May 3, 2008
President Haruhiko Kuroda
The Asian Development Bank
P.O. Box 789
0980 Manila, Philippines
We would like to thank you and Mr. Robert Dobias for ADB’s response to our letter submitted on May 4, 2007 in Kyoto. We commend your office for creating the opportunity to raise civil society concerns during the 41st Annual Governors Meeting.
However, it is equally important to inform you that the concerns raised in Kyoto have still not been adequately addressed by the ADB. While we raise a few new concerns in this letter, we would like to once again bring to your notice some points which continue to require resolution.
ADB Long Term Strategic Framework 2008-2020
We register our dismay over the new long-term strategic framework (LTSF) of the ADB. The strategy simply reiterate the ADB’s bias towards private sector-led development, which is in truth anti-poor and vulnerable to greater corruption. The strategic framework suggests expanding the Bank’s activities with the private sector to boost market-led economic growth in Asia and the Pacific region. This, we believe, will result in a more business-friendly, not community-friendly, environment and possibly dismantle what is perceived to be a corrupt public sector in favor of a less accountable though equally prone to corruption private sector. According to the LTSF, the ADB will increase its support for the private sector by 50 per cent in 2020, which is presently only about 12 per cent of its total operation. The provision for basic needs such as health, education, water and the infrastructure sector, however, will be reduced gradually to only 20 per cent.
While the LTSF recognizes that poverty remains the central challenge facing Asia and the Pacific region, it assigns the profit-driven market as the solution to the problem. Likewise, although it recognizes that rapid economic growth is putting severe strains on the environment, it is also increasing the private sector’s leverage in development projects, which would be dangerous due to the sector’s profit orientation and record of strong disregard of existing Bank policies regarding the safeguard of local community rights and livelihood and the environment from disastrous project impacts.
As a public development institution, ADB should not let the people suffer from private sector led development. We believe the ADB is making a fundamentally wrong assumption when it anticipates that Asia’s poor will be limited to mere pockets by 2020. Growing disasters, increasing disparities between the rich and the destitute and the failure of the market economy in the region to provide meaningful, sustainable gains to Asia’s masses will propel already marginalized poor peoples into further poverty. Unless ADB respects the diverse economic conditions prevailing in the region, it would be difficult for a regional bank to manage 3 billion people.
Asian Development Fund
We also share the concerns that some of the ADB Board of Directors raised during the on-going Asian Development Fund (ADF)- X replenishment negotiations. As we know the ADF is the only soft loan facility available to poor countries. However, ADF money has been invested in a number of projects that have largely created poverty instead of alleviating it, as stated in the overarching goal of the ADB. Since 1973 ADF funds have not been equitably and effectively invested, developed and distributed. It is a fact that the region is still home to 40 percent of the worlds poor.
We share similar concerns with those raised by some members of the Board of Directors, particularly with regard to the ADB’s failure to address staffing requirements and insufficient performance monitoring. We also believe that the ADB is now excessively focusing on middle-income countries with greater borrowing capacity at the expense of the region’s poorest nations.
We learned that the ADB has increased its lending in year 2007 to USD 10.1 billion which is more than USD 3 billion compared with year 2006. The ADB has issued USD 4 billion worth of Multitranche Financing Facilities while the civil society conveys their dissatisfaction on the facility since 2006. Meantime, ADB has not increased its staff capacity according to the requirements. This means the ADB is losing the quality of its lending while increasing the likelihood of committing more policy violations. We demand the ADB to stick to its poverty alleviation overarching goal and improve its aid effectiveness prior to increasing its budget.
ADB Private Equity portfolio
In addition we express strong concerns about the ADB’s private equity portfolio of over $600 million, held largely in offshore accounts. We have deep concerns about the relevance of these holdings to the Bank’s poverty alleviation efforts and see no meaningful evidence that appropriate environmental and social safeguards are being applied to these funds in accordance with ADB requirements. We call for the immediate release of the list of private equity funds as well as all companies financed through the funds under the Bank’s private equity portfolio. We also request all environmental and social safeguard documentation pertaining to these investments. We call for a strengthening of ADB safeguard policy towards such investments, to ensure full, thorough, and transparent implementation of the Bank’s policies.
For the past four decades, the Bank is one of the responsible agencies in the region that has contributed significantly to the current food crisis. While some ADB funded development projects destroy productive lands, ADB has reduced its financial allocation to the agriculture related projects over the years. As we learnt the conditionalities put forward to limit the role of the government and entry of private sector to the grain sector is the main reason for food crisis in the Philippines. We call for investments in the agriculture production to prioritize domestic food production over export crops and agro-fuel production.
