January 2014

All is Not Well with World Bank – ABD Funded Projects nstitutions like World Bank and Asian Development Bank (ADB) have been looked upon as the panacea of all ills faced by developing countries like India. While the amount of money they lend is small, their influence on the economy is disproportionately high. They continue to be the benchmark, for social and environmental policies, good governance, climate change, corruption and anything one can think for the country.

However, a peek at a few reports of its own accountability mechanism tells us that all is not well with these institutions when it comes to complying its own guidelines and policies. In fact, in most of the cases, violation of those policies is so serious that it has caused irreversible damage to people and environment.

Case of Tata Mundra

In October 2013, the Compliance Advisor Ombudsman (CAO) – the accountability mechanism of International Finance Corporation (IFC), the private sector arm of the World Bank Group – released its findings on its audit on the Coastal Gujarat Power Ltd (Tata Mundra).

In a report which detailed IFC's violation in Tata Mundra, CAO observed:

“IFC's review of its client's (Environmental and Social) E&S assessments was not commensurate with the risk involved. IFC paid insufficient attention to the requirements of the Performance Standards. IFC should have required that its client commission additional E&S assessment in order to ensure compliance. IFC did not pay adequate attention to verifying whether pre-project consultation requirements were met. IFC failed to assure itself that directly affected fishing communities were engaged in effective consultation. IFC's E&S review regarding marine impact did not meet the due diligence requirements set out in the Sustainability Policy. IFC has failed to ensure that its client has correctly applied the requirements of the Thermal Power Guidelines. IFC failed to meet the requirements of the Sustainability Policy despite sufficient indications of project-related displacement (both physical and economic) as to require objective assessment. IFC should have advised that CGPL's consideration of cumulative impact needed to go beyond that contained in the SEIA. IFC is unable to demonstrate that its client's monitoring is commensurate to risk.”

Despite such scathing findings, and growing global criticism for IFC's continued support to Tata Mundra, World Bank President Dr. Jim Kim refuses to take any appropriate action.

After World Bank, ADB to Investigate Tata Mundra: Finds Prima Facie Evidence of Noncompliance with ADB Policies.

Three months after CAO, Compliance Review Panel (CRP) of the ADB decided to investigate the policy violations while financing the 4000 MW coal plant.

The Board of Directors of ADB approved the recommendation of its accountability mechanism, the Compliance Review Panel (CRP) for full investigation, as published in its Eligibility Report.

In the $4 billion project, ADB and IFC invested US $450 million each.

In its report, CRP says, “The CRP finds prima facie evidence of noncompliance with ADB policies and procedures, and prima facie evidence that this noncompliance with ADB policies has led to harm or is likely to lead to future harm. Given the evidence of noncompliance… the CRP concludes that the noncompliance is serious enough to warrant a full compliance review.”

In its Eligibility Report, CRP found the following evidence of noncompliance: ADB held insufficient public consultations; the project-affected area is defined erroneously; CGPL discharges water at a higher temperature than is allowed by ADB standards; ADB's air emission standards are not met; insufficient cumulative impact assessments; flawed social and environmental impact assessments; harmful effects of the cooling system on the environment and the fish harvest; inaccessibility of fishing grounds and effects of coal-dust emissions.

Tata Tea, Vizhinjam port, GMR Kamalanga & Lafarge – projects under scrutiny

There are four other projects financed by IFC under the scrutiny of CAO. In response to a complaint by workers on Tata's tea plantations in Assam alleging inhuman working and living conditions, violations of their freedom of association, and coercion of workers, CAO ordered a full investigation in January. In its report, the accountability office concluded, “this complaint raises potentially significant adverse [environmental and social] impacts associated with the project.” A full investigation of potential non-compliance is expected to begin as early as March 2014. The technical assistance provided by IFC to the Vizhinjam port in Kerala is contested by the local residents and fishworkers in three separate complaints. In their complaint, the fishworkers union Kerala Swathantra Malsya Thozhilali Federation (Kerala Independent Fish Workers Federation) raises concerns about negative impacts of the proposed port project, such as pollution from port operations, damage to marine biodiversity, possible displacement of fisherman and their families from the area, and loss of livelihood for fishing communities within the vicinity of the project site.Financed through an intermediary (FI), IFC faces another scrutiny in GMR Kamalanga thermal power project in Odisha for using FIs to camouflage its lending to the project and refusal to take responsibilities for the negative impacts of the project. Since an Financial Intermediary is involved, none of IFC's policies are applicable in the project and people are denied access to information and any grievance mechanism of IFC. This is the first complaint at the CAO on FI from anywhere in the world.CAO initiated a process of enquiry into the violations by the largest cement manufacturer, the French company Lafarge, financed partly by IFC. A cross border project between India and Bangladesh, the limestone for the cement plant in

Civil Society Calls the Bluff of World Bank Accountability

“Response of World Bank President Jim Kim is evasive and does not even recognize the findings of the report on Tata Mundra,” noted social activist Medha Patkar said. She was speaking at a discussion mid December on the World Bank and its accountability in the context of the recent reports on Tata Mundra project. “The current stalemate is that of the President versus the Compliance Advisor Ombudsman (CAO), as he has not given any heed to the findings of CAO,” she said.

Member of Parliament Mani Shankar Aiyer said “Development without consideration for environment and people is pointless.” He decried government policies which give big corporations tax concessions, which is glorified in the name of stimulus, while the same done to the farmers and the marginalised is called subsidies.

The meeting was held in the context of the recent report by World Bank's accountability mechanism, which reported Bank's own policy violations by its private sector arm, International Finance Corporation (IFC) which is financing the Coastal Gujarat Power Ltd (CGPL – Tata Mundra) project.

