What’s Wrong with the World Bank’s Approach to Resettlement?

Thayer Scudder
Saturday, January 1, 2005

Lots, Says Longtime Resettlement Expert and Former WCD Commissioner

The following is an excerpt from the new book The Future of Large Dams: Dealing with Social, Environmental, Institutional and Political Costs by Ted Scudder (Earthscan, 2005). Scudder is a well–known anthropologist who has worked on resettlement issues on large dams for nearly 50 years, and has been an expert advisor on a number of World Bank dams. He was also one of the 12 commissioners on the World Commission on Dams. Here he reflects on the World Bank’s resettlement record.

A range of structural and policy issues undermine the World Bank’s ability to deal seriously with resettlement issues. They include pressure on staff to move funds, which favors larger projects over smaller ones and interferes with the time–consuming involvement of local people in options assessment and planning. Local involvement is also hindered by the continued difficulty of getting Bank reports, although in that regard the Bank has become more transparent than most project authorities. Another generic reason is the Bank’s relatively weak project supervision as well as infrequent evaluations of outcomes five to ten years after the end of each project cycle. And because the resettlement process continues after the end of Bank involvement in the large majority of its projects, the shortness (seldom over five years) of the Bank’s project cycle is a constraint to ongoing monitoring and evaluation. It may also lead to erroneous conclusions about success, as happened in the Kariba and Pak Mun cases.

Although many of the Bank’s operational directives relate to dams, efforts to compress and simplify them in a dam–specific policy directive have never succeeded. The same applies to an overall policy directive relating to social assessment as opposed to individual topics such as resettlement and indigenous people. And in those cases, I believe that the attention paid by the Bank is more a reactive response to NGO and other criticism than a proactive response based on realization of the adverse effect of the large majority of Bank financed dams on project–affected people.

Flawed Resettlement Guidelines

There is no doubt that the Bank’s resettlement guidelines have had a major impact on minimizing the number requiring resettlement. They have also improved planning and implementation to the extent that the majority of resettlers are made less poor than would have otherwise been the case. But, as the Bank is the first to admit, in the majority of cases their income–earning capacity and living standards have not been restored.

It is unacceptable for resettlers, who are a dam project’s main risk–takers and who are predominately poor people (including a disproportionate percentage of indigenous people), not to become beneficiaries of projects funded by an institution that claims poverty alleviation as its main goal. It becomes even more unacceptable when one realizes that large Bank–financed dams are often the largest single development project in a borrower’s portfolio.

While there is no question about resettlement being an incredibly complicated activity, I believe that a major reason why the Bank’s record continues to be unsatisfactory is that from their very beginning the guidelines have been part of the problem. As ICOLD recognized in 1997, resettlers must become project beneficiaries. That requires resettlement with development as emphasized in the final report of the World Commission on Dams. While the World Bank’s guidelines also state that resettlement projects should be development projects, that statement is immediately undercut by providing borrowers with the fallback option of merely restoring living standards.

Take, for example, the Bank’s revised 1990 guidelines, which remain the strongest that the Bank has produced. Noting ‘the severe long–term hardship, impoverishment, and environmental damage’ that may occur "unless appropriate measures are carefully planned and carried out," the guidelines then state that "Involuntary resettlement should be avoided or minimized where feasible." They go on to state that "where displacement is unavoidable … all involuntary resettlement should be conceived and executed as development programs, with resettlers provided sufficient investment resources and opportunities to share in project benefits." Then, however, that outstanding introduction is undercut by providing borrowers with the fallback option of merely restoring living standards.

Global research on dam displacement has shown that the ‘"living standards restoration" option is almost guaranteed to leave a majority of the resettlers worse off. Yet, because it is less expensive in the short run, it is the option that project authorities have tended to take. That, in my opinion, is the major reason why the Bank’s guidelines have played an impoverishing role in the past and why the Bank’s recently weakened guidelines will continue to play such a role in the future.

