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A look into ADB’s involvement in environmental degradation, involuntaryresettlement and violation of indigenous people’s rights

Development Debacles

September 2006

Development Debacles:A look into ADB’s involvement in environmental degradation, involuntary resettlement and violation of indigenous people’s rights

NGO Forum on ADBSeptember 2006

Contributors:

Hemantha WithanageRonald MasaydaRomil Hernandez

NGO Forum on ADB would like to thank the following for their valuable help and inputs in finalizing the briefers:

Chris Lang, Jasper Inventor, Jessica Rosien, Lia Kent, Prabin Singh and Isagani Serrano.

Cover Photo:

Toxic pollution pours from the huge chimney stacks of the Mae Moh power plant, Southeast Asia's largest lignite firedpower generating facility. Villagers in the area have long complained that the plant, which supplies north and north-east Thailand with power, is contaminating the surrounding area, posing hazards to their health as well damagingtheir agricultural lands.

Photo by Yvan Cohen /Asiaworksphotos.com c/o Greenpeace Southeast Asia

Back Inside Cover Photo:

Photo by Ingrid Macdonald/Oxfam Australia c/o Michael Simons of Oxfam Australia.

Layout by Romil Hernandez

Development DebaclesA look into ADB’s involvement in environmental degradation, involuntary

resettlement and violation of indigenous people’s rights

September 2006

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Table of Contents

The Asian Development Bank’s Safeguard Policies 5

The Saga of Disrupting Social and Environmental Safeguards in theSouthern Transport Development Project (Sri Lanka) 7

Liquid Gold: The Oil Palm and Disregard of Social andEnvironmental Norms (Papua New Guinea) 9

Impoverishing Laos: The Asian Development Bankand Industrial Tree Plantations 12

Controversies Continue to Plague the Melamchi Water Supply Project (Nepal) 15

Flooding Central Pakistan: The Chasma Right Bank Irrigation Project 18

The Hazardous Masinloc Coal-Fired Power Plant (The Philippines) 20

The Grievous Mae Moh Coal Power Plant (Thailand) 23

Marinduque Mining Project: The Worst Mining Disaster in the Philippines 25

The Questionable Tonle Sap Initiative (Cambodia) 27

How Corruption Ruined Thailand’s Samut Prakarn Wastewater Management Project 29

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Introduction

On July 25, 2005, the ADB announced that it was conducting an ‘update’ of its safeguard policies for purposes of“enhancing its effectiveness, and ensure its relevance to changing client needs and new lending modalities andinstruments.”1 The ADB recognizes that the implementation of its policies on the ground has been a problem. A keyaspect of the update is a plan to streamline operations and consolidate the three safeguard policies into one.

The Asian Development Bank’s Safeguard Policies

At present, ADB’s Social andEnvironmental Safeguard Division (RSES)within the Regional SustainableDevelopment Department (RSDD) isleading the safeguard policies update. Asteering committee, and internal andtechnical working groups were formed tofacilitate and discuss the safeguardissues. They are in charge of distillingthe principal policy elements of the SPUand drafting the policy paper (also knownas the W-Paper).

ADB’s expects to finish the entire updateprocess is in November 2007 where theBoard is expected to review the finalpolicy paper. Between July and October2006, the ADB will have its own internalconsultations. After which, the Bank willconduct external consultations.

ADB’s Safeguard Policies

The ADB’s safeguard policies require theBank to avoid, minimize, or mitigateadverse environmental and socialimpacts from its funded projectsextended to its Developing MemberCountries (DMCs) in Asia and Pacificregion. Currently, the ADB has threesafeguard policies:

· Involuntary Resettlement Policy(1995)

· Indigenous Peoples Policy (1998)· Environment Policy (2002)

The Involuntary Resettlement Policystates that forcible resettlement shouldbe avoided whenever possible.Resettlement plans must be developed inconsultation with affected communities.Affected people should be fully informedabout the resettlement. They should bejustly compensated and provided withappropriate land, housing andinfrastructure, among others.

Affected communities must be at leastas economically and socially well off after

the project as they were before theproject.

