World Bank Group Adopts new Approach for Investment in Palm Oil Sector

April 3, 2011

Washington DC, April 3 2011 – The World Bank Group today announced the adoption of a World Bank Group Framework and IFC Strategy to guide future engagement in the global palm oil sector. The new framework and strategy were developed following extensive consultations with a wide range of stakeholders including environmental and social NGOs, farmers, indigenous communities, private sector companies, and governments.  

Feedback received affirmed that, when guided by rigorous environmental and social protections, the palm oil sector can be an important contributor to economic development and poverty reduction.

“Throughout the consultations,” said Rachel Kyte, IFC Vice President for Business Advisory Services, “many voices in the private, public, and civil sectors recognized the potential of the palm oil production to contribute to poverty reduction when good environmental and social practices are followed.  Stakeholders look to the World Bank Group to support a new model for financing in the sector to benefit the poor and protect the environment.  This is what we have committed to do.”

Palm oil is produced by and employs over six million rural poor worldwide.  Small farmers dominate production and continue to enter the industry in increasing numbers.  Some 70 percent of palm oil production is used as staple cooking oil by poor households in Asia and Africa.

“Even though the World Bank is a small player in the palm oil sector,” said Inger Andersen, World Bank Vice President for Sustainable Development, “we can make a contribution to strengthening the sector’s sustainability.  Our focus on supporting small farmers and improving productivity - particularly that of degraded plantations - can help poor rural communities benefit while also helping the environment.”

Stakeholder consultations, held around the world over the last year, focused on a range of social and environmental issues facing the palm oil sector and the role the World Bank Group could play to address them. The consultations helped to shape key areas of focus for Bank Group engagement in the sector, including:

  • regulatory and governance reforms;
  • responsible private investments;
  • improved benefit sharing with smallholders and communities; and
  • development and widespread adoption of environmentally and socially sustainable standards and codes of practice.

The World Bank Group Framework and IFC Strategy for Engagement in the Palm Oil Sector will give priority to institutional and market initiatives that support smallholders and foster benefit sharing with rural communities.  This will take place by helping to strengthen smallholder producer organizations, promoting their access to finance and markets, improving their agronomy practices and productivity, and fostering fair contractual arrangements with larger companies.

To help protect forests and biodiversity and to move palm oil expansion from forested areas and peat lands, the Bank Group will give priority to initiatives that encourage production on degraded lands and seek to improve productivity of existing plantations.

The new approach also includes new analytical “tools”, such as a joint World Bank-IFC Country Situation Analysis and IFC’s Risk Screening and Assessment procedure.  This will enable an assessment of key opportunities and risks, particularly around the issues of land use and acquisition, governance, community concerns, and working conditions.  These tools will guide the Group’s decisions on whether to engage, the level of appropriate engagements, and measures to avoid or reduce potential risks.

In order to develop the new engagement approach, the World Bank Group suspended its new investments in the palm oil sector in September, 2009 to review lessons learned and to consult with stakeholders.  With the adoption of the new Framework and Strategy, it is now lifting that suspension.

About the World Bank Group
The World Bank Group is one of the world’s largest sources of funding and knowledge for developing countries. It comprises five closely associated institutions: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA); and the International Centre for Settlement of Investment Disputes (ICSID). Each institution plays a distinct role in the mission to fight poverty and improve living standards for people in the developing world.

Media Contacts
In Washington,DC
Amy Stilwel (World Bank)
Tel : +1 202 458-4906
In Washington, DC
Irina Likhachova (IFC)
Tel : +1 202 473 1813