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. Last Updated: 07/27/2016

World Bank Drops $160M Tibet Plan

WASHINGTON -- Under heavy pressure from the United States, the World Bank's board overruled Bank leadership Friday and denied financing for a sensitive Chinese anti-poverty proposal.

The $160 million plan, part of which would have resettled 58,000 farmers, most of them ethnic Chinese, in an area that nomadic Tibetan herdsman once dominated, divided leading borrowers from rich nations, including the United States. Rarely has any World Bank project aroused as much internal dissent and outside protest.

China withdrew the project from consideration Friday morning, when the board made it clear that it would not agree to finance the project and would reconsider the plan only after a lengthy and potentially intrusive study on its environmental and social effects.

The Chinese delegate to the Bank, Zhu Xian, attributed the defeat to "enormous political pressures" brought to bear by wealthy nations and pledged that China would use its own money to finance the proposal.

Numerous outside groups campaigned to stop World Bank support for the project, and demonstrators gathered outside the Bank's headquarters in Washington and cheered the decision.

Advocates for Tibet have argued that resettling the Chinese farmers in Qinghai Province would reinforce Chinese claims to historically Tibetan lands.

For the 181 member nations of the bank, the struggle was over controlling the tens of billions of dollars that the Bank lends to developing nations each year. Developing nations, which were led by China, the Bank's No. 1 borrower and a nation that has often successfully defended its interests in international organizations, pushed the board to finance the project and leave its execution in the hands of Bank managers, people involved in the debate said.

But leading industrial nations argued that the Bank management had ignored its internal procedures when approving the project. The United States signaled that it believed that the board had to take a more active role in reviewing lending programs.

"We and numerous other shareholders were not prepared to support this project, because we did not believe that it was in compliance with the Bank's own policies," said a senior Treasury Department official. "The bank needs to prepare specific proposals to give the shareholders a greater sense of confidence that management has the internal capacity to apply its established internal policies."

An inspection panel commissioned by the board of the bank reported last month that the Bank had violated its guidelines when it approved the proposal. Bank officials acknowledged errors but dismissed the report as an attempt by some board members to exert more control over day-to-day affairs.

People involved in the discussion said the United States and Japan wanted to kill the project outright and Britain, Germany and other European nations were prepared to consider the case again after the Bank had studied its effects more thoroughly.

But China objected to a fresh review. Zhu said some nations were using the cover of internal guidelines as a way to inject political control over lending. "Compliance policies have been interpreted by some to an extreme and used for political purposes," Zhu said.

China's decision to withdraw the project is a setback for the Bank's president, James Wolfensohn. He had urged the board to approve the proposal. Wolfensohn, recently reappointed with U.S. President Bill Clinton's support, favored the plan despite U.S. opposition.

The Bank thinks of China as one of its most successful customers. It has loaned China $4 billion for 31 anti-poverty projects and helped 200 million Chinese climb out of poverty in the last 20 years, Bank officials say.

Supporters of the Dalai Lama, the exiled spiritual leader of Tibet who was born in eastern Qinghai, have argued that the Bank would have contributed to increasing Chinese domination in the Tibetan region by helping to move mostly Han Chinese and some Hui Moslem farmers into a largely unsettled area of Qinghai. Some Tibetans claim that area as part of their homeland.

Nations that opposed the proposal said they did so more because of how the Bank had handled it rather than because of the project itself.

The United States and Japan argued that the panel's conclusion should be enough to end discussion of the plan. But several other wealthy nations thought it made sense for the Bank to be involved, especially because China intended to pursue the project on its own.