The Indigenous Peoples Policy statesthat the ADB should ensure that equalopportunity for indigenous peoples areprovided. Projects should beimplemented with the informed consentand participation of the IPs.Interventions that will affect the IPsshould be consistent with their needsand aspirations.

The Environment Policy states that theenvironmental impacts of projectsshould be evaluated and minimized. Thepublic should be involved in theevaluation of environmental impacts.Environmental impact assessmentsshould be conducted and disclosed to thegeneral public.

The safeguard policies are veryimportant to the civil societyorganizations (CSOs), concernedstakeholders and affected communitiesbecause these are the basic guidingprinciples that ensure the Bank’saccountability as regards theenvironmental and social impacts of itsprojects. When the operational policiesand procedures are violated, affectedcommunities and concerned stakeholderscan file a complaint with the ADB’sAccountability Mechanism. Complaintsare filed with the Office of SpecialProject Facilitators for problem-solvingpurposes, and elevated to the Office ofCompliance Review Panel for compliance.

Problems with the Safeguard Policies

There are some key problems with thesafeguard policies. One is that they donot allow communities to say “no” to acertain project. The policies only helplessen potential social and environmentalimpacts. Another one is that the ADB hasa poor track record in implementing itsown policies. Despite the existence of

the safeguard policies, evidencesuggests that many ADB projects havedamaged the environment and causedsocial and economic harm to vulnerablecommunities.

Some high profile ADB-funded projectshave exposed serious shortcomings, suchas the Southern Transport DevelopmentProject (STDP) in Sri Lanka, ChashmaRight Bank Irrigation Project (CRBIP)Phase III in Pakistan, and the SamutPrakarn Wastewater Management Project(SPWMP) in Thailand, just to name afew.

Another issue is the lack ofaccountability for safeguard compliance.In STDP (Sri Lanka), ADB’s ownCompliance Review Panel (CRP) reportedthat “the ADB management has notcomplied with most of the proposedremedial action in the CRP reportprepared in July 2005 to solve theproblems of the STDP.” The ADB rarelysanctions its clients or its own staff andmanagement for failure to comply withthe safeguard policies.

CSOs’ concerns with the Update

CSOs are concerned that the update willweaken the safeguard policies that couldresult in ADB being less accountable forits projects and interventions. CSOsbelieve that the present update isrelated to ADB’s ability to successfullycompete with export credit agencies andother development financiers in theregion that do not require borrowers tofollow stringent safeguard policies. CSOsare also concerned that the ADB isfollowing what the World Bank did in themid-1990s when the latter initiated asimilar process and resulted in thesimplification of its safeguard policies.

Another concern of the CSOs is ADB’sadoption of a ‘country systems’approach in addressing social and

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environmental safeguard issues. Thisapproach means that for certain projectsit finances, the Bank will rely on theborrowing government’s ownenvironmental and social systems ratherthan its own safeguard policies. Nationalsystems will be evaluated against a setof the Bank safeguards and if judged‘equivalent’, they will be used forproject preparation and implementation.Although CSOs have always advocatedthe strengthening of social andenvironmental standards and thebuilding of institutional capacity at thenational level, they have been concernedthat the shift towards country systemswill result in a dilution of the Bank’s ownresponsibilities for its safeguardpolicies.2

What Do CSOs Want?

CSOs want the ADB to stop supportinghighly destructive projects and to beheld responsible and accountable forsocial and environmental damages itsprojects bring. The ADB should seek theinformed consent of affectedcommunities before developing projects,and retain this strong voice throughout

the project cycle. These strongrequirements, among others, should bepart of the safeguard policies. CSOswant the ADB to view environmental andsocial planning as a way to minimizeproblems arising in the future, ratherthan as a constraint on competitiveness.In evaluating the effectiveness of itssafeguard policies, CSOs believe the ADBneeds to listen to the voices of projectaffected people and civil society fromdeveloping countries.