Demand for a “standard setting” 2nd draft of the Safeguard Policy Statement
We have been monitoring the review of the ADB’s Safeguards Policy since 2005 when the review was first announced. We remained engaged with the process in good faith for over two years and offered extensive comments and background analysis and also ideas on how the consultation process should be carried out. We were therefore severely disappointed when the ADB released the Consultation Draft in October 2007 which proposed a weakening of existing ADB policy and did not advance the Review’s goal of bringing clarity and cohesion to ADB safeguards. We have since submitted comments that elaborate on our view that the October draft is a step back for the ADB. Given our view that the October draft was an insufficient basis for public consultations, we asked the ADB on February 7th,, 2008 to halt the regional consultations and resume then only after issuing a significantly revised and strengthened second draft. We were disappointed that the ADB chose to ignore this demand and wasted public money on consultations which a large majority of civil society did not attend. The response we received from Mr. Xianbin Yao, Acting Director General of the RSDD in his letter dated 7th March did not address the reasons for the CSO boycott.
We are now informed via an April 23rd ADB press release that, in keeping with the CSO demand, the ADB will issue a 2nd draft ahead of the Working Paper. While we are glad the ADB has accepted a key process demand of CSOs, we fail to understand why the ADB did not take this action sooner and use the regional consultations to their full potential.
We strongly feel the ADB must seize this opportunity to put in place the next generation of environmental and social standards. These standards should be aligned with international law and best practice.
We call on you to ensure that the ADB carefully reviews the extensive detailed comments it has received from CSOs thus far, and fully reflect these in the 2nd draft. We also request you to ensure that the 2nd draft be released for public consultation in a form, process and manner that is commensurate with international good practice in policy formulation.
Request for a redraft of the ADB Energy Policy
We like to convey our dissatisfaction on the process surrounding the formulation of the Energy Strategy policy of the ADB, the first draft of which was released in 2007. We are concerned about the failure of your team to craft and release the Bank’s Energy Strategy review in a timely and appropriate manner. Need we remind you that despite commitments from your energy team made throughout the regional consultations and to different stakeholders that comments, critiques and responses generated by the regional consultations will be published in matrix form in the ADB website. To our dismay, we were told only last week that although the Bank is still committed to uploading the consultation outcome on the ADB website, the Bank would only do so once the final Energy Strategy is agreed and released as well. This is unfortunate, and we find little cause for confidence, since the reiteration of the commitment comes from the same ADB team which failed to produce a suitable draft.
The ADB appears to be relying excessively on carbon market instruments without ensuring the prioritization of energy efficiency and renewable energy development with adequate time tables and targets, despite the creation of supposedly ‘purportedly new ‘clean’ energy-based funds. We reiterate that the ADB cannot just leave the development of sustainable energy options to the market. We reiterate that the ADB needs to shift resources towards actual renewable and energy efficiency projects and programs and at the same time put in place policies that will stimulate the rapid deployment of real energy solutions. Other policy measures include getting developing member countries to govern their energy choices through full-cost accounting and real integrated resource planning (IRP) processes, which can ensure that a country’s available renewable and efficiency potential is evaluated first for full utilization before new capacity is considered.
We are also very concerned about the ADB’s assistance to the expansion of biofuels. We note that that the current food crisis has a relationship with the expansion of the biofuels market. We request ADB to make a realistic strategy and plan considering the impacts of expanding biofuels in predominantly agricultural countries, ensuring the biofuels needs of the North are not provided at the expense of the nutritional well-being of developing Asia’s population and the fragile ecosystems of the region.
Asian Development Bank Projects
ADB projects have created many environmental and social safeguard violations in the Asia Pacific region. We demand ADB to play a socially and environmental responsible development partner role rather than playing the role of business broker and implementer of destructive projects. Following, ADB funded projects needs your immediate attention.
