One of the most contentious points about the Asian Infrastructure Investment Bank is being addressed with the release of the Beijing-based financial institution’s environmental and social safeguards.
But while the move signifies the bank’s intent to comply with international standards and procedures, civil society observers contend that the provisions in the framework and the manner in which it will be implemented are not as stringent as what should be expected from a $100 billion development finance institution.
“We think that AIIB has to have very high standards, if not the highest standards, considering the scale in which they want to operate,” Rayyan Hassan, executive director of Manila-based organization NGO Forum on ADB, told Devex. “A bank that claims to have $100 billion in finance, to not ensure environmental and social protection once it starts operation is absolutely ridiculous.”
The 38-page draft document, called the Environmental and Social Framework, is expected to “provide a robust structure for managing operational and reputational risks of AIIB” while ensuring the “environmental and social soundness and sustainability” of the bank operations, among others. Hassan shared that while the document sounds similar to World Bank and Asian Development Bank safeguard documents, some of the language and even how the consultations are being conducted are worrying.
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The draft document, for instance, was released Sept. 7. But the interim secretariat on the establishment of AIIB has opened up written consultations only until Oct. 6. Hassan, who was part of one of the consultation sessions, criticized not just the short consultation period but also the fact that no face-to-face interactions were scheduled.
“In this window … [they want] the entire world to comment on AIIB’s $100 billion safeguards. And they want to finalize it by December. That has historically not happened with other [institutions],” he said, citing the World Bank’s lengthy consultation process for its safeguards review — which started in 2012 — as an example.
Lack of procedures, other issues
Other major issues civil society representatives raised at one of the consultation sessions include a heavy reliance on country systems and the overall lack of procedures as stated in the draft document.
“There was heavy reliance on country systems all throughout the draft … [and] they never used the world ‘equivalent’ in their policies,” Hassan said. This is important to ensure that the policies applied would at least be equivalent to international standards. But he said the draft only indicated that country systems be “broadly consistent” with international standards, which gives governments a “lot of flexibility.”
Consultations on the safeguard framework — which is led by Steven Lintner, the former senior technical adviser on safeguard policies at the World Bank — officially started Sept. 10 in Vienna, Austria; Lintner has referred to the series of video and audio conferences with various stakeholders as “effective dialogue.” These video and audio consultations are scheduled to end Sept. 24.
At the consultation with Lintner, representatives from nongovernmental organizations — such as Titi Soentoro from Aksi! Indonesia — brought up the “lack of procedures” in the framework. These include not having a grievance mechanism, excluding nuclear and coal from the bank’s list of sectors that should not be funded, and the sustainable development goals. According to Hassan, Lintner said that “AIIB is still thinking about developing a grievance mechanism” and will release a document soon.
“We don’t know which department in the bank is going to be engaged in this,” Hassan said. “Without the procedures, you’re looking at only the 10 percent of the information.”
There is also the huge issue that Jessica Rosien from Oxfam Australia raised on the language on the protection of indigenous people, particularly the caveat allowing partner countries or clients “to still pursue the operation even if the free prior and informed consent of these people is not ensured.”
“We don’t know exactly what does that mean. I mean, you don’t have FPIC but the operation still goes through,” he said, adding that there is no clear indication of what partner governments should do exactly as well. “Where is the clear-cut situation here that protects rights … it’s AIIB’s responsibility that people are not harmed, if not made better.”
Change in perception
So how can AIIB’s safeguards framework and consultations process be improved?
“What it requires is a perception change on the part of AIIB that if we have very good, high-standard safeguards, what it’ll actually do is facilitate broad-scale and inclusive and sustainable development,” Hassan said. “[AIIB perceives] safeguards … an obstacle to lending, and our perception is protection of the environment and the communities who will be facing the consequences of operations.”
This is echoed by Curtis Chin, former U.S. ambassador to ADB, saying that the formulation of environmental and social safeguards for all multilateral institutions, not just of AIIB, should not be a race to the bottom.
“Development in Asia need not, should not and must not mean shortchanging a nation’s own citizens, particularly its most vulnerable people and communities, or sacrificing the environment,” he told Devex, adding that China — as the leading proponent of AIIB — has the opportunity to cleanse its image of ignoring environmental and social issues in the pursuit of growth.
He concluded that “no matter how welcome and successful AIIB’s safeguards are on paper, the true test will be whether the environment is harmed and whether people are made worse off by the operations of this newest multilateral institutions.”
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