In response to ADB’s Discussion Note inMarch 2006, forty eight CSOs sent anopen letter to the ADB, expressingconcerns about the update. The lettercontained a number of recommendationsfor the ADB to strengthen itsenvironmental and social standards andhold ADB management accountable forpolicy implementation. These include:complying with international humanrights, labor and environmental laws,conventions, and norms; developingclear and comprehensive social andenvironmental policy frameworks;establishing mechanisms for complianceand ensuring accountability for results onthe ground; and protecting the rights ofall affected communities and ensuring

respect for indigenous peoples’internationally guaranteed rights.

(Footnotes)1 Seehttp://www.adb.org/Safeguards/policy.asp

2 For more information on the recenttrends at the World Bank, see ShannonLawrence “Retreat from the SafeguardPolicies: Recent Trends Undermining Socialand Environmental Accountability at theWorld Bank,” January 2005, available athttp://www.environmentaldefense.org/documents/4279_RetreatSafeguardPolicies_0105.pdf

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Background

The Southern Transport Development Project in Sri Lanka is a construction of a 128 km long six-lane expresswayconnecting Matara, a southern city in Colombo, the capital of Sri Lanka. While the primary objective is to spureconomic development in the southern region and to significantly reduce the high rate of road accidents, thesecondary objective is poverty reduction. Main financiers are the Asian Development Bank (ADB) and Japan Bank forInternational Corporation (JBIC). The project is implemented by the Road Development Authority (RDA). The projectwas in a controversy since 1992 and the ADB got involved in it in 1996. The EIA was approved in 1999. However,implementation was delayed due to strong opposition from both affected people and the National and Internationalenvironmental/advocacy groups, due to safeguard violations.

The Saga of Disrupting Social and Environmental Safeguards in theSouthern Transport Development Project (Sri Lanka)

Environmental and social Impacts

The road passes through four riverbasins and over hundreds of otherwetlands. It also crosses many villages.Over 1,300 houses were demolished dueto the project. Around 8,745 lots areplanned to be traversed by the highway.Current estimate shows that 5,683households of all categories will beaffected. The project has alreadydestroyed thousands of hectares ofpaddy fields and home gardens. It hasblocked waterways leading to flooding inthe region. The project has pushed theaffected families to depend on themarket by destroying their sustainablelivelihood.

According to affected communities, thecompensation issue has not been settledeven though the project was approvedseven years ago. They allege that theRDA did not conduct proper asset andland evaluation. As a result, this haspushed many of them into furthereconomic vulnerability. Affected peoplehave spent most of the compensationmoney to construct new houses, thus,leaving little resources for theirsustenance. Even worse, many familieshave not been compensated for treesand crops loss due to the project. Thesewere their major sources of income.Affected people, who have resettledvoluntarily, experienced loss of earning,which forced them to spend theircompensation on other things instead ofnew homes. The situation is furtheraggravated by the lack of basicamenities in the resettlement sitesprovided by the RDA.1

Cutting or clearing of very steep hills,rock blasting and dumping soil into thepaddy lands have created serious soilerosion along the road trace. The fillingof paddy fields with this loose soil has

threatened livelihoods as it is nowdifficult to farm. The filling of wetlandswithout adequate drainage system isalso very damaging as this could lead toflooding problems in the futureespecially during rainy season. Further,dust pollution is unbearable in someareas. Rock blasting and heavy vehiclemovement further poses health risks topeople who live near the constructionsite. While the ADB claims thatadditional environmental studies havebeen undertaken to address theseissues, situation has remained thesame.

ADB Safeguard Policy Violations

The Compliance Panel Report prepared inJuly 2005, in response to thecomplainants of the affectedcommunities, concluded that, “therehave been, at some time during theProject from project processing to itsimplementation, lapses of compliancewith the following applicable ADBpolicies and operational procedures.”

Involuntary Resettlement Policy

A year after the ADB AccountabilityMechanism’s Compliance Review Panelissued its final report on the Project, ithas continued to violate ADB’sInvoluntary Resettlement Policy. The CRPconcluded that, “compliance with thisOM Section has been problematic sincethe Board approval, with the significantshifts of the trace without publicparticipation. The CRP is also concernedabout Management’s inattention toindependent monitoring and the needfor supporting performance in the areasof compensation and resettlement.”

