FOREST INVESTMENT PROGRAM RESPONSES TO QUESTIONS IN ANNEX 1 OF THE 1 JUNE 2014 LETTER FROM RIO ISMAIL (AND OTHER CSOs) ON THE FIP DEVELOPMENT PROCESS IN INDONESIA September 14, 2014 Responses to Questions in Annex 1 of 1 June 2014 Letter from Rio Ismail (and other CSOs) on the FIP Development Process in Indonesia INTRODUCTION Four members of the World Bank and IFC received the letter of 1 June 2014 from Rio Ismail of the Ecological Justice/Lembaga Keadilan Ekologi), a Jakarta based civil society organization (CSO). The letter also references 66 Indonesia and international CSOs, and 40 individuals. The letter is titled Protest of Civil Society to WB‐IFC about the FIP Development Process in Indonesia. It includes three Annexes. The matrix of comments below addresses the questions raised in Annex I of the letter. For purpose of providing context, we wanted to remind everyone that the Forest Investment Plan is implemented through four projects, two of them are supported by the World Bank as the Partner Agency, one by the IFC and one by the Asian Development Bank. All four projects are at early preparation stage. The World Bank has a dual role in the implementation, it will act as the Partner Agency for the implementation of the “Dedicated Grant Mechanism for Indigenous Peoples and Local Communities (DGM)” and for the “Community Based Natural Resource Management and Institutional Development Project”. During the course of preparation and implementation, WB, IFC and the ADB will apply their institutions safeguard arrangements to the projects that they are each supporting respectively (i.e., World Bank safeguards will apply to the DGM and the Community Based Natural Resource Management and Institutional Development Project, IFC will apply its performance standards to the IFC project and ADB will apply its safeguards to the ADB project). All four projects are coordinated by a National Steering Committee. The responses in the below matrix build on those provided in the previous responses: Members of the World Bank and IFC received the letter of 30 October 2013 from three civil society organizations (CSO) including Solidaritas Perempuan, The Ecological justice and Ulu Foundation. The letter is titled FIP Indonesia: Continuing unanswered questions and concerns, violations of FIP criteria: Seeking immediate response from the World Bank and International Finance Corporation. A response letter was sent jointly from the World Bank and IFC with an invitation to meet the CSOs in person to address their questions. (We did not receive a reply to this response letter.) The responses below also build on those provided in the 20‐page document issued by the Indonesia FIP team on 11 February 2013 titled Updated Matrix of Comments and Responses on the Indonesia Forest Investment Plan. This document in turn addressed previous correspondence from the following CSOs: i) Solidaritas Perempuan‐AKSI‐Ulu Foundation on 10 October 2012; ii) Solidaritas Perempuan‐AKSI‐Ulu Foundation et al on 4 November 2012; and iii) debtWATCH Indonesia, AMAN, HuMa et al, on 5 November 2012. The responses also build on the details in the document of 28 October 2013 titled Information Sharing and Outreach Events for the Indonesia Forest Investment Program (FIP) Convened since the Endorsement of the Indonesia Investment Plan, November 2012 (Prepared by the Multilateral‐Development Banks (Asian Development Bank, IFC, and World Bank). Page 2 Responses to Questions in Annex 1 of 1 June 2014 Letter from Rio Ismail (and other CSOs) on the FIP Development Process in Indonesia Questions in Annex I of Letter World Bank Group Response First. Questions on FIP Documents 1. Does the Bank recognize the right of affected people, including Indigenous Peoples, to accept or reject the project (consent)? If so, what is the mechanism for communities to exercise their right to decision making (accept/reject) about projects in indigenous (adat) forests or surrounding forests, in accordance with the principle of FPIC, FPIC Consultation, safeguards of the WB, and the consultation requirements of FIP Design Document (attached Annex II) ? The World Bank has a dual role in the implementation of the Forest Investment Plan. It will act as the Partner Agency for the implementation of the “Dedicated Grant Mechanism for Indigenous Peoples and Local Communities (DGM)” and for the “Community Based Natural Resource Management and Institutional Development Project”. Both projects are at early preparation stage and for both projects the World Bank safeguards will be applied. Specifically in the context of the DGM, the Indigenous Peoples and Local Communities will steer their own process and will take decisions on the use of funds through their own decision making process. The Community Chamber of the DKN has led the process of establishing the National Steering Committee for DGM that consists of decision making members who represent the IPLCs from seven regions across Indonesia. The result of this process, including the final formation of nine (9) member of NSC, their roles and responsibility can be found in www.dkn.or.id. The NSC will then be supported by the National Executing Agency (NEA) who will implement the projects. The DGM Steering committee is also represented in the overall FIP Steering Committee which will guarantee voice and decision making power beyond the DGM component. The Bank bases its recognition of the rights of affected people based on the application of its relevant policies, of which its policy on