The World Bank’s Palm Oil Mistake

Saturday, October 23, 2010

By Thompson Ayodele

The environmental effects of palm oil production around the world should certainly be given consideration, but any new regulations should not impede poverty alleviation in the developing world, as poverty is the biggest driver of ecological harm

WHEN the World Bank held its annual meeting last weekend, there was much
discussion of trade imbalances and currency wars, but nothing about
Nigerian palm oil. That’s a shame, because the bank’s loans for plantation
agriculture in sub-Saharan Africa and other developing regions — some $132
million of which have gone to palm oil cultivation — have been
humanitarian and economic triumphs. Yet now, under misguided pressure from
environmental groups, the bank is turning its back on the program.  
Palm oil, which is extracted from the pulp of the oil palm, is an essential food in sub-Saharan Africa and other poor regions. Accounting for almost 40 percent of the world’s vegetable oils, it is an indispensable source of vitamins and calories. The developing world is heavily reliant on palm as a source of nutrition because the plant thrives
in tropical climates and yields significantly more fats and calories tha other options. It gives the developing world — where hundreds of millions  of men and women still live on a few dollars a day — the most caloric bang for the buck.

Nigeria’s palm oil industry, which once led the world, was moribund by the
end of the last century. But thanks to the World Bank program, it is now
one of the world’s largest producers, after Indonesia and Malaysia. In
addition to providing food, the palm oil sector offers jobs, employing
tens of thousands of Nigerians who earn wages similar to those of college
graduates. In a country where most people have limited education, this
sector has been essential to helping the broader Nigerian economy grow.

The industry is also diverse, as both small-scale landholders and a
growing number of industrial farms have used the World Bank loans to
invest in more efficient harvesting and production techniques. The revival
of the palm oil industry gives Nigeria hope that its economy will not be
forever hostage to petroleum production — and the pollution and graft that
inevitably accompany it.

But the bank’s legacy of success is now in serious jeopardy. Under the
leadership of Robert Zoellick, a former United States trade
representative, the bank has wavered from its poverty-reduction mission
and is increasingly focusing on achieving fashionable political and social
goals. As Mr. Zoellick put it, “We are all committed to ensuring that
positive developmental outcomes — including environmental and social
sustainability — are at the core of all our activities.”

This is a huge, and disturbing, change in direction. The World Bank was
conceived out of the wreckage of World War II, and its mission has always
been simple: extend low-interest loans from rich nations to support
development projects in poor nations. Of necessity, many of these loans
support agriculture-related projects. These projects do two crucial
things. First, they help poor nations feed their populations. Second, they
generate goods that can be traded in global markets, thus linking the
developing world economically with the wealthy world.

The results have been extraordinary. According to the bank itself, since
its inception, life expectancy in developing countries has risen by more
than 20 years. Adult illiteracy in poor nations has been cut in half since
1980. And over the past two decades, the number of people living on less
than $1 a day, while unacceptably high, has dropped for the first time.

But in many cases this progress has now run afoul of environmental groups
that often put ideology ahead of the needs of the poor. And,
unfortunately, these groups have persuaded Mr. Zoellick to suspend all
loans for palm-related plantation agriculture indefinitely as the bank
undertakes a review of its policies.

The critics of palm oil production, mostly in the United States and
Europe, claim that it contributes to the destruction of forests. Yes,
Nigeria has a problem with deforestation — but that is primarily in the
country’s north, and almost all palm oil plantations are in the south. The
forest depletion in the north is generally due to climate problems and the
population’s reliance on firewood for fuel.

Indeed, the expected drop in palm oil production because of the World
Bank’s decision is likely to worsen deforestation, as a weakened economy
will force more Nigerians to chop down trees for cooking fuel and shelter.

The environmental effects of palm oil production around the world should
certainly be given consideration, but any new regulations should not
impede poverty alleviation in the developing world, as poverty is the
biggest driver of ecological harm. And there are many multilateral
organizations that focus on environmental health, including several within
the United Nations, that are far better equipped than the World Bank to
handle the job.

Mission creep is a threat to any large bureaucracy. What has made the
World Bank almost uniquely successful over the last half-century has been
its sustained focus on the most important humanitarian goal: lessening
poverty. The moment the bank takes its eye off economic growth, it loses
its reason for being. The residents of the developing world will be the

Thompson Ayodele is the director of the Initiative for Public Policy
Analysis, an independent public policy group. This article first
appeared in the New York Times