Local communities have beencomplaining of continued violations ofvarious ADB safeguard policies, despite

the CRP findings. Most of the affectedcommunities expressed theirdissatisfaction over (1) compensationprocedures and amount, (2) landpossession by the authorities for theproject, (3) evaluation of assets, (4)living conditions in resettlement sites,and (5) transparency of both the ADB andRDA procedures.

Environment Policy

The CRP report produced in July 2005stated that, “Management cannot besatisfied with the sufficiency of theEnvironmental Impact Assessment done in1999 and the ensuing EnvironmentalFindings Reports for the ADB section. Also,the Galle access road has not received anadequate review of its environmentalimpacts, and some stretches of the FinalTrace well away from the Combined Traceneed more attention. Public informationand participation in the environmentalreview process has been inadequate sincelate 1999.”2 The complainants claimed thatnon-compliance by the ADB of itsoperational policies and procedures hadimpacted their lives negatively. Theystated that the project implementingagency altered 40 percent of the originalalignment of the highway leading to lossof homes, livelihoods as well as negativeimpacts on local ecology and wetlands.However, there has been no environmentalmonitoring for the project. While socialimpacts were prioritized due to theinvolvement of the affected communities,the environmental issues were not properlyaddressed.

After the ADB Board approved the CRPfindings, the Bank’s South Asia RegionalDepartment prepared a Course of Action.This laid out steps to bring the projectinto compliance based on the 15recommendations of the CRP. In itsOctober 2005 progress report, ADB

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Management informed the Board that ithad started implementing remedialactions including the required additionalstudies on SupplementaryEnvironmental Assessment, IncomeRestoration Program, and gender issues.

However, progress on the Course of Actionhas been considerably delayed. The CRPrecommendations are yet to beimplemented after nearly one year. Manyaffected people have not yet received fullcompensation. There has also been a lackof progress in the income restorationprogram. Moreover, details about theproject and its implementation status, asper the Board decision, have also not beenprovided to affected people in locallanguages.

The Monitoring report issued by the CRPin July 2006 stated that the Managementhas fully complied with only threerecommendations and partially compliedwith six specific recommendations.However, it also stated that theManagement has not complied with threegeneral recommendations and sevenspecific recommendations that include:“Management should require that allaffected persons be fully compensated byactual payment before they are moved.”

The Panel also reported that “some of theaffected people remain dissatisfied withspecific impacts of the project. There aremany potential reasons for theseobjections, ranging from highly specificissues such as construction-related cracksin buildings to broad anxieties related tothe disruption of cultural norms such asthe integrity of extended families inlandholdings of historical significance.”

Lessons to Learn

Affected people believe that STDP andthe violation of ADB Guidelines,Resettlement Implementation Plan (RIP)and Loan Covenants are inseparabletwins. Since its inception, the projecthas been marred by interruptions due toinfringement of project guidelines.Implementation arrangements andoversight processes have been far fromadequate and have resulted in numerousinstances of policy violations. The RoadDevelopment Authority (RDA) is nowexpected to complete the project by2009.

On paper, the ADB safeguard policies areone of the best among the IFIs. But theBank has been repeatedly criticized fortheir non-implementation. The recent CRPreport on the Southern TransportDevelopment projects stated that,“Management should review selected roadprojects as to how changes of scope maymake the application of environment andresettlement policies more difficult.” Thereport further state “The Panel wishes tomake clear that its intent in thisrecommendation was that ADB shouldassess the potential for weakening ofapplication of safeguard policies whenminor or major changes are made. Itseems clear, in the case of STDP that theenvironmental safeguards were weakenedwith the changes of trace and stakeholdersat each project stage until the FinalTrace.”

The main reasons include the following:• inadequate environmental impacts

assessment during the design,lack of willingness to address the

environmental issues due tovested interest;

• inadequate law enforcement insettling disputes over the affectedenvironment at local level;

• inadequate human capacity,expertise and funds in the projectmonitoring and approvingagencies;

• lack of clarity and disregard of ADBpolicies as well as local policies andhow to implement them

• lack or transparency and publicparticipation in project designand implementation,

• lack of binding of the contractorsand subcontractors toenvironmental provisions requiredby ADB.