Indigenous Peoples is one. That policy applies to Bank financed or supported projects under the FIP. The policy (OP 4.10) notes that it “contributes to the Bank's mission of poverty reduction and sustainable development by ensuring that the development process fully respects the dignity, human rights, economies, and cultures of Indigenous Peoples.” It also requires that “[f]or all projects that are proposed for Bank financing and affect Indigenous Peoples, the Bank requires the borrower to engage in a process of free, prior, and informed consultation.” Further, it states that financing will only be provided ‘where free, prior, and informed consultation results in broad community support to the project by the affected Indigenous People.” For these reasons, it has often be stated that the Bank’s policy can be seen as “substantially equivalent” to consent. It is also noted that there is no universal definition of consent. Page 3 Responses to Questions in Annex 1 of 1 June 2014 Letter from Rio Ismail (and other CSOs) on the FIP Development Process in Indonesia Continued… The mechanism for engaging with communities is laid out in the Bank’s procedures which state that “when a project affects Indigenous Peoples, the ‘task team” assists the borrower in carrying out free, prior, and informed consultation with affected communities about the proposed project throughout the project cycle, taking into consideration the following: (a) “free, prior, and informed consultation” is consultation that occurs freely and voluntarily, without any external manipulation, interference, or coercion, for which the parties consulted have prior access to information on the intent and scope of the proposed project in a culturally appropriate manner, form, and language; (b) consultation approaches recognize existing Indigenous Peoples Organizations (IPOs), including councils of elders, headmen, and tribal leaders, and pay special attention to women, youth, and the elderly; (c) the consultation process starts early, since decision making among Indigenous Peoples may be an iterative process, and there is a need for adequate lead time to fully understand and incorporate concerns and recommendations of Indigenous Peoples into the project design; and (d) a record of the consultation process is maintained as part of the project files.” 2. On May 14, 2013, the Indonesian Supreme Court recognized the rights of Indigenous Peoples to their forest territories. How will the Bank ensure that Bank projects do not interfere with indigenous rights to forest areas, in accordance with the Supreme Court ruling The May 2013 constitutional court ruling (MK 35) is a landmark ruling and will be relevant to all forest and forest land related activities undertaken by the Government of Indonesia and those supported by donors. Specifically under the Dedicated Grant Mechanism (DGM) it is expected that the future National Steering Committee of the DGM will play an important role in following up to this decision and will guide the implementation of the DGM Project accordingly. Under the Community Based Natural Resource Management and Institutional Development Project, the KPH will work together with the IP communities regarding this matter, locally and at national level. Page 4 Responses to Questions in Annex 1 of 1 June 2014 Letter from Rio Ismail (and other CSOs) on the FIP Development Process in Indonesia 3. The FIP Design Document requires an eight‐
part consultation process (see Annex II) for each investment strategy (the FIP is a strategy), program or FIP project. But until now these requirements have not been met, whether by the WB or FIP team. Please explain in detail, for each part of the eight steps of the FIP consultation requirements, complete with materials proving that the consultation requirements have been fulfilled, how the Bank has met its consultation obligations to date under the FIP, including throughout the FIP development process. (See Annex 2) FIP Design Document: Guidelines for Consultations to be carried out in accordance with subparagraph 16(d) of the Design Document for the Forest Investment Program For the World Bank supported part of Indonesia’s FIP allocation for the “Community Based Natural Resource Management and Institutional Development Project” the World Bank has signed a grant agreement to provide Kemitraan with the preparation grant to assist the Government of Indonesia with the preparation of the project, which will include but not be limited to national and regional consultations with relevant stakeholders, as well as technical assessments of various aspects of the KPHs. A detailed consultation plan and updates on results from the consultations can be found under www.kph.dephut.go.id and www.kemitraan.or.id. For the consultation process, Kemitraan and the Ministry of Forestry have agreed to adopt the national protocol for public consultation prepared by the DKN and endorsed by the National Steering Committee of the FIP. In the context of the DGM, the World Bank has supported the consultation process in 7 regions with the objective to identify the representatives for the National Steering Committee for the DGM. This consultation process included one national event for the selection of a woman representative. A detailed consultation plan and updates on results from the consultations can be found under www.dkn.or.id. All consultations are in line with the FIP design Document. 