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AIIB Watch
Case Studies to AIIB financed Projects

How environmentally friendly and socially just is the AIIB?

AIIB Watch documents environmental and social conflicts arising from infrastructure projects financed by the Asian Infrastructure Investment Bank (AIIB).

Our interactive map lists 18 cases where there is evidence that the AIIB is failing to meet its own safeguard standards. For more information on safeguards, have a look at the glossary below.

The cases take the environmental and social standards approved in 2016 and revised in February 2019 as a basis (see link under further information). These were to be reassessed and adjusted after three years based on practical experience with them. However, the review of the implementation and effectiveness of the standards was not done by the Bank itself, but primarily by civil society. Consultations with civil society took place from fall 2019 to May 2021.The AIIB Watch and the cases documented here informed the revision of the standards. In May 2021, the revised standards were approved and will enter into force in October 2021 (see link under further information).

For the project overview, we used information from the AIIB homepage. Please click on "More information" in the map to be taken to a summary for each case that provides details and further links to the safeguards involved. These summaries are compiled by a group of civil society organizations from Asia, Europe and North America. They are designed to help give voice to local communities, document realities on the ground, and testify that standards on paper can never be enough - they must be implemented.

Projects are constantly reviewed and results are documented on an ongoing basis. The research of the partner organizations often takes place under high risks. The security situation is so volatile that we cannot present all the details of individual cases without endangering the communities.

Legend & Abbreviations
Legend AIIB Watch map
Source: AIIB (2019): Environmental and Social Framework.
Online under: https://www.aiib.org/en/policies-strategies/_download/environment-framework/Final-ESF-Mar-14-2019-Final-P.pdf

In May 2021, the AIIB amended the environmental and social standards. Urgewald together with an alliance of Asian and European NGOs, had beeen involved in the discussion with the AIIB management on possible best practices. Here you can see our comment after the May amendment.

The amended ESF applies for all projects approved after October 2021

AIIB: Asian Infrastructure Investment Bank

AM: Accountability Mechanism

ESF: Environmental Social Framework

ESIA: Environmental and Social Impact Assessment

GRM: Grievance Redress Mechanism

PPM: Project-affected Peoples Mechanism

Glossary

This glossary explains terms used in connection with operations of the AIIB and other International Financial Institutions (IFIs). The explanation is made through the lens of civil society. We try to show the differences and communalities when CSOs and AIIB use these terms. Quite frequently the interpretation differs and usually the CSO viewpoint uses a more rights-based approach than the Bank. But we try to be as objective as possible.

Safeguards – Environmental and Social Framework (ESF)

’Safeguards’ are the rules, which IFIs haven given themselves to guide their due diligence when assessing and preparing new projects and their implementation of operations. The World Bank was the first IFI to develop safeguards in the late 1980s. Massive protests against mega-projects in Indonesia, Brazil and India and political pressure from shareholder countries, mainly the USA, compelled the World Bank to develop a set of environmental and social policies. All other IFIs followed suit over time. Recently there was a move by almost all IFIs to weaken their safeguard systems under the pretext of flexibility and leaner decision processes. The new term ‘Environmental and Social Framework’ was introduced, which also indicates that binding rules are substituted by ‘standards’ open to a wide range of interpretation. Also, the task to evaluate alternatives and report on project progress lies entirely in the hand of the project proponent (sponsor). The question is, which state or company would tell a possible financier that there is a viable alternative or the no-project option would be better.

Involuntary Resettlement

”Next to killing a man the worst thing you can do is to displace him.” This quote by Thayer Scudder, social anthropologist and one of the very few leading experts on resettlement, says it all about the importance of the issue. Besides transparency, disclosure, and meaningful consultation this issue causing a lot of harm. Resettlement is always connected to infrastructure projects. And it depends on the diligence of project sponsors and designers, whether affected people at least are treated with respect and get proper compensation for the loss of land and livelihood. The impact of land acquisition and involuntary resettlement covers a range from full displacement through partial loss of land and income to economic displacement caused by up- or downstream effects of projects.

