Does ADB respect its safeguard policies?

by Hemantha Withange

ADB: The Asian Development Bank (ADB) is the second largest financing agency in the Asia-Pacific region. ADB is currently going through a safeguard policy review as a response to its business crisis. ADB lost its profits in 2004 since some middle income countries refused to accept ADB Ordinary Capital Recourses due to its long processing time and safeguard conditionalities.

Meanwhile, Countries such as India and China are strongly lobbying the ADB to weaken its safeguard standards. ADB safeguard policies include Environment policy (2002) Resettlement Policy (1998) and Indigenous people's Policy (1995).

ADB's role in development-induced displacement of local people has been widely criticized in the last two decades. In a number of contentious cases, displaced individuals and communities caused by ADB-financed projects have continued to suffer from the absence of basic income or sustainable livelihood and social services. Sri Lanka's Kirindi Oya Irrigation and Settlement project, which was built from 1978-1986 and uprooted around 15,000 families, is one glaring example.

Similarly, the recent ADB Special Evaluation Study (SES) of the Involuntary Resettlement (IR) Policy has bared these alarming findings: "ADB's project approved between 1994 and 2005 anticipated that the projects would have an impact on at least 1.77 million affected peoples (APs). Projects approved in the last five years were expected to affect between 100,000 and 150,000 people every year."

The study also reported that the actual figure is 65 percent, much higher than estimated in the RRPs. While 76 per cent of the APs have been affected by the transport projects across Asia, 61 percent come from the People's Republic of China. The findings point to public sector projects as responsible for majority of the displacements.

Specifically, the Involuntary Resettlement (IR) policy, adopted in 1995, has been one of the token measures developed by the Bank to avoid possible resettlement issues or cases. The policy also ensures that displaced people are compensated properly. It is very clear that these key provisions are crucial to the very survival of affected people and communities, which are increasingly being displaced to give way to the Bank's development projects.

Essentially, the IR Policy requires all ADB projects to uphold these major safeguard principles: (i) avoid involuntary resettlement where feasible; (ii) minimize resettlement where population displacement is unavoidable; and (iii) ensure that displaced people receive assistance, preferably under the project, so that they will be at least as well off as they would have been in the absence of the project.

It also specifies three types of assistance for APs: (i) compensation for lost assets and loss of livelihood and income; (ii) assistance for relocation, including provision of relocation sites with appropriate facilities and services; and (iii) assistance for rehabilitation to achieve at least the same level of well-being with the project as without it.

Despite these policies, communities have suffered due to the failure of the ADB and local executing agencies to implement them. The Southern Transport Development project in Sri Lanka and the Melamchi Water Supply Project in Nepal are just two projects with serious and controversial resettlement issues, which have been elevated to the Bank's Accountability Mechanism.

However local people did not get much benefit from this exercise due to bureaucratic red tape, corruption, lack of political will and the tug-of-war between International Financial Institutions and national/local agencies.

While ADB's new report has significantly underscored the Bank's role in the displacement of people, the stark reality remains the same: the number of projects that has resettlement issues has been rising. Likewise, we find it alarming that existing resettlement safeguards cannot be implemented in some Developing Member Countries (DMCs) due to lack of resources and capacity.

Development-induced resettlement is a crime against humanity if displaced individuals are not given the proper and just assistance for them to have better lives. However, some of the DMCs Government officials and bureaucrats see the compensation issue as a sacrifice for the national interest. They treat the compensation package as a privilege rather than the right of those affected people.

Sri Lanka's Appeal Court Judgment on STDP, however is emphatically clear about the issue. It has stated: "that if it is permissible in the exercise of a judicial discretion to require a humble villager to forego his right to a fair procedure before he is compelled to sacrifice a modest plot of land and a little hut because they are of "extremely negligible" value in relation to a multi-billion rupee national project, it is nevertheless not equitable to disregard totally the infringement of his rights: the smaller the value of his property, the greater his right to compensation."

Except in very few cases, affected peoples in rural areas are generally unhappy about what resettlement has done to their lives. This unhappiness is not only about compensation money. It practically stems from intangible and non-material losses that neither the Bank nor the Governments can ever be able to remunerate.

For example, the affected people in the STDP project not only lost their sustainable home gardens and paddy fields. Their relationships with relatives, neighbours, and friends have been unwittingly severed. Further, they have irretrievably lost their affinity with their former environment as well as access to natural resources.

Likewise, they have been dissociated from their schools and places of worship. They have lost other important social and environmental links that no financial recompense can match. Obviously, the ADB, or EAs have the capability to provide them their old lives. Therefore, avoiding development displacement remains the single, most important resettlement principle.

According to the new report 123 respondents surveyed inside the ADB, only 13 have environment background (while 56 and 38 respondents, respectively, have economic and engineering backgrounds). They are the key decision makers in ADB projects. It is clear that weak implementation of the Bank's environmental policy most likely due to lack of expertise.

On the other hand, the new report acknowledges the fact that among the more than 2,000 staff members of the ADB, there are only 17 safeguard specialists. Likewise, only 14 percent of the Appraisal Mission Leaders have received any environmental training.

The ADB cannot be excused for giving little attention and less consideration to putting in place qualified and better equipped staff to oversee the implementation of environmental safeguards in ADB-supported projects.

Country systems

The ADB is now considering for introducing "Country System." This means the country policies will be elevated to handle own safeguard requirements and ADB will only act as a funding agency. It is clear that Bank's policies and the country policies are far from being equal. In fact, most DMCs still do not have Involuntary Resettlement Policies in place.

This has somehow compromised the Bank's involvement in projects that involve displacement of people. Meanwhile, IFI's are now considering harmonization of the IFI policies in order to make it easy for the national governments to approve projects.

The pressing question is whether Country System can provide the necessary safeguards to affected people living in countries plagued with serious problems such as corruption, misgovernance, bureaucratic red tape, and incompetent court systems.

Will the monitoring of these projects be effective, objective and independent sans supervision from a third party like the ADB? Will this constitute an abandonment of the entire decision-making process on resettlement in favour of the borrowing countries?

Some countries do not acknowledge the basic human rights of people, whether they are legal or informal settlers. Country systems may be seen as a solution to this situation. But we would like to caution the Bank. Supporting these DMCS and their unjust policies under the country system approach would signify that the Bank is indirectly abetting such discriminative acts.

What needs to be done?

ADB's role in the displacement of people in the Asia-Pacific region is quite significant. The figures in China and India are very high. Development-induced displacements are rising annually in other DMCs too. The experiences of the affected people are not very positive. Other than IR Policy violations, problems such as corruption and bureaucratic tug-of-wars have further aggravated their sufferings.

ADB is not the only stakeholder to be blamed in the development induced problems. The local executing agencies have a bigger responsibility to ensure safeguards of the people and environment. However, the practices of these agencies are unacceptable in most countries. This needs to be change if the projects need smooth implementation.

Revealing the "bitter truth" of the ADB's capacity and quality of its safeguard expertise and its role as a leading institution in the region is a remarkable approach of the report. While this provides a momentum for the ADB to revisit its own capability and its role, it cannot be excused for some of its failures as a public institution.

The report shows that the ADB does not provide any benchmark for safeguard standards. Such an Institution cannot provide any positive development in the safeguard standards before the Bank improves its own capacity. Therefore, while the need of strengthening ADB's role for capacity-building at the country level is acceptable, it is better to strengthen its existing compliance and its monitoring role rather than "passing the buck" to the countries.