4. Will World Bank FIP projects, programs and investments be brought to the World Bank Board for approval? Do the Executive Directors have the right to approve (accept or reject) these projects which have a high risk of significant impact? On what date will the documents be presented to Bank Management and Bank Board? Or will the Bank’s FIP projects be approved solely by Management without Board oversight? All FIP funded projects, including the Dedicated Grant Mechanism for Indigenous Peoples and Local Communities, will be presented to the WB Board for endorsement. 5. The FIP documents presented by the Indonesian FIP team in the meeting in Bogor, Indonesia, June 27 to 28, 2013, stated that the timeframe for the World Bank to prepare its forestry investment project The new consultation schedule for the “Community Based Natural Resource Management and Institutional Development Project” is currently under review and will soon be found under www.kph.dephut.go.id and www.kemitraan.or.id. It is important to highlight that this schedule will remain indicative as emphasis is on ensuring that the project is robust and responds to the issues identified in the consultations. Periodic World Bank missions will Page 5 Responses to Questions in Annex 1 of 1 June 2014 Letter from Rio Ismail (and other CSOs) on the FIP Development Process in Indonesia would be in accordance with the following schedule. Referring to the above schedule, please explain: update the implementation schedules. Aide Memoires will be made available at the same webpages and on the CIF/FIP webpage. The preparation and consultation activities under the DGM for IPs and local Communities can be found on DKN website (www.dkn.or.id). Future consultations and preparation schedule can only be designed after the first meeting of the National Steering Committee of the DGM. a. What parts of this schedule have been implemented by the World Bank so far? Please clarify any changes. Please, find a detailed update on the consultation process under the following website: www.kph.dephut.go.id and www.kemitraan.or.id b. Why are public consultation / FPIC process not included in the schedule above? Please provide a revised schedule which includes public consultation in the calendar. Otherwise lack of such scheduling seems to prove that there is still no intent to consult with the public in any meaningful manner On what dates will the (preparation, evaluation and draft proposal) documents be published and consulted widely and openly in accordance with the terms and safeguards of WB and FIP, prior to submission to the SC FIP? Refer to answer under 5 and 5 a. The estimated date for submission to the SC FIP is the last quarter of 2014, but this will need to be confirmed based on progress made on the consultation and preparation process. c. On what date will the first draft proposal document of the World Bank project and any draft operations manual be available for comment?, How will it be distributed – in what language and manner ‐ to receive inputs from indigenous communities, CSOs, and other observers of the project? How long will the public comment period be on the first draft? Based on the current schedule, the government expects to have a first draft of the project appraisal document for review by late September. However, this might change depending on the needs for further consultations. The relevant documents will be translated into the local language and all documents will be available for a period of time that is in compliance with the World Bank and national consultation requirements. The relevant safeguard frameworks that will be the basis for developing the operational manual will also be disclosed for a period of time required as per World Bank and national requirements d. What is the mechanism for the handling of public inputs according to the terms of FIP Please refer to answer 5 and 5 a. And in addition, as part of the consultation processes, the Preparation team of FIP Project II Page 6 Responses to Questions in Annex 1 of 1 June 2014 Letter from Rio Ismail (and other CSOs) on the FIP Development Process in Indonesia and WB safeguards, particularly with the FIP requirement which states that "conclusions and recommendations resulting from consultations should be integrated in the design and implementation of investment strategy, program or project”? (See Annex II) conducts a Multistakeholder Team meeting after the public consultation at regional and national level completed. The objective of this meeting is to discuss inputs and recommendation received from four regional and one national public consultation. This process is meant to ensure the transparency process and facilitate the integration of inputs that would feed into the design of project. The multistakeholder team consists of representatives from 5 chambers of DKN, the Ministry of Forestry, Kemitraan, as well as the World Bank (as an observer). e. What date will the second draft of these documents, revised after public input into the first draft, be available for public consultation? How long will the public comment period be? How much time is allocated for the process of integrating public comment on the second draft prior to submission to the SC FIP, Bank management and Board? The second draft of the project appraisal document and the associated frameworks will be developed and made available for public consultation within a timeframe that allows due attention to the issues raised and submission to the FIP SC (with the same caveat presented in the answer to 5b). Please see answer 5c for duration of public comment. f.