Here I analyse five reasons why the Bank’s guidelines cause impoverishment. The first relates to the nature of the lengthy planning process, a 10–20 year planning horizon not being exceptional. During this period, living standards for the majority can be expected to drop for a number of reasons. Governments, private sector entrepreneurs, NGOs and project–affected people themselves are much less likely to make investments within a future reservoir basin. Hence, by the time a decision is made to proceed with major feasibility studies, including "baseline studies" to determine pre–project living standards of future resettlers, those people’s living standards will already be lower than those of neighbors outside the project area.

Once people realize that relocation may be forthcoming, housing improvements are less likely to be made and local entrepreneurs are less likely to invest in new enterprises. In the case of the Swaziland–South African Maguga Dam, local people who wanted to start business ventures over ten years before start of construction were told by authorities not to proceed. When removal is imminent, labor migrants often return home to help their families, with those families losing access to remittances. Because of uncertainty over removal dates, people may also be less likely to harvest good crops, having planted a smaller area or being told by the authorities not to plant at all because removal, subsequently delayed, was imminent.

A second reason relates to what the World Bank refers to as pre–project base–line studies. Current guidelines are based on the inaccurate assumption that such studies accurately reflect pre–project income and living standards and hence constitute a basis against which restoration can be measured. Yet even where pre–resettlement surveys are undertaken – and adequate ones are rare – there is a general tendency to underestimate people’s incomes at that time so that restoration targets remain too low. Reasons include forgetfulness on the part of those providing data, failure to give value to the utilization of soon–to–be–lost common property natural resources for food and other purposes, fear of being taxed and the unflattering or illegal nature of some income–generating activities.

The World Bank’s own evaluations refer to the inadequacy of such studies as a baseline against which to measure subsequent restoration. Thailand’s Pak Mun Dam is a good example. In this case, there was no true baseline study, only preliminary surveys. Furthermore, the Pak Mun preliminary surveys considered only income, and that incompletely since income from the most important activity, fishing, was excluded; in addition, they dealt only with households requiring physical removal. Completed seven to eight years before construction began, results were considered so inadequate that a second survey was carried out. Although considered a baseline study by the project authorities, that survey was actually done four months after the dam had been completed and resettlers had moved. While it dealt with activities over the previous year, including eight months before reservoir inundation, surveys undertaken during the year of removal cannot be expected to provide a reliable record.

A third reason why the Bank’s guidelines are part of the problem is that project authorities following the "restorations option" tend to emphasize compensation, as opposed to providing the sort of development opportunities that are necessary even to restore living standards, let alone improve them. The Bank’s latest guidelines place disproportionate emphasis on compensation, mentioned 19 times, whereas development is mentioned only four times.

A fourth reason becomes salient immediately following removal, when adjusting to new habitats, hosts and government programmes reduces time and energy for restoring living standards. During this period, which can be expected to last at least two years, living standards for the majority can be expected to drop. Policies based on restoration do not take into consideration the extent to which living standards have been adversely affected during those years. Nor do they consider situations where living standards have been rising outside the project area because of non–project–related national development activities. In these situations the living standards of resettlers have worsened in comparison with neighbors unaffected by the project.

Also post removal, a fifth reason relates to the majority of cases where farmland and access to common property resources are lost or reduced. Following removal, household expenses are often greater than before. Increased costs are especially a problem for resettlers who have to purchase food supplies that previously they were able to produce, or where less fertile soils require the purchase of inputs such as improved seed and fertilizers, or where new production techniques require loans that lead to indebtedness. Another reason why loss of arable land to a project tends to leave households worse off is that such land, unlike cash compensation and jobs, is a resource that usually is inherited from one generation to the next.

Downgraded Guidelines

The Bank’s 2001 guidelines cover only direct economic and social impacts. That is another major weakness. Excluded are a wide range of negative cultural effects reported in study after study that relate to loss of home, burial grounds, religious sites, and ideological and political control over a familiar habitat. Nor do they cover the public health implications of such psychological impacts as "grieving for a lost home" and "anxiety for the future," which are especially serious for indigenous people and for many ethnic minorities and peasant communities with strong ties to the land and limited mobility. There is no way that the Bank’s use of cost–benefit analysis can accurately reflect the hardships involved. Resettlement must be planned and implemented as a development project to offset such costs by helping resettlers become project beneficiaries.