West Seti Hydroelectric Project- Nepal
Among number of other projects, we are concern about ADB’s involvement in the 750 MW hydropower project in western Nepal, with a loan and political risk guarantee provided by ADB. According to the Environmental Impact Assessment (EIA) report, 12,914 people will be displaced and more will be affected due to the project. As we know the ADB’s Board is planning to discuss the project in September 2008. However there is a massive campaign going on in Nepal for the cancellation of this project as well as against the ADB’s involvement in it. The project is politically and economically harmful for Nepal. The ADB should not finance the West Seti hydel Project, because the following social and environmental issues are not taken into account in the project design and implementation:
Many affected people expressed their concerns and disagreements with the project. In fact, West Seti Concerned Committee (a broader local affected committee) sent a letter to you on July 15, 2007, in order to request ADB to reconsider its finance for the project. ADB sent an acknowledgement to the letter sent by West Seti Concerned Committee without responding peoples concerns and issues. While it’s clear that there is a lack of consultation with affected people, there is a gross violation of accountability on part of ADB. As per the article 156 of the Interim Constitution of Nepal, 2006, Water & Energy Users’ Federation-Nepal (WAFED) based in Kathmandu has filed public interest litigation in Supreme Court of Nepal challenging the legality and constitutionality of the project.
The living conditions in the proposed resettlement sites in Terai is significantly different/ or alien from the present location. Comparatively Terai region is a plain area devoid of rich biodiversity as the present location which will be submerged due to the hydel project. However, according to the Resettlement Plan of the project, losses of livelihood and income generation based on natural products such as edible wild plants, fruits, vegetable oil and fish will be altered to land compensation, and the project sponsor will not provide realistic options like trees and fishery farms around the resettlement sites. Therefore, there is a high risk that displaced people will not be able to sustain, let alone improve their livelihood. It would be a violation of the ADB Involuntary Resettlement Policy, since its Para 34 (iii) requires project sponsors to ensure that economic and social future of displaced people will generally be “at least favorable” with the project as without it.
Bardia National Park is located 140km downstream, and host to many endangered wildlife species such as gharial and mugger (crocodile), one horned rhinoceros, elephants, tigers, barasingha (deer) and one of the critically endangered Ganges River Dolphin. The project will alter the monthly flow in the river between minus 15% (July) to plus 18% (February). The change in river flow would severely alter the reproductive patterns as well as migratory patterns of these wildlife species which transcends bordering Indian forest region. However, the scope of EIA does not include the Bardia National Park.
Completed versions of EIA Report and Resettlement Plan are currently available on the project website. Except summary EIA report, most of all reports are in English language and not in local or national language. So the local people are deprived of accessing to all project information and documents that are critical to make any opinion or decision about the project. This is a violation of ADB Public Communication Policy (Para 78 and 82).
Nam Theun 2 Hydropower Project in Laos
In April 2005, the ADB Board approved public and private sector loans and guarantees for the massive Nam Theun 2 dam in Laos. Nam Theun 2 will forcibly displace more than 6,200 indigenous peoples while decimating fisheries and exacerbating flooding and erosion for more than 120,000 people downstream. As reservoir impoundment begins, critical social and environmental problems and violations of ADB safeguard policies and the Concession Agreement have not been addressed.
Before the remaining loan disbursements are made to the Nam Theun 2 Power Company, the ADB should ensure that more funding is allocated for the Nam Theun 2 downstream livelihood restoration program and that interim compensation measures are established for villagers, as recommended by the international Panel of Experts. The ADB should also require that adequate replacement land is urgently provided to the 300 to 400 ‘project lands’ households, some of whom lost their land more than two years ago.
We demand that the ADB should not provide loans or guarantees for more dams or transmission lines in Laos until and unless the outstanding problems with Nam Theun 2 and other ADB-supported hydropower projects, such as Theun-Hinboun, Nam Song and Nam Leuk, have been addressed.
Pulbari Coal Mining in Bangladesh
We raised our dissatisfaction about ADB’s support to the Pulbari Coal Mining project, which was due for Board approval in 2008. After the board presentation made by Civil Society organizations on 28 March 2008, the Private sector Operations Department decided to withdraw the project from the pipeline. However, media reports from the ADB seem to indicate that the ADB has merely postponed its decision and that it has not completely taken itself out of the project pipeline. The ADB Website gives notice that the “ADB is undergoing due diligence for its possible participation in the Project.”
We demand a clear statement from the ADB regarding the status of its participation in this project.
Khulna Jessore Drainage Rehabilitation Project (KJDRP) in Bangladesh
We raised concerns on the Kulna- Jessore Drainage Rehabilitation Projects (KJDRP) in Bangladesh. Without consulting local people the Bangladesh Water Development Board (BWDB) designed the KJDRP in collaboration with the ADB (Loan No. 1289-BAN). Unfortunately, instead of increasing agricultural productivity, the project has created water logging. Operation Evaluation Department report completed in 2007 found that both the ADB and the Government of Bangladesh are not successful in implementing the project.
