by Walden Bello*
(This article appeared in the Bangkok Post, March 26, 2001)
The report on a controversial
wastewater management project in Thailand by an independent Inspection Panel
of the Asian Development Bank (ADB) has struck Bank management like a thunderbolt.
To make things worse, most of the key conclusions of the inspection panel on
ADB management's decision-making behavior have been endorsed by the ADB Board
Inspection Committee.
The focus of the report, the Samut Prakarn Wastewater Treatment Project, was
designed to alleviate massive water pollution in Samut Prakarn province, the
most heavily industrialized and rapidly urbanizing of the five provinces of
the Bangkok Metropolitan Region in Thailand. Sharp escalation of project costs
eventually made the project the largest turnkey project ever supported by the
ADB, with the figure reaching US$948 million, of which about $230 million came
from the Bank.
The revision of original estimates was accompanied by major changes in the design
of the project. One such change brought into the project a site that was not
originally included: the village of Klong Dan. This was done without consultation
of the residents, provoking protests from the villagers, who accused the Bank
of violating its key policies, including those on consultation, resettlement,
environment, and good governance. In a letter to ADB President Tadao Chino,
three individuals-the mayor and two civic leaders representing the villagers--
asked for an immediate halt to ADB funding for the project and an investigation
of what they claimed were the "many violations of ADB policies."
Under pressure from a campaign waged by key groups in Thai civil society and
a number of international NGO's--which included a massive protest during the
ADB's 33rd annual meeting in May 2000--the Bank Board commissioned a review
of the project by an independent panel. The team was eventually composed of
Judy Henderson, chair of Australian Ethical Investment Ltd, Wiert Wiertsema,
co-founder of the Dutch NGO Both Ends; and Pin-Cheung Loh, former Secretary
General of the International Cooperation and Development Fund in Taipei.
Despite obstruction from the Thai government and ADB management's marked reluctance
to assist them in visiting the project site without having to conform to what
panel members viewed as unacceptable conditions imposed by the government, the
inspection panel issued a report based on available data and interviews with
Bank staff members in November 2001.
Damning Findings
The findings were damning. According to the inspection panel, the Bank management:
- violated its policies governing the review of cost overruns by not carrying
out a reappraisal of the whole project in preparing financing for a supplementary
loan;
- failed to comply with policies covering changes made in project design by
not conducting a full reappraisal of technical, economic, social, and environmental
issues relevant to the project;
- breached the Bank's environmental guidelines by not conducting an environmental
impact assessment (EIA) of the project;
- violated the Bank's policy on involuntary resettlement by not carrying out
a social impact assessment (SIA);
- violated Bank policy on governance by not allowing opportunities for the affected
residents of Klong Dan to participate in designing and implementing the project;
and
- failed to comply with Bank policy on project evaluation and monitoring by
not putting in place a system for effectively monitoring the social and environmental
impacts of the project.
In response, the Bank's management drafted a point-by-point rebuttal of the
Inspection Panel report. However, the Board Inspection Committee (BIC) headed
by John Lockart of Australia upheld most of the Panel's main findings. According
to the BIC, "ADB's failure to comply with policies on supplementary financing
of cost overruns and operational missions (and particularly the failure to carry
out a comprehensive reappraisal after a fundamental change in technology and
a massive cost overrun and again when a substantial supplementary loan was processed)
constituted and led to important omissions." It went on "accept"
the inspection panel's conclusion that "a relevant group has suffered direct
and material harm as a result of ADB's noncompliance with operational policies
and procedures."
Inexplicable Recommendation
It is inexplicable, however, that after finding significant deviations from
its policies that resulted in harm to Klong Dan villagers, the inspection panel
did not recommend suspension of loan disbursement, as the Klong Dan villagers
demanded. In fact, the suggested course of remedial action is rather weak, consisting
of ADB management admitting it did not comply with its policies, improving the
monitoring, consultation, and participation process, and working with the Thai
government to compensate villagers for the harm done to them.
Reparations are unlikely to occur, however, since, as a multilateral institution,
the Bank is exempted from damage claims and the Thai government has stoutly
resisted any suggestion it behaved inappropriately in implementing the project.
Fear that they would be used to legitimize continuation of the project was one
of the factors that prompted the Klong Dan villagers to refuse be interviewed
by the panel. With the inspection panel's formula of getting management to acknowledge
violations of policy while endorsing continued ADB funding of the project, the
villagers' skepticism about the inspection process appears to have been justified.
Siege Mentality
Nevertheless, the panel report is creating consternation among Bank staff. Management
fears that the Samut Prakarn fiasco will dominate talk at the Bank's 35th annual
meeting in Shanghai in mid-May. There is also the fear that there will now be
greater public scrutiny of the Bank's operational policies, many of which are
not yet in the Operations Manual and thus inaccessible to both staff and the
public. In fact, according to one ADB source, "the Operational Manual has
not been updated for five years, which raises fundamental questions about staff
being aware of the existence of certain policies."
The biggest fear, however, is that the Samut Prakarn case-the first inspection
to be conducted under the Board's inspection policy approved in 1995-- will
trigger other requests for independent inspection panels. Two controversial
projects, one in Sri Lanka, the other in Pakistan, are said to be in the inspection
pipeline as a result of strong pressure from civil society groups. To contain
the impact of such inspections, management is seeking to limit what is "inspectable"
in projects in fairly narrow terms to "operational policies and procedures
that provide ADB staff with mandatory directions on how to formulate, process,
and implement projects" and exclude all other matters such as "strategies
and strategic aspects of all policies."
Skepticism
Will the Samut Prakarn decision really mean a change in the Bank's way of doing
business? Many within the Bank are doubtful. Noting the move to limit the elements
of projects open to inspection, an ADB economist who requested anonymity said,
"Instead of opening itself to a transparent process, the Bank is allowing
itself to be taken over by a siege mentality." Referring to the response
of management to the inspection panel report, she continued, "the document
amounts to a blanket defense not only of everything the ADB staff did but of
everything the Thai government did-including preventing the inspection panel
from conducting a site visit."
This skepticism was echoed by an alternate director in the ADB board: "These
fellows are entrenched, and they'll manage to resist change. Look, you have
a great inspection panel report, but there's hardly any change. The project
goes on."