What date will the project design documents Please, refer to answer 5 a and 5 b. be submitted to the SC FIP? 6. Is the signing of the grant agreement between the World Bank with the Partnership for Governance Reform to prepare documents and an “operations manual” on 14 February 2014 a separate process from the rest of the FIP? If not, why has this been implemented prior to public consultation about the design of the FIP and the design of this process? If separate, please describe the consultation process The World Bank has signed a grant agreement with Kemitraan with the objective to assist the Ministry of Forestry with the preparation process of the “Community Based Natural Resource Management and Institutional Development Project”. Kemitraan will hire consultants and organize consultation processes on behalf of the Government of Indonesia along the criteria outlined above. It will also provide technical advice to the Government. However, the Government remains the responsible entity for the quality and the content of the project Page 7 Responses to Questions in Annex 1 of 1 June 2014 Letter from Rio Ismail (and other CSOs) on the FIP Development Process in Indonesia Second. Project Preparation Process in International Finance Corporation 1. Proposal to support industrial logging in an area up to 700,000 hectares of natural forest is in clear violation to FIP requirements. Given the fact that this is a large ‐scale violation, what steps will be taken to cancel this proposal?
There is no IFC proposal to support industrial harvesting of natural forest. As clearly stated in Annex 1.3 of the FIP Indonesia investment Plan (October 2012), Table A1.3.1 provides a framework and overview of potential private sector FIP initiatives in both natural and planted forests. Sustainable forest management (SFM) is a recognized element of REDD+ and does not violate FIP requirements. To date, IFC has not invested in natural forestry in East Asia. IFC’s focus has been to promote planted forests on degraded lands. It is likely that the focus on planted forests will continue under FIP, but other sustainable forest management (SFM) opportunities will be considered particularly in the context of adding value to supply chains for wood products by engaging small and medium forestry enterprises. 2. IFC FIP projects, programs and investments are likely to have a significant impact on forests, indigenous lands, indigenous and other forest dependent peoples, including women. Does the IFC recognize the right of affected people, including Indigenous Peoples, to accept or reject the project (consent)? If so, what is the mechanism for communities to exercise their right to decision making (accept/reject) about projects in indigenous (adat) forests or surrounding forests, in accordance with the principle of FPIC, Performance Standards of the IFC, and the consultation requirements of FIP Design document (attached Annex II)?. Following FIP sub committee approval of the Indonesia private sector FIP (PSF) program proposal, IFC will develop projects with individual forestry enterprises (clients) at specific locations in Indonesia. Prior to IFC project approval, clients will be subject to IFC’s due diligence process and evaluated for compliance with the 8 IFC Performance Standards (PS). PS1 on Assessment and Management of Environmental and Social Risks and Impacts states in Para 8 that affected communities will be identified early in the assessment process. Where indigenous peoples are among affected communities, IFC PS7 on Indigenous Peoples will apply, which is consistent with the FIP consultation guidelines. The IFC environmental and social performance standards can be viewed at http://www.ifc.org/wps/wcm/connect/Topics_Ext_Content/IFC_External_Corp
orate_Site/IFC+Sustainability/Sustainability+Framework/ Page 8 Responses to Questions in Annex 1 of 1 June 2014 Letter from Rio Ismail (and other CSOs) on the FIP Development Process in Indonesia 3. On May 14, 2013, the Indonesian Supreme Court recognized the rights of Indigenous Peoples to their forest territories. How will the IFC ensure that IFC projects, programs and investments do not interfere with indigenous rights to forest areas, in accordance with the Supreme Court ruling? All IFC projects and activities with clients are subject to IFC’s due diligence process and evaluated for compliance with the 8 IFC PS as mentioned above. IFC Performance Standard 7 on Indigenous Peoples and FPIC procedures can be viewed at http://www.ifc.org/wps/wcm/connect/topics_ext_content/ifc_external_corpora
te_site/ifc+sustainability/sustainability+framework/sustainability+framework+‐
+2012/performance+standards+and+guidance+notes+2012/performance+stand
