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Good Governance
or Bad Mangement
An Overview of the ADB's
Decision Making Processes
and Policies
Focus on the Global South
c/o CUSRI, Chulalongkorn University, Bangkok 10330, THAILAND
Tel : 662 218 7363/7364/7365/7383 • Fax : 662 255 9976
E-mail : admin@focusweb.org • Web page http://www.focusweb.org
May 2002
C o n t e n t s
A Master-plan for Market Expansion:
3 The Asian Development Bank and Governance
By : Shalmali Guttal
Providing What Justice, and to Whom?:
7 The ADB's Access to Justice Programme for Pakistan
By : A. Ercelawn and M. Nauman
The ADB's Uncivil Engagements:
17 The Experiences of Chashma Affectees
By : Mushtaq Gadi
22 The Sri Lanka Southern Transport Development Project
By : Heather and Cyril Mundy
25 Hijacking Development in Madhya Pradesh
By : Raghav Narsalay
30 BOT, Governance and the ADB
By : Andrew B. Wyatt
38 The ADB - “Governing” The Pacific?
By : Aziz Choudry
42 The Citanduy River Diversion Project: Some Critical Thoughts
By : Susi Pudjiastuti and P. Raja Siregar
Disclosure, or Deception?: Multilateral Institutions
47 and Access to Information
By : Shalmali Guttal
Governance and the ADB: Complicity and Conflict of Interest
52 By : Jenina Joy Chavez
2
A Master-plan for Market Expansion
The Asian Development Bank and Governance
By Shalmali Guttal*
In its 1999 policy on governance, the the development process and encompasses the
Asian Development Bank (ADB) states, “The functioning and capability of the public sector,
term ‘governance’ means different things to and the rules and institutions that provide a
different people.”i In relation to the ADB, this is framework of conduct for government, public
certainly true. The ADB’s forays into good enterprises, private business and corporations.
governance over the past few years clearly show Although its policy states that “governance is
that what governance means to the ADB is quite about the institutional environment in which
different from what it means to millions of citizens interact among themselves and with
people in the Asia and Pacific region, who are government agencies/officials,”iii the policy
unfortunately under its financial (and neither discussed, nor recognises a meaningful
governance!) umbrella. role for citizens in governance processes,
For most people, precepts of good frameworks and mechanisms.iv
governance would imply publicly accountable The ADB does, however, articulate in
systems of rights, entitlements, laws, rules, considerable detail what governments—as
distribution and use of resources, decision “economic development managers”—must do in
making, and so on, that are based on universal the area of good governance. The ADB claims a
principles of equality, equity, and justice, but “legitimate and direct interest in governance
which at the same time, allow for the cultural issues” because of its involvement in the
specificities of a society or nation. For the economic development of its DMCs. Its
ADB, however, governance is about putting into framework for governance both, arises from and
place the required policy environments and supports, its development ideology.
structures in its Developing Member Countries
(DMCs)—who are also its debtors—to ensure
the success of ADB financed programmes. Getting it right
By its own admission, the ADB’s The ADB is a market fundamentalist in
approach to governance is “economic” rather its economic and development approaches. Its
than “political;” i.e., the Bank regards good poverty reduction strategy is based on
governance from the perspective of “efficient unshakable beliefs in the wonders of rapid
management of public resources” and “sound economic growth, financial liberalisation,
development management.”ii Accordingly, good privatisation, deregulation and increased market
governance is about “effective management” of “openness.” By adding the phrase “pro-poor” to
*Shalmali Guttal is the Coordinator of the Micro-Macro Issues Linking Programme at
Focus on the Global South (s.guttal@focusweb.org).
3
its usual range of operations, it seeks to justify the capacity of borrowing governments for
its efforts towards private sector and market policy formulation and implementation. While
expansion. For example, the stated purpose of a the policy objective in a particular DMC sector
conference in March 2002 on privatised might be clear enough, knowledge of the
infrastructure development was to: help institutional framework and its capability will be
disseminate information on “pro-poor helpful in the design of reform measures.”vi
infrastructure development by the private In other words, “good governance”
sector,” showcase lessons on “pro-poor contract provides the ADB with an effective and
design regulation and reform processes,” and legitimate window though which it can
discuss current thinking on “pro-poor reform institutionalise the reforms needed to firmly
policy in infrastructure development.” establish market capitalism among its DMCs.
Appropriately, the conference was titled “Private This involves writing new laws and regulations,
Solutions for the Poor.” It is extremely unlikely developing new administrative and management
though, that the poor themselves were present at systems, creating new positions and roles within
the Conference. government, institutionalising new decision
The Bank’s governance policy—which is making processes and in fact, doing whatever is
considered an integral component of its poverty required to ensure that the DMCs stay firmly on
reduction strategy— is in effect, a master plan of the path of market-led economic growth.
strategies, directions and actions that borrowing
governments must follow in order to ensure the
supremacy of market processes, structures and Hiding behind the Charter
mechanisms in all aspects of social and The ADB’s charter prohibits it from
commercial life. This is no secret and the ADB “interference” in the political affairs of its
is makes its ideas on the correct place for members and from being influenced by the
government, the public sector and private political character of its members. Under
enterprise in economic development quite clear: Article 1 of the Charter, the purpose of the Bank
“In a market-oriented economy, the is to foster economic growth and cooperation in
government has the obligation to see that the region, and the Charter clearly gives primacy
markets function efficiently and that the playing to “economic considerations” in the carrying out
field is level for all participants.....Market of the ADB’s purpose and functions. By its own
regulation by the government should ensure that admission, however, the term “economic
the operating rules do not discriminate between considerations” has been “widely interpreted”
individual participants or interest groups.”v and ADB programs extend to any area that is
The ADB’s approach to governance deemed to have “economic effects.”
poses serious threats to preserving autonomy Accordingly, the Bank’s governance agenda too
and sovereignty in national policy making. has extended into such diverse areas as the
While the Bank claims that its principal activity environment, education, health, judicial systems
is project lending, it argues that weak and women’s empowerment.
implementation capacity and poor sectoral On the other hand, the ADB is not quite
policy frameworks in borrowing countries can as willing to recognise the political
negatively impact technically sound and well- consequences of restructuring national policy
designed projects. Therefore—the Bank environments that form the core of it
argues—it undertakes programme or policy governance programmes. While it is true that
based lending to complement its project social and environmental programmes have
financing activities. Such program loans cover a economic effects, all programmes, economic or
range of activities, from local and sectoral social, also have political effects.
studies to developing plans and strategies for the Numerous examples can be found in the
reforms of entire sectors (for example, judicial, region where the access and rights of people and
administrative, transportation, agriculture, communities to crucial resources and
education, etc.). According to the ADB: opportunities have either been severely
“These efforts at helping DMCs ‘get restricted, or lost altogether as a direct
policies right’ are now commonplace in the consequence of ADB supported projects and
Bank, and have led it to take greater interest in programmes. Policy prescriptions such as
4
enhanced cost recovery for health, education emerging track record of poor management and
and public utilities, water user fees in irrigation project quality, negative project and programme
systems, the rationalisation (downsizing) of civil impacts, and allegations of corruption in
service sectors, creating “flexibility” in labour numerous World Bank financed initiatives, the
markets, and the privatisation of public sector World Bank is indeed a poor role model of
enterprises, have resulted in the governance for any multilateral institution.
disempowerment and marginalisation of large
numbers of people across the region. The
ADB’s strategy of “pro-poor growth” has Reconstructing the public domain
encouraged governments to freeze minimum The ADB has identified four elements of
wages and withhold the rights of workers to good governance for its purposes:
association, benefits and protections. In Accountability, Participation, Predictability and
countries such as Pakistan, India, Thailand and Transparency. All four elements are
the Philippines, protests against ADB projects operationalised by policy and sectoral reform
and programmes have resulted in social unrest programmes that promote private sector needs
and divisions, and at times, even political over public interest priorities. For example,
harassment of those who protest. “The litmus test [for Accountability] is whether
Since the ADB’s framework of private actors in the economy have procedurally
governance does not discuss the political simple and swift recourse for redress of unfair
dimensions of governance, it shows little actions or incompetence if the executive
interest in the fact that its own projects and authority.” And, “Access to accurate and timely
programmes may violate the constitutional information about the economy and government
rights and democratic spaces of citizens. Too policies can be vital for economic decision
often, reform regimes imposed by the ADB have making by the private sector.”viii Predictability
acted as barriers to the accountability of is about developing legal frameworks, especially
governments to their own citizens, and to the to support private sector development.
protection of broad based public interest. The The ADB claims that its “bread-and-
transformation of public sectors to serve butter business” is assisting the public sector in
corporate and market interests in the guise of DMCs. This assistance is geared primarily
“efficient management of public resources” towards the reform of public enterprises, with a
undermines the obligations of governments to concomitant process of reconstructing an
provide appropriately and sufficiently for their “appropriate” role for the State in a market-
citizens. It also creates new vulnerabilities, friendly economy. Maximising profits,
especially among those who are already income minimising costs, preserving markets, market-
poor and politically marginalised. Not only has friendly economic reforms, promoting market
the ADB not accepted its culpability in these mechanisms in the provision of services,
consequences, but also, it has consistently competitive operating environments, enhanced
hidden behind the privileges that its Charter cost recovery, divestiture and privatisation, are
provides and assumed a politically neutral face. the main concerns that guide the ADB’s
The ADB has taken much of its content assistance to the public sector, and the
and operational strategy regarding good operationalisation of the ADB’s elements of
governance from its sibling institution, the good governance.
World Bank. Inspired by the World Bank’s The ADB’s governance policy is vehicle
“global experience with project and adjustment for entrenching sectoral reform and
lending,” the ADB feels confident in positioning reconstructing the public domain. It is also
good governance as “sound development fundamentally contradictory. While the Bank
management” necessary for “ensuring adequate claims to eschew involvement in political
returns and efficacy of the programmes and aspects of governance, its core mandate-
projects financed.”vii promoting economic development-is a deeply
The World Bank’s Charter also prohibits political phenomenon. Economic development
it from engaging in political activities and plans determine the distribution of a society’s
directs that decision-making be based on wealth, opportunities and challenges, who gains
economic considerations alone. But given the and loses, and how power is realigned or
5
entrenched. It is both delusional and self-
serving for the ADB to project that the political
and economic dimensions of governance can be
separated in policy and reality.
The ADB’s policy on good governance
offers no prescriptions for its own institutional
governance. Accountability, Participation,
Predictability and Transparency are the
buzzwords for governments, but appear not to
apply to the ADB’s own conduct or operations.
ADB insiders have revealed that the institution
is increasingly plagued by poor and
irresponsible performance by Bank staff and
Management, and a lack of clarity about its own
operational policies and procedures. Questions
have been raised in meetings of the ADB’s
Board of Directors about the appropriateness of
Bank conduct in formulating, processing and
implementing projects. Controversies
surrounding a number of ADB projects and
programmes—from the Chashma Canal Project
in Pakistan to reform programmes in the Pacific
Island States-reveal that the ADB’s commitment
to good governance is at best a lie and at worst,
antagonistic to nationally meaningful and
accountable governance structures and
mechanisms.
Evidently, there is a lot for the ADB to
learn and acknowledge about the implications of
its specific version of governance. The ADB is
well advised to clean its own house and
demonstrate its accountability to citizens and
their governments before imposing its version of
governance on the people of the region.
i Governance: Sound Development Management.
Asian Development Bank, August, 1999. Page 3.
ii Ibid. Page 20.
iii Ibid. Page 3.
iv It could be argued that the ADB alludes to
citizens in its language on private sector actors;
however, the policy contains no meaningful
discussion about a country’s citizenry as a force
discrete from economic actors.
v Governance: Sound Development Management.
Asian Development Bank, August, 1999. Page 5.
vi Ibid. Page 16.
vii Ibid. Page 7.
viii Ibid. Pages 8-13.
6
Providing What Justice, and to Whom?
The ADB’s Access to Justice Programme
for Pakistan
By A. Ercelawn and M. Nauman*
The Asian Development Bank (ADB) the ADB Loan Document (RPP: PAK 32023) for
proposes to assist Pakistan in improving the Access to Justice Programme (AJP). A
governance through loans of $350 million and a request for full documentation has been made to
grant of $0.9 million. These loans and grants the Minister for Law and Justice, Mr. Khalid
include $20.9 million for technical assistance, of Ranjha (the former Minister was Shahida Jamil).
which 4 million dollars will go for training, In the meantime we rely on the document
workshops and public awareness campaigns (i.e, made available by Mr.Hamid Sharif at the ADB
slush funds and disguised kickbacks). The office1
Government of Pakistan (GOP) will contribute Supposedly, the request for donor
$25 million to a national Fund. Of this, a Legal assistance for a Justice programme came from
Empowerment Fund can get up to $5 million, the Federal Government, rather than being
which may be used by “approved” civil society imposed upon Islamabad by the ADB. Is it then
groups for advocacy efforts, although not a mere coincidence that the text of the letter
presumably against donor boondoggles. from the Finance Minister reads like the loan
The loan commenced in December 2001 document? Or is because the same types of
and ends in December 2004. The Federal consultants drafted both documents?
Ministry of Law, Justice and Human Rights, will
be the executing agency through a special
Programme Management Unit. The right rhetoric
In view of the substantial addition to The loan document states the rationale of
already unserviceable indebtedness, and/or the programme as follows:
because of a record of systematic plunder and “Vulnerability, justice, and entitlements
squander in externally determined “assistance” are closely linked. Vulnerability is a function of
programmes, all donor projects need sustained, insecurity of access to key sets of material,
critical watching. Such monitoring has become social, political, and environmental assets.
all the more necessary after the United States Justice is a function of the relationship between
(US) has signalled to donors that Pakistan’s institutions responsible for delivering
ruling elite must be generously rewarded. entitlements (public goods and services)
In preparation for this project, over $4 predictably, affordably, and accountably, and the
million have been, and are being spent spent ability of citizens to secure and sustain their
through Technical Assistance (TA) grants since access to key sets of assets. The pro-poor
1997 (TA 2979-PAK, 3015-PAK and TA 3433- rationale of this Programme assumes that efforts
PAK, 3640-PAK). to limit the vulnerability of the poor to the
This paper provides an initial review of vagaries of systems of administrative, political,
*A. Ercelawn and M. Nauman are with the Creed Alliance in Pakistan
(awarakhi@yahoo.com, darvesh@super.net.pk)
7
civil, and criminal justice are at least as Serious business
important as macroeconomic performance in The loan document claims that the “the
poverty reduction.” AJP is to assist the Government to improve
This rationale requires recognition that access to justice so as to, (i) provide security and
law is about the power to regulate social and ensure equal protection under the law to
economic relationships. Hence, changing the citizens, in particular the poor; (ii) secure and
balance of power is intimately related to sustain entitlements and thereby reduce the
promoting justice as the acknowledgement and poor’s vulnerability; (iii) strengthen the
realisation of rights. But the document legitimacy of state institutions; and (iv) create
compromises the notion of justice by defining conditions conducive to pro-poor growth,
the programme as a way to merely “influence especially by fostering investor’s confidence.”
the exercise of political, administrative and The Programme will contribute to these
judicial power so as to improve the accessibility aims by supporting five inter-related governance
of public entitlements for all citizens, in objectives: “(i) providing a legal basis for
particular the poor, women, and minorities.” judicial, policy, and administrative reforms; (ii)
The ADB asserts that “poverty reflects improving the efficiency, timeliness, and
social and political processes that are mediated effectiveness in judicial and police services; (iii)
through a range of institutions. “ But how about supporting greater equity and accessibility in
the economic arrangements enforced by the justice services for the vulnerable poor; (iv)
state? Or more generally, the creation of improving predictability and consistency
institutions that favour property over labour? between fiscal and human resource allocation
Does it really matter that social and political and the mandates of reformed judicial and
processes would be made more benign without police institutions at the federal, provincial and
altering the institutions themselves? local government levels; and (v) ensuring
The ADB’s analysis, however can only greater transparency and accountability in the
lead it to assert that “the vulnerable poor are performance of the judiciary, the police and
especially affected by their relations with a administrative justice institutions.”
dysfunctional and predatory local state” Will the AJP then also permit financial
(original emphasis). It is such an anemic support to groups endorsing or supporting the
approach, or perhaps self-serving naivet?, that referendum for sustaining reforms with Chief of
results in the absence of any efforts in the loan Army, General Musharraf as President?
programme to support the mobilisation of the
poor themselves for collective action in defence
of their rights. Guiding rules
The AJP objectives are marked by the
absence of explicit reference to the national
Just markets constitution, or even international conventions,
“In addition, the present legal framework such as the UN Conventions on Social,
and the performance of judicial institutions Economic and Political Rights and the ILO
significantly constrain market-based economic Declaration of Principles. This is self-serving
growth, and in particular hinder foreign direct since the State and its financiers cannot be held
investment as well as the growth of small and accountable by objective, substantive
medium-sized enterprises.” benchmarks. Also worrying is the equation of
law with justice in a country with a record of
And, “....the informal legal system is incomplete translation of the Constitution into
insufficient for adequate market-based economic laws, of laws that endorse exclusion and
growth, and constrains significant foreign direct discrimination, and more generally, of laws that
investment as well as the growth of small- and permit the State to not acknowledge and protect
medium-sized enterprises.” people’s rights.
The attached Poverty Assessment is What are we to make of the emphasis on
illuminating in this regard. securing assets? Are rights and justice to be
thought of as little more than economic
transactions? In which case, the prevailing
8
system of bargains between state agencies and Negotiating, or managing
the poor through local negotiations of property contradictions?
rights for life and livelihoods is already on the Some degree of tension naturally prevails
right track. within and between the Programme rationale
The first sentence and paragraph of the and Programme objectives. How are these to be
Introduction to the main Programme proposal is resolved when promoting justice to the poor
revealing in the narrowness of Bank conceptions collides with making the country investor-
of justice — “governance has emerged as friendly or market-friendly? What if
Pakistan’s foremost development priority.” Not environmental conservation implies a different
a word about participatory democracy is to be growth model, one that is poor-friendly but not
found in this section, as through progress on statistics friendly? In every sector, numerous
realising social and economic rights can happen illustrations can be given of serious adverse
without the fundamental right of association in impacts upon the poor and the environment as a
all its meanings. result of the drive for (naturally profitable)
It is considerable number of pages later privatisation and of the obsession with
that issues of political justice are taken up in the infrastructure. What then of justice as commonly
loan document. This disjunction between understood? Moreover, as the Kirthar case
priority and treatment is not accidental, since the illustrates, “enforcement of environmental laws”
project only pays lip-service to addressing the becomes a travesty of justice when laws are
political implications - as institutions for modified in favour of foreign investors as a
collective voice and response — of promoting consequence of unrelenting pressure by the
justice for the poor. ADB and the World Bank for privatisation of
The language is revealing in defining the the energy sector.
goal of the AJP as “an efficient, citizen-oriented Accountability of “judiciary, the police
judicial system” and uncomfortably resonant of and administrative justice institutions” is also
the Bank’s aim of economic reforms towards an included as an objective. It is then puzzling why
efficient and consumer-oriented system. To virtually the same institutions have been made
repeat, justice is about rights and people rather the implementing agencies. Set a thief to catch a
than laws and citizens. Until this distinction is thief?
accepted, dangerous confusion will persist about Also notable is the absence of any
the nature of reforms needed to promote the reference to the obligations of a just state - a
realisation of rights through reforms in the constitutional mandate in Pakistan — to
justice system. Over the past half-century it eliminate the private oppression and exploitation
should be more than obvious that the State of people that is engendered through denial of
acknowledges few rights and permits even fewer social, political and economic rights. As an
entitlements. extreme example there is bonded labour; more
The shallowness of ADB’s analysis is common is the denial of even a decent living
also reflected in the statement that “the most wage. More broadly, we have the exclusion of
serious constraints are found in the political women from ‘public space’ but inclusion as
culture, and in sanctions bearing on the property rights of men.
judiciary, police and administration.” Of course “Concentration of power at the federal
these are important factors. But central to the and provincial levels has limited broader
plight of the poor are the inequitable and participation which has led to overrepresentation
oppressive economic and social arrangements of feudal and business interests.” How would
that underpin the Pakistani State, and which will balanced representation substantively affect
surely worsen as the State embraces justice for the poor? It seems that the ADB
globalisation at the behest of Washington and shares the frivolousness of those who believe
Manila. and would have us believe that an enduring
freedom to `do your own thing’ reflects
substantive justice.
