IFC watchdog investigates Postal Savings Bank of China over loan for Indonesian mine

Postal Savings Bank of China’s loan to a mining group was in apparent contravention of IFC environmental standards, complainants say

The probe marks the first time that the International Finance Corporation’s independent watchdog has investigated a Chinese financial institution

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An excavator loads soil onto a truck at an open pit mine in Indonesia in this 2019 file photo. Photo: Reuters

Published: 6:37pm, 27 Jul 2020Updated: 12:58am, 28 Jul 2020

An independent watchdog with links to the World Bank’s International Finance Corporation (IFC) is investigating a complaint that the Beijing-based Postal Savings Bank of China (PSBC) loaned money to a Chinese mining group involved in a plan to build a zinc mine in Indonesia’s North Sumatra without regard for environmental concerns, worrying locals.

The Compliance Adviser Ombudsman (CAO), which scrutinises the social and environmental concerns of communities affected by IFC-backed projects, launched the investigation because the PSBC – an IFC client that received a US$300 million equity investment in 2015 – loaned funds to the state-owned China Nonferrous Metal Mining Group and its Foreign Engineering and Construction Company (NFC) subsidiary in apparent contravention, activists say, of the IFC’s environmental and social standards.

This is because NFC went on to buy a controlling interest in Dairi Prima Mineral – which is developing the mine in Indonesia’s earthquake-prone Dairi Regency – from the politically well-connected Bakrie family’s Jakarta-based Bumi Resources Minerals.

The PSBC’s loan to NFC and its parent company had not previously been made public. CAO’s investigation – its first into a Chinese financial institution – revealed details of the loan in an internal letter seen by This Week In Asia that it sent to local communities in March via human rights group Inclusive Development International (IDI).

A graphic showing the flow of funds into the proposed zinc mine in North Sumatra. Image: SCMP

IDI and the North Sumatra Advocacy and Legal Aid Association (Bakumsu), a local NGO, helped residents file their CAO complaint in October.