ards+‐+2012 4. The FIP Design Document requires an eight‐part consultation process (see Annex II) for each investment strategy (the FIP is a strategy), program or FIP project. But until now these requirements have not been met, whether by the IFC or FIP team. Please explain in detail, for each part of the eight steps of the FIP consultation requirements, complete with materials proving that the consultation requirements have been fulfilled, how the IFC has met its consultation obligations to date under the FIP, including throughout the FIP development process. (See Annex 2) FIP Design Document: Guidelines for Consultations to be carried out in accordance with subparagraph 16(d) of the Design Document for the Forest Investment Program The IFC PS are consistent with the FIP design document and guidelines for consultations (Annex III). General consultation procedures are described in PS1, while specific consultation requirement for indigenous peoples are included in PS7. IFC has not selected any enterprises yet for the PSF program. IFC will formally engage with prospective enterprises following approval by the FIP Subcommittee of the PSF program proposal. Part of the selection and engagement process will include consultation with affected communities, including indigenous peoples in prospective project locations. 5. Will IFC FIP projects, programs and investments be brought to the IFC Board for approval? Do the Executive Directors have the right to approve (accept or reject) these projects which have a high risk of significant impact? On what date will the documents be presented to IFC Management and IFC Board? Or will the IFC’s FIP projects be approved soley by Management without Board oversight? Advisory services projects are approved by Regional Directors and the Global and Regional Heads of Advisory Services. Investment projects are approved by the IFC Board (Executive Directors). As the PSF program will include both advisory and investment projects, IFC will apply both approval procedures, respectively. IFC will only engage with specific enterprises on projects following approval of the PSF program by the FIP SubCommittee. The dates when the projects will go for Board approval will depend on the time taken for project development, consultations, and due diligence on the project’s compliance with IFC’s PS mentioned above. Page 9 Responses to Questions in Annex 1 of 1 June 2014 Letter from Rio Ismail (and other CSOs) on the FIP Development Process in Indonesia IFC Project/Program/Investment Schedule a. What parts of this schedule have been implemented by the IFC so far? Please clarify any changes. The schedule presented in the Investment Plan has changed to reflect the consultations and discussions with the various stakeholders in developing project concepts. IFC presented the following revised schedule at the June 2013 communication meeting at Bogor. A further updated schedule is as follows: From January 2013: Program Preparation (Concept note development; FIP team and administration; Meetings with potential private sector firms; IFC program concept note approval; Stakeholder discussions; FIP steering committee ; identify GoI counterpart; Coordination with other MDB programs) June 2014‐December 2014: Development of PSF program proposal (proposal formulation; stakeholder discussions at national and regional levels, and public consultation on draft proposal; submit program proposal to FIP Sub‐Committee for approval) January‐March 2015 (estimated): Begin implementation of advisory services phase of PSF program (Formal project engagement with at least one enterprise; Stakeholder consultation in project location with affected communities, including FPIC with indigenous peoples) It should be noted that IFC will only engage in advisory or investment services program when a client enterprise successfully meets IFC due diligence requirements. Any enterprise in the PSF program implemented by IFC must also meet IFC’s Environmental and Social performance standards. Screening enterprises that meet these two minimum requirements is a rigorous and time‐
consuming process. The schedule provided above is a best estimate at this time, and will depend on the time taken to carry out the required consultations and due diligence. b. In the schedule, the following activities are mentioned: preparation, evaluation, project approval by the FIP Team and IFC management but there is nothing about any public consultation or FPIC process. Please provide a revised schedule which includes public consultation in the calendar. Otherwise lack of such scheduling seems Refer to schedule discussed above, which includes consultation activities. IFC‐As per IFC PS7, all potential client projects affecting indigenous peoples undergo FPIC. This will occur during the project development period as part of IFC’s pre‐implementation planning and implementation preparation processes. Page 10 Responses to Questions in Annex 1 of 1 June 2014 Letter from Rio Ismail (and other CSOs) on the FIP Development Process in Indonesia to prove that there is still no intent to consult with the public in any meaningful manner. On what dates will the preparation, evaluation and draft proposal documents be published and consulted widely & openly in accordance with the terms and safeguards of IFC and FIP, prior to submission to the SC FIP? c. On what date will the preparation documents, evaluation documents or first draft proposal document or draft operations manual of the IFC project be available for comment? How will it be distributed ‐‐ in what language and manner ‐ to receive inputs from indigenous