Bureaucracy is also one of the majorproblems in STDP case. It also shows thatco-financing agencies have no clarity onhow to implement safeguard policies.

(Footnotes)

1 BIC, NGO Forum on ADB and CEJ.“A Fact-finding Report on Status of ResettlementImplementation Plan.” June 2006. Therea.

2 ADB. “ADB Accountability MechanismCompliance Review Panel AnnualMonitoring Report 2005-2006 to the Boardof Directors on CRP Request No. 2004/1 onthe Southern Transport DevelopmentProject in Sri Lanka(ADB Loan No. 1711-SRI[SF]).” Manila, 11 July 2006.

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Liquid Gold: The Oil Palm and Disregard of Social andEnvironmental Norms (Papua New Guinea)

Background

In 2000, the Government of PNG requested assistance from the Asian Development Bank (ADB) for the preparation of anagro-industry development project to generate income-earning opportunities for the rural population. A project preparatorytechnical assistance (PPTA) was approved in November 2000. 1 The Prime Minister of PNG stated, “The Government, inrecognition, identified the Oil Palm industry as a vehicle and growth strategy to enhance the economic and socio-indicators of Papua New Guinea. The Government through the PNG-ADB Nucleus Agro Enterprise Project, has identifiedareas in PNG which are suitable for Oil Palm Development, such as: Turubu/Sepik Plains in East Sepik, Bewani in WestSepik, Amazon Bay in Central Province and Arowe in West New Britain Province.”2 Thus, the Nucleus Agro-Enterprisesproject (NAEP) was approved for lending by the ADB to the Independent State of Papua New Guinea on 18th December2001.

In October 2001, the government endorseda proposal from Ramu Sugar in PNG to setup an 8,000 hectares oil palm plantationin Usino-Bundi in Madang province. About6,500 hectares would be operated by RamuSugar and the other 1,500 hectares bysmallholders. In August 2001, the governorof the East New Britain province, whichcurrently has no oil palm plantations,announced that the province would startto encourage the establishment of oil palmplantations. The provincial governmentplans to convert a large area of land in theOpen Bay area of North Baining for thispurpose. In August 2001, the governor ofMorobe province presented a pre-feasibility study on a 30,000- hectare oilpalm project on the border of the Morobeand Gulf provinces. In June 2002, the OilPalm Industry Corporation (OPIC)announced that a large number of new oilpalm projects could be developed in PNGwithin the next five to ten years if currentfeasibility studies on proposed projects arecompleted and approved by thegovernment.

The ADB provided its first loan for oil palmdevelopment to PNG in 1986. The projectcompletion report rated the project aspartly successful. During appraisal, theproject cost was estimated at $49.9million. The output from the Project wasabout 70,000 tons of fresh fruit bunchesin 1998. The peak harvest of about107,000 fresh fruit bunches was expectedby the year 2004. The total number ofproject beneficiaries was 1,731 or 79percent of the appraisal target of 2,200farmers. The report stated that, “thefarmers are very enthusiastic about thisenterprise and virtually all are planning toplant an additional two hectares of oilpalm. Overall, the project impacts aresignificant and the Project is rated asgenerally successful.”3

According to a 2001 ADB news release onthe PNG NAEP, “Agricultural production inPNG is the mainspring of growth and theprincipal tool for reducing poverty inrural areas.” These enterprises will inturn provide much needed employmentto subsistence farmers, shifting themaway from the informal subsistenceeconomy. The Bank claimed that this willimprove incomes and standards of livingin rural areas throughout PNG. However,the project was heavily criticized forpromoting export-driven approach todevelopment rather than respecting andbuilding on PNG’s wise constitutionalprinciples of culturally-sensitive andecologically-sustainable development.