Energy expert Soumya Dutta, local community leaders Ayub Haji and Bharat Patel also spoke at the meeting.

Bangladesh is mined in Meghalaya, violating the customary rights of and Constitutional provisions for the tribals in Meghalaya.

Case in Honduras

Away from home, in Honduras, World Bank found itself in financing companies guilty of perpetuating human rights violations. In January, an investigation by CAO revealed that the World Bank has invested in a palm oil and food company implicated in serious rights abuses in Honduras. CAO concludes that IFC failed to adhere to its own policies meant to protect local communities; either failed to spot the serious social, political and human rights context in which this company is operating or where it did, failed to act effectively on the information; failed to disclose vital project information, consult with local communities, or to identify the project as a high-risk investment.

The CAO found that these failures arose, in part, from staff incentives “to overlook, fail to articulate, or even conceal potential environmental, social and conflict risk” and that staff felt pressured to “get money out the door” and discouraged from “making waves”.

There are at least three emerging pointers.

People affected by these projects have decided to take on the financiers of those projects which are threatening their lives and livelihood. Apart from petitioning to the District Collector or at best, other state agencies, and rarely with the judiciary, people realise that the unfettered flow of global finance to the project proponents, without any accountability needs to be challenged. In addition to their local struggles, taking on the financiers, including the biggies like World Bank and ADB makes the company sit up and take note of the issues raised by the people.

However progressive the policies look on paper, institutions like World Bank and ADB do very little to implement them. They do not have independent monitoring mechanisms and rely only on the reporting of the company on the compliance of the policies. What is more alarming is the recent trend that even when internal mechanisms like CAO confirm the concerns of the communities and investigate the gross violations, senior management does not take any proactive action. Rather, they defend their actions and their client. This casts a big shadow on their claim that these institutions ultimately wants to alleviate poverty and better the lives of the have-nots.

If World Bank and ADB continue to lend credibility to companies with poor track record on social and environmental issues, without taking effective steps for course correction, these institutions run the risk of people looking at their investments suspiciously, if not already, and rather than any sense of relief, their involvement in any project will only send

In the News

Telegraph

January 29, 2014

World Bank loan for Tripura project

Sekhar Datta

Agartala: The World Bank will provide the major share of a Rs 8,150-crore project to create infrastructure in the power sector for six northeastern states, sources in the Tripura State Electricity Supply Corporation Limited said here today.

The state-owned Power Grid Corporation of India Ltd will implement the World Bank-aided projects in the six states.

“The PGCIL last year signed agreements with Assam, Meghalaya, Mizoram, Manipur, Nagaland and Tripura to implement the North Eastern Region Power System Improvement Project,” an official of the state electricity supply corporation said. “The World Bank will provide a major portion of the project as a loan. Under this project, power transmission lines, transmission sub-stations and related will be completed in a phased manner.”

“The PGCIL, a Navaratna power transmission company, will also provide technical and managerial support for inter-state transmission and distribution systems,” a senior TSECL official said.

Financial Express/PTI

Lakshmi Swaminathan becomes 1st Indian Asian Development Bank Admin Tribunal presidentNew Delhi : Lakshmi Swaminathan has been elected president of Administrative Tribunal of the Asian Development Bank (ADB) for three years."The Tribunal elected Judge Lakshmi Swaminathan as President and Professor Roy Lewis as Vice-President on the occasion of the 35th session held in Manila...," ADB said.Swaminathan is the seventh president of the Tribunal. She is the first Indian to become the president of the Tribunal. She was appointed as member of the Tribunal in 2010 and has been its acting president since August 2013.

___________________Members of the Working Group on IFIs include: NGO Forum on ADB; National Alliance of People's Movements; National Hawkers Federation; National Forum of Forest People and Forest Workers; All India Forum of Forest Movements; Bharat Jan VigyanJatha; North East People's Alliance; South Asia Network on Dams, Rivers and People, New Delhi; Narmada Bachao Andolan; Nadi Ghati Morcha, Chattisgrah; Programme for Social Action, New Delhi; Focus on Global South, New Delhi; Delhi Forum, New Delhi; Odisha Chas Parivesh Suraughya Parishad, Odisha; Machimar Adhikar Sangharsh Samiti, Gujarat; Manthan Adhyayan Kendra, Madhya Pradesh; Toxic Watch Alliance, New Delhi; Water Initiatives Orissa, Odisha; International Rivers; Kabani, Kerala; INSAF, New Delhi; Srijan Lokhit Samiti, Madhya Pradesh; Ban Asbestos Network in India, New Delhi; Bank Information Centre Trust, New Delhi; DICE Foundation, Kohima; Environics Trust, New Delhi; Environment Support Group, Bangalore; Equations, Bangalore; Intercultural Resources, New Delhi; Matu People's Organisation, Uttarakhand; River Basin Friends, Assam; Urban Research Centre, Bangalore.

Contact details: Working Group on IFIs, c/o 6/6, Jangpura B, Mathura Road, New Delhi 110014Email: bictrustindia@gmail.com | Tel: +91-9871153775, +91-9818905316

Swaminathan is jurist in administrative law and was the vice chairman of the Principal Bench at Delhi of the Central Administrative Tribunal. She has worked in Ministry of Law & Justice for over 20 years. She was legal adviser for several ministries and departments.

Source: Reserve Bank of India

India's total External commercial borrowings in 2013 were $34.5 bn.

Institution

No of Project

Approved in 2013 Total lending

World Bank 12 $2.8 bn

IFC 12 $383.6 mn

ADB 36 $3.5 bn

Investments from World Bank Group & Asian

Development Bank in 2013

Data

Source: World Bank & ADB