communities, CSOs, and other observers of the project? How long will the public comment period be on the first draft? The draft proposal will be available for public comment in the last quarter of 2014 and posted for at least two weeks at www.dephut.go.id, in Indonesian and English languages. A schedule of the public review process will also be posted. Comments will be received at Indonesia.fip@gmail.com. As above, once the PSF program proposal is approved by the FIP SC, at least one enterprise will be engaged in 2015 at specific location(s), where affected communities can be identified. It is at this point that consultations will follow IFC Performance Standards and FIP Annex III guidelines mentioned above for affected communities. d. What is the mechanism for the handling of public inputs according to the terms of FIP and IFC Performance Standards, according to the requirements of the FIP Committee and particularly with the FIP requirement which states that "conclusions and recommendations resulting from consultations should be integrated in the design and implementation of investment strategy, program or project"? (See Annex II) As mentioned above – a draft PSF program proposal will be available at www.dephut.go.id, in Indonesian and English languages. Comments will be received at Indonesia.fip@gmail.com. Public comments on the first draft of the proposal will be summarized and used to adjust and enhance the proposal design, while maintaining the spirit of the private sector investment focus of the PSF program. Other stakeholder consultations will also be held as indicated in 5 (a) and should program activities have an impact on indigenous people, IFC’s PS 7 requires that they are subject to FPIC in the project design phase. e. On what date will the second draft of these documents, revised after public input into the first draft, be available for public consultation? How long will the public comment period be? How much time is allocated for the process of integrating public comment on the second draft into the final draft prior to submission to the SC FIP, IFC management and Board? The second draft of the proposal will also be posted during the last quarter of 2014 at www.dephut.go.id, in Indonesian and English languages at for at least two weeks. Comments will be received at Indonesia.fip@gmail.com. Page 11 Responses to Questions in Annex 1 of 1 June 2014 Letter from Rio Ismail (and other CSOs) on the FIP Development Process in Indonesia Third. Money Laundering, Tax Evasion, and Importance of Cooperation with the Financial Intelligence Unit/ PPATK 1. At a meeting in Bogor 27 to 28 June 2013, the IFC representative Michael Brady and Harris Nasution said that the IFC has conducted preliminary discussions with 20 large‐scale companies. What are the names of those companies? Were the companies involved in the discussions with the IFC screened to ensure that they were free of forestry law violations, tax evasion, money laundering, human rights violations including women's rights? Correct name is Haris Iskandar. Companies that participated in FIP consultation events in 2011‐2012 are listed in Annex 2 of the Investment Plan. IFC is in various stages of discussion with several enterprises to determine interest and suitability for the PSF program. Enterprises are subject to IFC’s due diligence process as discussions progress. Compliance with IFC’s 8 Environmental and Social Performance Standards is evaluated as part of the due diligence. 2. Please provide details about the due diligence process used by the IFC to make a determination that a given company is free of money laundering , tax evasion, human rights violations, and corruption. No private sector enterprises have been selected yet for PSF program and projects. The due diligence process is described here: http://www.ifc.org/wps/wcm/connect/CORP_EXT_Content/IFC_External_Corpor
ate_Site/What+We+Do/Investment+Services/ 3. Has the IFC carried out due diligence to indicate no involvement in money laundering or tax evasion on the companies listed by the IFC in the FIP? For example, what due diligence was carried out on PT. Arara Abadi. Did the IFC find that Arara Abadi, listed by the IFC in the FIP document, engaged in human rights violations of local communities, engaged in conflict with communities, or used security forces to engage in such conflicts? (Please note that we asked this question in 2013 and received no answer.) Events in 2014 have only heightened our concerns PT Arara Abadi is not being considered by IFC for FIP. 4. As part of its due diligence process for the assessment of Yes. All IFC projects are subject to screening for money laundering and tax the potential for money laundering or tax evasion, did or evasion. will the IFC will analyze or map companies domiciled in secrecy jurisdiction / tax havens which are used or owned by forest sector companies or conglomerates under consideration for partnership with IFC? 5. To what extent is the IFC using the Asian Agri Supreme Refer to due diligence process. Potential enterprise clients are assessed on a Page 12 Responses to Questions in Annex 1 of 1 June 2014 Letter from Rio Ismail (and other CSOs) on the FIP Development Process in Indonesia Court decision as an important case which allows them to map in detail the practice of tax evasion and money laundering in the forestry sector? case by case basis. Tax evasion and money laundering issues are assessed in the due diligence process. 