Environmental and Social Impacts

According to the ADB-OED report, “Landdegradation, as a result of oil palmcultivation, is not expected to besignificant as the Project has avoidedsteep land and gullies as planting areas.In addition, the rapid buildup of palmfronds on the floor of interrowsminimizes soil erosion risks andconserves soil fertility.” However, thereport stated, “the concern on theenvironmental impact from oil palmdevelopment is from the mill processingof FFB was not addressed at appraisal asthe processing of the fruit bunches bythe plantation palm oil mills wasregarded as outside the scope of theProject. However, the processing ofsmallholder’s FFB by the privately ownedmills would result in generation ofadditional waste. Because the privatelyowned mills have failed to install propertreatment plants, the waste is beingdischarged directly into the sea. TheGovernment has established guidelinesfor palm oil waste treatment.Unfortunately, no monitoring is being

undertaken to ensure that palm oil millscomply with the guidelines. It wasobserved that the full complement oftreatment ponds necessary to treat palmoil waste has not been established in themills. Thus, the discharge from thesemills could have some adverse effect onthe coastal ecosystem. It is importantthat the PNG Bureau of Water Resourcesmonitor the situation regularly asuntreated mill effluent could causedamage to the reef and inshore marinelife.” The report further stated, “thereare no control measures to minimize airpollution from the burning of fruit fiberand empty shells in the mills. While themills’ contribution to the greenhouseeffect is negligible, the fallout of finedust is both a nuisance and a healthhazard to nearby residents.”

According to the local environmental GroupCELCOR, many of the ADB-funded large-scale monoculture cash crops projectshave been controversial as they were oftensocially and environmentally damaging. ADBhas received much criticism for usingpoverty reduction as a front to subsidizeand support the private sector.Furthermore, the conversion to cash cropsoften results in irreversible environmentaldamage. This is particularly significant forPNG since no less than 65 percent of itsland are still forested and are ecologicallyintact. And over 85 percent of its fivemillion population are dependent on ahealthy and intact natural environment forsurvival.

In Oro Province, oil palm plantationshave encroached upon the habitat ofthe world’s largest and endangeredQueen Alexander Birdwing butterfly,which is endemic to the area. Furtherexpansion of oil palm in Oro Provincewould increase the risk of extinction of

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this butterfly specie. There wereconcerns that in East New Britain, theOpen Bay oil palm proposal wouldthreaten one of the most spectacularcave systems on Earth –- the Caves ofPomio.

The rivers have been drained frominland areas where the oil palms areplanted. The downstream of theoperation has affected the livelihood ofthe people. Villagers complained ofreduced food supplies from the river andcoastal region, contaminated water, aswell as skin irritation after theintroduction of oil palm in their area.

PNG is known for its extensive anddiverse coral reef and fringing reefsystems. However, there is a concernthat increasing land clearing for timberand subsequently for oil palm willincrease the amount of pollutant andsedimentation entering the coastalregion. Excessive nutrients run-off fromthe residues of fertilizers used in oilpalm plantations are corrosive to thefragile and sensitive reef systems. Thisinevitably contributes to the destructionof pristine reef systems and hence,valuable fish breeding and spawninggrounds.

Oil palm processing mills are usuallylocated close to urban centers for easeof transportation and access toinfrastructures. In Popondetta in theOro province, the entire town andsurrounding area have been infestedwith flies which are health hazards. Thestench of rotting waste from the millcould be smelled for kilometers and thesmoke from the Higaturu palm oilprocessing mill could be felt from as faras the Managalas plateau.4

ADB Safeguard Policy Violations

Like many large-scale projects, theintroduction of agro-enterprises in PNGalso brought many complex and costlysocial problems once unknown to ruralPNG.