It is absurd to state that “no adverse
social impact is anticipated” or that “no adverse
environmental impact is anticipated,” from the
9
Programme when a key objective is to promote accidental since implementation details show
property rights in markets and of investors, i.e. much of the project rationale to be mere
to privilege capital over labour, rather than to rhetorical.
nurture community and people. “A National Programme Review and Co-
ordination Committee (NPRCC) will review and
co-ordinate overall progress, and corresponding
Gender issues Provincial Programme Review Committees
Predictably, the project includes attention (PPRCs) will operate at the provincial level. The
to gender aspects of injustice. But is this chairperson of NPRCC will be the secretary of
attention substantive? Consider the assertion MOL. NPRCC will comprise one representative
that “in most aspects of their lives the poor rely of each of the provincial high courts, to be
on informal justice and dispute resolution forum nominated by their respective chief justices; the
that in some respects have been more effective secretaries of the ministries of Law, Finance,
than formal mechanisms.” Any serious observer and the Interior; the director general/secretary of
would agree that jirgas and panchayats are quite the National Public Safety Commission; the
effective, but only in oppressing women by secretaries of the provincial law departments;
exclusion of participation and blatant one representative nominated by the Pakistan
indifference to their rights. Bar Council; the director general of FJA: one
representative of the Law Commission; one
representative of the Federal ombudsman; and
Implementing agencies one representative of civil society nominated by
The Federail Ministry of Law, Justice the Federal law minister. Each PPRC will be
and Human Rights will be the executing agency headed by the chairperson of the P&D or the
for the loans and technical assistance, through a additional chief secretary (development) of the
special Programme Management Unit. P&D. A PPRC will comprise the secretaries of
Implementing agencies will be the Federal Law departments of Law, Finance, and Home; the
Commission, Ombudsman, Judicial Academy, high court registrar; the provincial inspector
and the Ministry of Interior. Provincial general of police; the secretary of the provincial
implementation will be done by the Dapartments PSC; two representatives of subordinate courts
of Law, Home and Planning & Development, to be nominated by the chief justice of the high
involving the Ombudsman, High Court, and court concerned; and one representative of civil
Public Safety Commission. society appointed by the governor. NPRCC and
The Ministry of Law, Justice and Human the PPRCs will be assisted by the outputs of the
Rights is not renowned for even comprehending, TA grant, which will focus on programme
let alone acting upon, rights. Their support to the monitoring and evaluation. Under the TA, civil
dilution of the National Policy & Plan for society participation will be encouraged together
Bonded Labour is the most recent illustration of with public surveys.”
odious conduct and wholly incompatible with When the State is the problem, there is
the mandate of the ministry. little point in packing implementation and
Also of note is that the Federal Ministry oversight mechanisms with State functionaries.
of Interior and the Provincial Home Department For example, the Environmental Protection Act,
are central to implementation, despite their and the Bonded Labour Abolition Act do not
ignoble records of repression rather than justice. function because the highest state officials will
Similarly, the provincial Planning & not allow it to be enforced. In fact, even the
Development Department is the co-ordination existence of widespread agricultural bonded
link, in spite of a public record of suppressing labour is denied at the highest levels in the
people’s rights through project boondoggles and province of Sindh.
displacements. Furthermore, public debate and
Since the Programme rationale includes transparency are prerequisites of serious
economic and environmental rights, glaring also reforms. Does anyone really believe that these
is the absence of any institutions directly are likely to be fostered by the proposed
involved with labour or environment, at either implementation arrangements?
federal or provincial levels. This is not
10
What benefits? To whom? efforts to transform the performance of the
The Bank claims that “AJP will deliver judiciary and the police such that the citizenry
benefits in three domains. Actions in the first will regard these institutions as the important for
domain, policy and legal provisions, will secure the assertion and protection of their rights, while
(i) greater judicial independence, transparency, the poor will feel confident to use them to
and accountability; (ii) better citizen-state reduce their vulnerability. While the benefits of
relations; and (iii) more durable public the improved rule of law are indispensable to
institutions responsible for the delivery of improve economic performance, the AJP will
justice.” decrease vulnerability for the poor in substantial
These reforms in policy and law are ways including (i) alleviating the vulnerability
likely to yield lukewarm benefits that will make arising from everyday harassment, under
little positive difference to the range of the performance, exclusion, and denial of basic
rights of the poor. rights by public officials; (ii) easing the
“Actions in the domain of institutional vulnerability of informal sector activities to rent-
performance will result in: (i) greater judicial seeking activities of officials responsible for
independence, fostering the predictable, timely licensing and regulating people’s access to
and impartial rule of law conducive to investor economic and environmental assets; (iv)
confidence; (ii) a dramatic decline in political improving the accountability of public officials,
interference in police services; (iii) enhanced and improving the accessibility and affordability
institutional arrangements for holding public of public goods and services on which the poor
servants and officials accountable for violations rely disproportionately.”
of citizens’ rights and entitlements; and (iv) If realised, these claims are of
greater public engagement in planning and revolutionary performance. Certainly a first
monitoring the performance of judicial and reading of the document belies these claims.
police service delivery. What are we to make of the assertion, “
Accountable to whom? Engagement by The vulnerability of the poor is significantly
whom? The usual coterie of public exacerbated by their weak literacy in law and
representatives, uniformed or otherwise, give the inability to enforce the law.” Is this a
little reason for optimism that accountability to question of inability, or design/intention? Or,
the poor for their rights can somehow be secured that “it is apparent that patterns of adult literacy
without direct, collective action by the poor greatly affect the capacity of the poor to access
themselves. the opportunities created by reformed public
Combining claims in the first and second institutions.” What types of rights and services
domains suggests that greater judicial are we talking about? Since literacy is currently
independence is largely to be confined to largely absent among the poor, whom then is the
promoting investor confidence. This is AJP really going to serve?
especially ominous in light of the frequent If the poor are admittedly non- or not
expressions of making labour and environmental fully literate, how and through which
laws as investor friendly, i.e. turning the entire intermediaries would they benefit from the
country into an export processing zone where following programme actions? “Freedom of
capital can operate with much impunity. Has Information (FOI) law will be passed, and the
anyone at the ADB bothered to think about the public will be informed of its meaning and uses.
decades it would take even with high economic Publication of laws efficiently through the
growth to wipe out existing income poverty? official gazette will be reviewed, and web
publication of all laws will be achieved during
The loan document further claims that: the AJP period. A law will also be enacted to
“Actions in the third domain, ensure that all regulations and circulars having
budget/expenditure management, will result in the effect of law will be published in the official
greater consistency between allocations of gazette. The Ministry of Law (MOL) and the
human and fiscal resources and institutional Department of Law (DOLs) will be assisted in
responsibilities for the delivery of justice at the timely publication of the official gazettes,
federal, provincial, and local government levels. including publication on the web. In addition, to
The AJP will contribute to the Government’s enhance the public’s understanding of the law,
11
simplified explanations of all new laws will be “access to justice in private life, economic
published in Urdu. Over the AJP period, livelihoods, and public goods and services are
simplified Urdu explanations of major enacted profoundly affected by the administration and
laws such as the Civil and Criminal Procedure police as well as the judiciary.”
codes and the Penal Code will be published.” “Second, programmes in support of
Whether simple or complex, documents in and reforms can provide short-term incentives for
of themselves are irrelevant to those who are policy reform, but they cannot supplant or
non-literate! precede prior domestic political commitments.”
“To provide quick relief against unlawful How then are the poor to be mobilised to press
imprisonment, a study on the law of habeas for such political change in the State?
corpus will be initiated and recommendation “Third, reform programmes must assist
implemented to increase access to justice in governments to articulate these commitments
such cases.” Does unlawful include private into long-term budgetary arrangements that
imprisonment? There is no evidence that the provide for independence of the judiciary and
AJP intends to deal with the current situation in devolve spending powers to the appropriate
Sindh, where the High Court has essentially administrative level of authority. Fourth, reform
denied the application of habeas corpus to programmes must work with governments, civil
bonded labour society, and the private sector to define, embed,
and extend institutional arrangements to
articulate policies/laws and enabling resources.”
Safeguards and risks But one would imagine that justice calls for
The loan document considers that, creating new arrangements rather than merely
“Three factors present particular risks to defining or extending them. How are the poor to
the reform process, each of which is only participate in these partnerships? What kind of
marginally within the capacity of the AJP to justice would we have if profits are the sole
mitigate: (i) the fiscal crisis will make it incentives offered to the private sector to
extremely difficult for the Government to collaborate?
adequately and predictably resource the reforms Coalitions and alliances of the poor with
over the next decade; (ii) implementing civil society are necessary (even if insufficient)
government commitments to reform will depend for promoting justice. It is then rather odd that
on corresponding constituencies being created the Bank does not require the project design to
among provinces and local governments and on be focussed on facilitating such coalitions and
the facilitation of broad coalitions and alliances alliances. Is it any wonder that mobilisation of
with civil society; and (iii) the window of the poor does not figure anywhere in the
opportunity for reforms, through to October document as a “safeguard” intrinsic to the
2002, is vulnerable to uncertainty, within both realisation of the project objectives?
Pakistan and the region. While the AJP design, But then even the provision of justice is
in particular the TA loan, will assist in characterised by the ADB project as service
ameliorating risks relating to (ii) above, the delivery.
other risks are beyond the capacity of the AJP to
mitigate. Furthermore, the heightened sense of
instability and uncertainty created by the present Accountability for what, and to
regional crisis will undoubtedly impact on the whom?
law, order, and security situation within Pakistan The project will use part of the TA grant
that it is the purpose of this programme to for “independent” monitoring. Since the
improve.” programme is executed by the Ministry of Law
Quite refreshing is the reminder that “the and Justice, which itself deserves scrutiny, the
lessons from experience with conventional process of monitoring is fatally compromised to
justice reform is it they must extend beyond the begin with. Tragically, nothing seems to have
judicial domain. However well designed and been learnt from past projects such as the multi-
run, judicial systems are unlikely to be well used billion Social Action Programme scandal, where
by the poor.” But then there is a sudden shift in monitoring consultants kept parroting task
language towards a managerial approach - managers only to belatedly acknowledge that
12
there were serious problems in the Programme. policy and legal framework for sustainable
“Through the TA grant, ADB will help judicial and police reforms, and initiate a set of
the PMU to establish monitoring procedures to activities to address some of the most pressing
meet three purposes: (i) monitor the progress of issues in the sector.” When such activities are set
the implementation of the reforms; (ii) ensure by the ADB, they are likely to ensure everything
independent audit procedures; and (iii) provide but justice.
strategic information, based on lessons from
experience, to manage the reforms. Monitoring
will focus on three aspects of the reform: (i) Bribery and co-optation
Budgetary Commitments and Expenditure “An institutionalised and multipurpose
Performance. (ii) Implementation of legal empowerment fund (LEF) will be created,
Institutional Arrangements. (iii) Performance of as an integral component of the AJDF, with its
the Access to Justice Development Fund.” own governance structure that reflects civil
It is assumed, both arrogantly and society representation. The LEF will provide
dangerously, that public monitoring of the new options for Pakistan’s most vulnerable
substance of the reforms is not required. If for citizens and will allow for civil society
example, the Government of Sindh decides to initiatives and public-private partnerships to
side with the Sindh High Court in persuading empower the vulnerable poor. The feasibility of
bonded tenants to seek relief in the dormant and establishing a public defender system will also
inadequate provincial Tenancy Tribunals rather be examined to provide legal support to the
than in the Federal Bonded Labour Act, should vulnerable poor.”
we be delighted at this successful management No word about public prosecutors to
of implementation of injustice? address the glaring deficiencies of the Federal
“MOL, in co-operation with the Attorney General or the Advocate Generals at
Implementing Agencies and TA grant and loan the provincial levels - perhaps because the
consultants, and ADB will conduct evaluations lessons from Ombudsmen here and elsewhere is
by an independent authority jointly appointed by that success in achieving justice requires the
ADB and the Government at the end of year 3 of sincere and vigorous mobilisation of new civil
AJP implementation.” Not surprisingly, society associations.
accountability remains confined between “Civil society groups will be able to
government and donors despite much rhetoric of access the LEF to raise awareness about and
good governance. provide assistance for enforcement of
environmental rights.” Whose rights, and to
what? Will the AJP finance peoples’ actions
Whose designs? against the environmentally damaging
It is a cruel joke to claim that a project expansion of commercial fisheries that the ADB
addresses the needs of justice by the poor and itself or donors such as the European Union
then to exclude them in designing the project. (EU) are supporting? As another illustration,
This is the reality despite the claim that “reform can the LEF be used to put brakes on the
proposals have been indigenously driven Chashma canal project funded by the ADB?
through multi-layered stakeholder How will the LEF be constrained if the ADB
participation.” funds expansion of the Karachi water supply
In view of its shallow moorings but before it first addresses problems of marine
enormous power, the ambition of the ADB is pollution?
dangerous. “The AJP is the first phase of ADB’s Quite consistently, civil society is to be
long-term assistance to Pakistan for access to involved in oversight only through nominated
justice reform. Legal, judicial and police representation at the federal and provincial
reforms, like any institutional change, are levels.
inherently complex and require time to change “By engaging stakeholders (within state
institutional culture, incentives, and behaviour. agencies and civil society) in the reform process
In this first phase, the AJP aims to integrate and demonstrating to the public that a positive
access to justice issues into the larger difference can be made in the delivery of justice
development debate in the country, set the through improved procedures, greater
13
transparency, automation, etc., these Police Reform - $237 m; Fund - $25 m.
complementary activities will instil confidence Additional expenditures are to come from local
in the reform process.” Since the document is government. The AJP loans and grants of $350
silent on how such engagement will be fostered, million are to “defray” these outlays.
one should safely assume business as usual in all Administered by the Law Commission
its senses. (for a lawful commission of 3%) the Access to
Justice Development Fund (AJDF) will include
a Judicial Development Fund (JDF) of $16. 7
No role for the poor million; the Legal Empowerment Fund (LEF)
The ADB considers that the programme’s using between $3.75 - 5 m; the Fund for
“focus on accountability, sanctions and Innovations in Legal Education (FILE) of $1. 75
performance through legal empowerment will - 3 m; the research and development fund of
raise sensitive cultural, social, and political $1.75 m; and the Federal Judicial Academy
issues. According to this empowerment-oriented Fund of $1.75 m. From the AJDF, $ 2 million
definition of access to justice, awareness and may be used to establish centres of legal
literacy involve building people’s appreciation education. Another subsidy to the rich?
of their rights and the law; their ability to act on The judicial reforms in the loan
legal knowledge or to assert their rights programme say absolutely nothing of real
individually or collectively; and their capacity to consequences to the poor. One would have
mobilise for change. This approach will focus expected the agenda to include reform of labour
on disadvantaged populations who most need laws towards universality and towards better
legal knowledge and ways to use it.” enforcement such as through a Minimum Wage
But then how are the poor assisted by this Tribunal. Instead, the programme will provide
Programme to act? dedicated full-time benches for commercial
cases in the Lahore and Karachi High Courts.
In view of the emphasis on
Protecting the environment environmental justice, it is odd that judicial
“Consistent with its institutional focus, reforms include the setting up and actual
the AJP is to support the enforcement of functioning of the long-promised Environmental
environmental laws through the establishment of Tribunals only in Balochistan and the NWFP.
environmental tribunals already provided for in Does the ADB really believe the Sindh and
the law, and by ensuring that any conflict of Punjab Governments that such tribunals are
interest is removed by different persons heading already operational in these provinces? Or is it
environmental protection agencies (EPAs) and considered too dangerous to establish tribunals
the provincial environment departments so that in Sindh and Punjab?
EPAs can effectively promote the public The ADB promises among other benefits:
interest.” “enhanced institutional arrangements for
How does the AJP intend to deal with holding public servants and officials accountable
gross environmental abuse such as changing for violations of citizens rights and entitlements;
laws to accelerate commercial exploitation of and greater public engagement in planning and
protected natural parks, as was done for Shell monitoring performance of judicial and police
and Premier by the Sindh Government and its service delivery.” The document fails to explain
agencies in Kirthar Park? What does the AJP what these “enhanced” arrangements are to be
recommend that citizens do when the North- and how they will be attained. These are not idle
West Frontier Province (NWFP) government queries. Consider, for example, the current
prevents the Forestry Commission from difficulties in acknowledgement of employment
functioning as intended by law? status faced by informal sector workers and
sharecroppers, with the consequent depredation
upon their rights to life and livelihood.
Where the money will go Similarly, the loan document does not
The programme expects the Federal and discus how meaningful public engagement will
provincial governments to spend over $ 400 be carried out. Most likely, these engagements
million as follows: Judicial Reform - $149 m; will involve elite negotiations with sham “public
participation.”
14
Market-friendly rights to substantively overhaul projects for which
For purposes of the poverty analysis, the large loans have been approved and subsequent
programme document looks at broad expected vested interests created within the Bank as well
outputs “in terms of their anticipated impacts on as in Pakistani society.
the labour market, prices of goods and services,
public expenditures, and access to public goods
and services.” The attached tabular presentation
1 hsharif@adb.org; www. adb.org/Documents/
is illuminating. Justice, did we hear anyone say?
RRPS/PAK/rrp_32023. pdf .
In the Sindh Rural Development Project,
the ADB proposed to buy the freedom of bonded
labour from their creditor landlords, rather than
insist upon compliance with the exisiting
legislation that declares all such debts illegal
and requires prosecution of the creditors.
Perhaps this is what the ADB would call a
“market solution” to injustice.
Role of the law
Since much is made of justice as
adherence to law, it is useful to recall the odious
role played by the ADB in funding, and
continuing to fund — despite documented
objections — projects and agencies who have
blatantly and consistently flouted national laws
on land acquisition. The unnecessary
displacement of people and their livelihoods - in
scale or timing — has been the hallmark of
projects such as the Chotiari Reservoir in Sindh
(under the National Drainage Programme); the
Chashma Link Canal in Panjab; and the Ghazi-
Barotha Hydropower project in Panjab and
NWFP. It should be apparent from these and
other examples - such as urban cleansing by
eviction of squatters to provide space for
shopping plazas - that for the poor, claims to
resources are threatened most by the State.
It is perverse to term a programme that
makes the world safer for capital and its
interests, but tramples on all other moral orders,
as promoting access to justice for the poor.
Beyond remedy
As a programme to advance justice by
promoting people’s rights, this the ADB
supported AJP is considered to be seriously
flawed in design and implementation
arrangements. An appropriate popular response
needs to be carefully formulated after wide
public discussions about the implications of the
Programme.. Our past experience (e.g. with the
Korangi Waste Water Project) is that it is
illusory to expect the ADB and the Government
15
POVERTY IMPACT ASSESSMENT (Appendix 4, AJP Loan Document)
Type of Effect
Channel Direct Indirect Macro Impact on
(short-term) (Medium-term Non-Poor
Labor Minimal effect jobs Income losses for Improvement of Skilled and educated
Market in the judiciary and rent seekers business confidence. labor is expected to
police through the facilitating services benefit from
creation of new under current increased foreign
positions. system.
investment that
Employment creates employment
generation in private opportunities.
sector as investment
increases.
Prices Service charges for Increased business
legal fees are to be efficiency of formal
increased but businesses is
consumers are expected to lower
willing to pay for prices of domestic
better service goods and services.
especially if hidden
changes are
abolished.
Public Despite budgetary Other sector may Overall fiscal deficit
Expenditures constraints increase receive relatively targets agreed upon
government smaller budgetary with IMF will be
expenditure for allocation given maintained.
judiciary and police budgetary
administration. constraints.
Access to Due to the A significant Spillover effect to
Public Goods tremendous backlog improvement in the improved delivery
and Services of cases and timeliness and of public foods
entrenched practices quality of legal across as the Impact relatively
in the legal/justice services is expected. efficiency and less on non-poor
system the effectiveness of who have access to
significant judicial and police justice and police
immediate effect is services permeate services through
not anticipated. throughout the
their position of
public sector.
power or financial
strength.
