July 7, 2000
China has rejected World Bank conditions and withdrawn its request for a US$40 million loan for a controversial project involving the resettlement of nearly 58,000 poor farmers of mainly Chinese ethnicity into a traditionally Tibetan and Mongolian area of Qinghai province following intense meetings at the Bank today and yesterday. The Chinese authorities have announced that they will now carry out the proposed resettlement and development of the project area in Qinghai without funding from the World Bank. The decision, which is likely to affect the policies of other global financial institutions towards China, means that World Bank funds will not be used to fund a project which accords closely with Beijing's aims of demographic restructuring and development of Tibetan areas. The decision is likely to discourage other international organisations from funding the transfer of non-Tibetans into Tibetan areas, and may have an impact on other indigenous peoples' issues.
The decision by China to withdraw from Bank funding for the Qinghai component of the China Western Poverty Reduction Project (CWPRP) is understood to have been made by Chinese Premier Zhu Rongji last night following nearly seven hours of intense discussion at the Bank and at the Beijing Ministry of Finance. World Bank management, led by President James Wolfensohn, had proposed a compromise solution to Bank Directors aimed at meeting some of the serious criticisms levelled at the Bank by the Inspection Panel, a World Bank-appointed team of experts which carried out an independent investigation of the project. The changes to the project proposed by Wolfensohn and management would have cost just over $2 million and led to a further 15-month delay. A divided Board of Directors was ultimately not prepared to give full approval to the project without meeting again in 15 months to reassess how the proposed changes had been implemented, and this further delay until the reassessments had been considered was clearly unacceptable to China. A key point of the Inspection Panel's report had stated that it was meaningless to implement projects before assessments of these projects had been carried out.
China's withdrawal from World Bank funding of the project indicates the impact made on both the Bank and Beijing of the report by the three-member Inspection Panel, which visited the project sites in Qinghai last year in order to assess Bank compliance regarding the project. The Inspection Panel concluded that the project design and appraisal had contravened seven of the Bank's key directives and guidelines, including procedural directives on the environment, indigenous people, and disclosure of information. The report drew attention to divisions within the Bank on crucial matters of policy and procedure that are likely to have a significant impact upon the relationship between the World Bank and China in future. The report also set an important benchmark below which the Bank cannot now descend, particularly on issues of compliance and on the Bank's dealings with China. The Inspection Panel had particularly highlighted management's tendency to deviate from established policy and procedure and revert to "precedent" with regard to China, which had been described by staff at the Bank as "different" to other countries. The implicit acceptance by the Board of Executive Directors today of the criticisms in the Inspection Panel's report indicates an awareness of the gravity of the points made by the Panel and a realisation that the credibility of the Bank would be at stake if these criticisms were ignored.
The Chinese Executive Director Zhu Xian said in a carefully-worded press release issued by the Bank today: "China accepts no conditions beyond management's original recommendations that had been agreed between management and my authorities... It is unacceptable to my authorities that other Bank shareholders would insist on imposing additional conditions on management's recommendations - namely coming back to the Board for approval again for a project that was already approved last year... We regret that because of political opposition from some shareholders the World Bank has lost a good opportunity to assist some of the poorest people in China, probably in the world, after so much effort by World Bank management and staff."
Chinese Executive Director Zhu Xian confirmed that China would be carrying out the project itself with its own resources, which could have a dramatic impact on the indigenous Tibetan and Mongolian population of the project area and beyond. The Chinese Executive Director's statement that China will carry out implementation of the project "in its own way" suggests that resettlement may be carried out at a greater scale than envisaged in the World Bank proposal before the Board. The number of settlers had already been reduced from 100,000 to less than 60,000 after the Bank's involvement in design of the project. The proposed in-migration to Dulan (Tulan in Tibetan) county in Haixi (Tibet: Tsonub) Mongolian and Tibetan Autonomous prefecture, Qinghai, would already more than double the county's population; the Tibetan and Mongolian population of the county could now be diluted still further by the Chinese authorities. The proposed new towns will each have populations five times as large as Xiangride, the nearest established town to the main irrigation site, which will lead to further development and possibly a further influx of settlers into the region. China's World Bank Executive Director Zhu Xian also stated that by its actions the Bank's "development effectiveness" had been "jeopardised". This statement equates the notion of population influx with the Chinese authorities' approach to development in Qinghai.
The Chinese authorities had previously emphasised that the Dulan county resettlement project proposed by the World Bank is a suitable model for future development in the province. World Bank funding would have fulfilled the provincial government's aim of developing an agricultural base and an infrastructure in the area, enabling it to exploit the rich mineral resources of Qinghai, which include petroleum, natural gas, asbestos, salt, potash, lead and zinc. The deputy governor of Qinghai, Liu Guanghe, told the Chinese news agency Xinhua on 22 April 1998: "A combination of available labour in the eastern portion of the province with natural resources in the western part should contribute to Qinghai's development." The news agency stated in the same article that population influx was an integral part of this development: "Since 1996, farmers in the arid eastern mountainous area have migrated to the Qaidam Basin to develop oasis agriculture and to lead a better life." The Chinese government and the Qinghai authorities had already begun to prepare for implementation of the resettlement programme by extending a road into Dulan (Tulan in Tibetan) county, Haixi (Tib: Tsonub) Mongolian and Tibetan Autonomous prefecture, Qinghai and establishing irrigation schemes.
A major international campaign against the Qinghai component of the China Western Poverty Reduction Project followed the publication of a TIN News Update in April 1999 highlighting the implications of the poverty reduction project. The World Bank Board agreed to a request made by the International Campaign for Tibet for a full investigation of the project, which was carried out by the Inspection Panel. Today's decision could lead China to take a tougher approach towards the project, and possibly towards the whole question of development and resettlement in Tibetan areas.
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