4 March 2004
By Bank Information Center (BIC)
NGO Forum on ADB
Environmental Defense
Centre for Organisation Research & Education (CORE)
Oxfam Community Aid Abroad
March 2004
Problem Statement
One of the leading critiques traditionally issued by civil society groups against the Asian Development Bank (ADB) has been that it is not accountable for the impacts of its lending, particularly with respect to the environmental, social, and cultural impacts of its operations. The concept of accountability at the ADB, as well as at other Multilateral Development Banks, has focused on its compliance with its own environmental and social policies, which are supposed to safeguard the environment and vulnerable communities from the negative impacts of ADB lending. Over the years, project specific campaigns have revealed a persistent failure on the part of the ADB to enforce these standards.
In recent years the ADB has acknowledged the need for it to be accountable to its stakeholders for the impact of its lending and has taken significant steps to increase its accountability. These measures have included the adoption of its first ever Environment Policy, a comprehensive review and updating of the ADB’s Operations Manual, and adoption of a new accountability mechanism. Though these measures demonstrate some progress, a pervasive emphasis on quantity versus quality of projects and programs continues to undermine these efforts.
Staff promotions and evaluations at the Asian Development Bank are heavily influenced by the amount of money that is “pushed out the door.” This pressure to lend has been documented across the multilateral development banks for years, and its negative consequences can be seen in ongoing project performance and policy compliance failures. This perverse dynamic reinforces disturbing trends such as inadequate project supervision, lack of compliance with ADB environmental and social policies, and poor project and program results.
ADB Staff feel a much stronger pressure to get new projects financed rather than to ensure that existing projects are successfully implemented. The ADB does not possess institutional incentives that encourage staff to continuously and systematically ensure that projects comply with ADB policies and guidelines. Projects are generally not monitored sufficiently to assess whether the project’s goals are being met and to correct any compliance and performance failures as they occur. Often, indicators for assessing the success of a project are not articulated. As a result of these factors, accountability for project quality routinely suffers.
Case Study – Chashma Right Bank Irrigation Project, Pakistan
The Chashma Right Bank Irrigation project has been implemented by the ADB in three stages. Stage I was completed in 1986, stage II in 1992, and the third stage is still being funded by the ADB. An Operations Evaluation Department (OED) assessment of the first two stages of the project found that no adequate socioeconomic survey of the project area was ever conducted and that the projects were designed based on a “theoretical cropping pattern” and not on actual cropping patterns and socioeconomic conditions in the affected area. As a result the project design “was essentially an ongoing process,” which resulted in “incomplete preparation for each project.” OED also found that the irrigation project lacked a benefit and monitoring system, which they found to be “a continuing shortcoming since the beginning of CRBIP…that resulted in a succession of flawed design as well as inadequate operation, maintenance and management of the completed facilities."
Communities affected by the Chashma project have since filed a complaint against all three components of the project. However, due to an eligibility requirement that prevents the ADB’s Inspection Function from investigating loans that have been more than 95 percent disbursed, an Inspection Panel that was recently established can only inspect stage III. Much of the harm suffered by the communities, including inadequate resettlement measures, displacement and compensation disputes, lack of transparency, flooding, land degradation, and deforestation, can likely be traced from flaws in the earlier stages of the project.
Proposed Reforms
As an institution committed to promoting poverty alleviation and sustainable development in the Asia Pacific region, the ADB must take measures to ensure that staff comply with the policies and guidelines set forth by the ADB to meet these goals. We call on donors to promote greater staff accountability for the impacts of ADB operations by promoting the following reforms:
- Staff should be rewarded for ensuring that projects comply with ADB policies at appraisal, approval, implementation, and completion phases. Staff should also be rewarded if positive feedback is received from the communities with which the staff has worked. The Project Officers and staff responsible for project appraisal should remain on that project for at least a year following project approval.
- Staff rewards and promotions based on quantitative lending targets, existing either formally or informally within the institution, should be abolished
- ADB should require equally rigorous accountability standards of its programmatic lending operations so as to prevent the creation of “perverse incentives”, namely, staff favoring programmatic lending to avoid the relatively more complex appraisal and supervision responsibilities of project lending
- ADB should demonstrate how the institution’s commitment to transparency, anti-corruption, and good governance is translated throughout staff training and learning processes
- ADB should facilitate independent, community-based and NGO monitoring of projects
- ADB should prevent conflict of interest situations where the same staff are responsible for implementation, compliance monitoring, and evaluation of projects.
- Mechanisms should be introduced to ensure that lessons from OED project, program, sector and impact evaluations are translated into subsequent lending operations and reflected in staff training, promotion and incentive practices