World Bank, Asian Development Bank under fire for mutual reliance plan

The World Bank and Asian Development Bank are poised to begin relying on each other’s due diligence and for some co-financed projects, with NGOs claiming the move will lead to lower standards and less accountability. The Full Mutual Reliance Framework, or FMRF, will be up for discussion by the boards of both lenders next Tuesday. However, the full text of the framework has not been released. Instead, consultations have been based on a nine-page PowerPoint presentation. The presentation states that the mutual reliance framework would be optional and apply to some public sector projects, with the consent of the borrower. If used, it would mean both banks are bound by the policies on project preparation and supervision of the lead lender and require the use of that bank’s independent accountability mechanism. The banks say that will ensure faster project implementation and lower transaction costs, and that the plan shows they are listening to calls for multilateral development banks to work more together. However, 26 civil society groups wrote jointly to the banks opposing the move, and arguing that more consultation is required, including with communities in Asia. The civil society groups wrote that both banks have an international legal obligation to prevent and remedy harm tied to projects they finance and that this “cannot be delegated.” At the least, they wrote, the financier not in the lead should coordinate with the lead financier to ensure appropriate safeguards, monitor public information about the project, reserve the right to conduct site visits, and intensify their supervision when presented with credible information about harm. The NGOs want affected communities to be able to access either or both banks’ independent accountability mechanisms. And they say both banks should remain responsible for providing a remedy if harm occurs. Devex wrote to the World Bank and Asian Development Bank, asking for their response to the NGOs’ concerns, but was largely directed back to the PowerPoint presentation. Responding together, the banks said via email that the new framework would see the lead lender charged with “all aspects of project appraisal, supervision, monitoring and reporting (including all fiduciary, environmental and social and technical assessments), in accordance with its operational policies.” Devex asked ADB in particular whether the framework contradicted its new Environmental and Social Policy, which states that a common approach to environment and social issues in projects it co-finances is only acceptable if it applies the most “stringent” standard among all co-financiers. The banks responded together that “A joint ADB-WB analysis of our respective operational policies, including the Environmental and Social Frameworks, showed our policies are substantially aligned.” But the civil groups argue there are major differences in the “independence, accessibility and effectiveness” of the banks’ policies. For example, communities can complain to ADB’s accountability mechanism for 24 months after the loan or grant closing date, whereas the World Bank only allows 15 months. Radhika Goyal, a policy associate at the NGO watchdog, Accountability Counsel, told Devex by email that environmental and social safeguards should not be “weakened by stealth.” “ADB spent four years consulting on its Environmental and Social Framework and outlining its due diligence and monitoring obligations, only to create a carve out for potentially millions of dollars in co-financing,” Goyal wrote. And she also took aim at subpar consultations. “The entire process has taken less than four months,” Goyal wrote, “and all [civil society organizations] have seen so far is one powerpoint presentation.”