6. Does the IFC simply depend on the statements of the “large ‐scale clients" ( " self ‐ assessment" )? Or has the IFC sought or received input on specific clients from CSOs and the community? For which companies (company name) has the IFC conducted due diligence, including on the matter of money laundering, tax evasion, corruption? The PSF program of the FIP investment plan will address small, medium and large forestry enterprises, with attention to engaging smallholders and communities. IFC has been open to input on potential clients from all stakeholders, including CSOs and communities. However, potential client are always assessed on a case by case basis using IFC’s due diligence process. IFC‐Engagement with prospective clients is confidential. When engagements are formalized, IFC applies its IFC Access to Information Policy What was the process? Did the IFC do any due diligence before contacting potential partners for an initial discussion? Or did screening only occur after the discussions had already been held? (http://www.ifc.org/wps/wcm/connect/corp_ext_content/ifc_external_corporat
e_site/ifc+projects+database/projects) IFC‐Refer to due diligence process above. The IFC forestry team is familiar with many companies in the sector and is generally aware of those that will not likely pass the due diligence. Engagement with prospective enterprise clients is confidential. However, no 7. Did the IFC find Sinar Mas Group (listed in the IFC portion of the FIP) free of money laundering, tax evasion private sector enterprises have been selected yet for FIP project. Sinar Mas and corruption? Did the IFC find Sinar Mas Group and its Group is not being considered by IFC. subsidiaries to be free from involvement in forestry crimes, human rights crimes and other crimes? 8. Which companies (company name), including of the 20 companies listed by the IFC in the FIP, did the IFC find to be free from money laundering, tax evasion and corruption? Engagement with prospective enterprise clients is confidential. Potential clients are subject to the due diligence once IFC has determined that preliminary discussions warrant further pursuit. Several of the 20 companies have been subject to initial due diligence investigation. 9. It has been reported that IFC has a" blacklist” of companies that need to be avoided as a result of their FIP research / due diligence. Is the Sinar Mas Group and / or its subsidiaries on the “black list “of the IFC? Does the IFC report companies on their" black list” to the Financial Intelligence Unit/PPATK, the Corruption Eradication Commission, the Director General of Taxation or the public? IFC does not maintain a black list of companies. Potential clients are assessed on a case by case basis and are subject to the due diligence once IFC has determined that preliminary discussions warrant further pursuit. Page 13 Responses to Questions in Annex 1 of 1 June 2014 Letter from Rio Ismail (and other CSOs) on the FIP Development Process in Indonesia 10. If the IFC determines a suspicion criminal activity, corruption, money laundering, tax evasion, is the IFC not required to report this to the relevant national and international institutions? If so, when has this been/will this be reported or announced? Since the IFC is a public financial institution, when it will report these findings and the blacklist to the public? See above Fourth. Military Involvement Page 14 Responses to Questions in Annex 1 of 1 June 2014 Letter from Rio Ismail (and other CSOs) on the FIP Development Process in Indonesia 1. What assessments have the World Bank and the IFC conducted regarding the role of security forces, armed forces, armed thugs (preman) other armed agents in the Indonesian forestry sector, in general, as well as in the areas of planned FIP activities. If there are any such assessments, please make them public. If there are no such assessments, please provide a schedule for conducting these assessments, linked to the FIP project, program and investment schedule and prior to project, program, or investment design. The World Bank will not support any of the above mentioned groups. Prior to engaging with the private sector, IFC performs a rigorous due diligence analysis of prospective enterprises for both investment and advisory services. 2. Can the World Bank and IFC and FIP Team ensure that there is no military/TNI involvement in the FIP project areas? WB ‐ Refer to answer under point 1 above. IFC ‐ Yes, through IFC’s due diligence process, which involve an integrity risk assessment of politically exposed persons. 3. If there such involvement, what action will be taken by the World Bank, the IFC and FIP Team? WB ‐ No military involvement IFC ‐ Due diligence on security safeguards is explained in PS4. In addition, no FIP private sector funds are channeled through the public sector. 