As we pointed out in our letter last year to you, “the Project has now left a ‘legacy’ of environmental disasters characterized by silted, dead rivers, permanent inundation of thousands of hectares of land and the loss of indigenous varieties of fish and crop biodiversity. Up to now, the people continue to experience the disastrous aftermath of the project. To date, an estimated 300,000 people in the Khulna-Jessore region live year-round in a waterlogged traumatized situation. Children cannot go to school, farmers cannot grow food, and cattle are held in dikes.”
Therefore we demand the ADB to correct the project and to compensate the people have and continue to suffer as a result of this project. We also demand that a Multi Stake Holder Forum (MSF) be set-up as a forum of governance and not as a tool of implementation. We also demand for the proper implementation of Tidal River Management (TRM) because it is the local and proper concept for drainage management suitable for the region.
Southwest Area Integrated Water Resource Management Project (SWAIWRMP), Bangladesh
We would like to draw your attention to the Southwest Area Integrated Water Resource Management Project (SWAIWRMP) in Bangladesh. The project with the estimated cost amounting to $43.4 million is under preparation and one sub-project unit is under implementation by the Bangladesh Government in collaboration with the ADB. Due to slow progress of the project so far, the consultation with the communities have not done accordingly.
We strongly believe the project should be implemented only after due consultation and in consent with the local communities and diverse stake holders. To lessen the apprehension among the communities due to mis-leading information, the ADB should disseminate information from time to time. We demand that the relevant document of the project should be translated in Bangla version as per the Disclosure policy guideline. The ADB must learn from the KJDRP failure and act accordingly.
Call for suspension of the loan to Lafarge Cement Factory in tsunami hit Aceh
We urge ADB for not declaring a private sector loan to ADB amounted to USD 45 million to Lafarge Cement Factory Private. Ltd. Semen Andalas Indonesia (SAI), as effective until demands of the Lhok Nga and Leupung communities in tsunami hit Aceh, Indonesia, and other environmental and social concerns are addressed. Furthermore, we request ADB to ask Lafarge-SAI to revise the Environmental Impact Assessment (EIA) as demanded by the local communities.
The loan, which was approved by ADB in April 2007, is to reconstruct the Lafarge SAI factory that includes an expansion of the plant to a capacity of 1.6 million metric ton per year, construction of a coal fired power plant and a harbor facility. This loan was approved under irregular conditions: in violation of ADB environmental and social safeguard requirements, inaccurate Environmental Impact Assessment, non-compliance with Indonesian laws regarding public information disclosure and people participation in EIA process, without proper public consultation, and disregard for the destructive track record of the Lafarge SAI plant. On December 17, 2007, more than 3,000 people of Lhok Nga and Leupung communities staged a demonstration in front of Lafarge SAI facilities demanding a revision of the EIA among others and stressing that local communities have the rights to be involved in the decision making regarding development in their area.
Child Labor in Central Asia
In Central Asia ADB is financing agriculture, particularly, cotton industry. Uzbekistan is a second largest exporter of cotton in the world. Tajikistan is heavily dependent on cotton as a source of income in hard currency. However, both countries used children as cheap labor in the cotton Industry.
The main objective of the Sustainable Cotton Sub sector Project approved in 2007 are the repayment of farmer’s debts and profitability of the Tajikistan cotton sector. The majority of the workforce for cotton growing is women and children. They are undergoing harsh working conditions like long working hours during the scorching summer heat that can go as high as 120 degrees Fahrenheit. They suffer from health ailments ranging from exhaustion to intestinal and respiratory infections. Grossly violating the UN Declaration of Rights of the Child (1959), this ADB funded project is employing on average seven years children in the cotton fields. School children live in unhygienic barracks while working in the fields. We request ADB to investigate as soon as possible this child labor issue and strictly follow the international agreements on child rights. We further request ADB to include core labor standards including child labor into the safeguard policies.
We bring the above issues to your attention in the name of public interest. As we have seen the gross social and environmental violations have made people more vulnerable to development-induced disasters in many instances under ADB funded projects.
We would appreciate timely, corrective actions on your part as well as a substantive written response regarding the ADB’s proposed solutions to the aforementioned concerns.
NGO Forum on ADB