Anthropologist Ted Downing’s assessment of the revised and weakened World Bank 2001 guidelines is especially damning. After acknowledging impoverishment risks associated with resettlement, the Bank policy fails "to propose measures to address them. Instead, it falls back on the same flawed economic analysis and methodologies that have been responsible for decades of unacceptable performance." Emphasizing compensation as opposed to the necessary development, "the revisions sidestep the need for viable rehabilitation." Furthermore, the distinction between direct and indirect costs "leads to an understatement of total project costs" and "excludes the critical costs of reintegrating and restarting disrupted economies, social institutions and educational systems."

Downing also believes the 2001 policy "institutionalizes a negotiating system that potentially violates human rights." Why, for example, does it not address resettlers’ "lack of information and legal representation" that "has consistently undermined the capacity of project–affected people to understand and negotiate for their economic reconstruction"? And why does the policy "permit the Bank to underwrite the borrower’s cost of negotiating with the displaced, but not vice versa"?

Even within the Bank, some had begun to emphasize the need to move beyond the restoration option. In the Bank’s Operations Evaluation Department’s (OED) 1998 review of dam–induced resettlement, the authors stated that "The emphasis should shift from restoring income levels, which suggest stagnation at pre–dam lifestyles, to improving income levels, which brings the displacees into the development process along with the project’s primary beneficiaries." An updated version published by the Bank as a book in 2001 was even more emphatic: "Above all, displacees must be beneficiaries of the project. Merely aiming to restore standards of living and lifestyles common to isolated river valleys can be a dead–end development strategy. The opportunity must be taken to establish new and dynamic sources of sustainable growth."

Given such opinions, why is it that the Bank’s resettlement guidelines continue to accept the restoration option? The question is the more perplexing given the Bank’s emphasis on "A World Free of Poverty." Resettlement experts within the World Bank’s Social Development Department explain this paradox in terms of strong resistance within the World Bank and from Bank members to revising the guidelines to require improvement. The main argument by opponents within the Bank against shifting from restoration to improvement relates to the failure of the existing guidelines to even achieve their goal of restoration. Why revise goals upward to require improvement, they argue, when "The Bank has acknowledged that the record on restoring – let alone improving – incomes has been unsatisfactory."

I reject that argument for two reasons. The first is that the emphasis throughout on compensation and restoration as opposed to development is a major reason for the failure of the Bank’s guidelines to restore income and living standards. Because of that emphasis, potential development opportunities are not being sought during the planning process. Indeed, as the 1998 OED study notes, "the weakest part of planning is on economic rehabilitation."

The failure of the World Bank’s current guidelines to recognize the further impoverishing impacts of mere restoration not only causes those guidelines to be inadequate, but also encourages borrower countries to emulate them. That is the case even in countries with improved national policies for resettlement. China is a case in point. The Chinese Government has a law that "advocates and supports resettlement with development." Yet like the Bank’s guidelines, it backtracks, stating that "all resettlers shall be assisted to improve or at least restore their former living standard in steps." In the case of Lesotho’s Highlands Water Project, the binational policy–making commission has continued to reject development initiatives necessary even for living standard restoration by claiming that they go beyond the Bank’s restoration requirement.


Scudder notes in the book that he has been a supporter of various large dams for nearly 50 years. The book does reflect a shift in his thinking, however. "Adverse and irreversible environmental impacts continue to occur and improved policies have yet to yield improved outcomes for project–affected people. This conclusion applies to some of the largest dams recently completed or currently under construction. Unless dam builders can show they are willing and capable of implementing the WCD’s core values and strategic priorities, they should not receive international finance and support." He continues to advise the World Bank on the Nam Theun 2 project in Laos, however, and remains convinced that the project will improve lives in this poor nation.