World Bank Exits Project in China Opposed by U.S.

WASHINGTON —  A deeply divided World Bank on Friday in effect bowed out of a plan to resettle 58,000 Chinese peasants near Tibet, a project portrayed by critics as a cynical effort by Beijing to weaken Tibetans’ cultural identity in the name of economic development.

As protesters camped outside World Bank headquarters here, critics inside--including members from the United States and other wealthy nations--sought to impose new loan conditions that Chinese authorities blasted as “unacceptable.”

China then withdrew its request for a $40-million loan, vowing to proceed on its own with the controversial development effort in the western Chinese province of Qinghai.

“We’re overjoyed, and we’re quite surprised,” John Ackerly, president of the International Campaign for Tibet, said about the World Bank’s departure from a project that has been a cause celebre in pro-Tibet circles for more than a year. “We did not expect this outcome.”

Friday’s dramatic turn of events underscored an unusual breach between the World Bank board, which was heavily influenced by U.S. opposition to the plan, and the organization’s staff, which had continued to push for the project after a damaging internal audit came to light last month.

Under the project that the World Bank had considered financing, the impoverished farmers, including ethnic Chinese and Hui Muslims, were to be relocated about 300 miles westward to Qinghai near Tibet. They were to receive arable farmland and social services in the region, birthplace of Tibet’s revered Dalai Lama.

The peasants are among the world’s poorest, according to World Bank officials, and have been struggling to survive on farmland that has been compared to “the surface of the moon.”

The program was part of a $160-million plan to combat poverty in western China. But activists seized on the Tibet issue, contending that Beijing’s real goal was to dilute Tibetan influence and culture with a huge migration of outsiders into a region that traditionally has been home to Tibetan and Mongolian herders.

Beijing has carried out such strategies in the past, critics say, resettling large numbers of outsiders into independent-minded strongholds of Inner Mongolia and Xinjiang province.

The World Bank was prepared to move forward a year ago with the project, which is strongly supported by bank President James D. Wolfensohn. But a barrage of complaints prompted bank officials to slow things down and conduct an internal review.

In a major setback for the project, the review was extremely critical. The report found that the bank had violated many of its key safeguards for such development efforts, according to leaked accounts, such as failing to consult affected groups--in this case, the Tibetans--about the potential impact of the program.

Proponents within the World Bank countered with a proposal for new studies of the project’s environmental and social impacts, to be conducted over the next 12 to 15 months. The board debated for more than six hours behind closed doors Thursday and three hours Friday before conceding an impasse.

First, board members, led by the U.S. and other rich countries, rejected the proposed additional study as an insufficient answer to the many criticisms of the project. “We and numerous other World Bank shareholders were not prepared to support this project because we do not believe it was in compliance with the bank’s own policies,” a senior U.S. Treasury official said Friday.

Efforts to salvage the project then centered on a proposal that the board be given another chance to vote, once the new studies were completed next year.

At that point, China’s World Bank representative, Zhu Xian, declared that his government had had enough.

“It is unacceptable to my authorities that other bank shareholders would insist on imposing additional conditions on management’s recommendations,” Zhu declared in an unusually sharp statement that was released by the World Bank.

China, he said, would undertake the project with its own resources and in “its own way.” From the start, he said, the loan had been “under enormous political pressures,” and the bank’s effectiveness in helping poor nations develop had been jeopardized. “We call for discussion on this as soon as possible,” he said.

Declared Wolfensohn: “We accept the decision by the Chinese government. We note that the project will be implemented by them. We look forward to continuation of our long-standing relationship with China in the context of other projects.”

U.S. officials refrained from criticizing Wolfensohn directly but were clearly displeased by the World Bank’s handling of the issue in the past. They described it as “inadequate,” given the findings of the bank’s internal panel that it had failed to comply with its own safeguards.

“Moving forward, the World Bank needs to prepare specific proposals to give shareholders a greater sense of confidence that the bank management has the internal capacity to apply its established policies fully and consistently,” a U.S. official said.