16
The Asian Development
Bank’s Uncivil Engagements
The Experiences of Chashma Affectees1
By Mushtaq Gadi*
The Asian Development Bank (ADB) informal practices to address these
makes frequent assertions about bettering the contradictions. The public is tactfully denied
governance aspects of the development projects access to relevant information. Decisions and
it finances. Participation, transparency and agreements that are considered pragmatic are
accountability are considered major mechanisms kept secret to avoid unpleasant and
to improve overall project management and unpredictable consequences. Meetings with
address adverse social and environmental project-affected communities (affectees) and
impacts. A number of policies, albeit formal, representative of civil society organizations
legalistic and procedural in character, prescribe (CSOs) are not generally recorded, and often,
these elements as pre-requisites for attaining the they are mis-represented. Participation is
goal of good governance in terms of project reduced to token representation. The risk of
planning and implementation, programming and opposition and resistance by affectees and CSOs
strategy development. is deterred through prolonged, laborious and
However, there is now significant unclear engagements with Project and Bank
accumulated evidence available to demonstrate staff, without any indications or assurances
that the ADB’s claims do not match reality. Its about the outcomes of these engagements. The
written words seldom translate into deeds. Bank success of these engagements depend largely on
staff usually find it difficult to even ensure seductive and imaginative speech. General
compliance with the ADB’s own already weak features of such engagements include promises,
and contested policies regarding project complaints about ADB’s lack of leverage,
preparation, planning, implementation and criticism on dysfunctional national policies and
monitoring. The Bank frequently finds that it laws, and sympathy for the suffering of the
has to negotiate decisions in deeply political affectees by ADB and project staff. On the
institutional contexts, and thus needs to increase other hand, Bank staff always display uneasiness
its political leverage and make strategic power and reluctance when issues of rights and
alliances to protect its institutional interests. compliance with institutional policies are raised
Unfortunately, project-affected communities with them.
who lack voice in decision-making and access to The policy violations based on informal
power alliances remain marginalized in this practice coupled with the lack of effective
process. mechanisms for internal accountability yield a
The fact of non-compliance with its own variety of “uncivil” engagements by Bank staff
policies has led Bank staff to engage in a set of with the project affectees. Although these
*Mushtaq Gadi is with the Sunghi Development Foundation in Pakistan (mushtaq_gadi@hotmail.com).
17
uncivil engagements are not recorded, they of environmental impacts. Most shamefully, the
overwhelmingly determine the relationship of report on resettlement survey and plan was
the Bank’s staff with project affectees. More prepared in the same month when the
often than not, these engagements appear to be engagement of Chashma affectees was started
more of a game for Bank staff than a genuine with the Bank. The affectees were kept in the
recognition of the fundamental rights and dark and denied their right to know about these
responsibilities of the affectees. plans (the right to know is accepted in the
The experiences of affectees and civil Bank’s own guidelines). This was clear violation
society organizations involved in the campaign of the Bank’s own policies.
of Chashma Right Bank Irrigation Projects Apparently, the violation of the affectees’
(CRBIP) are a testimony to the uncivil right to know was necessary in order to conceal
engagements practiced by the ADB. a series of policy violations in other areas. In
fact, the Bank was not fully prepared to follow
its own guidelines and policies. It was therefore
Information maneuvering thought better to conceal Project related
The formal engagement of Chashma information as long as agreement between the
affectees with the Bank was started in February Bank and WAPDA was not reached. The
2001. The first demand from the Chashma agreement was negotiated three months later
affectees and NGOs was to allow full access to when the WAPDA refused to implement the
all project related information, and particularly resettlement plan. Consequently, a second
to the report on resettlement surveys and the document was prepared in May 2001 which
environmental management plan. However, stated clearly that the affectees should either
Bank staff refused to share any of this accept nominal cash compensation or
information and pleaded that the Bank’s new construction of flood protection embankment.
policy on information disclosure does not apply Again, the second document was also not shared
in the case of CRBIP since the Project was with the affectees.
approved in 1992. Similar answers was given
with regard to compliance with the Bank’s
Policy on Involuntary Resettlement. Consultation: choose between
Surprisingly, after almost two years, the forced eviction or life
Project Management Consultants handed over imprisonment
the resettlement survey report and action plan to “Flood protection bund is a sub-jail for
representatives of the affectees during the us. Our women, children and elderly people face
Chashma Stakeholders’ Workshop held in problem for toilet. In our village, we are 170
March 2002. After going through the report, persons at present; naturally we will grow and
surprise was replaced with utter shock. be in need of more houses soon; but the
The document was extremely revealing. premises is too small to build a single room;
We learned that the resettlement survey and plan imagine living within 18-20 feet high
was prepared in accordance with the guidelines embankments at 50 degree temperature. The
for incorporation of social dimensions in Bank protection bund could be breached any time and
Operations2. These guidelines make it we would be buried inside the bund. You people
compulsory to consult with the affectees and would be responsible for our death”.
concerned NGOs. Moreover, consultations with The above are the views of an affectee,
the affectees and NGOs was also included in the expressed during the Chashma Stakeholders’
terms of reference for the resettlement survey Workshop.
and plan. It was further revealed that the ADB “ We can not do anything to solve your
had asked the consultants to take into account problem. We don’t have the funds for
the Bank’s Policy on Involuntary Resettlement resettlement. Moreover, the law does not permit
when preparing the resettlement plan for us to provide resettlement for affectees. It is up
Chashma affectees. Bank guidelines mandate to you whether you want to live there or migrate
that irrigation projects which cause involuntary to the other areas.”
displacement should include resettlement “ We admit that there is a severe problem
components and be given high ranking in terms of flooding in the riverine belt caused by the
18
project. We are also ready to extend the The entire situation was a two-pronged
distributaries and flood carrier channels up to strategy jointly formulated by the Bank and
the Indus River. However, the local community WAPDA. On one hand, Bank staff continued to
will have to cooperate with the WAPDA and engage the affectees and NGOs in consultations
should provide the land to the government free without sharing vital project information or
of cost”. disclosing decisions that had already been
The above are the views of the project agreed on. Bank staff pretended that they were
director expressed during the Chashma serious in their intentions to follow their policies
Stakeholders’ Workshop and guidelines. On the other hand, WAPDA
The life of more than thirty thousand carried on coercive operations against the
people living in the west side of Chashma Right affectees to compel them to choose between
Bank Irrigation Canal is under the severe threat forced eviction and the construction of flood
of project induced flooding. A number of mighty protection embankments. The strategy was
hill-torrents from the west side hit the canal and indeed a fine combination of tactical thinking
created flooding because of failure in getting and use of force.
safe and timely passage. Last year, the implementing agencies and
The first social survey and resettlement local police tried to forcefully evict the affected
plan for the villages facing the threat of project villagers. They were asked to accept the
induced flooding was prepared in February payment for only houses. It was said that the
2001. The resettlement survey and plan was compensation for land would be paid later, after
meant to consult with the affectees about the the completion of legal processes. However, the
option of resettlement or construction of flood villagers are still living in their ancestral places
protection embankments around the endangered despite the fact that they would be under the
villages. All villages except one opted for threat of flooding during the monsoon in the
resettlement in the east side of the canal. The current year.
survey report indicates that the opinion in the The people in the village who opted for
villages that opted for flood protection flood protection embankments feel that they are
embankment was also divided. However, these now living in a jail. Imprisoned by the high
consultations proved to be symbolic, and views embankments, they can now only view the sky
of the affected communities were totally or stars. There is no facility for the drainage of
disregarded in the decision-making process. rainwater-which is enough to flood the entire
Consultation with the affectees was one sided village. New construction in the village is
and there was no institutional mechanism to impossible because of the closed embankment.
involve the affectees in decision-making Mobility has been seriously constrained. It is
processes. particularly difficult for the elderly to walk up
In May 2001, the decision was made and cross the embankment. Most importantly,
against the implementation of resettlement plan. these earthen embankments provide minimum
It was agreed between the WAPDA and Bank to protection. They can be breached any time by
either pay the nominal cash compensation or the force of floodwaters.
provide flood protection embankments to these
villages. This was the same month when the
Bank showed its readiness to send a special Making the impossible happen:
review mission followed by a stakeholders’ Inaccurate data, changes project
workshop in response to the concerns of design, flooding and displacement
Chashma affectees and NGOs. During the When the project was started in 1992, it
negotiation, the Chashma affectees and NGOs was claimed that there would be no
demanded once again access to the resettlement displacement. Four years later, it revealed that
survey and other project-related documents. The nine villages would be displaced due to the
demand was rejected on the basis of policy project induced flooding. The figure went up to
restrictions. In fact, it was considered incorrect twelve villages when the resettlement survey
to share this information before making the final and plan was prepared in February 2002. The
decision. figures on displacement continue to rise. In a
recent document, the WAPDA indicated that
19
about twenty-three villages would be under the stakeholders. Efforts towards multi-stakeholder
threat of flooding. However, the affectees are dialogues and consensus building help the Bank
convinced that this recent assessment is still not to buy time to speed up the process of project
realistic. Rather, the number will continue to completion. Most importantly, the rules of
increase because of fundamental structural flaws stakeholder dialogues and consensus building
in the project design are being deliberately processes are purposefully structured to impose
ignored. decisions that have already been made on the
The reason why the Bank, WAPDA and vulnerable affectees.
foreign engineering consultants failed to assess Our experiences of a recently held
the flooding and subsequent displacement Chashma Stakeholders’ Dialogue are ample
accurately is interesting. The project is an proof of the sophisticated manipulative skills
impossible endeavor that was made to look and methodical tactics of Bank staff in imposing
possible on paper through hyper-scientific and decisions on affectees. In response to the
engineering imagination, using inaccurate data affectees’ demand for an independent project
about peak flood flows and rate of silt review, the ADB agreed to send an internal
deposition. In addition to divergent local views, special review mission. Based on the affectees’
information and figures of other national and concerns about the independence of the review
international agencies also contradict the process, the Bank suggested involving external
estimates made by the project’s engineering consultants to document stakeholders’ concerns
consultants. and facilitate the dialogue on conflictual issues.
Most interestingly, one of the major aims The process took almost seven months to
of the project is to protect local communities culminate into the stakeholders’ workshop.
from the risk of seasonal floodwaters by the During the workshop, the WAPDA refused to
various hill-torrents. Almost half of the project agree with the major demands from the
budget was allocated to construct flood affectees regarding resettlement, just
protection structures. Indeed, this objective was compensation for loss of livelihoods, full access
misplaced. Local communities have never to information, etc. The delegation from the
considered the water of hill-torrents as ADB refused to comment on compliance with
floodwaters. Rather, they have used this water Bank policies in relation to these issues. The
for irrigation purposes for generations. A very affectees also came to know that “consensus”
sophisticated hydraulic system was developed was already reached and agreed upon between
by the local communities to control and use this two powerful stakeholders. This led the
seasonal water for irrigation purposes. The affectees to boycott the workshop. The entire
Chashma project failed to achieve this objective process proved to be an important learning
and instead, created a situation in which a large experience for the affectees, who trusted the
number of local people are facing the severe Bank and entered into the stakeholder dialogue
threat of project induced flooding. with the hope to achieve something from the
The Bank and its consultants have not promised “win-win” solutions.
only used wrong data, but also used misplaced
objectives to justify the project. The planning
and preparation of the project were based more Report on the Chashma
on the will to profit, than the need to address stakeholders’ workshop:
local problems. Secondary displacement
The affectees were shocked when they
received the report on the stakeholders’
Multi-stakeholder dialogue: workshop. There was no reporting on the areas
Imposing consensus where major disagreements had occurred. The
Multi-stakeholder dialogues and views and opinions of affectees on issues critical
consensus building are two preferential terms in to them were not considered worth documenting
the Bank’s discourse on engagement with in the report. The report on one-day field visit
society. The Bank benefits from this discourse in was entirely missing. The Chashma affectees
many ways. Compliance with its policies is considered this technique a kind of secondary
made conditional to consensus building among displacement in which the views and opinion of
20
affectees were systemically displaced from the financing for the project was provided by the ADB
discourse and text. Despite several protest letters in 1999. Major concerns of affectees are project
against this attitude, the consultants hired by the induced flooding and subsequent displacement of
ADB refused to report on the areas of more than thirty thousand people, irreparable
disagreement and to include the views of disruptions of local livelihoods, massive losses of
affectees in the main report. Clearly, displacing productive assets including land, trees, houses and
the voices of affected peoples from mainstream other structures, and adverse environmental
discourse is essential for powerful institutions impacts. This paper will focus on the governance
such as the ADB to ensure that they control related aspects of the project.
knowledge about development. 2 Guidelines for the incorporation of social
dimensions in Bank’s operations were approved in
1991 and hence applicable in this project.
Conclusion: Rethinking
engagement
Civil society organizations and peoples’
movements have serious concerns about the
approach and practices of International
Financial Institutions (IFIs) on governance and
rights. They are becoming increasingly
convinced that the policies of these institutions
on information disclosure and structures of
decision-making are not able to ensure
compliance with universally recognized,
fundamental human rights. On the other hand,
these institutions claim to evolve “constructive
engagements” with key stakeholders to create an
enabling environment for resolving the
problems and addressing the concerns of
affectees.
Like many other cases, the experiences
of Chashma affectees show that the rhetoric of
constructive engagement has never become a
reality in actual practice. Rather, a set of
standard, informal practices and strategies are
devised to impose consensus on politically
marginalized groups of local affectees. Instead
of constructive engagement, a variety of uncivil
engagements are developed and used to achieve
the IFIs’ own institutional objectives.
There is serious need to document
experiences of such uncivil engagements in
different projects to facilitate future dialogue
and strategy development among projected
affected peoples and supportive CSOs. Equally
urgent is the need within civil society to debate
the issue of engagement with institutions such as
the ADB and other IFIs from the perspectives of
good governance and rights.
1 The project referred to in this paper is the third
stage of the Chashma Right Bank Irrigation
Project (CRBIP) which started in 1992. Additional
21
The Sri Lanka Southern
Transport Development Project
By Heather and Cyril Mundy*
We have been told that in the Charter of political and financial influence. The ADB failed
the ADB it is clearly laid down that the Bank to monitor the RDA as a result, none of the
should ensure it is a socially minded lender. “Elements of Good Governance” as given by
However, we are seeing the complete opposite ADB in their Operations manual OM Section
of this in Sri Lanka, in the Southern Transport 54/BP were practised by the RDA.
Development Project that is supported by the All the ADB documentation, the Report
Asian Development Bank (ADB). and Recommendation of the President to the
Board of Directors on a Proposed Loan (RRP),
The Sri Lankan road system is very poor Summary Environmental Impact Assessment
and there is certainly the need for a network of (SEIA) all refer to the originally designed route.
fast roads to improve communication and None of the variations of the RDA have been
movement of freight. The first is a link between covered by any of the above studies. The
the capital Colombo and Matara, a deprived area changes in the route causes significant social
in the South of the island. Funding for this link disruption, for instance in one village alone 138
is being provided by the ADB and the Japan houses out of five hundred houses will be
Bank for International Cooperation (JBIC). destroyed. Most of these houses are parts of
extended families. The splitting of these close
In line with the ADB policy, a highway family ties by moving people elsewhere is very
was designed which minimised the destruction disruptive to the community. Moreover, there
of houses and ensured the road had the best are no places to resettle the families, so large
balance of income and costs, both social and compensation have been promised to silence the
financial. This design was handed over to the critics. The promise of compensation is
executing agency the Road Development untenable— Under ADB guidelines people
Authority (RDA) to manage the environmental displaced have to be provided with alternatives
clearance and come up with a detailed design. In which provide an equal or better standard of
the process of doing so the RDA changed the living. Many of the people in the village are
route of the proposed highway link. The RDA farmers and will not be provided with
acted in secret, and partly staged a cover up alternative lands to cultivate. They are too old
exercise. The change of the proposed route was to be retrained. The people have been promised
concealed from the public and possibly the ADB only 1/8th of an acre in compensation, at
as well. The RDA design seems to be a result of present most of the villagers have productive
*ggama@mail.ewisl.net
22
home gardens and vegetable plots in addition to the organisations realised that some of the
their paddy fields. The promised land will not comments of the people and of the
be able to sustain them in the same way. There is representatives were conspicuous by their
also an obligation to re-locate people within the absence. When the local organization
administrative divisions that they now live in. Gelanigama asked the ADB to include the
This impossible as there is not sufficient land for statements, the request was denied. The idea of
this in the local area. Children’s schooling will getting an inspection request to investigate the
be disrupted and family ties severed. In areas project is in itself a very uphill task. The details
where compensation was paid, early on, it was required for the Inspection request is often hard
derisory, recent values that have been offered in to obtain, moreover, the manual and guidelines
some areas are also very low. for such a request are in English and couched in
legal jargon, which makes it extremely difficult
After our pleas to the RDA and the for non-english speaking farmers to
Government of Sri Lanka (GOSL) fell on deaf comprehend and adequately address.
ears for many months, we sent a petition in July
2001 signed by 188 families representing 745 We did our best and sent in a request with
people to the JBIC and the ADB. The ADB did all the details we could find. We have not
not even acknowledge it. In December 2001 we received any information from the inspection
were told that the Resident Mission had sent it administration or the ADB management. To
to Manila, who have not acknowledged it up to make matters worse, the ADB claimed the
now! We were not aware that this project was whole issue is sub-judicei and therefore cannot
being run by Manila and feel the Resident be discussed. However, the investigation is not a
Mission concealed this fact from us. Not much legal case and therefore, by virtue which, all
of “Transparency” by the ADB! evidence and information should be considered.
The ADB were advised in detail of the It is clear therefore, that the ADB is not willing
changes and results of these changes on the to hear evidence that could expose the flaws of
people by various groups along the route. The the project. The ADB’s claim to transparency,
ADB were pressured to ask the RDA for accountability and good governance seem to
clarifications. The RDA’s clarifications were have vanished into thin air.
clearly unsatisfactory and falsified. For instance
the RDA claimed that they conducted 4000 The RDA is now in a race to beat the
meetings with people affected in one year, Inspection Committee. Get the project to a point
which means the RDA should have conducted where the Inspection Panel, if there is one, can
12 meetings day every single day of the year, do nothing. All the land acquisition is to be done
including weekends, holidays!! The ADB before the Board ratifies the Inspection
accepted the clarifications given by the RDA Committee’s decision. The route then becomes
and referred the RDA’s letter to the a fait accompli!
complainants, with a covering letter stating
ADB’s acceptance of RDA’ clarifications. The ADB Management is happy to help
Further letters were sent by societies in the the RDA, it asks for extensions for its reply.
villages of Gelanigama and Akmeemana to the The Inspection Committee also gets extensions
ADB asserting the RDA’s responses were not for itself. The ADB Directors will not respond to
factual. The ADB Management’s lengthy reply letters, they will not even meet the complainants
reiterated the ADB’s acceptance of the RDA’s to understand the problem and delay the RDA.
clarifications. The indications on the Panel request so
In December 2001 the ADB sent a team far are that the RDA continues to misguide the
of representatives to meet the people , this was ADB and Management, who in their turn are
in response to a inspection request made by the content to pass them on. The Management
affected people. The ADB representatives met Response to the Inspection Request cannot be
the people and in their discussions the team had seen or verified by the affected people. Perhaps
indicated their displeasure over RDA’s handling we will see it after the Board has made its
of the project. However, when the minutes of decision on the Inspection Panel.
this meeting were received from the ADB office,
23
The decision is due mid April 2002. It is
surprising, that having written the first
complaint in July 2001, it takes the ADB more
than a year to make a decision?
Other affected groups have sent in their
Inspection Requests, ten in all. One organisation
may receive a decision in early May, the others
have been pigeon-holed by the Inspection
Committee waiting for them to review the
request ‘as soon as practicable’ which has been
more than four months.
All the good words about transparency
and good governance come to naught if the
Management and the Board cannot show these
themselves. They certainly have not been
interested in trying to get the GOSL to follow
them.
i In a legal case the matters under review by the
court cannot be talked about outside Court with
those concerned as this would possibly affect
justice being done. For this reason discussions of
legal matters are considered ‘sub judice’ and
cannot be discussed.
