Reputation on line over bid to update criteria

By John Aglionby

Financial Times

Published: November 17 2008 00:42 | Last updated: November 17 2008 00:42

The Asian Development Bank faces one of the biggest tests of its reputation this week when it holds consultations with civil society groups from around the world on a draft plan for updating its social and environmental lending criteria.

Activists and analysts say the strategy that emerges will determine the ADB's commitment to defending the region's poorest people, who are often the least protected in society.

Haruhiko Kuroda, the ADB president, has insisted that there will be no dilution of the safeguards, which cover the environment, involuntary relocations and indigenous people.

But the scores of people attending the meetings starting on Tueday in Manila, in the Philippines, have prepared a paper containing hundreds of pages, detailing ways in which they believe the ADB is planning to water its standards down. Documents obtained by the Financial Times also show that numerous experts within the ADB, including its own lawyers, have reservations about the draft.

The draft under consideration is the ADB's second attempt to engage with non-governmental organisations. Its first draft, published a year ago, provoked such outrage, including public protests in India and Indonesia, that it had to be rewritten.

Main criticisms of the new policy focus on the halving of the public consultation period for private sector projects to 60 days, the delegation of responsibility for safeguard enforcement to private sector intermediaries or governments, and an alleged weakening of standards under the guise of harmonisation with those of other financial institutions.

The ADB's Office of General Counsel said the new draft was an "improvement" but that "not all ... matters previously raised have been fully addressed".

In two of more than 100 comments the office said: "We continue to have concerns that the private sector modalities ... and guarantees are inadequately dealt with in the [draft]" and "the [cofinancing] proposal effectively presents a waiver of ADB's policies justified on the basis that the other institution's policies are equivalent".

It also describes the passing of some responsibilities from the bank's chief compliance officer to the social and environmental safeguards director as "a significant difference from ADB's current internal law".

Some experts within the bank are scathing about the three sectors' operations manuals being distilled into one. One person described the new manual as "illogical" while another said the result was "confusing and incoherent" with no specification of minimum applicable standards.

Stephanie Fried, of the Environmental Defense Fund, said the second draft, though better than the first, was still a "breathtaking unwinding of existing policy".

Nessim Ahmad, director of social and environmental safeguards at the ADB, said many of the criticisms were "misrepresentations" of the policy's intentions. He said: "We're not losing the identity of the policy, we're consolidating the process. And the safeguard policies are subject to our compliance review policy."

The critics remain unconvinced. Ted Downing, president of the International Network on Displacement and Resettlement, said he feared the overhaul would impoverish millions .

He added: "For example, when you turn over the right of compulsory acquisition to the private sector you don't just open Pandora's box, you stir it with a big stick."

Copyright The Financial Times Limited 2008