Land Acquisition

Any infrastructure project needs land. One way of acquisition is to declare ‘eminent domain’ and seize the land needed with or sometimes without compensation. This also means involuntary resettlement for the affected people. Another way is negotiated transfer of land, which is preferred by ESFs. But these negotiations need prior information and fair compensation. Often IFIs claim that project sponsors (public or private) have reached an agreement with landowners and users before the IFI comes in for funding. Unfortunately, IFIs mostly take these assertions at face value. Experience shows that these prior ‘negotiated voluntary’ acquisitions often go along with massive pressure and intimidation. In some countries even ‘land donations’ are mentioned, which raise a lot of questions as this happens mostly under oppressive regimes.

Indigenous Peoples

There are two documents of international law, which define a lot of aspects regarding Indigenous Peoples. These are the convention 169 of the International Labor Organization (ILO 169) and the UN Declaration of the Rights of Indigenous Peoples. Basic principles are self-determination as Indigenous and the right to free, prior informed consent (FPIC). At IFIs these international laws, ratified by many shareholder countries, are not reflected in the safeguards. Management as well as shareholders often try to redefine FPIC as ‘consultation’ instead od ‘consent’, as it is the case with the AIIB. And sometimes the whole concept of Indigenous Peoples is disputed and neglected.

Information disclosure

Being informed about projects or programs which affect you, your livelihood, your environment is a basic human right. Without comprehensive, but also commonly understandable and culturally fitting information potentially affected communities are not able to interact with the IFIs and the sponsors of projects. Translation of relevant documents and making them understandable for common people is very important. One prerequisite of this is a rule with clearly defined time limits, when and how information must be disclosed. The current best practice is a full disclosure as described in the ‘Pelosi Amendment’ in US budget law. Hereby, information must be disclosed 120 days before board approval at an IFI.

Public consultation, stakeholder engagement

One basic and widely accepted principle in preparing a project is the consultation of affected people. The World Bank safeguards have set a precedent. They require consultations early on, with the best possible information for the affected communities. The process has to be culturally appropriate respecting the traditional decision-making processes, but also including gender considerations. A ‘stakeholder engagement plan’ is the document which outlines how a project sponsor or the IFI itself is organizing the consultations. This plan also is meant to outline interactions in the implementation phase.

Financial Intermediaries

Usually, IFIs finance large projects and programs, which amount in millions. To reach small and medium enterprises (SME) IFIs and especially their private sector departments or subsidiaries are more and more channeling finances through financial intermediaries (FIs). These FIs can be commercial banks, private equity funds or investment funds. Over time more and more parts of IFI portfolios have been allocated to financing FIs. But this goes along with problems in transparency and accountability. While affected people have a fair chance of getting to know an IFI involvement in a project, when it is financed directly, this mostly is up to impossible with FIs. The requirements to disclose sub-projects (i.e., projects financed by/through an FI) is next to non-existing. This deprives project-affected people and communities of their right to complain at the IFI’s accountability mechanism.

Accountability mechanism

IFIs as international legal bodies have immunity from legal prosecution for their actions. In contrast to most countries, where people have some opportunity to pursue some form of legal recourse through courts, this is impossible with IFIs. When this became more and more evident in connection with establishing safeguards, the World Bank was the first IFI to install an independent accountability mechanism (AM). Guiding principles for an AM are independence from management, impartiality and, if needed, anonymity for complainants. Also, members of AMs usually are barred from having jobs or consultancies with the IFI, on which’s panel they were. The processes differ from IFI to IFI. At the AIIB, civil society doesn’t see the AM as really independent as it is part of management activities. Also, the process to file a complaint has so many impediments, that it is almost impossible to do so. After a complaint the AM will, depending on the guiding rules, either try a mediation or will investigate the case and submit a report. This report ideally will result in remedial action by the IFI and/or the project sponsor.

Grievance Redress

In order to handle problems in a project early on IFIs require project sponsors to establish a grievance redress mechanism (GRM) within the project. This office or person is part of the project management and in no way independent or impartial. It depends on the responsiveness of the project sponsor whether the GRM really addresses problems or is just trying to impede complaints to the accountability mechanism. The quality of GRMs ranges from specially assign contact persons to a simple letter box outside an office.