24
Hijacking Development
in Madhya Pradeshi
By Raghav Narsalay*
Introduction mainly through support for efforts to reduce
Since the beginning of the nineteen- bottlenecks in key infrastructure sectors,
nineties, the Asian Development Bank (ADB), including measures to improve policy,
has played a central role in deepening neoliberal institutional and regulatory frameworks and
ideology at the sub-national level by through support for financial sector reform and
strategically extending what are known as capital market development.”
‘policy loans’ to national and sub-national The above paragraph shows that the ADB
entities in India. By adeptly using political wants to generate employment and growth in
processes at the sub-national and national levels, India by reducing bottlenecks in key
the ADB, with active support from different infrastructure sectors. Is this approach
state-level governments, has carved out a role particularly India-specific? Not at all. In fact,
for itself in pushing policy reforms, especially in the ADB has been implementing this strategy in
the states of Madhya Pradesh, Gujarat and almost all the countries where it is operational.
Kerala.ii Which then raises the question, why is the ADB
Given this evolving role of the ADB in keen in pushing such a strategy everywhere?
the Indian context, it is critical to analyse how
the ADB uses its macroeconomic framework to ADB furthering interest of the State at the cost
push the macroeconomic and sectoral reforms at of people’s interest
the sub-national level. Also important would be For the ADB, creation of key
to review as to whether the ADB becomes an infrastructure is about building dams, huge
agent to facilitate the political objectives of the electricity generation plants, ports and other
State and elite local private interests and vice forms of large infrastructure. Creation of such
versa. inflexible, hard projects helps not only the ADB,
but also helps the State to promote a false,
development-friendly image before its people.
The Macroeconomic Framework Furthermore, actualization of these projects
of the ADB - some critical issues creates a space for the State and the ADB to add
To quote from the ADB’s Country new contours to the definitions of ‘national
Assistance Plan (2000-2002): pride’ and ‘national security’. The State and the
“ADB’s current country operational political and economic elite are then in a
strategy (COS) for India is designed to support position to use these notions to roll out projects
efforts to achieve higher growth and that may snatch away the rights of local
employment generation by improving the supply communities over their natural resources and
side efficiency of the economy. This is done livelihood opportunities under the garb of
* Raghav Narsalay is a Research Associate with Focus on the Global South, India
(focusweb@mantraonline.com and focusind@yahoo.com)
25
serving and safeguarding the larger public construct such infrastructure projects. For
interest. Rolling out such projects then provides example, by instituting processes such as
an opportunity for the State to seek external international competitive bidding for purchases
funds and for the ADB to lend, and oils the above certain amounts, the ADB effectively
machinery that furthers private and institutional distorts the level playing field for domestic
interests. producers and service providers from host
Constructing linkages between the countries.
creation of infrastructure projects and generation In addition, similarities between the
of employment also provides a rationale for the reform approaches of the ADB and other
ADB to argue that the generation of bilateral aid agencies at different levels allow
employment and increase in economic growth these institutions to complement each others’
reduce poverty (which is not necessarily true). efforts in deepening the neoliberal framework of
And thus, the ADB claims the right to be reforms at the macroeconomic, as well as at
functional in the area of poverty reduction. Like sectoral levels.
the World Bank, the ADB then claims to have an
expertise in designing and promoting economic
reforms that purportedly lead to greater poverty The ADB’s agenda for Madhya
reduction in the Asia Pacific region. Pradesh - is it at all a
Through its self-proclaimed expertise in developmental one?
the area of poverty reduction, the ADB gets a An examination of the macroeconomic
license to automatically demand much greater framework of the ADB vis-á-vis developmental
and well-defined policy space from the national concerns of its host countries clearly shows how
and sub-national governments in the sphere of the ADB creates an incentive structure for the
economic reforms, encompassing areas such as State and other private interests to collaborate
education, health, sanitation and other essential with it in the garb of furthering public interest. It
services. Many a times, it gets much more than would therefore not be surprising to see this
the demanded space. This happens mainly happening in the state of Madhya Pradesh as
because the State also finds it politically well.
worthwhile to accept costly ADB financing to
help the State to defuse the intensity of its Mapping the process
immediate political concerns at the national and In 1997, Madhya Pradesh was shortlisted
international levels. In sum, by accepting ADB as the second state for ADB assistance (the first
funds, the State, at the national level, can keep state was Gujarat). During December 1997, the
pushing the neoliberal reform process by Bank cleared two packages in the area of
showing that it is not abdicating its technical assistance, viz. “Support for the
responsibility of providing the required financial Government of Madhya Pradesh Public Finance
resources to enhance the quality of basic Reform and Institutional Strengthening”iii and
services. And at the international level, the State “Strengthening Local Government in Madhya
can continue to build a pro-reform image. Pradesh”iv.
Technical Assistance included ‘teach-ins’
Furthering the private interests of developed for officials working with public institutions and
countries the State Government on the benefits of
There is also another reason why the undertaking a public sector reform programme.
ADB is keen on pushing such a strategy across As expected, these teach-ins concentrated on
the Asia-Pacific region. By showing linkages convincing the officials about the usefulness of
between key infrastructure development and the ADB-strategy for the state of Madhya
economic growth, the ADB and its major Pradesh and making them adopt the necessary
developed country donors generate definitive language that would guarantee an ADB loan
demands for goods and services provided by under the rubric of ‘poverty reduction’.
large international suppliers (from the donor These observations are verified from tone
countries) not only in the area of technical and language of the letter written by the Chief
assistance, but also in the procurement of Secretary of the Madhya Pradesh Government in
expensive goods and services required to August 1999 to the then Finance Secretary of
26
the Government of India requesting him to from the private sector.
“forward this letter to the Bank for the purpose 3. The Report mentions that the ADB is
of seeking Bank financial assistance for the trying to learn from the sub-national experiences
Program”v. The letter clearly reveals the fact that of other organisations like the World Bank.vii
the Government of Madhya Pradesh had not But this does not seem to be the case, especially
entered into any critical consultation with people since this document was released three years
before putting forward such a proposition to the after the initiation of the Structural Adjustment
ADB. Programme (SAP) by the World Bank in the
Although the ADB boasts about its state of Andhra Pradesh. Research conducted by
governance policy, it completely overlooked this Focus on the Global South and the Centre for
fact and in fact found it fit to come out with the Environment Concerns in Hyderabad clearly
‘Report and Recommendation of the President shows how the World Bank initiative— which is
to the Board of Directors on a Proposed Loan similar to the one being pushed by the ADB in
and Technical Assistance Grant to India for the Madhya Pradesh— has actually deepened the
Madhya Pradesh Public Resource cycle of indebtedness in Andhra Pradesh.
Management”vi in November 1999. 4. If the State Government continues to
take loans from bilateral and multilateral donors
Problems with the ADB President’s Report to finance its social sectors but is unable to raise
It would have been surprising if there revenue through taxes, then its chances of
were no striking glitches in the Bank President’s falling into a debt trap are extremely high. The
Report, which is based on a process that did not President’s Report does not discuss this issue
involve peoples’ participation in any stage of its and therefore, it does not discuss strategies by
formulation. Following are some of the which the State can address such risks.
shortcomings regarding the President’s Report: Based on the above shortcomings and the
1. The document is marred with process by which the Report was formulated,
inconsistencies right from the beginning. For one can conclude that the President’s Report is
e.g., the “Objective and Scope” and the anti-people. Furthermore, the language and the
“Classification” of a project are important to inconsistencies within the document imply that
understand the basic categorization of an ADB the ADB is deliberately promoting confusion
loan. Consistency in language describing the about the unfolding economic reform process in
“Objective and Scope” and “Classification” in India.
ADB documents provides understanding on
whether a loan would prioritize social concerns
over economic imperatives. But this The ADB’s entry into the power
consistency is absent in the President’s Report. sector of Madhya Pradesh
In the Report, while the “Objective and Scope” The President’s Report (the document
prioritize social sector reform over economic discussed in the section above) clearly makes
growth, economic growth becomes the primary crucial links between the reform of public
objective and human development becomes the finances and power sector reform. Although the
secondary objective in the section on Report mentions that this particular observation
“Classification.” It is hardly surprising that is based on the lessons drawn from Gujarat,
these inconsistencies are reflected (and used by these links have also been highlighted in the
the ADB to its own benefit) in the letter sent by the Chief Secretary, Government
implementation of the public sector reform of Madhya Pradesh to the Finance Secretary,
package. Government of India. This letter also reflects
2. The President’s Report mentions that, the interests of the State Government in toeing
“Reconnaissance, consultation and fact-finding the ADB line regarding the power sector reform
missions were fielded between December 1997 programme.
and April 1998.” However, reports from a
number of local organisations, social
movements and trade unions in the state indicate
that the consultation process carried out by ADB
staff was limited to government staff and actors
27
What are the objectives of the power sector State Government is undertaking these actions
reform programme? in connivance with the ADB under the name of
Overall objectives of the reform include: rectifying commercial losses but is relegating
1. Achieving commercial efficiency and the welfare dimensions associated with
improving viability of the sector; electricity distribution to the background. The
2. Increasing operational efficiency through Madhya Pradesh Electricity Board (MPEB),
enhanced competition, managerial autonomy which actually distributes the generated
and higher accountability; and electricity to households, is taking such
3. Creating an enabling environment for private draconian measures even when it knows that
sector participation. small and marginal farmers and poor households
are not responsible for the commercial losses of
Some problems with power sector reforms the MPEB.
Transparency and Financial viability being put
at stake
Once again it is important to note that the How have mass movements and
programme of power sector reform has been other social formations acted?
formulated in a very secretive manner. There has In the past two years, civil society
been no public debate to discuss the nature of organisations and mass movements in India
reforms that the power sector actually requires. have realised that ADB is also playing a key role
The concerned trade unions have never been in entrenching neoliberal policies at the national
invited for discussing the relevance and the need and the sub-national levels. As a result, a
of such a package before its formulation. In number of organisations and movements have
spite of carrying out its plans in such a manner started to critically analyse the documents and
the ADB continues to talk about good actions of the ADB at all levels.
governance initiatives that have been introduced Specifically in the case of Madhya
as a part of this exercise. Pradesh, mass movements and other social
The energy sector policies that the formations have already started critically
Madhya Pradesh Government is promulgating evaluating and mobilising against the process of
on the advice of the ADB have not only reforms institutionalised by the State and
legitimized prohibitively expensive power supported by the ADB. On January 17, 2001,
production by private corporations, but have nearly 150 people from people’s organisations
also given tacit support to financing private were jailed while marching on the streets of
power projects that are anti-people. For Bhopal (Capital city of Madhya Pradesh) to
example, the Power Finance Corporation, which protest against the anti-people policies of the
has received funds amounting Rs. 15 bn. ADB and the World Bank.ix
(around US$ 350 mn.)viii from the ADB and the Especially in the area of power sector
World Bank will give a foreign currency loan reforms, movements in Madhya Pradesh are
worth about Rs. 11 bn. (around US$ 200 mn.) to particularly angered by the fact that the ADB is
a private power generation project-the not concerned that the money that it has lent to
Maheshwar Power Project in the Narmada Power Finance Corporation is being channeled
Valley— to produce power at the rate of Rs. 7 to to the controversial Maheshwar Hydel Power
Rs. 10 per KWH. This is several times higher Project (the Maheshwar Power Project has been
than the power that is supplied by the Madhya severely criticised not only by peoples’
Pradesh Electricity Board (MPEB). movements but also by expert teams for its
Furthermore, the Energy Reforms Bill demographic and socioeconomic non-viability).x
that has been passed in Madhya Pradesh at the Awareness campaigns are being
instance of the ADB has meant that marginal organised at the local level to make people
farmers (farmers having land less than 1.22 understand how the State Government, in
hectare) have stopped receiving electricity at coordination with the ADB, is unfolding a
concessional rates, which was promised to them reform programme that would only end up
by the State. For many poor families, this has deepening their debt burden.
meant the loss of the only (single point)
electricity connection in their households. The
28
In conclusion ii Madhya Pradesh, Gujarat and Kerala are three
In summary, one can conclude that ADB states in India
has deliberately continued with the same set of iii TA No. 2943-IND worth US$ 780,000
errors that it has committed in other parts of the iv TA No. 2944-IND worth US$ 700,000
world. The ADB is assisting and endorsing state v Letter from K. S. Sharma, Chief Secretary,
reform packages and private sector development Government of Madhya Pradesh to P. G.
that are anti-poor, and serve the interests of local Mankad, Finance Secretary, Government of
elite and transnational players at the cost of local India, Dy. No: L-10544, Date: 29/8/1999
labour, capacity, resources and industry. The vi RRP: IND 29051
ADB’s operations in the state of Madhya vii The World Bank in 1996 initiated a structural
Pradesh confirm its unwavering commitment to adjustment programme at the sub-national level
support for hard and inflexible infrastructure in the Indian State of Andhra Pradesh. This was
development, no matter what its cost to the the first time that the World Bank had decided to
people. get into structural lending at the sub-national
The ADB has cleverly used the language level in the Indian context.
of poverty reduction to gain entry into the social viii 1US$ = INR 49
sectors of various states. It continues to work ix For more on this kindly refer to:
closely with the State and local elites to www.destroyimf.org/news/bhopaldemojailed.html
institutionalise economic reforms that serve the x For more on this kindly refer to, “Maheshwar
economic and political interests of a small Hydroelectric Project: Resettlement and
coterie. By serving the short-term political Rehabilitation” (June 2000); An independent
interests of State Governments, the ADB has review conducted for the Ministry of Economic
created an incentive structure within Cooperation and Development (BMZ),
developmental processes that institutionalizes Government of Germany; Printed by the
white-collar corruption and poor governance. Narmada Bachao Andolan
And finally, under the name of poverty
reduction, ADB supported reform programmes
are steadily pushing people into a debt trap.
However, civil society and social
movements in India are getting increasingly
vigilant about the role being played by the ADB
in deepening neoliberal ideologies at the
national and sub-national levels. The primary
task before them now is to mobilise the people
to mount a unified challenge to the policies and
operations of the ADB.
i Madhya Pradesh is a state of the Indian republic.
It was formed in 1956 and is in the centre of
India. It is the country’s largest state, covering
more than 4,00,000 square kms. As per the ADB
documents the state covers around 13.5 per cent
of India’s total geographic area. The ADB
documents also state that more than one third of
the state’s 77 million people belong to socially
and economically disadvantaged groups
consisting of scheduled tribes and scheduled
castes, the highest proportion in India. The state
has the poorest per capita income of Rs. 7,500
(around US$ 150) per annum amongst all the
states in India.
29
BOTs, Governance
and the ADB
By Andrew B. Wyatt*
“The demand for private capital has management of a country’s economic and social
increased considerably in the Region, influenced resources for development”. Whilst the ADB’s
by the financing needs of large infrastructure focus in this definition is that of its Developing
development programs ... ADB is in a unique Member Country (DMC) government’s
position to assist in mobilising international performance, I contend that the DMC’s are not
private capital for its DMCs. It has considerable the sole determinate of DMC economic and
regional experience accumulated over decades social development performance. This is readily
and, through policy dialogue with member apparent since the ADB wields considerable
governments, has assisted in the formulation of power to shape and direct policy. In terms of
policies designed to encourage private governance, the ADB should therefore also be
initiatives.” (Asian Development Bank, under scrutiny in terms of the policy and
2000b:1) strategy advice it gives.
“In addition, ADB will develop sectoral In this paper I wish to critically examine
templates for appropriate risk-sharing the ADB’s continuing promotion of private
arrangements that would allow the private sector infrastructure development support, one of two
to earn reasonable rates of return ...” (Asian primary areas of the ADB’s Private Sector
Development Bank, 2000a : 15) Operations (PSO), despite increasing evidence
A key area of ADB policy advice has that the ADB’s advice in private infrastructure
been in the development of and support for development is leading to unsustainable and
private infrastructure. Through consistent highly risky developments for its DMCs. In
support for numerous Technical Assistance particular, continuing ADB support for and
studies, forums such as the GMS Subregional mobilisation of project finance into
Electric Power Forum, and workshop series infrastructure through project delivery systems
such as the Workshop on Economic Cooperation such as Build-Operate-Transfer (BOT) and
in Central Asia, the ADB’s policy advice reaches Build-Own-Operate (BOO) and related
decision makers, planners and implementers mobilising mechanisms such as Partial Risk
from ministerial level all the way down to the Guarantees (PRG) which the ADB has recently
technocrats. As such the ADB has considerable reviewed and expanded (Asian Development
power to influence and shape policy and Bank, 2000c) are of considerable concern.
direction of developments such as foreign All this, despite the cautionary words of
private capital flows and private infrastructure. independent private sector analysts and
The ADB defines governance as “the stakeholders such as Kent Rowey (1997, pg.22),
manner in which power is exercised in the a partner and head of project finance at
Freshfields,
*Andrew Wyatt is a Senior Research Associate at the Australian Mekong Resource Centre in Sidney, Australia
(A.Wyatt@geography.usyd.edu.au)
30
“It is often assumed that the use of government provided guarantees.
financing techniques such as BOT and BOO in As capacity and understanding has built
Asian private infrastructure programmes within the DMCs over the last decade, there has
relieves the host country from the liabilities been resistance against a number of aspects of
associated with financing, building and project financing in infrastructure as greater
operating infrastructure projects. This is a awareness was gained of the compromises DMC
misconception. The reality is that many of the governments have had to agree to. For this very
risks of the project remain with the host reason, in Vietnam where BOT type investments
government under the support contracts they and project financing has been legislated for
enter into.” since 1993, not a single power sector project had
reached financial closure by 2000, and only 3
Another industry insider, Levy, points water sector projects had received investment
out, “Most of the public/private infrastructure licences. However, in many DMC’s, within
partnerships created in the 1970s and 1980s technocrats and politicians overseeing these
have yet to yield the hard evidence of a series of developments there is a sense of “what else can
successfully completed projects since few of the we do?” Certainly, there are no other viable
typically 20 to 40 year concession agreements options being presented by the ADB and its
are near maturity.” (Levy, 1996: ix) multilateral partners such as the World Bank.
Levy’s observation is in stark contrast to Here I will focus on a couple of areas
the ADB’s premature claims for the success of that I contend are leading the DMCs into highly
BOT type investments in infrastructure (see for unsustainable and risky developments.
example, Asian Development Bank, 2000a) and In its seminal study of energy sector
indeed, Rowey’s words on the cusp of the Asian development in the Greater Mekong Subregion
financial crisis were to prove prophetic in (GMS) in 1995, ‘Subregional Energy Sector
demonstrating the enormous risks that the ADB’ Study for the Greater Mekong Subregion’, the
s DMC early adopter’s took. ADB pointed out to its DMC governments that “
To facilitate project financing, the capacity
charge will normally have to be denominated in
Key issues in project financing and a hard currency” and “investors will often insist
BOTs on provisions such a high capacity charge or a
Project financing utilising limited or non- substantial minimum take provision, making it
recourse financing in BOT type investments is a clear that the utility will be required to take
highly complex business that many DMC electricity over the full useful life of the power
politicians and government bureaucracies have station” (Asian Development Bank, 1995a :
had difficulties in coming to terms with. It is 607-611). These conditions are not restricted to
simple enough from the viewpoint that the the energy sector but are also called for in
harnessing of private capital flows into much sectors such as water supply and transportation
needed physical infrastructure is meant to avoid where the investors obtain a profitable return on
increasing public debt in the face of a crisis in their investments from the revenue stream the
public funding globally. This rationale has been project will generate, eg. water tariffs and
the single most enticing feature of BOT type motorway tolls.
investments. But all is not as it seems. Hard currency, usually in US dollars are
The limited or non-recourse nature of the usually demanded in order to pay back levels of
project financing insulates parent companies debt that may reach as high as 80% of project
who are investing in the project from the project cost denominated in same currency. Investors
risks and makes financiers extremely nervous and their bankers therefore avoid the risk of
about the risks that will come into play since currency fluctuations. The minimum off-take
they have no recourse to the parent balance provisions are often known in the industry as
sheets should things go bust. As a result, “take-or-pay” guarantees. These are guarantees
financiers and developers spend considerable that governments have to enter into ostensibly to
effort to ‘correctly’ allocate risks, shift it onto a minimise network and regulatory risks that are
party least capable in analysing the under the control of the government, but in
consequences, or to insulate from risk through effect where a large element of the investors’
31
market risk is also covered. following the start of the Asian currency crisis in
The consequences of these aspects of July 1997, the domestic revenue implications for
project financing in private infrastructure have the Government of these payments have risen by
been devastating where project financing in 60 percent.”
