guinea with no real development gain. We fear that increasing debt level in the face of governance failure will lead to the further devaluation of the Kina [local currency], adding greater burden to our people and our precious environment. This will inevitably lead to more hardships for our people and further pressure to exploit the relatively healthy environment, which over 80% of our people depend on for their survival. This is essentially poverty creation, not reduction!”

Furthermore, the funding comes to a country where governance is under challenge: “The Government of Papua New Guinea is unaccountable. Papua New Guinea has a long track record of governance failures, mismanagement and misuse of public funds by those in power. This has rendered most development assistance useless and ineffective.”

“Imprudent banking. It is irresponsible for the World Bank to disburse a loan for this project given the failure of the Forest and Conservation Project (FCP). Last year the Asian Development Bank (ADB) had to cancel its loan for a similar project entitled the Nucleus Agro-Enterprises project on ground of financial mis-management. Given that the risk involved is high and the World Bank has little leverage to influence outcome as a lender, it is a bad banking practice to embark on yet another project for oil palm expansion, and to provide another loan to PNG.”

Too many risks for the sake of oil palm industry: “PNG becomes indebted to subsidise the palm oil industry: Although the project document claims that this is a scheme that would increase income for PNG, it is in reality a subsidy provided to the industry. Our people, especially the growers whom the World Bank has identified as needing assistance to get out of poverty, have ended up shouldering the bulk of the debt burden. It is on this basis that communities have begun to reject oil palm projects, as evidenced by the statements of protest attached for your reference.”

The NGOs conclude denouncing that the loan contradicts the National Goals and Directive Principles: “Our national constitution emphasises small-scale enterprises and respect for the PNG way, integral human development for our people, wise use and management of our natural resources for now and for the future. If the World Bank is genuinely interested in development in PNG, the five directive principles of the constitution provides a sound framework for a unique development approach we believe will be more beneficial for our country.”

The full letter is available at

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