4. May FIP funds be utilized to fund military operations? WB ‐ No IFC ‐ No 5. If not, how can the Bank, the IFC and the FIP guarantee that support for the Ministry of Forestry or for the private sector will not be used to fund security forces or armed interventions against communities? Please explain the due diligence steps taken to date to ensure this. What monitoring and evaluation is being undertaken to ensure that the FIP, IFC or the World Bank are not paying for military operations through the Cooperation Agreement or other means WB ‐ WB resources will be spent based on a detailed procurement plan and will be periodically be supervised by the World Bank and by the Government’s audit programs. IFC ‐ Due diligence on security safeguards is explained in PS4. In addition, no FIP private sector funds are channeled through the public sector. Page 15 Responses to Questions in Annex 1 of 1 June 2014 Letter from Rio Ismail (and other CSOs) on the FIP Development Process in Indonesia 6. Do areas targeted for FIP, and especially IFC projects in areas in which there is conflict, contain military forces or other armed forces, including the police special forces (BriMob) or the Department of Forestry armed forces? WB – no definite areas for WB interventions have been identified. However, the Ministry of Forestry has recently carried out an internal exercise to define criteria for site selection and identification of potential sites for WB intervention IFC ‐ No private sector enterprises have been selected yet for PSF program. Those enterprises being considered do not have security issues beyond preventive and defensive needs. In all cases, PS 4 will guide security issues. 7. Are the military and elite police / Mobile Brigade ( Brimob ) and special police forces of the Forestry Ministry / SPORC funded directly or indirectly by the FIP or the IFC or IFC partner companies to secure the investment program ? WB – NO IFC ‐ No. Also see response 6 above. 8. What kind of due diligence steps are the FIP and IFC utilizing to ensure that partner companies do not use armed forces/TNI, Brimob and Forestry armed forces to resolve land use conflicts or disputes with communities? IFC ‐ Due diligence process and compliance with Performance Standards as described in responses 1‐5 above. Fifth. Consultations with Indigenous Peoples 1. Has or will the IFC also make the same commitment? IFC ‐ Yes, refer to IFC Performance Standard 1 on Assessment and Management of Environmental and Social Risks and Impacts (PS1), which describes consultation as part of general stakeholder engagement. More specific consultation with indigenous peoples is described in Performance Standard 7 on Indigenous Peoples. 2. What is the process to ensure “Equivalency” between the standards of the World Bank and the Indonesian national standards? The WB safeguards can be seen as minimum standards, application of higher standards are welcome 3. Will the "Equivalency" evaluation be conducted in accordance with the terms contained in the World Bank's Country Safeguard Systems? See above Page 16 Responses to Questions in Annex 1 of 1 June 2014 Letter from Rio Ismail (and other CSOs) on the FIP Development Process in Indonesia 4. Is Indonesia is a country that has passed "Equivalency" evaluations according to the conditions contained in the World Bank's Country Safeguard Systems? See above 5. Is there a requirement/commitment that for any activities in Indonesia FIP, the World Bank and the IFC will only use the national standard if the standard is higher than the standard of the World Bank? Or does this statement only apply to Indigenous Peoples? Or only to Indigenous Peoples under the World Bank project? WB ‐ Refer to responses 1‐3 above IFC ‐ PSF program and projects will comply with PS1, which requires that environment and social impact assessment be performed and include the identification of affected communities. PS 1 also requires that projects establish and maintain environmental and social management systems (ESMS), which include as elements: Stakeholder Engagement (stakeholder analysis and engagement planning, disclosure of information, consultation, etc.) and External Communications and Grievance Mechanisms. Free, Prior and Informed Consent (FPIC) is required for IFC projects involving indigenous peoples, as described in PS7. 6. In the Indonesian FIP, the IFC committed to using the FPIC process for the Indigenous People. Will the World Bank also commit to use FPIC (Free Prior Informed Consent) process for all project affected peoples? Please refer to WB responses to 1‐1 above. Sixth. Do No Harm Commitment In the Indonesian FIP, the ADB has committed to ensuring that FIP investments "do no harm" to the affected communities. Do the World Bank and IFC also commit to the same thing? Or do they propose that projects, programs and investment strategies are allowed to do "harm" to communities? WB ‐ WB safeguards are set up for this purpose; to prevent communities from being harmed by investments provided from World Bank projects. IFC ‐ IFC safeguards (performance Standards 1‐8 and Guidance Notes, etc.) will be followed to ensure environmental and social sustainability in IFC projects. Page 17