BOT type infrastructure has been widely According to Fernando Roxas (1999:
adopted. 150), Group Manager of NAPOCOR, by 1999
NAPOCOR was “... paying about P60 million
(US$1.5 million) a month to the Department of
BOTs, contingent liabilities and Finance for the provision of these guarantees
debt: The Philippines disaster covering the BOT projects.”
In the late 1980’s and early 1990’s under These payments were directed to the
a power supply crisis, the Philippines private IPPs, but served to compound
government became the first country in Asia to NAPOCOR’s exposure to its US dollar debts
enact a law specifically for the BOT process in that had been under control before the financial
1987. By early 1995, 19 BOT power plant crisis and have dragged the corporation - which
projects had come online and by 2002, there even the ADB had admitted was under good
were over 45 contracts in place (Domingo, financial management between 1992 and 1997
2002). In almost all of these contracts, the (Bello, 2001) - to its knees. With total debts of
Philippines government power utility the US$6 billion (Landingin, 2002), NAPOCOR is
National Power Corporation (NAPOCOR), had trying to raise US$1.65 billion in foreign
guaranteed payments in US dollars and provided borrowings just to service debt which matures
take-or-pay commitments in its Power Purchase this year (Batino, 2002).
Agreements (PPA) with the Independent Power The whole debacle leading to the
Producers (IPPs), most of whom were owned by indebtedness of NAPACOR also instigated the
foreign power companies. Without the ADB to push for the restructuring of the
guarantees, no investor would invest. Philippine power sector through the unbundling
It proved to be a fatal strategy! The Asian and privatisation of NAPOCOR (see for
financial crisis in 1997 left the Philippines example, Bello, 2001; Landingin, 2002;
government bearing the risks of power purchase Williamson, 2001).
agreements denominated in US dollars and the Before the extent of NAPOCORs crisis
devaluation of their currencies during the crisis became apparent, the ADB repetitively rolled
raised government purchasing costs and out the Philippine model of energy sector
increased retail prices. Compounding the liberalisation through BOT type investments as
situation, the slow down in the economy and a prime example of how successfully private
lowered energy demand left NAPOCOR in a sector capital could be brought into
situation where it was paying for electricity infrastructure investment (see for example,
purchases that it could not use. Asian Development Bank, 1995b; Asian
Development Bank, 1997; Asian Development
David Husband (1999 : 105), Chairman Bank, 1999b). Despite the experience of the
and Principal of Global Economics Ltd., Philippines, and that of Indonesia which has had
observed; “... developing countries that have had a mirror experience, the ADB in its blind faith in
some success in attracting BOT/build-own- the benefits of liberalising private capital flows
operate-transfer (BOOT) infrastructure and privatisation, continues to provide private
investments, such as the Philippines, must be sector loans for infrastructure projects despite
regretting the terms. While the Philippine the knowledge that government guarantees
Government fast-tracked BOOT power projects demanded by the private sector, such as take-or-
in the early 1990s to overcome crippling “ pay guarantees, would lead to situations where
brownouts,” it did so basically by assuming the the government would not be able to recoup
entire foreign exchange risk. Foreign exchange- costs.
denominated payments of $600 million in 1997
will rise to more than $1 billion in the next few
years. Given that the peso fell by about 60
percent against the dollar in the months
32
The beginnings of a BOT fiasco in sector production. In so doing, the ADB (and
Vietnam? IFC) demonstrate a lack of accountability to its
One such recent example appears in Ho DMC governments. According to ADB’s own
Chi Minh City (HCMC), Vietnam, a city of 6 researchers (McIntosh and Yniguez, 2000), the
million people, but where the government situation at Binh An is such that the government
owned HCMC Water Supply Company (HWSC) owned HWSC is forced to pay the BOT
has only 300,000 connections. Here the ADB contractors for water it cannot sell to consumers.
has supported the development and co-financing According to deputy minister for construction,
for the largest BOT water supply project in Nguyen Tan Van, water off-take commitments at
Vietnam, the US$154 million Thu Duc Water Binh An costs HWSC more than VND8 billion a
Supply plant. The project will increase HCMC’s month, yet its revenue from Binh An’s
water supply by almost a third of present production is just VND3 billion a month (Ngoc
capacity. It was a non-competitive negotiated An, 2001). Furthermore, as a result of the
bid by a multinational consortium led by one of implementation of these BOT projects, tariffs set
the largest multinational water companies in the by the HWSC are also set to rise from
world, Suez of France who holds a 70% share in VND1300 m3 in 2000 to VND9, 400 m3 by the
the project. A 25 year concession was granted in time Thu Duc comes on line in 2004 (ibid). It is
1997 and the project company reached financial certain that consumers will not see any
closure in August 2001 with the ADB providing reduction in water pricing any time soon.
US$106 million worth of co-finance together Because the take-or-pay guarantees and the
with four other financial institutions, including water tariffs that the government enters into with
US$31 million loan from the ADB’s ordinary the BOT companies are locked into contract for
capital resources (Asian Development Bank, the 20-25 year life of the concessions, there are
2001a). no competitive pressures on the BOT companies
In fact the city of HCMC to date has to reduce water pricing.
contracted 3 BOT water supply plants including It is apparent that despite the disastrous
Thu Duc. The other 2 plants are; the US$38 experience of BOT in the Philippines, the ADB
million Binh An water plant, owned and continues to support non-competitive projects
operated by a consortium of Malaysian and mechanisms that actually raise utility prices
companies with IFC finance consisting of a loan and which leaves considerable risk with
of US$12.5 million and a syndicated loan of up governments. One might argue that the HCMC
to US$12.5 million for the account of government had to ensure the on-time
commercial banks and financial institutions completion of the distribution networks and that
(International Finance Corporation, 1999); and this was a risk that it had control of, but
the Grand Imperial which received an questions must be asked as to why the IFC
investment licence in 1999 but whose present initially, and then the ADB concluded financing
status remains unclear. All three projects have when the city was not yet in a position to fully
demanded and received government take-or-pay utilise new capacity. The result has been that the
guarantees that would insulate the private major beneficiaries have been the multinational
investors from market risk. Binh An was the companies investing in the projects and their
first to begin production in 1999 while Thu Duc financiers, both of whom are guaranteed a
is scheduled for commissioning in 2004. revenue stream no matter what transpires, whilst
However there are questions over the government is left with liabilities that are
whether the city is able to fully utilise the water adding to greater levels of borrowings.
it has contracted to take-or-pay from these 3
three projects. Partly this has to do with the lack
of distribution capacity, which is not yet in Development strategy, BOTs and
place. Although the responsibility for the ADB: Lao export hydropower
distribution remains within the government’s at a dead-end?
hands, it is apparent that the ADB’s and IFC’s The role of the ADB as a player in
due diligence process of ensuring the viability of development strategy has come under increasing
these projects has not extended to the criticism in the Lao PDR in recent years. In the
government’s capacity to fully utilise private Lao PDR, the ADB together with the World
33
Bank has been at the forefront in advising the (Asian Development Bank, 1999a). By 2001, at
Laotian government on policy and strategy for the Sixth Meeting of the GMS Experts Group on
the development of a Laotian export Power Interconnection and Trade, the Laotian’s
hydropower industry, but which under the were growing increasingly desperate about the
ADB’s GMS program also doubles as regional development of the Thai electricity trading pool.
infrastructure. Since the inception of the GMS in The Lao representative, Houmphone
the early 1990’s, the ADB has provided regional Boulyaphol, Director General, Department of
governments with the vision of an Electricity, Ministry of Industry and
interconnected electricity grid that would allow Handicrafts, commented out of concern that “...
the development of a regional energy trading in Lao PDR, a number of projects were on hold
system (Asian Development Bank, 1995a). The due to uncertainties in financing and
hub of this regional energy trading system uncertainties in the status of PPAs under a
would be Thailand where demand exceeded power pool system” (Asian Development Bank,
supply in the years before the Asian financial 2001b).
crisis. To direct and support the development, The Laotians had good reason to be
the ADB continues to support various forums concerned. For almost a decade now, the Lao
the most important of which is the yearly government, with advice from the ADB and
Subregional Electric Power Forum, involving World Bank had pinned their hopes on the
ministerial and expert level delegations. development of a Laotian hydropower export
Ostensibly these forums allow technocrats to industry as a key development strategy to pull
exchange information, and to receive policy Laos out of poverty. But public funds were not
advice and strategy from the ADB and other available to finance such large investments, so
resource persons from the World Bank and with assistance and advice from the ADB and
international authorities such as the Tennessee the World Bank, Laos turned to the BOT form
Valley Authority of the USA with regards to of investment. The ADB sponsored a
energy development cooperation and direction. demonstration project, the US$280 million
Ministerial delegations then rubber-stamp Theun Hinboun hydropower project. The World
decisions and agreements. Bank followed soon after with what it hoped
One of these development strategies first would also be a demonstration project, the
flagged in the ADB’s 1995 Subregional Energy massive US$1.2 billion Nam Theun 2
Sector Study, has been the development of a hydropower project.
competitive trading system for electricity in the In 1994, the Theun Hinboun project was
GMS. Since then the World Bank, who actively established as a joint-venture BOT concession
participates in the GMS Subregional Electric between the Lao government electricity
Power Forum, has carried out its own studies to company Electricity du Lao (EdL) holding 60
promote the development of a competitive percent equity and the sponsors and private
electricity market in the GMS (World Bank, sector partners, Nordic Hydropower (20 percent)
1999) as has the ADB through its ‘Study on the - a joint-venture company owned by the utilities
Regional Indicative Master Plan on Power of Norway (Statkraft) and Sweden (Vatenfall
Interconnection in the GMS’. Norconsult, a AB) - and MDX Lao of Thailand, a subsidiary
Norwegian engineering and management of GMS Power, one of Thailand’s leading IPP
consulting company heavily involved in developers (20 percent). The project moved
regional hydro feasibility and environmental quickly to financial closure with a 1995 power
studies carried out the latter. Both these studies purchase agreement (PPA) with the Thai
promoted the establishment of a Thai electricity government electricity utility, the Electricity
trading pool. Generating Authority of Thailand (EGAT).
By October 1999, at the Third Meeting of Under the terms of the off-take agreement,
the Experts Group on Power Interconnection EGAT committed itself to purchase 95 percent
and Trade, the Thai’s announced their own study of the output on a take-or-pay basis. The base
on the establishment of the electricity trading rate tariff is 4.3¢/kWh (1994) escalated at 3
pool would be completed by year-end. This was percent a year for the four-year construction
of concern to the Laotians who were at that period, and at 1 percent a year for ten years
meeting and they requested further information thereafter. The price would be renegotiated at
34
the end of the ten-year period. The project came project development cycles. It is now becoming
into operation in 1998. apparent that the only way Lao export
By contrast, despite development of the hydropower projects with the intention of selling
two projects beginning at about the same time, into a competitive Thai market will proceed is
the large predicted social and environmental under what is known as mercantile financing.
impacts, international opposition, and the Asian However it is highly unlikely that financiers
financial crisis delayed the Nam Theun 2. The would finance these high-risk mercantile
project is currently finalising the PPA with projects. First of all, there is no precedent for the
EGAT, which would then allow it to move to financing of mercantile projects in developing
financial closure. countries such as Laos with a relatively high
However, the Lao PDR currently has 14 political risk profile. The ADB’s and World
other priority private hydro projects lined up for Bank’s partial risk guarantees are specifically
PPA negotiations with EGAT. Of these, two structured for project financing and no
projects, Nam Ngum 2 and Nam Ngum 3 equivalent mechanism exists for mercantile
together with the Nam Theun 2 project are listed financing. Secondly, mercantile projects do not
as priorities under the first tranche of a non- sell electricity based on take-or-pay guarantees
binding Memorandum of Understanding (MOU) or fixed tariffs, rather they are required to
signed between Thailand and Laos for the export dispatch electricity on a daily basis and at daily
of 1600 MW of electricity to Thailand by year prices1. On this basis, knowledge of particular
2007 (Worley and Lahmeyer International, market conditions must be well established in
2000). Under the GMS program the ADB had order for financiers to judge if debt repayments
been supporting the development of Nam Ngum can be made. This is hardly the case since a Thai
2 and 3 through the provision of a TA for a electricity market does not yet even exist, let
500kV transmission line system that would alone have a track record.
enable power to be delivered to Thailand (ibid). In Laos, private investors with sunk costs
It also received a request for financing from the in BOT hydropower project development left
developers of both these projects. without a PPA and therefore unable to obtain
Despite this, it is clear now that Nam financing for their projects are fuming. Mid-
Theun 2 will be the last private power producer level government bureaucrats are beginning to
to enter into a PPA. As a result of the question the wisdom of a development strategy
development of the Thai electricity pool, which that led Laos to invest a huge amount of
is slated for implementation in 2003, EGAT is financial and human resources into the BOT
refusing to enter into any further PPAs that export hydropower program, with just 2
would require take-or-pay conditions as well as completed operational projects2 to show for a
long term fixed tariffs. Negotiations over the decade of export hydropower development. On
PPA for Nam Theun 2 dragged on for 3 years this front, the ADB has been extremely quiet,
over this issue until EGAT was finally forced to shelving plans to support the implementation of
negotiate the PPA consisting of a much-reduced the 500 kV transmission line for Nam Ngun 2
take-or-pay period and tariff after political level and 3. It has recently been requested to consider
intervention. EGAT’s concern here has been that co-financing for the Nam Theun 2 project and it
the Lao PPAs were uncompetitive, and that remains to be seen if it will again provide
EGAT and Thai consumers would eventually be support for a BOT export hydropower project in
subsidising the private producers in Laos. Laos that the Thai’s see as uncompetitive, and
Under these conditions, it is highly likely which in all likelihood, will be the last export
that the Lao BOT export hydropower program is BOT hydropower project in Laos.
at an end even if regional energy demand should
pick up. The establishment of a competitive
Thai electricity market is being further Rethinking ADB governance
reinforced by the increasing availability of Governance must be analysed in much
cheaper alternative sources of energy such as broader terms if it is to be effective in delivering
natural gas from Myanmar and Malaysia, and sound management of social and economic
investments in efficient gas turbine technology development that benefits the ADB’s DMCs.
with much lower up-front investment costs and The ADB must turn its focus on governance
35
onto itself and its powerful role as a policy of the huge public costs of the contingent
broker or driver of development policy and liabilities inherent to BOT projects in a
strategy. developing country context.
In the case of private infrastructure It is also clear from the case of private
development presented here, it needs to move hydro in the Lao PDR that regional private
out of its mindset of liberalising private capital infrastructure in the form of BOT projects are in
flows and rhetorical claims of the benefits of contradiction with moves toward the
privatisation and in particular, private competitive energy market developments in the
infrastructure in the form of BOT projects. The GMS that the ADB itself has been promoting as
ADB must be accountable for the policy advice a part of the GMS’s longer term regional
it provides and the development strategies that it infrastructure development strategy. Having
develops for its DMCs, much of it lacking in invested considerable financial and human
transparency. In its development strategies, there resources into the development and support of
is often no consideration of independent BOT in the Lao PDR, the ADB and its DMC,
research or options. It must take heed of the the Lao PDR, finds many of these investments
warnings of independent analysts and stranded, leaving investors and government
researchers without a vested interest in the officials alike privately furious at the dead-end
building of a BOT industry and critically which the industry now faces.
examine its premature calls of success in BOT. The case of BOT developments in the
The claims of success are clearly based on the selected DMCs presented in this paper
narrow definition of achieving financial closure demonstrates the ADB’s considerable allocative
and commissioning new projects. It fails to power and ability to influence and direct a
analyse the longer-term consequences of BOT DMC’s economic and social resources for
investments to the DMCs and their publics that development without recourse to critical
take between 20 and 35 years to run the course independent analysts. It has done so and
of its concession. continues to do so with little accountability for
The case of BOT private infrastructure the unfolding disaster of BOT investments in its
clearly demonstrates the short-term nature of its DMCs. Its own governance credentials must be
strategies and lack of accountability in terms of on the line!
longer-term development goals of its DMCs
such as debt and risk management. For example,
very little research and policy analysis has been References
carried out by the ADB on the long-term
contingent liabilities of the various BOT type Asian Development Bank, 1995a, Subregional
guarantees that governments take on which this Energy Sector Study for the Greater
paper has just touched upon. These are critical Mekong Subregion, Final Report, Asian
issues that concern the economic and social Development Bank, Manilla.
sustainability of the ADB’s DMCs, which the ________, 1995b, Subregional Energy Sector
ADB continues to ignore. World Bank Study for the Greater Mekong Subregion,
researchers have recently begun to explore the Final Report, Part II, Asian Development
costs of such liabilities. In one of the first Bank, Manilla.
attempts to account for the contingent liabilities ________, 1997, Emerging Asia : changes and
of government guarantees in private challenges. Asian Development Bank,
infrastructure the World Bank found that the call Manilla.
on guarantees can potentially create major ________, 1999a, Proceedings from the Third
budgetary shortfalls and follow-on Meeting of the Experts Group on Power
consequences for future generations. Of three Interconnection and Trade, GMS. Asian
private infrastructure projects in Colombia, the Development Bank, Manilla.
World Bank estimated that expected government ________, 1999b, Second Workshop on
losses from government guarantees could Economic Cooperation in Central Asia:
amount to as much as US$93.2 million (Lewis Challenges and Opportunities in Energy.
and Mody 1998). Clearly the Philippines is now Asian Development Bank, Manilla.
another such case where there is ample evidence
36
________, 2000a, Private Sector Development 08.Htm, 20 March, 2001.
Strategy: Promoting the Private Sector to Rowey, K., 1997, Project Pitfalls, Financial
Support Growth and Reduce Poverty. Times, December 9 1997: 22.
Asian Development Bank, Manilla. Roxas, F.Y., 1999, BOT in the Philippines, in
________, 2000b, Private Sector Operations: Asian Development Bank, Second
Strategy, Policies, Modalities and Workshop on Economic Cooperation in
Procedures. Asian Development Bank, Central Asia: Challenges and
Manilla. Opportunities in Energy, Asian
________, 2000c, Review of the Partial Risk Development Bank, Manilla.
Guarantee. Asian Development Bank, Williamson, H., 2001, Manila seeks final draft
Manilla. on energy reform , Financial Times, May
________, 2001a, Private firm will improve 25, 2001.
drinking water in Vietnam commercial World Bank, 1999, Power Trade Strategy for the
capital, ADB News Release, No. 082/01, Greater Mekong Subregion: Report No. 1
No. 7 Aug, 2001. 9067-EAP. World Bank.
________, 2001b, Proceedings of the Sixth Worley and Lahmeyer International, 2000,
Meeting of the Experts Group on Power Hydropower Development Strategy for
Interconnection and Trade, GMS. Asian Lao PDR: Draft Final Report, Volume A,
Development Bank, Manilla. January 2000, Vientiane: Worley and
Batino, C. S., 2002, Napocor loan requirements Lahmeyer International.
to hit $1.65B , Philippine Daily Inquirer;
April 17, 2002.
Bello, W., 2001, Privatizing power in the
Philippines: Cure worse than the disease. 1 A likely Thai model would be based on daily
Focus on the Global South, Bangkok. dispatch contracts
Domingo, R. W., 2002, Napocor reviews 12 IPP 2 Theun Hinboun and Houay Ho. The government is
deals, but no action yet , Philippine Daily in fact reported to be losing money on the Hoauy
Inquirer; April 18, 2002. Ho project after debt repayments are taken into
Husband, D., 1999, GMS and the Energy Sector, account (Worley and Lahmeyer International,
in Asian Development Bank, Second 2000)
Workshop on Economic Cooperation in
Central Asia: Challenges and
Opportunities in Energy, Asian
Development Bank, Manilla.
International Finance Corporation, 1999, IFC
invests US$25 million in first private
water treatment facility in Vietnam, IFC
Press Release , No. 99/01.
