Comments on ADB's Planned Responses to the Report of the World Commission on Dams

June 2002

General comments

International Rivers appreciates the generally positive response of the Asian Development Bank to the World Commission on Dams report. We note the commitments to follow-up action expressed in President Chino's letter of 22 December 2000 to Prof. Kader Asmal, Chair of the WCD, and in the comments made by Preben Nielsen at the third meeting of the WCD Forum in February 2001. We also appreciate ADB's efforts at disseminating and discussing the WCD report in member countries.

International Rivers finds ADB's Planned Responses to Report of the World Commission on Dams to be an ambiguous document. We appreciate that the document expresses explicit support for the Commission's guidelines. And we agree with ADB that financial institutions should consider applying the WCD recommendations to sectors other than water and power. However, we would like to note the following general concerns about ADB's Planned Responses, and the Bank's current approach to the WCD report:

(1) In several cases, the Planned Responses misrepresent the actual WCD recommendations, possibly in an attempt to make current ADB policies appear to be in compliance with them.

(2) In his letter to the WCD Chair, President Chino committed ADB to 're-examine its own procedures, including our environmental and social development policies, and determine the extent to which the report's recommendations may necessitate changes in these procedures'. In contrast, the Planned Responses are confined to presenting the status-quo of ADB's compliance with the WCD guidelines, or the lack thereof, and do not include a plan to overcome the present gaps in compliance.

(3) While we support ADB's efforts at organizing national workshops on the WCD report in member countries, such events are not appropriate venues for defining ADB's own response to the report. Experience indicates that, with good reasons, these workshops focus on the consequences of the WCD report for national policies. And since important member governments do not appear to be interested in holding national workshops, ADB's own response to the WCD report is presently being held hostage by the procrastination of member governments.

(4) The WCD report clearly indicates that financial institutions such as ADB have a responsibility of their own for the impacts of large dams. According to the report, they have 'played a key strategic role globally in spreading the technology, lending legitimacy to emerging dam projects, training future engineers and government agencies, and leading financing arrangements'. Given this responsibility, we find it unacceptable that ADB's Planned Responses attempt to shift the responsibility for the implementation of key WCD Strategic Priorities, including Gaining Public Acceptance and Comprehensive Options Assessment, solely to the member countries. This is a responsibility which ADB must also assume.

The following sections contain comments on ADB's Planned Responses to specific Strategic Priorities of the WCD report, grouped under four general headings, and recommendations for changes of ADB policies and other follow-up action.

Specific comments

(1) The Rights and Risks approach:

The Rights and Risks approach lies at the heart of the WCD report. As ADB President Chino remarked in his letter to Prof. Asmal, 'it is heartening to note that the Commission recommends that more attention should be paid to the rights and risks of vulnerable groups, when development projects are being planned'. And as Mr. Preben Nielsen stated at the third WCD Forum meeting, 'anyone whose right to well being, livelihood or quality of life is at risk from a project, should have a say in how those rights are restored'.

Given this explicit recognition, it is surprising to see that ADB's Planned Responses shift the responsibility for implementing the Rights and Risks approach to member governments. This is particularly true for the following Policy Principles:

• Policy Principle 1.1. Recognition of rights and assessment of risks are the basis for the identification and inclusion of stakeholders in decision-making on energy and water resources development.

According to the Planned Responses, ADB simply 'abides by national policy and law' and by its own policies when it comes to recognizing the rights of project-affected people. This is not a sufficient response to the WCD's ground-breaking report. The ADB's current policies do not recognize the rights of communities to make decisions affecting their lives, and do not articulate procedures for identifying all people who might be affected by a project or program. Initial Social Assessments are done once a decision to move forward with a particular project is made, rather than at the initial needs and options assessments stages as recommended by the WCD.

• Policy Principle 1.3. Demonstrable public acceptance of all key decisions is achieved through agreements negotiated in an open and transparent process conducted in good faith and with informed participation of all stakeholders.

As ADB's Planned Responses concede, agreements in ADB projects are restricted to resettlement and compensation. This is insufficient, in that it does not allow affected people to participate in the decisions about development options, and to ensure that projects are designed in ways that make affected people true beneficiaries. Even worse, the Planned Responses are misleading in that the term 'agreement' is meaningless if affected people do not have the right to reject a project or program.

