News & Broadcast - ‘Environment Matters 2006’

WASHINGTON, November 8, 2006―With many developing countries losing 4 to 8 percent of GDP annually due to environmental degradation, strengthening the management of water, forests, fisheries, wildlife, and other natural resources is vital to these countries’ overall wealth, according to the World Bank’s annual publication, Environment Matters, released today.

Recent estimates by the World Bank reveal that corrupt and illegal practices related to logging, fisheries, and biodiversity amount to losses estimated $30 billion per year – roughly equal to the total Bank Group commitments in 2005.*

“The world’s population is increasing rapidly,” said Katherine Sierra, World Bank Vice President for Sustainable Development, “mostly in developing countries. With growing numbers of people comes an expanding need for basic goods and services such as water, food, energy, sanitation, housing, and transport. Meeting these needs depends on our ability to manage these resources and ecosystems in a sustainable way.”

According to Environment Matters, natural resource degradation – such as depleted soils, insufficient water, rapidly disappearing forests, and collapsed fisheries – threatens the health and livelihoods of millions of people. These problems are particularly acute in poorer countries, in which people are most dependent on their natural resource base – and where management of water, forests, fisheries, wildlife, and other resources is too often subject to weak governance.

An annual review of the World Bank’s environmental work, this year’s Environment Matters focuses on the challenges of promoting accountability and transparency in environmental management. It points out that factors such as climate change, invasive species, and water scarcity will increase the challenges.

In recent years, some of the worst armed conflicts within developing countries have been connected to efforts by one group to control dwindling environmental resources at the expense of another group. Post-conflict countries often suffer from damaged physical infrastructure, scarce employment opportunities, reduced foreign investment, increased capital flight, and weakened governing institutions that can lead to further damage to environmental capital. This is especially true where displaced populations are often forced to live in ecologically fragile areas. The resulting depletion of the host’s forest and water resources can instigate new conflicts between displaced populations and the local community.

In fiscal year 2006 (July 1, 2005 – June 30, 2006), the World Bank approved 73 projects with environment and natural resources management content in 48 countries, amounting to $1.4 billion in new commitments. Twenty-four of these new projects have objectives specifically targeting strengthening environmental policies and institutions. The total active portfolio with environment and natural resources management components was $9.7 billion at the end of fiscal year 2006.

“The central focus of the World Bank’s Environment Strategy and program is to promote poverty reduction while managing this natural wealth for current and future generations,” said Warren Evans, Director of the World Bank’s Environment Department. “In this issue of Environment Matters, the emphasis on good governance underscores our commitment to work with clients and partners on building stronger institutions and systems for greater transparency and accountability.”

Fisheries – Illegal, unreported, and unregulated (IUU) fishing is a global problem, with the total value of IUU catch at $9.5 billion. This past year, the World Bank launched, in collaboration with donors, NGO partners, and other international organizations, a global program on sustainable fisheries – PROFISH. Good governance is at the heart of the PROFISH agenda – addressing issues of illegal fishing, corruption, and equitable access to fisheries resources.

Forestry – The World Bank’s forest program is supporting regional forest governance activities to curb illegal logging and support the development of a more level playing field among legitimate forest operators. The World Bank estimates the market value of global annual losses from illegal cutting of forests in public lands at over $10 billion – more than eight times the total official development assistance flows fro the sustainable management of forests. And about $5 billion per year is estimated to be lost due to uncollected taxes and royalties on legally sanctioned timber harvests due to corruption.

Water Resources Management – In water resources management and the delivery of water services, governance rests on two core values: inclusiveness – ensuring that all members of the affected group receive equal treatment – and accountability – ensuring that those in authority answer to the group they serve if things to wrong, and are credited when things go well. For water resource management, governance processes determine decision making about water storage, types of water use, regulation of extraction from aquifers, regulation of discharges, and allocation between competing uses, including allocations to maintain basic environmental services.

Natural Resources and Institutional Quality – In low-income countries, the natural capital share (26 percent) of total wealth is much greater than the share of produced capital (16 percent). Achieving sustained growth entails managing a complex portfolio of assets, in which the elements are not just buildings and machines, but natural and human resources as well. If managed properly, natural resources will yield rents that can be an important source of development finance.

The publication concludes that the poor are fundamentally dependent on the health of their environment, and managing natural resources is vital to fighting poverty in developing countries. A major challenge is in recognizing – and accounting for – these environmental benefits and costs, including resource depletion and population growth.

* World Bank estimates that losses from illegal logging and failure to collect appropriate taxes from legal forest operations amount to $15-20 billion per year; High Seas Task Force estimates illegal, unregulated, and unreported fishing at $9 billion per year (Closing the Net: Stopping Illegal Fishing on the High Seas, March 2006); and Interpol estimates that illegal trade in wildlife products amounts to $6-10 billion per year (16th Meeting of the Interpol Working Group on Wildlife Crime, October 2003).