Landingin, R., 2002, Philippines on roadshow
for Napocor deal , Financial Times, Feb
14, 2002.
Levy, S. M., 1996, Build, Operate, Transfer:
Paving the way for Tomorrow’s
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New York.
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Privatization of Water Supplies in Ten
Asian Cities, Manilla: Asian Development
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Ngoc An, 2001, Warnings sounded over HCM
City plans to sell water supply projects,
VNS News: Http:// Vietnamnews.
Vnagency. Com.Vn/2001-03/19/Stories/
37
The ADB -
“Governing” The Pacific?
By Aziz Choudry*
“Good Governance” and the holding of measures promoted by the Asian Development
multi-party elections are added conditions Bank - measures for which there is little popular
imposed by the donors and creditors, yet the support and which are rapidly increasing
very nature of the economic reforms, precludes economic inequalities.
a genuine democratisation.... Structural It is a mystery as to where the ADB
adjustment promotes bogus institutions and a claims to derive any authority to determine what
fake parliamentary democracy, which in turn is good or bad governance. However, it is very
supports the process of economic restructuring. clear what the ADB means by “good
‘Michel Chossudovsky, Professor of Economics, governance”.
University of Ottawa, April 2000 The ADB’s concept of ‘good
“Small island nations are vulnerable and governance’ “focuses essentially on the
are practically of no consequence when it comes ingredients for effective management”. Its
to combating the adverse effects of globalisation policy document, Governance: Sound
and what is emerging is a new order of Development Management says “the common
colonialism. The uneven distribution of wealth features that stand out in respect of the high-
and power points to the potential loss of performing economies are stability in broad
sovereignty by national governments as the policy directions, flexibility in responding to
control of their respective economies becomes market signals, and discipline in sticking with
more subject to global forces such as measures necessary for meeting long-term
multinational companies and the pressures of the objectives despite short-term difficulties, all
select global brotherhood”. Sani Lakatani, hallmarks of sound development management,
Prime Minister of Niue, January 2001. i.e., good governance.”
The Asian Development Bank (ADB), in Building upon the World Bank’s
adopting a policy on governance in October approach, the ADB has identified four basic
1995, claims to be the first international elements of good governance: accountability (of
financial institution to have a board-approved the public sector for delivering specific results),
official position on “good governance”. predictability (of legal frameworks for private
“Good governance” is a serious sector development), transparency and
contender for a prize for the best example of participation (of key stakeholders).
Orwellian doublespeak. It has nothing to do Jane Kelsey, Professor of Law at
with democratization, humanitarianism or University of Auckland, defines ‘good
support for peoples’ rights. It is a euphemism governance’ as “shorthand for a limited
for a limited state designed to service the market government” whose role is “to facilitate
and undermine popular mandates. It is explicitly markets, Western-style rule of law, individual
linked to the kinds of structural adjustment liberty, private property rights, and passive
forms of electoral democracy.”
*Aziz Choudry is the editor of GATT Watchdog in Aotearoa, New Zealand (azizch@spl.at)
38
The Asian Development Bank operates in strengthening its professionalism; promoting
12 Pacific Developing Member Countries more open and growth-orientated economic
(PDMCs). These are the Cook Islands, Fiji policies and; encouraging privatisation and a
Islands, Kiribati, Federated States of larger role for the private sector.
Micronesia, Republic of the Marshall Islands, It states: “A core good governance
Nauru, Papua New Guinea (PNG), Samoa, agenda of economic policy, public sector and
Solomon Islands, Tuvalu, Tonga and Vanuatu. It governance reform has already been agreed to
also has operations in East Timor, which is not broadly. The Pacific countries have already
yet formally an ADB member country. agreed in principle to this agenda through the
Annually the ADB approves between Pacific Islands Forum. ADB has appropriately
US$100 million and $150 million in loans and fostered and supported this agenda, which forms
$15 million in technical assistance grants for the the basis of most of the reform programmes
Pacific region. It has also influenced the currently being financed by ADB in 10 of the 12
direction of the Pacific Islands Forum (formerly PMDCs”.
the South Pacific Forum). This body represents The ADB co-sponsored the first Pacific
14 Pacific Island governments (Australia and Regional Conference on Governance for
New Zealand are also members), and plays a Parliamentarians in Nadi, Fiji, in March 2000.
key political role in getting assent and The Pacific Islands Forum has also adopted
commitment on economic, financial and trade eight principles of public accountability
policy measures. The Forum has increasingly developed at the 1997 FEMM, and the October
focused on promoting the economic agenda 2000 Biketawa Declaration on good governance.
already being pushed by the ADB, the World The economic reforms, trade and
Bank/IMF, APEC and the WTO. investment liberalization, with their “good
At the first South Pacific Forum governance” focus are also being advanced in
Economic Ministers Meeting (FEMM) in Cairns the region by bilateral aid donors such as the
in July 1997, the structural adjustment model European Union, Australia (AusAID) and New
was formally adopted in an action plan which Zealand (NZODA).
covered economic reform, public accountability, There is increasing coordination among
investment and tariff policies, and multilateral the various multilateral and bilateral donors to
trade issues. The FEMM stated that “private the region. Australia in particular makes a
sector development is central to ensuring significant contribution to the ADB’s Asian
sustained economic growth, and that Development Fund. The World Bank also lends
governments should provide a policy about $50 million annually to the Pacific (Fiji
environment to encourage this.” The theme for Islands, PNG, Samoa, Solomon Islands, Tonga,
the August 1998 South Pacific Forum Leaders and Vanuatu), with governance one of its
meeting was “From Reform To Growth: The focuses. AusAID argues that aid plays a vital
Private Sector and Investment as the Keys to role in encouraging ‘good governance and in
Prosperity.” promoting sound economic policies’. This
In its 1999 report, Pursuing Economic entails across-the-board intervention to promote
Reform in the Pacific, the ADB praised the ‘the competent management of a country’s
FEMM Action Plan for being based on “market resources in a manner that is open, transparent,
friendly policies widely accepted as accountable, equitable and responsive to people’
economically sensible, albeit politically difficult s needs and which enables all people to
to implement.” contribute to and benefit from development’.
In its 2001 strategy document, A Pacific Sydney-based AIDWATCH notes that
Strategy for the New Millennium, the ADB lists AusAID’s direct and indirect expenditure on
its areas of emphasis relating to governance in promoting ‘good governance’ in recent years
the initial phase of the reform programmes since has exceeded the estimated total direct and
1995. These are: supporting legislative reform indirect expenditure on health, and the total for
of the role of parliament and the public sector; infrastructure. As members of the Pacific
strengthening good governance institutions; Islands Forum, and with extensive trade,
introducing fiscal discipline and output focused investment and economic interests in the Pacific
budgeting; downsizing the civil service and Islands, Australia and New Zealand play key
39
roles in maintaining pressure on the region to that exist in some countries in the region. To
implement the reforms. advance the argument that a solution to these
As well as being a key element of the problems can be tackled by accepting the ADB’s
structural adjustment programme, good “good governance” misunderstands the concept.
governance - or rather the lack of it has been Throughout the Pacific local communities and
frequently used as a convenient explanation for movements like the Tongan Human Rights and
economic crises and a way to blame Democracy Movement are organizing to
governments rather than the policies set by the challenge domestic problems in government,
reform programmes. and issues of democratic rights.
Another excuse is lack of local “ The ADB claims that “with the adoption
ownership” of the reform agenda. Introducing of a strong governance reform agenda by the
the ADB’s new Pacific strategy at last year’s new Government in late 1999, and supported by
ADB Annual Meeting in Hawaii, Basudev multilateral and bilateral development
Dahal, Director of ADB’s Office of Pacific institutions, PNG has quickly managed to
Operations said: “The challenge is to deepen the substantially reverse its fast-declining economic
commitment of government and civil society to performance, and subsequently improve its
the reform programme”. access to international finance.”
Predictably, the ADB speaks of Yet it was precisely the structural
consulting more widely with “civil society” and adjustment programmes, privatizations, and sale
working to “strengthen the interface and of state assets driven by the ADB, IMF, World
collaboration” between Pacific member Bank and backed by the Australian government
governments and NGOs/civil society groups. which sparked last year’s mobilizations against
“[W]ider NGO involvement and consequent them in Papua New Guinea. Last June four
stronger ownership of Pacific developing young Papua New Guineans were shot dead by
member country governments’ development riot police and many more injured after an anti-
strategies and reform agenda has become a privatisation rally in Port Moresby, the capital.
priority”. The ADB now emphasizes “poverty Where was the ADB’s celebrated “strong
reduction” and “good governance”. It will tailor governance reform agenda” then?
its activities towards “country-specific Despite all of the good governance
strategies” in the Pacific. The buzzwords might sloganeering by the ADB and other vehicles
have changed over the years. But the economic pushing the neoliberal agenda in the region,
fundamentals that underpin its programme Pacific peoples have little or no input into the
remain unchallenged. development of macroeconomic policies
Indeed the “new” Pacific strategy offers affecting them, promoted with little empirical or
more of the same. “Emphasis will continue on independent research on whether or not they are
implementing fiscal discipline, strengthening appropriate or desirable for the recipient
revenue management, promoting an export country.
orientation, and encouraging private What consultations there have been with
investment.” It promises to promote “ communities and NGOs on the economic
privatization of state-owned enterprises, private reforms have been little more than cosmetic
sector participation in infrastructure exercises. In February 2002, the Pacific
development, liberalization of investment and Network on Globalisation (PANG), a network of
trade regimes, and greater competition.” NGOs and individuals concerned with
While its economic reform programmes globalisation and the Pacific, challenged Pacific
have meant cuts to public services like health Island governments about the lack of public
and education, the ADB envisions a greater role consultation or parliamentary debate over two
for NGOs in service delivery - not in setting the regional trade agreements which had been
agenda. Through engaging selected NGOs in “ opened for signature at the Pacific Islands
dialogue” and “consultations” the ADB seeks to Forum Leaders Summit in Nauru last August.
legitimize its economic reforms. Communal ownership of land, the
To be critical of the “good governance” existence of the subsistence economy (some
agenda of multilateral financial institutions is 85% of people are engaged in the subsistence
not to ignore issues of corruption and conflict economy in PNG, 80% in Vanuatu, and 55% in
40
the Federated States of Micronesia (FSM)) and Pacific countries are governed by Western
strong communitarian values are celebrated as systems of governance, indigenous models of
strengths against the onslaught of corporate governance are still highly relevant today.
globalisation by its critics in the Pacific. The “Governance in the indigenous concept is
ADB regards traditional values, the subsistence linked to a belief system that supervises and
economy, and especially traditional forms of monitors peaceful co-existence of everyone and
land tenure throughout the Pacific as little more everything that share the multi-dimensional
than impediments to private sector investment natural world that we live in....Individual rights
and growth. and freedom are practiced within the parameters
According to its 1999 Reforms in the of collectivity. Any disturbance to peace is
Pacific - an assessment of the ADB’s assistance frowned upon and collective responsibility for
for reform programmes in the Pacific, its peace restoration is a crucial task....Truth and
reforms had led to the slashing of public sector justice are prerequisites for good governance,
employment - by 57% in the Cook Islands social security, economic self-reliance and
between March 1996-October 1998, by 37% in political stability,” she told ABC Radio in
FSM between 1996-January 1999, and 33% in Australia in January.
the Marshall Islands between October 1995- A joint church/NGO submission to Fiji’s
March 1999. 1999 national budget asked “are we trying to
Social services spending cuts and the make Fiji into something it was never meant to
introduction of user-pays have seen the decline be - a poor copy of large nations, reliant on an
of health services, especially in rural areas, and economic model in which we will always be
imposed barriers to the affordability of dependent or losers? In our current system
education. Unemployment, especially for youth, some may profit but most are excluded or
has worsened as the private sector in Pacific exploited. We believe that this system is not
Island countries cannot absorb the available made for us.”
labour. Public sector “rightsizing” has been
accompanied by a sudden increase in the
numbers of consultants.
At a Public Service International Oceania
regional conference in Auckland in March 2002,
delegates of public sector unions from
throughout the Pacific said that radical
restructuring of the state sector had had
disastrous effects. Most said that as a
consequence of privatization, deregulation and
globalisation, living standards had lowered, and
employment rights had been eroded through
individual contracts. As a result of job losses
through restructuring, emigration has soared in
several Pacific Island countries.
Convenor of PSI Oceania, Paul Slape, of
the Australian Services Union, said:
“In many smaller Pacific nations,
government has been the main employer.
Without the private infrastructure in place,
restructuring is simply leading to high
unemployment and the erosion of labour
standards. It is undermining communities and
breaking down social cohesion.”
Pacific peoples have long histories of
struggle against colonialism. Director of the
Pacific Concerns Resource Centre, Motarilavoa
Hilda Lini, from Vanuatu, says that while all
41
The Citanduy River Diversion Project
Some Critical Thoughts
By Susi Pudjiastuti and P. Raja Siregar*
The Asian Development Bank (ADB) is future use and management of the Segara
providing financing to the Government of Anakan (ECI, page 3). The latest plans-based
Indonesia for the Citanduy River Diversion on two studies (ECI 1994 and BBV 2000)-will
Project. The supposed aim of the Project is to ostensibly save the Segara Anakan from being
preserve the Segara Anakan Lagoon which has a totally filled with sediment from the
unique and rich marine eco-system. However, contributing rivers by undertaking major
the process by which the Project has been engineering interventions. The Project is being
formulated and negotiated raises serious financed and technically supported by the ADB.
questions about the ADB’s real motives in This paper shows the problems and
supporting and promoting the Project. inconsistencies contained in the proposed
The Segara Anakan is a large Lagoon on engineering interventions and argues for a major
the south coast of the island of Java in review of the threats that Segara Anakan faces.
Indonesia. It is situated on the north side of the
Nusa Kambangan island, between Cilacap in
Central Java and Pangandaran in West Java. The plan and justification.
The Lagoon is connected to the Indian The two latest studies about the Segara
Ocean via the Western Outlet and smaller Anakan were done by the ECI in 1994, and as a
connections such as tidal Channels towards follow-up by Binnie Black and Veach (BBV) in
Cilacap. Two large rivers: the Citanduy and 2000. Both arrived at the conclusion that the
Cikonde supply the majority of the fresh water Segara Anakan is filling-up because of the
to the Lagoon. A small amount of fresh water is sediment brought in by large rivers. They also
also supplied by smaller rivers. conclude that there has to be a dredging program
Since the first mapping of the Lagoon in and ultimately, the diversion of the Citanduy and
the early 1900s, its surface area has Cikonde rivers. Even in reaching these
continuously declined. The main reason for this conclusions, both reports contradict themselves
is high levels of upland erosion. The fresh water and omit facts recorded in other sources. They
supplying rivers carry large amounts of also do not properly address many potential
sediment and silt into the Lagoon. Other problems. The diversion of the Citanduy river is
important contributing factors are land planned for early 2002 without an initial trial
reclamation and flood control measures. programme of dredging, which was considered a
The Segera Anakan has long been the vital part of the plan.
focus of many studies, proposals and projects In the ECI plan, the justification for the
involving Government agencies, international diversions of the rivers is that the Citanduy and
institutions and Consultants. Over the years, a Cikonde carry among them almost 100% of the
variety of proposals have been made for the sediment load that is now deposited in the
*Susi Pudjiastuti is an independent business woman in Indonesia (astuti@bdg.centrin.net.id);
P. Raja Siregar is with WALHI in Indoensia (radja@walhi.or.id)
42
Segara Anakan. By diverting these rivers a large initial dredging stage.
proportion of this sediment can be deposited in There are serious doubts about the
the sea. The economic justification for this positive environmental and economic effects of
course of action consists mainly of three this project as it is planned and proceeding
elements: the benefit to off-coast fisheries; a today. These doubts justify an independent and
proposed aquaculture project; and, improved comprehensive review of the Project goals,
drainage for agriculture areas surrounding the justifications and implementation means.
Segara Anakan. It is argued that if the project is
not implemented. these benefits cannot be
realized. for the following reasons : Environmental impacts
• As the Segara Anakan fills in, many There is no doubt that the Project will
marine species which use the mangrove and have a major environmental impact on the
Lagoon area as nurseries will be reduced in Segara Anakan Lagoon and it’s surroundings.
numbers and thus affect the coastal and Lagoon There is concern that these changes will lead to
fisheries negatively. If the Lagoon is preserved, the destruction of the Lagoon environment as is
the fisheries can be kept at the present level and today. Many indications of major negative
even improved. impact can found in the ECI and BBV reports :
• The increased salinity of the Segara
Anakan makes a large aquaculture project inside 1. Nutrients
the area feasible. Other than sediments, the large rivers
• Direct diversion of the large rivers will also contribute freshwater and nutrients to the
improve drainage and decrease flooding upriver. Lagoon. Both freshwater and nutrients are
It has to be noted that the report needed for the Lagoon to function as it does
concludes with the fact that if any one of these now. The Citanduy alone carries about 75% of
three benefits cannot be gained fully. the project freshwater and nutrients into the Lagoon.
loses the economic viability. A special focus of The ECI Report mentions on page 9: “It
the project seems to be the aquaculture is possible to save the Lagoon from the
component. The ADB claims that it is incessant sedimentation and at the same time to
supporting the Project in order to reduce destroy its productivity as it now exists. The
sedimentation in the Segara Anakan Lagoon and irony is that the sediment filling the Lagoon is
that the Project is categorised as an accompanied by the nutrients that make the
environmental project. However the Project has Lagoon so productive. “ However, the Report
a component focussed on aquaculture by also attempts to argue that even without the
opening 200 hectares (ha) to shrimp ponds. Citanduy input, the nutrients would be sufficient
The ECI report provided the following for the Lagoon: “... much of the nutrients
timetable of activities: from 1994 to 1999, requirements of the biotic system of Segara
initial annual dredging were to be performed in Anakan is stored within the system itself “ and
the Lagoon. to restore and preserve the shape that freshwater input “ merely contribute readily
and size of the Lagoon. After this dredging available nitrogen and phosphorus, currently
phase (five years) it was to be determined if the exceeding requirements” (page 19). The truth of
environmental requirements and implications of these claims is questionable since even nutrients
dredging could be addressed. In 1998 and 1999 already in the system will one day be exhausted
the Citanduy diversion was to be constructed, if no there is no regular re-supply! In addition,
but only after it was proved that the mangrove the Report mentions that there is no observation
forests could be managed satisfactorily and the of effects on mangroves that would indicate
dredging program met all the necessary excess amounts if nutrients available (page 33).
requirements. After that the Cikonde diversion
would be made. After all these interventions, the 2. Salinity
Report estimates that salinity will be high With both rivers diverted, the salinity in
enough to start the 200 ha aquaculture project. the Lagoon will rise considerably. At the
Uptill now, no work has been done on moment water in the Lagoon can be considered
dredging. It appears that now work shall start brackish at most times with salinity in most part
directly on the Citanduy diversion, without the of the Lagoon at no more than 20 ppt in that
43
wet season, and no more than 10-15 ppt in the welcome condition for the proposed aquaculture
dry season (BBV, page 42). After diversion, the component. This component seems to be
salinity will double or even triple in places, extremely iimportant to the ECI consultants
rendering the Lagoon a seawater area. It may since they write in many parts of their report
also be that the salinity will rise to even higher (pages 48, 54, 94, 96, 101, 107 and 109) that
levels because of increased water temperatures without the aquaculture component, the entire
and subsequent evaporation. project will not be feasible from the perspective
The possible negative impacts of this of Internal Rates of Return (IRR). The plan is to
increased salinity on the Lagoon and it’s develop a concentrated site with a maximum of
habitants is not directly mentioned in the 200 ha of brackish water ponds since a greater
reports. However there are some notable items area “ is judged to have a negative impact on the
mentioned which need further clarification to be other functions and services of the Lagoon
able to asses the environmental and economic mangrove complex “ (page 48). However, to
impacts of increased salinity improve the outcome of the economic analysis,
On page 25, the ECI Report mentions this area could be increased by up to 70 percent
interactions of species inside the Lagoon. It (page 101).