• Policy Principle 5.1. Recognition of rights and assessment of risks is the basis for identification and inclusion of adversely affected stakeholders in joint negotiations on mitigation, resettlement and development related decision-making.

Again, ADB's Planned Responses delegate the responsibility for this aspect to national policies and laws, as long as they do not contravene ADB policies. This too is unacceptable, since important member countries such as India do not even have national resettlement policies.

• Policy Principle 5.3. All recognized adversely affected people negotiate mutually agreed, formal and legally enforceable mitigation, resettlement and development entitlements.

The Planned Responses claim that ADB's resettlement policy requires agreed and binding compensation measures. This statement is misleading. ADB's Involuntary Resettlement Policy requires a detailed resettlement plan with time-bound actions in all projects involving resettlement. However, there is no requirement within the policy that legally binding compensation and mitigation agreements be negotiated between affected communities and the relevant authorities. This requirement should be incorporated into the ADB's Involuntary Resettlement Policy.

• Policy Principle 1.4. Decisions on projects affecting indigenous and tribal peoples are guided by their free, prior and informed consent achieved through formal and informal representative bodies.

ADB's Planned Responses reject this approach of the WCD report, and simply state that fundamental decision over projects are "seen as a matter of national sovereignty and thus the government's decision". As the WCD report points out, national and international law increasingly recognizes the rights of indigenous peoples to free, prior and informed consent. For example, the free, prior and informed consent of indigenous peoples has been recognized in ILO Convention 169 on Indigenous and Tribal Peoples, in the Philippines Indigenous People's Rights Act, and in Australia's Aboriginal Land Rights (Northern Territory) Act. Since many dams and other infrastructure projects in Asia affect indigenous peoples, it is important that ADB support this emerging principle of international law. This principle should be incorporated into the Bank's Indigenous Peoples Policy.

(2) Comprehensive assessment of needs and options:

The WCD report documents the need for comprehensive assessments of needs and options before any particular projects are initiated, and proposes a procedure for undertaking these assessments. At the third WCD Forum meeting, Mr. Preben Nielsen supported a strong emphasis on options assessment, including better demand-side management. The ADB report, Large Dams and Recommended Practices, confirms that 'project deficiencies can often be traced back to inadequate 'options assessment''.

Given this recognition, it is surprising to see that ADB's Planned Responses again shift the responsibility for ensuring comprehensive options assessments to the member governments. The WCD found that vested interests and a political bias towards large projects has often prevented a balanced assessment of all needs and options at the national level. The WCD states that 'With few exceptions, an inclusive institutional and policy structure capable of dealing with a spectrum of options has been slow to emerge in developing countries' Interests promoting non-structural alternatives have rarely offered an adequate political counterbalance to interests promoting a dam option'' Furthermore, the WCD report found that multilateral development banks such as the ADB have played a key role in promoting large dams as opposed to other alternatives.

For these reasons, undertaking needs and options assessment are precisely the areas where ADB should assist its developing member countries. Consequently, ADB's position regarding the following Policy Principles should be changed:

• Policy Principle 2.1. Development needs and objectives are clearly formulated through an open and participatory process before the identification and assessment of options for water and energy resource development.
• Policy Principle 2.2. Planning approaches that take into account the full range of development objectives are used to assess all policy, institutional, management, and technical options before the decision is made to proceed with any program or project.

The Planned Responses delegate the responsibility for implementing both these Policy Principles to governments, and confines ADB's role to assisting governments in the process. Practical evidence demonstrates that this is not sufficient. As part of its lending for specific projects and through its power and water sector programs at the policy level, ADB should ensure that development needs and objectives are clearly formulated through an open and participatory process, and that all available options are evaluated in a balanced way. ADB's energy and water sector policies should be amended to reflect these requirements. Further, ADB's Environment Policy should be amended to require public participation in needs and options assessments.

• Policy Principle 2.3. Social and environmental aspects are given the same significance as technical, economic and financial factors in assessing options.

The Planned Responses appear to misinterpret this Principle, and do not address it. The principle requires that social and environmental factors are treated equally to technical, economic and financial factors when assessing various options. In past ADB hydropower projects, social and environmental factors have been downplayed in the project development stage, and have certainly not been assessed on an equal basis to technical, economic and financial factors (for example, Theun-Hinboun and Nam Leuk Hydropower Projects in Laos). While the current draft Environment Policy does recommend that strategic environmental assessments be undertaken for program or sector loans, there are no clear stipulations requiring the ADB to undertake these assessments. This should be clarified in the redrafted policy.