Due diligence

Before a project is approved the IFI is not only negotiation financial terms. It is also checking the environmental and social impacts of the planned operation. The result of this is written down in the Environmental and Social Impact Assessment (ESIA). This entire process is called ‘due diligence’. It also entails disclosure, consultations etc.. People and communities affected by a project, who feel that their rights and views have not been properly addressed in the due diligence process, can approach the IFI’s accountability mechanism. The AM then investigates whether the due diligence was properly administered and reports on its findings.

Gender considerations

Women although being half on mankind are among the most vulnerable groups impacted by infrastructure and other development projects. These effects range for example from loss of income as a small trader to sexual violence or the rise in HIV/AIDS. Therefore, impacts on women are a special aspect of the due diligence process. And in general development projects should not only avoid harm, but also have components to provide economic and social advance of female livelihood.

Community health and safety

This aspect of an IFI ESF covers many different issues. It addresses additional health issues like the rise of HIV/AIDS due to the influx of migrant workers in infrastructure projects, but also problems with dust or road kills along a road. From civil society view it is important to not limit the scope of the due diligence to the projects area, but also look at the up- and downstream impacts in a wider area.

Labor

The labor chapter in an ESF should give clear guidance on all the aspects regarding the workforce at a project. It should be applicable not only to the core staff of the project sponsor, but also to the staff of sub- and sub-sub-contractors. Also, there should be no exclusion of temporary workers from the application of the labor safeguard. And all labor regulations at projects should by compliant to the core labor standards of the International Labor Organization (ILO), a UN body. Unfortunately, the AIIB labor standard is far behind this as for example the right of collective bargaining (and forming independent trade unions) is not recognized.

Biodiversity

Since the 1992 summit in Rio biodiversity has become one of the main aspects of due diligence in IFI projects. As development projects by IFIs and first and foremost infrastructure projects have grave ecological impacts this has become one of the ‘battlegrounds’ between civil society, IFIs and project sponsors. In the recent years IFIs have weakened their standards (see Safeguards). At the World Bank the clear provision that primary forests and critical habitats with endangered species are off limits has been replaced by a regulation which allows projects in these areas when there is not an economically feasible alternative and the sponsor can provide on ‘offset’. But offsetting is highly disputed among practitioners and scientists. Who for example would dare to say that mountain gorillas in East Africa can be simply relocated to a completely different area to make way for oil drilling or mining?

 

Background

"Lean, clean and green" is the name given by the AIIB to its Environmental and Social Framework (ESF). By involving former employees of the World Bank in the development of the ESF, the AIIB wanted to prove that its rules stand up to comparison with international standards.

The bank lends for (large) infrastructure projects, mainly in Asia. So far, it has invested $10 billion in 18 countries. The bank's focus is on global development, with a mission to "improve social and economic outcomes in Asia." In the words of AIIB President Jin Liqun at the 2020 Annual Meeting:

"We strive to build a world that is financially, socially, environmentally and economically sustainable."

Together with an international alliance of regional and international NGOs, urgewald monitors the China-dominated bank and investigates declared standards and their sustainability. There are now 18 case studies, covering projects in transportation, energy (water/gas/transport pipelines), urban infrastructure and financial intermediaries. In addition, policies and sector strategies are being monitored.

We would like to thank all contributors for this summary and are immensely grateful to all communities for their commitment.

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Kontakt

    Bild Anprechpartner   Dr. Nora Sausmikat

    Dr. Nora Sausmikat
    China desk/Campaigns on Multilateral Development Banks
    nora.sausmikat [at] urgewald.org

    Bild Anprechpartner   Knud Vöcking

    Knud Vöcking
    Campaigns on Multilateral Development Banks
    knud [at] urgewald.org
    +49 (0)2583/30492-14

    Bild Anprechpartner   Dustin SchÀfer

    Dustin SchÀfer
    Campaigns on Multilateral Development Financial Institutions, Focus: Accountability and Transparency
    dustin [at] urgewald.org

→  Unser Team

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