goes on to say that “ for instance, many types of The report also mentions the following:
shrimp have evolved optimal growth rate at “Aquaculture, especially for tiger shrimp, has
lower salinity levels at certain stages in their failed in other parts of Indonesia. Special skills
life, making them dependent on the inner are needed to manage tiger shrimp ponds. It is
creek.” This could mean that one of the planned to provide the necessary resources so
consequences of the river diversion is that many that failure is avoided in the Segara Anakan”
of the shrimp species now present in the Lagoon (page 109). This is very correct! Almost all
will not be able to live there any more. This will black tiger shrimp farming in Indonesia has
have negative impacts in both, the failed because of intensive cultures and
environmental and economic sense. subsequent overuse and overstocking have
The report discussed extensively resulted in diseases. Pollution has made many
laboratory results which suggest that “ late ponds unusable for many years to come!
juvenile stages of certain shrimp species cannot Furthermore, these failed ponds mostly had
tolerate very low salinities, whereas young direct access to the open sea whereas the Segara
juveniles demonstrate larger tolerances .” It Anakan ponds will contribute to pollution in the
would be interesting to know if this affects Lagoon and eventually poison themselves.
commercially valuable shrimp species as well. Small shrimp pond projects on the south coast
Also in the ECI Report (pages 18 and work well if they are managed according to
20), there is mention of growth reduction in the traditional methods, but there is no reason to
mangroves under high salinity conditions. The believe that a large 200 ha site in the Segara
type of mangroves that grow well in these Anakan would be operated and managed in an
conditions will also change, in effect, changing environmentally friendly and sustainable
the entire ecosystem of the Lagoon. The BBV manner! It must also be stressed that the EU is
Report even mentions tested flow scenarios for a getting extremely strict on medications that are
“ No mangrove scenario, in case that the permissible in shrimp farming.
mangrove loss around Segara Anakan results in
the loss of storage volume that presently exists
“ (page 20). Economic sense
Further, the ECI Report mentions (page To evaluate the economic sense of the
33) that one of the indirect uses of the Segara diversion project, the assumptions guiding the
Anakan is the prevention of saline water project and providing the economic rationale
intrusion, by maintaining a fresh water wedge need to be evaluated.
on top of the salt water on the coast. It goes on A big question of concern is the urgency
to say that “ increased penetration of saline with which the river diversion stage, with its
water (...) may cause far-reaching socio- associated costs-is being implemented.
economic and ecological impacts. ” Dredging and management requirements
Of course, the increased salinity is a very mentioned in the ECI Report have not yet been
44
implemented (page 106). In addition. according a base for calculations (ECI Report, page 53).
to estimates in the ECI report, the Lagoon Since the trawl ban was implemented in 1980,
should at the present time already be filled catches have diminished significantly (ECI
completely (page 14, surface prediction for the Report, page 47) and now average about 7.500
year 2000). However, the Lagoon still exists, tons of fin-fish and 2.000 tons of shrimp. The
even if smaller in size than in 1992. use of the pre-1980 data casts doubts on the
An indication of what is happening neutrality of the ECI report in its assessmentt.
comes from the BBV Report where it is Also needed is an evaluation of the
mentioned that already almost 93 percent of all effectiveness of much cheaper methods to
sediment carried by the rivers flow out to sea, preserve the Lagoon, some of which have fewer
and due to a changed Lagoon size and coastal long-term impacts on the environment. The
shape this amount of sediment may be ASEAN report mentions only agitation
increasing. Untill an equilibrium state is dredging and enhanced flushing as methods to
reached (BBV Report, pages 45 and 1), the preserve the size of the Lagoon (ASEAN, page
actual sediment deposition is 500.000 m3 per 44). The BBV report also mentions that the
year (1999) as opposed to 1.000.000 m3 Cikonde diversion alone would already have a
estimated by ECI in 1994 (BBV, page 7). If in large effect an the sediment deposits in the
fact it is true that there is an equilibrium stage Lagoon, without having to construct the much
that has almost been reached at this time, there more expensive and environmentally destructive
may be time to think about other measures to Citanduy diversion project.
protect the Lagoon than an expensive Without doubt, an extremely
engineering intervention. environmentallyy friendly alternative would be
If a reduction in fish catches in and to spend money on preventing the rivers from
outside the Lagoon is taken as an indication that carrying such large amounts of silt in the first
the Lagoon is losing it’s productivity as it place, which means an effective upriver erosion
becomes smaller, it must be pointed out that control program. The ECI report (page 108)
much more productivity loss in fisheries can be devotes a single paragraph to recommend a
attributed to the use of destructive fishing gear feasibility study about upland erosion control,
by lagoon and offshore fishermen. This is but states this is not feasible basin-wide. But
described in detail in the 1990 report on “ how would they know this without the necessary
Coastal Resources Management Project “ by feasibility study?
the ASEAN-US cooperative Program on Marine
Sciences (pages, 20, 28). Another important
factor is the rapid destruction of mangrove Local participation
forests around the Lagoon by human activity Diverting the Citanduy rivers will
(ASEAN page 19, ECI Report page 21 and 30). generate result in a large proportion of sediment
The assumed economic benefits of the being carried out to the coastal area in Cilacap,
Project through aquaculture must be related to West Java, where villagers and fisherfolk live.
environmental issues. As it is unlikely that the This will affect their environment and
black tiger farming will be successful in the livelihoods. Therefore fisherfolk in Cilacap are
long term, this should not be counted as a opposing the project.
project benefits. In addition, marine farm prices The ADB has discussed the project with
have collapsed following the September 2001 local people in Cilacap who would be eligible to
WTO attacks and European Union import will receive some benefits. However, no broad
restrictions. The ECI Report (page 102) based public consultations and discussions have
mentions that a 10 percent fall in both farmed been carried out anywhere. The fisher folk in
and captured fish prices will push the IRR below Pangandaran, West Java, who will also be
the required 12 percent. Certainly these prices affected sedimentation from the river’s diverion
have fallen much more than 10 percent and are have not been consulted at all. At present, they
expected to remain low. are also opposing the Project.
In looking at offshore fisheries data, it is The Project will require the appropriation
questionable to use pre-1980 data of 5.000 tons of land that is in the route of the river diversion.
of shrimp and 15.000 tons of fin-fish catches as Affected land owners and users are supposed to
45
be compensated by the Project for loss of land. activities are reduced and the nursery
The project has finished the study phase and is function of the Lagoon can thrive. Together
in the process of preparation and with Nusa Kambangan, the Segara Anakan
implementation. However, iimplementation has could from a unique and valuable nature
currently stopped because of disagreements over reserve for the Southern Java coast. This
land compensation. The owner of 130 ha of would eventually be beneficial to local
land in Cilacap, whose land will be directly in people and communities as a productive fish
the new route of the river, has refused the and shrimp nursery, bird habitat and refuge,
compensation price offered by the Project. and an attraction for visitors from other
Meanwhile, villagers in the Segara places.
Anakan area have been informed by ADB There is a serious question why the ADB
consultants that diverting the river is the best and the Government of Indonesia have chosen
option to reduce sedimentation in the Lagoon. to divert the flow of the Citanduy river to reduce
The fact that fisher folk in Cilacap refused the sedimentation, instead of considering another
Project has created potential for conflict among option that has proved to be succesful, namely
villages in the two areas and villages in Segara forest rehabilitation. Forest rehabilitation in
Anakan consider those villagers in Cilacap to be upland areas, which had already been completed
jealous of the benefits of the Project in the up to 50 percent, has significantly reduced
Lagoon area. sedimentation in Segara Anakan. Despite its
success, forest rehabilitation was eventually
discontinued because of corruption and
Alternatives to consider mismanagement.
The following proposals are made: Benefits from the Project will not go to
• A study must be conducted by an the local communities or those living up or
independent and neutral entity, supported and downstream from Lagoon area. The real
accepted by all parties. Current data should beneficiaries of the Project will be the
be gathered and an assessment made on all consultants, project executors (local and national
possible solutions to Segara Anakan problem. government officials, commercial shrimp
• Upland erosion control should be considered businessmen, and the ADB itself.
seriously, at it not only saves the Segara
Anakan Lagoon, but also benefits the entire
upland watershed areas of the Citanduy and
Cikonde rivers. Financing should be made
available for these measures..
• Until the erosion control has had positive
effects on the filling of the Segara Anakan
Lagoon, maintenance dredging (either
conventional or agitation) can be performed
to maintain the size of the Lagoon, or to even
enlarge the Lagoon back to a suitable size.
• The encroachment of commercial farming
and aquaculture on the mangrove and Lagoon
areas must be stopped.
• Fisheries in the Lagoon must be regulated
and destructive fishing gears outlawed. No-
catch zones, seasonal restrictions, and
minimum net mesh sizes should be
considered. This must go hand-in-hand with
education measures for the fisher folks and
increased Marine Research of the Lagoon and
offshore fisheries.
• The Lagoon should be designated a nature
reserve so that disturbances from human
46
Disclosure, or Deception?
Multilateral Institutions
and Access to Information
By Shalmali Guttal*
Multilateral institutions such as the Asian irresponsible in their stated commitment to
Development Band (ADB) and the World Bank promote public participation, and equitable and
pride themselves on their information disclosure fair access to information.
policies, and hold them up as evidence of their
commitment to transparency and accountability.
The discussion on information disclosure, The politics of information
however, needs to be located in the larger disclosure
context of rights and governance. Today, the Access to information is primarily a
public’s right to know is considered indisputable political issue, and embedded in power relations
by most proponents of democracy, and and the exercise of power. It involves not
articulated in the Universal Declaration of simply the ability to access information that
Human Rights and International Covenant on exists, but also, the generation of information
Civil and Political Rights. Most of us would that would influence the ability of the public to
agree that meaningful public participation in participate in making decisions that shape the
democratic processes requires informed future directions of their societies and countries.
discussion and debate. Unless a public is fully The capacity to generate information and to
empowered with all the relevant and required enshrine this information in social and
knowledge, its participation in a given situation institutional memory as “knowledge” is indeed a
is cosmetic at best. powerful one. Both the World Bank and the
By Governance, I refer to a ADB have these capacities and have used it to
comprehensive and transparent system of rules, their full advantage in the name of information
processes, and procedures that ensure the disclosure.
protection of peoples’ rights to knowledge and The information disclosure policies of
decision-making, and accountability and both institutions are comparable in some
responsibility for decisions made and actions fundamental shortcomings.
taken. Policy decisions have economic, social
and political consequences, and it is crucial to 1. Irrelevance to decision-making
examine whether those who bear the greatest The most obvious flaw in the information
costs of decisions have been involved in making disclosure policies of the World Bank and the
these decisions. ADB is that they have little to do with
In this context, both the ADB and the influencing key policy decisions made by the
World Bank fail in their practices on information institutions. It does not matter how much paper
disclosure and access to information. Both or how many megabytes they make available;
institutions are completely unaccountable to the the most important decisions in both institutions
public, highly non-transparent in their policy are made according to the economic and
formulation and decision-making, and political interests of their more powerful
* Shalmali Guttal is the Coordinator of the Micro-Macro Issues Linking Programme at Focus on the Global South
(s.guttal@focuseb.org). This paper is based on her presentation at the Conference, “Access to Information” held in
Hua Hin, Thailand, from March 4-6, 2002
47
members and not according to broad based that it will receive majority approval from the
public interest. Board. And if this approval is not possible
Equally important here is the issue of through informal “consensus-building,” senior
how decisions within these institutions are management is likely to delay the process by
made. Again, public debates or public interest bringing additional steps into the formal
priorities have little meaning here. It is widely decision-making process.
acknowledged that a significant reason for why In sum, decision-making in the ADB and
developing countries have been disadvantaged the World Bank is controlled by exclusive,
by multilateral institutions is that they have been closed circles of top leadership and senior
marginalised from the formal decision-making management, and guided by multiple levels of
systems of these institutions. self-interest. The present information disclosure
In the World Bank, formal decision- policies of the two institutions are not going to
making power is based on the size of capital change this situation.
subscriptions. Here, the United States (US),
with a 17.6 percent voting power has the formal 2. Selective disclosure
clout to veto decisions that it does not favour. Another fundamental flaw in the
The only contender on the horizon to the US’s information disclosure policies of the two
power in the World Bank is Japan, whose capital institutions is that they only disclose what is
share and voting power the US has been able to convenient to them and advance their
limit to eight percent. Formal power is further institutional interests. What is more important
supplemented by informal mechanisms. The than the information they disclose is what they
World Bank President is always a US citizen do not disclose.
and the Bank’s location in Washington DC has The World Bank’s recently revised
helped to ensure that (US approved) US citizens information disclosure policy continues to focus
account for a quarter of senior management and on providing people with information about
higher-level professional staff. According to a decisions already taken, rather than making
US Congressional Research Service analysis, available the information needed for the public
the advantage of the World Bank and to participate in decision making. In the new
multilateral development banks to the US (and policy, key documents such as tranche release
other rich lenders) is that they are able to memoranda, the Bank President’s reports, drafts
demand performance standards of their of Country Assistance Strategies (CAS) for most
borrowers that the US and other lenders may be countries, and the draft and final documents for
reluctant to impose on a bilateral basis. most structural adjustment lending will not be
What Japan has lost in the World Bank, it made available to the public. The Bank’s Board
has claimed in the ADB. According a number of was apparently divided on the question of
ADB insiders, the ADB operates by the rules of transparency in structural adjustment lending
“Japanese culture.” Decision- making is “ and these divisions are reflected in the
consensus-driven” (in the Japanese way) and complicated agreement that was eventually
takes place through informal discussions in reached. Final versions of some documents for
hallways among select members of senior low-income borrowers will be made available,
management and the Board. The ADB too has while documents pertaining to middle-income
specific key senior positions reserved for the borrowers will be left to the “discretion” of
nationals of its more powerful capital borrowing governments to disclose.
subscribers. Sole and final authority on all According to the Bank Information
decisions rests with the President of the ADB Centre (BIC), a US based policy research
who is also the Chairman of the ADB’s Board of organisation that has monitored the World
Directors-and most important, is Japanese. Bank’s information disclosure process
Although members of the Board are expected to exhaustively, under the new policy the World
consult with the national capitals they represent Bank has essentially abdicated responsibility for
for major policy decisions, senior management its own transparency by pushing such disclosure
have no such cumbersome requirements. Their decisions onto borrowing governments. It has
primary concern is to ensure that no policy or thus clearly chosen to deny the public its right to
issue goes to the Board unless they are confident access key documents regarding structural
48
adjustment lending. not disclose the information on which its own
Also under the new policy, the World assessment was based.
Bank’s Board of Directors will continue to By October, 2001, the Samut Prakarn
govern in total secrecy. Again according to BIC, project went into the ADB’s inspection process,
the Board has yet to acknowledge that the public which itself was racked with non-transparency,
has a right to know how they are being conflict of interest and antagonism between the
represented within the Bank. Almost no Bank’s senior management and staff, Inspection
progress has been made regarding disclosing Committee, Inspection Panel, and the Thai
information about project lending. While the Government. An inspection report was
World Bank claims that it is interested in submitted by the Inspection Panel team to the
including project-affected communities in ADB without the Panel having visited the
decision-making, it refuses to make important project site or having direct consultations with
documents about project design and project-affected communities. Even so, the
implementation, and financing agreements inspection report finds that the ADB violated a
available to the public until after decisions have number of its important policies and procedures.
already been made. The project should have been re-appraised at a
The ADB on its part proudly touts its much earlier stage, before a supplementary
website, and the number of reports it has financing loan for the project was made. But it
published and made available on the website as took the ADB several months to make this and
evidence of its commitment to information other related documents available to the general
disclosure. However, according to a source public. The Requestors of the inspection (the
close to the ADB, what is not on paper is the affected communities in Samut Prakarn) were
real issue. What is available on the website or in not contacted by the ADB management about
published form is not pertinent to the ADB’s the inspection report until several months after
decision-making processes. Too many decisions the report was submitted to the ADB. To date,
are made through closed, informal discussions what the ADB has made public is a summary of
that should in actuality be open to the public. its conclusions about the Inspection Committee’
Much of this information and access to such s recommendations. The nature of deliberations
discussions are also not equally shared within within ADB Board regarding its responsibility
the ADB itself; delegates from poorer and thus and culpability, however, remain secret.
less powerful countries are as likely to be kept In the meantime, project construction
out of the loop as the general public in the ADB continues and affected communities cannot
borrowing countries. expect any compensation from the ADB for lost
ADB secrecy is amply demonstrated in livelihoods and a degraded environment. The
case of the Samut Prakarn Wastewater position and response of the ADB in the Samut
Management Project in Thailand. Despite Prakarn Wastewater Management project is not
repeated requests by project-affected simply a violation of its own information
communities and members of the Thai Senate, disclosure policy; it is a fundamental betrayal of
the ADB did not disclose the project profile, the public’s right to know. And this is one
procurement documents or even initial instance of the ADB’s commitment to
environmental and social impact assessments of information disclosure that the public is
the project. Project-affected communities and watching very closely.
supporting non-governmental organisations
presented substantial data to the Bank about the 3. Dubious quality
potential negative impacts of the project. They Given the high degree of secrecy that
also pointed out how the project violated both governs the information disclosure policies of
Thai laws, and many of the ADB’s own the World Bank and the ADB, it is difficult to
operational policies (such as Anticorruption, trust the quality and integrity of the information
Governance, Confidentiality and Disclosure of that it does disclose.
Information, and Environmental Assessment The recent draft water resources sector
Requirements). However, the ADB continued to strategy prepared by World Bank staff was
maintain that it saw no evidence of wrongdoing found wanting by members of the World Bank’s
or negative impacts, but at the same time, it did Board. Quite a few World Bank financed
49
infrastructure projects have been marked with public participation in the development of their
scandals of corruption and bribery, which respective policies and programmes, what
occurred even as senior Bank staff reported that purpose do they serve? I would conjecture that
all was well. One of the Bank’s own internal the primary aim of these practices is to keep the
reports in 1999 indicated that the Bank has public occupied with sometimes interesting, but
tolerated corruption, legitimised false statistics largely irrelevant information while the Banks
and was complacent about the state of human get on with business as usual. This is not
rights in many of its borrowing countries. The information disclosure in any meaningful sense,
Bank’s close involvement with the Suharto but rather, this is deception.
regime in Indonesia—to which it funneled US $
30 billion in 30 years—has been well
documented. Bank management was found Struggling with governance
violating its own rules on environment and There is ample evidence to show that
resettlement in the China Western Poverty neither the ADB, nor the World Bank are
Project. The Meltzer Commission report sufficiently competent to sermonise to the world
released in February 2000 found that the failure about transparency, accountability, good
of Bank projects is 65-70 percent in the poorest governance and participation.
countries and 55-60 percent in all countries. In In order to bolster its image, the World
sum, the Commission concluded that the World Bank attempted to engage the public in at least
Bank was irrelevant to the achievement of its two global initiatives, the Structural Adjustment
stated mission of global poverty alleviation. Not Programme Review Initiative (SAPRI) and the
surprisingly, none of this information was made World Commission on Dams (WCD). In both
available to the public by the Bank itself. these initiatives, the public-which included
The information provided by the ADB many long-time critics of the Bank-entered into
about its own policies is out of date with what they hoped would be good faith processes
developments within the institution. For of research and dialogue with a variety of
example, long pending reviews of its opposing interest groups. And despite
Information Disclosure Policy and the challenges and compromises, they stayed with
Inspection Policy have yet to be conducted. the programmes. The World Bank, on the other
Preliminary problems with both policies thus far hand, started to back-peddle as soon as it
have been kept secret, as have debates between became clear that the two reviews were
senior management and the Board about the generating information that contradicted its self-
quality of ADB programmes and projects. The created scorecards of success in structural
ADB’s lawyers have advised Board members to adjustment programmes and support for large
not make public statements about the possibility dams. In the case of SAPRI, the Bank produced
or state of project inspection processes (as in the its own report, which ignored the findings of the
case of Thailand and Sri Lanka). The research that its own staff was involved in. And
Operational Manual for ADB Staff has not been by so doing, it effectively closed off any
updated for at least five years. Operational substantive or meaningful discussion with the
policies and procedures that should have been public about structural adjustment. In the case
reviewed years ago are still unchanged, while of the WCD, the Bank more or less rejected the
other policies approved five years ago have still Commission’s findings and is taking refuge
not been included in the Manual-at least not in behind opposition to the report by some country
the version that is publicly available. There is governments as an excuse to not implement the
thus a great deal of confusion among Bank staff WCD recommendations.
as to which policies they should follow-those on In the meantime, the World Bank
paper (but outdated), or those agreed on by the continues to impose structural adjustment
Board (but not yet included in the operations through a new programme-the Poverty
manual). Reduction Strategy Papers (PRSP), which the
Given that the information disclosure Bank claims are nationally owned and
practices of the ADB and the World Bank do not participatory. However, investigations into the
provide complete, accurate, and reliable PRSP process by civil society groups reveal that
information to the public, nor do they facilitate PRSPs are plagued with the same flaws of
50
policy and conditionality imposition, information disclosed through paper and
inaccessibility of information and absence of megabytes, even as decision-making and
any serious learning from past Bank imposed democratic oversight in the ADB and the World
reform programmes. In the same vein, the Bank Bank become increasingly remote to the public.
has entered into yet another global review Secrecy in public information disclosure
process, this time of mining and extractive policy is a violation of the social and political
industry. But here, the Bank does show some compacts between a people and their
institutional learning. The process is far more government. Governments are-at least in
closed and exclusive than the WCD, and the theory-expected to be accountable to their
Bank is attempting to exercise greater control citizens for the decisions they make.
than before over the review structure and Multilateral institutions-which are public
process. Sources close to the World Bank have institutions—argue that they are directly
indicated that the Bank may be on a path responsible to the governments that constitute
towards “downward harmonisation” of project their clientele, and not to the general public.
and programme standards in an attempt to However, the policies and practices of these
ensure that it does not lose its infrastructure and institutions have severe and long-term
borrowing clientele. consequences that are not borne by governments
The ADB has its own problems of alone, but by the populations in the client
internal governance and non-transparency. The countries. And the less directly accountable a
Samut Prakarn Wastewater Management Project public institution is to the public, the more open
inspection process has opened a can of worms and transparent it needs to be in order to uphold
within the ADB, highlighting problems of poor its stated commitments to democracy, good
leadership, staff confusion, and lack of governance and social responsibility.
responsibility and accountability. The Experience to date shows that the ADB
inspection process has revealed the and World Bank have failed in this regard. They
inconsistencies between the ADB’s stated are in no position to preach the values of
policies, what is recorded on paper and actual openness, transparency and accountability to
implementation. A particularly alarming internal anyone until they can fundamentally restructure
by-product of the inspection process appears to internal and external governance in their own
be a rush within the ADB to update the staff houses.
operations manual towards protection from
future inspection processes. According to
sources close to the ADB, the Bank may try to Selected References:
arbitrarily decide which of their policies and Asian Development Bank: www.adb.org
which parts of their policies are subject to
inspection, and which are not. In the future, Aubugre, Charles: Still Sapping the Poor: A Critique
project managers are likely to be in a bind about of IMF Poverty Reduction Strategies.