• Policy Principle 2.4. Increasing the effectiveness and sustainability of existing water, irrigation and energy systems are given priority in the options assessment process.

The Planned Responses claim that demand-side management is already considered in ADB's project design and approval process, and that such projects are being supported. While ADB indeed funds isolated DSM projects, practice indicates that this option does not receive a balanced treatment, let alone the priority which is stipulated by the WCD report, in project appraisal. ADB should require an explicit evaluation of DSM options in the appraisal of every power or water sector project it supports, and should require the power and water utilities which ADB supports to embody this principle in their policies as well.

(3) Addressing existing dams:

The World Commission on Dams has made addressing the legacy of existing dams a Strategic Priority of its report. It thus supports the growing international trend to establish mechanisms to redress the unresolved legacy of past projects and practices. ADB's Planned Responses do not adequately address this issue.

• Institutional Responses - Bilateral Aid Agencies and Multilateral Development Banks, point 4: Review the portfolio of past projects to identify those that may have under-performed or present unresolved issues and share in addressing the financial burden of such projects for borrower countries. This may include, for example, canceling the outstanding debt related to them, converting debt repayment into development assistance targeting affected areas, or providing new support to help borrower countries address unresolved economic, social and environmental problems.

The Planned Responses simply acknowledge that ADB does not have a policy to deal with such cases. As the WCD report stipulates, the Bank should urgently develop such a policy.

• Policy Principle 3.3. Outstanding social issues associated with existing large dams are identified and assessed; processes and mechanisms are developed with affected communities to remedy them.

ADB's Planned Responses claims that such a process has been established in the case of the Theun-Hinboun Hydropower Project. This response obscures the fact that the situation at Theun-Hinboun remains unresolved for affected communities, and that the ADB only took action as a result of strong pressure from NGOs. The ADB still does not have systematic mechanisms to deal with such issues. As stipulated above, ADB should develop such mechanisms.

• Policy Principle 3.1. A comprehensive post project monitoring and evaluation process, and a system of longer-term periodic reviews of the performance, benefits and impacts for all existing large dams are introduced.

ADB's Planned Responses claim that projects are being ex-post evaluated 'as a matter of routine'. International Rivers is pleased to see that the ADB's new Environment Policy includes more detailed requirements for monitoring and ensuring compliance with Environmental Management Plans during project implementation. However, ADB's policies still require no systematic monitoring after the project completion report has been done, which usually takes place a year after completion of construction. We note that the new Environment Policy states that ADB will assist executing agencies and other relevant government authorities 'where unanticipated environmental impacts become apparent during project implementation or after project completion'. This is commendable. However, there is still no requirement for systematic long-term periodic reviews of projects, as recommended by the WCD. This requirement should be incorporated into the Environment Policy.

(4) Sustaining rivers and livelihoods, and ensuring compliance:

• Policy Principle 4.1. A basin-wide understanding of the ecosystem's functions, values and requirements, and how community livelihoods depend on and influence them, is required before decisions on development options are made.

ADB's Planned Responses claim that in some cases this is already being done, and refers specifically to the Se Kong-Se San and Nam Theun River Basins Hydropower Development Study as one example. This is a blatant mischaracterization of the nature of this study. The aim of the Se Kong-Se San and Nam Theun River Basins Hydropower Development Study was to 'prepare a regionally optimized, sustainable, and environmentally acceptable hydropower development plan' for the three river basins, not to develop a basin-wide understanding of the ecosystem's functions and how communities depend upon them.

Obtaining accurate and reliable baseline data is one area where ADB has been notoriously deficient in project preparation. There is no baseline data for the livelihoods of communities affected by Theun-Hinboun or Nam Leuk Hydropower Projects. This has made the whole process of determining and allocating compensation very difficult for these communities. The ADB's new Environment Policy should include a stipulation requiring that a basin-wide understanding of the ecosystem and livelihoods of communities be obtained before proceeding with any river development projects.

• Policy Principle 4.2. Decisions value ecosystems, social and health issues as an integral part of project and river basin development and prioritise avoidance of impacts in accordance with a precautionary approach.

ADB's Planned Responses make no mention of the precautionary approach recommended by the WCD. The precautionary principle is a well-recognized international principle governing decision-making on issues affecting the environment. The ADB should incorporate the precautionary principle into its environment policy and other relevant policies.