ISODEC, June, 2000.
whether they should focus their efforts on
Bank Information Centre: The Ongoing Struggle for
faithfully meeting project objectives, or on World Bank Transparency-The Outcome of the
implementing the “inspectable” policies and Information Disclosure Policy Review.
thereby protecting themselves from the risks of November, 2001.
future inspection processes. Bank Information Centre: The Asian Development
Like the World Bank, the ADB may also Bank’s Inspection Function. February, 2002.
Bank Information Centre: Testing ADB
be moving towards a general lowering of Accountability: The Case of the Samut
programme and project standards by arbitrarily Prakarn Wastewater Management Project in
deciding which of its policies and procedures Thailand. February, 2002.
are “inspectable” and which are simply “good Bello, Walden: Prospects for Good Governance:
practice.” And whatever is deemed The View from the South. Focus on the Global
South, October, 2001.
“inspectable” would still be shielded from
The Bretton Woods Project: website.
external accountability by the ADB’s immunity The Halifax Initiative: Halifax Initiative Submission
to local and national laws, as guaranteed by its to Consultation on Draft Information
charter. Most likely, these trends will be Disclosure Policy.
accompanied by a lot more irrelevant The World Bank: website
51
Governance and the ADB
Complicity and Conflict of Interest
By Jenina Joy Chavez*
When crisis struck East Asia in 1997, the reforms (civil service and judicial reform,
international financial institutions (IFIs) and regulatory and market governance), in some
multilateral development banks (MDBs) cases compiled in a comprehensive governance
scampered everywhere to look for an masterplan or action plan, became one of the
explanation. That is, everywhere but into hottest initiatives coming from the IFIs/MDBs.
themselves. Not surprisingly, the most viable One would not have begrudged the IFIs/
apology turned out to be governance, or rather MDBs their claim of the moral high ground had
the lack of it. Governments were corrupt and institutional memory been short. Fortunately
nontransparent, rules were unclear and such was not the case. Most everybody
discriminatory, private companies were remembers that the IFIs/MDBs definitely
irresponsible and overextended - the system was hugged the policy limelight during the darkest
not functioning the way it should. It mattered and most repressive era of East Asia. They have,
little that the system gave such incentives for for instance, stayed on and shored up the
overextended “irresponsible” behavior of both Suharto regime in Indonesia, even at a time
government and the private sector, nor that the when civil society was already appealing for
rules were designed in the way most expedient their withdrawal of support. The World Bank
and politically convenient. After all, the system and the International Monetary Fund had been
was sponsored by the IFIs and the MDBs known to manipulate certain country data to
themselves, and anytime at their beck and call, it justify their loan programs in the past. And the
should be “all systems go”. U.S. Congress appointed International Financial
More than anything, it was governments Advisory Commission (also known as the
that received the ire of the good governance Meltzer Commission) reported in early 2000
gurus. They alleged that corruption pervaded that more than half of World Bank projects were
governments, and this spelled doom for failures.
countries during the crisis and made it difficult The most damning revelation came with
to implement the necessary response. For former the collapse of American electricity equipment
United States Treasury Secretary Robert E. and supply giant, Enron Corporation. Enron
Rubin, the situation was so bad that he urged the registered the biggest bankruptcy in U.S. history
IFIs “to cut off assistance when corruption to date, leaving on its trail more than US$140
undermines the viability and effectiveness of billion in debts. Not only did the most powerful
their reform programs” because “scarce country in the world fail to arrest the situation
resources should not be wasted in countries that before it exploded, it was also revealed that
are not prepared to confront and combat Enron thrived with its financial support.
corruption seriously”.1 According to the Institute for Policy Studies
Thus began the march of good (IPS), a U.S.-based progressive policy think
governance as the most important new pillar in tank, “since 1992, at least 21 agencies,
international development discourse, second representing the U.S. government, multilateral
only to poverty reduction. Governance-related development banks, and other national
*Jenina Joy Chavez is a senior research associate at Focus on the Global South, Manila
(J.Chavez@focusweb.org)
52
governments, helped leverage Enron’s global policy responsibility”, a situation that challenges
reach by approving $7.219 billion in public the
financing toward 38 projects in 29 countries”2. “traditional merit of a Regional Development
Closer to home, the governance discourse Bank being closer to its borrowing members
has also been actively promoted by the Asian countries”6 DFID further sees the operation of
Development Bank. The ADB has been cited by “a quota system for professional staff (i.e., the
the same IPS report as having “supported number of staff of a particular nationality
(Enron’s) Batangas Power Plant with a $26.4 depends on the size of that country’s
million loan”3. Official ADB documents show shareholdings)” and the reservation of certain
that the loan was approved in 1993 from the posts for particular countries, an anomaly.7 This
Bank’s Ordinary Capital Resources, and that the quota system is responsible for having the most
Bank also made an equity investment to the senior management posts occupied by Japanese
plant in the amount of US$3 million4. and American nationals. The Presidency, the
The irony of Enron is not so much that it Treasury and Budget portfolios are reserved for
went bankrupt. But that, being a private the Japanese, while the Americans take charge
corporation, it was subject to less nagging over of the General Counsel’s Office.
governance issues than governments were. The How the ADB handles projects and
irony is that the private sector has long been programs in DMCs is itself not a source of good
pitted against the public sector, hailed as the examples. Projects with implications on
better of the two, and in the 1990s been the resettlement almost always fail to incorporate
recipient of much direct support from the meaningful participation (versus mere
MDBs. consultation) with affected communities.
Relevant information are not made available on
time, if at all. Although one wonders whether
As the ADB says, not as it does the production and/or possession of conclusive
The ADB prides itself for being the first pieces of evidence (whether positive or
to have a Board-approved governance policy. negative) is really more important to the Bank
This policy has four core elements - than actually having a project or program
accountability, participation, predictability and implemented come what may.
transparency. The governance activities the The latest scandal to prick the ADB’s
Bank supports in developing members countries governance veil was the Samut Prakarn
(DMCs) revolve around the following Wastewater Management Project. First brought
objectives: to (1) strengthen governance in to public attention in Chiang Mai in 2000,
public sector management; (2) improve public Samut Prakarn was the first Inspection case
enterprise management and public-private brought before the Bank. Being the first, one
interface; (3) improve public expenditure would think that the Bank would put its best
management; (4) support public administration foot forward. Instead, a Board nervous about the
reform; (5) enhance participation; (6) deluge of potential Inspection requests, and a
decentralise government services; and (7) total lack of political will on the part of the
reform the legal system.5 Bank, caused the Bank to repeatedly ignore or
outright violate its own governance guidelines
However, the ADB does not always and proceeded with a poorly managed
practice what it preaches. Internally, the ADB is Inspection process. Still, the Inspection
very centralised and hires personnel based on Committee found various violations of Bank
criteria other than merit. A Department for policies, including participation, in the Samut
International Development (DFID, UK) study Prakarn case8.
pushed for institutional and management reform The project, however, is continuing. The
within the ADB. DFID claims that “the Bank Inspection Report is likely to gather dust. And
remains a higly centralised organisation with civil society’s worst fear is coming true: the
most decisions taken at its headquarters in Bank has started turning down new requests for
Manila”, that “in-country offices are...restricted inspection.
to project implementation, logistical support and
liaison with the host government” and lack “
53
Conflict of interest commissioned a large hydropower consultancy
It should not be hard to see why it is firm, Norconsult International, to assess the
difficult for the ADB to apply its own energy potential for the Greater Mekong
governance yardstick onto itself. There are just Subregion (which at the time everybody knew
too many elements of the governance principle the ADB was grooming as a hydropower hub).
that threaten the very foundations of the Bank. Not surprisingly, the report that was produced
When an institution’s professional judgment is read like a dam catalogue.9 But when
compromised or appears being compromised by consultants manage to come up with
considerations other than those openly covered compromising results, as in the case of
in the assessment process, a situation of conflict independent fisheries expert Terry Warren, the
of interest arises. In the case of the ADB, the ADB manages to pretend no such reports exist.
considerations need not be personal or financial, Terry Warren confirmed that the Theun-Hinboun
but values that the institution feels the need to hydropower project is responsible for negative
protect. This includes financial viability, positive impacts, including the loss of fisheries,
public projection, shareholders interest, and riverbank erosion and damage to drinking water
survival. supply.10
The Bank should be measured against an It is also self-promotion when the ADB
expanded standard of conflict of interest because explicitly states in consultancy terms of
it is a public institution, one that has tremendous reference (TOR) that certain projects must be
influence not only over how projects are done identified for implementation even before there
but also over what policies are implemented in is conclusive assessment that will support such
the DMCs. Financial resources have long been a projects. Such was the case with the TOR for the
weapon of coercion. Because of this, the ADB US$2.5 million Basin Hydropower
should be placed under very strict scrutiny. Development Plan in the Xe Kong, Se San and
Conflict of interest may be explicit or Nam Theun river basins in Cambodia, Laos and
implicit. It may surprise some people to know Vietnam, where its was stipulated that the study
that in many instances, the conflicts of interest should identify at least six hydropower projects
involving the Bank are more explicit than the for early implementation.11
Bank itself cares to recognise. Finally, it is self-promotion to extend
funds for “constituency building”, or the process
Self-promotion of convincing DMC citizens about the virtue of
Self-promotion is the selective use and Bank-financed projects or programs, usually
disclosure of information and dispensation of done through massive media campaigns. This
policy based on their potential contribution to practice was first tried out by the World Bank12
the Bank’s image. For the purpose of and is being tried by the ADB in some of its
scrutinizing the Bank, self-promotion can also sector restructuring projects.
mean the use of official position to ensure that
only positive things about the Bank or its Private sector operations
projects are publicised officially, or to ensure The ADB recorded its first private sector
that criticisms in official documents are held at investment facility approval in December 1983.
bay. The ultimate objective for self-promotion is It was a less than one million dollar equity
to show that the Bank is doing everything right investment to the Korea Development
all the time. Investment Corporation. Direct support for
The ADB is guilty of self-promotion for private sector projects used to be done through
only hiring consultants who are to make positive the Bank’s non-sovereign window, but are now
or favorable recommendations on controversial carried out by the Private Sector Operations
projects. By extension, the Bank is self- Department (PSOD).13 As of December 2001,
promoting when it ignores important the ADB has approved a combined total of
information that negates its own consultants’ US$2.66 billion in private sector investment
reports, or withholds negative findings even of facility, including direct equity, underwriting,
the consultants that the ADB itself hires. For loans and risk guarantees14.
instance, in 1993 it can be said to have The recent attention the ADB drums up
committed self-promotion when it for its private sector operations and the spate of
54
private sector lending from its Private Sector themselves. However, if a guarantee exceeds a
Group has led to accusations of conflict of specified limit (US$50M or 25% of project cost
interest on the part of the ADB. The conflict for partial risk guarantee, and US$100M or 50%
arises because other groups within the Bank of project cost for political risk guarantee), the
promote privatisation programs in DMCs. ADB requires a counter-guarantee from the host
Uncannily, the biggest private sector loans government.17
approved by the ADB in recent years have been Finally, when the Bank has both
connected to the buying up/operation of assets/ government and private sector clients in a DMC,
utilities that have been privatised under ADB and where the Bank has Resident Mission
programs. While the ADB itself acknowledges offices, statements by Resident Mission
that there is a potential for conflict of interest, members remotely referring to the private sector
they are quick to claim that this is not a real client’s dealings with the host government can
problem since the Private Sector Group has no be considered meddling and an occasion for
real influence over the Policy and Strategy conflict of interest. Similarly, if the Bank is
Department of the Bank.15 silent on the design of a privatisation program or
Far from the ADB’s claim that the its regulatory instrument, especially when such
conflict of interest in this case can be avoided by silence means undue advantage may be captured
full disclosure or by assurances that different by the private sector client once the program or
departments do not confer with each other, the instrument is approved, it is liable for conflict of
broader development objective of assisting a interest.
DMC still “appears compromised”. Having These are not hypothetical occasions.
these two groups, clearly with disparate The experience of the Philippines around the
functions and motivations, in a single institution metropolitan water utility privatisation (where
is problematic and in itself constitutes conflict the ADB is also arranging a private sector loan
of interest. to one of the winning concessionaires) is a stark
The Bank’s Private Sector Strategy, reminder that the Bank can be a “persuasive”
which aims to leverage private sector investment power when its interests are on the line. The
in DMCs, does not help at all. The strategy Bank uncritically and insensitively made
admits that DMCs have development needs far comments about how it would be difficult for
beyond what the ADB can finance.16 This is a them to arrange the loan facility for their private
crucial question to the ADB’s ability to sector client if the Philippine Government does
spearhead development in the region and an not grant their petition for automatic currency
implicit declaration that private sector partners exchange adjustment.18
are necessary for its continued relevance. On the other hand, the Bank may choose
If the argument is that assisting private not to be explicit about not-so-perfect conditions
sector groups helps client governments by that may hold in technical and impact
promoting production, why not channel the assessment, as long as broad opening up or
assistance through government instead? The privatisation objective is met. For instance, a
private sector can still be the ultimate Technical Assistance activity attached to the
beneficiary. The argument that the government restructuring of a major public utility might be a
will be inefficient in directing support (through study on pricing and regulatory practice in a
credit, for instance) becomes tired. And anyway, “competitive environment”. The study would be
given its questionable governance performance, fine, except that in the real world a competitive
who’s to say that the ADB will be better? At environment remains a pipe dream. Yet the ADB
least the government has sovereign power to will not place the emphasis on how the
make private corporations pay compensation for competitive environment can be achieved, nor
damage they cause. When has the ADB ever run would it reassess its role in the restructuring if
after erring contractors? its design were found to be less-than-
Even in its private sector operations competition friendly. Such was the experience
(PSO), the ADB calls on government to be with the ADB around the Power Restructuring
involved in certain occasions. Private sector Program.
loans no longer require government guarantees.
The ADB usually covers these guarantees
55
Policy Conditionality
The conflict of interest in the ADB’s PSO 1 Robert E. Rubin, Remarks delivered at the
becomes more pronounced when viewed in the conference Global Forum on Fighting
context of broad-based policy conditionality that Corruption: Safeguarding Integrity Among
the Bank imposes on its DMCs. The ADB has Justice and Security Officials, February 24,
been giving policy-based lending since 1978. 1999. Available on the internet: http://
However, it was after the programs’ second www.fas.org/irp/news/1999/02/99022403_clt.htm
review in 1987 that policy-based lending 2 Enron’s Pawns: How Public Institutions
became more stringent. Bankrolled Enron’s Globalization Game.
In policy- or program-based lending, Sustainable Energy and Economy Network,
loans are usually released in three tranches, with Institute for Policy Studies, March 22, 2002.
each tranche release conditioned on the Available on the web: http://www.seen.org/PDFs/
achievement of certain benchmarks or the pawns.PDF
performance of specified conditions. For 3 Ibid.
example, the second tranche of a power 4 Asian Development Bank. December 2001. Loan,
restructuring program loan may be conditioned Technical Assistance and Private Sector
upon among other things the passage of a power Operations Approvals.
sector restructuring law (such as in the case of 5 Asian Development Bank. 2000. Promoting Good
the Philippines). And third tranche will be Governance: ADB’s Medium-Term Agenda and
released upon the approval of a privatisation Action Plan
program for the national power company (also 6 Department for International Development. 2000.
as in the case of the Philippines). Tranche Working in Partnership with the Asian
release conditions may number from as few as Development Bank
one or two to as many as a dozen or more. 7 Ibid.
Even without the PSO, the use of policy 8 Final Report of the Inspection Panel on the
conditionality is already a big governance Samut Prakarn Wastewater Management Project,
problem. What if DMCs would like to 14 December 2001. Summary of Key Points
experiment beyond the economic orthodoxy? prepared by Shalmali Guttal, March 2002.
Should not programs be evaluated on their 9 International Rivers Network. The Asian
individual merits and based on specific country Development Bank: Financing Destructive
contexts? Quite obviously, with the PSO, policy Development in the Greater Mekong Subregion.
conditionality makes a clear case for conflict of http://www.irn.org
interest. 10 Joy Chavez, “Will the ADB Pass the Reality
Test?”, Focus on Trade No. 63, ADB Special Part
II, May 2001.
Beyond governance 11 IRN, Ibid.
The ADB’s poor performance record on 12 http://www.challengeglobalization.org/
governance reeks of doublespeak. It invents 13 Asian Development Bank. 2002. Private Sector
new policies to exhibit a seeming freshness, but Operations: Catalyzing Investment Across Asia
clings on to outdated structures. It co-opts and the Pacific.
progressive language to project dynamism, but 14 Asian Development Bank. December 2001. Loan,
fortifies its support of old models. It packages Technical Assistance and Private Sector
itself as working for the benefit of its client Operations Approvals.
governments, while becoming more and more 15 Jenina Joy Chavez. 2001. Taking Stock of the
beholden to the interest of its private sector Motives and Interests in ADB’s Private Sector
clients. Operations, in Profiting from Poverty: The ADB,
This doublespeak highlights the Private Sector and Development in Asia.
opportunism of the Bank who wants the cloak of 16 Asian Development Bank. 2000. Private Sector
security provided by a multilateral public Development Strategy
character, but nevertheless diminishes the public 17 Asian Development Bank. 2001. A Guide to
institutions that make it possible. ADB’s Official and Commercial Cofinancing
Operations
18 Jenina Joy Chavez, Ibid.
56