• Policy Principle 4.4. Project options are selected that avoid significant impacts on threatened and endangered species. When impacts cannot be avoided, viable compensation measures are put in place that will result in a net gain for the species within the region.

ADB's Planned Responses claim that impacts on threatened and endangered species are given 'serious consideration', and that compensation measures are enacted which will ('at a minimum') prevent a net loss of fish populations. This has certainly not been the case for the Theun-Hinboun Hydropower Project, where it is clear that the project has resulted in net losses of fish populations with no corresponding preventative measures insisted upon by the ADB. In fact, the fisheries monitoring study that was undertaken by Terry Warren during the year after project operation was never publicly released nor acted upon by the Theun-Hinboun Power Company or the ADB, evidently because the study contained recommendations unpalatable to the company.

It is true that the Nam Leuk Hydropower Project included a component for strengthening management of the Phou Khou Khouay National Biodiversity Protection Area (NBCA), yet the management plan for the NBCA has been fraught with difficulties. It is clear that the ADB needs to strengthen its procedures for ensuring that significant impacts on threatened and endangered species are avoided in its project operations.

• Policy Principle 4.5. Large dams provide for releasing environmental flows to help maintain downstream ecosystem integrity and community livelihoods and are designed, modified and operated accordingly.

ADB's Planned Responses states that this issue is being investigated, and refers specifically to the Theun-Hinboun Hydropower Project, where a study on minimum downstream releases is proposed. However, initially the Theun-Hinboun Power Company's (THPC) Mitigation and Compensation Program proposed reducing the minimum downstream flow. Only through pressure from International Rivers has the Bank and the THPC agreed that the study will look at what the optimal minimal downstream release will be for the project, and even so there has been no commitment from THPC to releasing the terms of reference or other documentation surrounding this study, making public participation impossible.

Recommendations:

(1) Policy changes:

ADB should follow up on the commitments expressed in its official response to the WCD Chair and at the third WCD Forum, and bring its policies in line with the WCD guidelines. The following policy changes would be particularly important:

• In order to respect the importance of the 'rights and risks' approach as recognized in its official responses, ADB should embody the principles of 'demonstrable public acceptance', negotiated agreements, and of free, prior and informed consent for indigenous peoples, into its policies on involuntary resettlement and indigenous peoples.
• As a major actor in the water and power sectors of Asian countries, ADB should integrate the principles of comprehensive assessment of needs and options, as stipulated in the WCD report, in its water, energy, and environment policies.
• The Bank should establish a mechanism to redress the unresolved legacies of past projects and practices, as recommended by the WCD.
• The ADB's Environment Policy is currently being drafted. The ADB should not miss this important opportunity to incorporate WCD principles into this key policy. The Environment Policy should incorporate the following WCD principles:

Clear guidelines for public participation in decision-making at all stages, and for all loans, including program loans, sector loans, loans involving financial intermediaries, and private sector loans. The ADB Environment Policy should adopt the framework for public participation in development decisions recommended by the World Commission on Dams.

Clear stipulations requiring the ADB to undertake strategic impact assessments for all loans, including project loans, program loans, sectoral loans, and private sector loans.

ADB should incorporate the precautionary principle into its environment policy and other relevant policies.

ADB should be required to undertake periodic systematic long-term reviews of projects even after the project has been closed.

Stipulations requiring that a basin-wide understanding of the ecosystem and livelihoods of communities be obtained before proceeding with any river development projects.

• Increasingly, ADB does not support water and energy sector development through direct project lending, but through program loans, financial intermediaries, and river commissions. Sector restructuring loans in particular provide a unique opportunity to integrate Strategic Priorities of the WCD such as needs assessment, comprehensive options assessment and demonstrable public acceptance at the policy level. Experience in many countries clearly demonstrates that privatization, as promulgated by ADB, is not sufficient to promote a balanced options assessment. ADB should ensure that the utilities, intermediaries and river commissions which it supports adhere to the guidelines of the WCD.

(2) Relevance for other sectors:

ADB's Planned Responses correctly point out that the WCD recommendations do not only affect water and energy projects, but 'in a broader sense, all our infrastructure projects, including roads, railways, ports, water supply, sanitation, and urban development'. ADB should prepare an action plan laying out how the implications of the WCD report for these other sectors can be analyzed and addressed.