Indigenous Peoples Policy

The change that comes with this kind ofexternally imposed project is oftendisruptive and undermines the existingcustomary system and structure which hassustained local communities for as longas they can remember. Often, noteveryone in the community is in

agreement with the agriculture project.Sometimes, customary land boundaries arecrossed to establish the crops. In othertimes, the parent company leases outlands to people from other areas for theiragriculture plots resulting in communaltension and misunderstandings. Thismanipulation of land use and transfer oftenure is not based on customary processand often results in discontent and angerwithin a community and amongcommunities. Conflicts from land disputesincreased as these kind of schemes areintroduced.5

The transition from subsistence to cargoor cash-dependency has both social andeconomic ramifications. According toCELCORE, “It is unfair and patronizingto classify rural Papua New Guineans as‘rural poor’ as they have access toabundance of resources as long as theirland remains intact and the naturalenvironment healthy.” The naturalenvironment forms the basis for theirsubsistence and strong cultures andsocial safety net. However, agricultureprojects as proposed by the ADBdrastically undermined this strongsystem as these projects often requiremajor cultural shifts and restructuringof community activities andrelationships. Growers essentially losecontrol of their lifestyle once theybecome bound to a long contractualarrangement with the parent companyof NAEP, they said.

Rise in drug and alcohol abuse was foundas a major social problem. Money fromcash crops production has increased thepurchasing power of growers. Often,men were the key recipients of moneyfrom the produce even though the entirefamily may have been involved in thewhole production cycle. Unfortunately,alcohol is one of the most popular itemspurchased by men in places withsmallholder scheme. They also claimedthat rise in crime rate was also very highin these project areas.

Landowners and smallholders in existingoil palm project areas are unhappy withthe low return from their labour andonce productive land. Many growerscomplained that big promises weremade to coerce them into accepting oilpalm as a good development projectjust to find themselves trapped in asituation of total dependency on the oilpalm company and commodity pricefluctuations. Normally, growers allocate

the best farmland available in theircharge to oil palm. According to localpeople, the oil palm cultivation is notthe best crop. However, it wasintroduced to produce oil for developednations such as Australia.

Environment Policy

The ADB-OED report accepts that someenvironmental issues were not addressedin the project. According to CELCORE,“downstream communities often bear thebrunt of waterway pollution which isanother source of communal conflicts.”6

Due to the long delay in project start-up, the scheduled two-year project hasjust completed its first quarter ofimplementation. Selection ofsubprojects and pilot projects hasrecently completed so the analysis isbased on one of out the total of fourkey activities to be undertaken byTASMU. No field monitoring of any ofthe selected projects has been carriedout.7

The focus of the feasibility studies andpiloting of projects of the NucleusSmallholders Agro Enterprises Projectoffers a lot of scope for the ADB toimplement its environmental guidelinesand policy. In the Report andRecommendation of the President to theBoard of Directors on a ProposedTechnical Assistance Loan to Papua NewGuinea for Nucleus Agro-Enterprises inNovember 2001, specific assurances inrelation to the environment were givenby GOPNG. These assurances which havebeen incorporated into the LoanAgreement were:

(i) The Government, through DNPM1(Department of National Planning andMonitoring) and TASMU, will ensurethat

a) environmental concerns are fully takeninto account from the time of theformulation of selection criteria to thecompletion of the subproject feasibilitystudies;

b) opportunities exist to maximizepotential environmental benefits andminimize environmental conflicts andcosts; and

c) any investment proposal resultingfrom a subproject feasibility study istested on the basis of environmentalparameters as well as technical andfinancial parameters.

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(ii) All environmental mitigation measuresidentified as the result of a subprojectfeasibility study or pilot projectinvestment plan will be incorporatedinto the project design and followedduring project construction,operation, and maintenance inconsultation with the Government’sOffice of Environment andConservation and in accordance withADB’s environmental guidelines.

These agreements were also reflected inthe Environmental Considerations of theLoan Covenant. Specifically, it stipulatedthat: The Borrower (GOPNG) shall ensurethat TASMU and the Screening Committeeensure that in evaluating and/or fundingany Subproject in which environmentalconsiderations are involved (includingresettlement, gender and other socialdimensions),

(i) Environmental concerns are fully takeninto account from time to time in theformulation of detailed selectioncriteria to the completion of the SFS;

(ii) Opportunities exist to maximizepotential environmental benefits andminimize environmental conflicts andcosts; and

(iii) Any investment proposals resultingfrom an SFS is tested on the basis ofenvironmental parameters as well astechnical and financial parameters.

However, these provision were not properlyadhered to in this project

In the loan document, the ADB said that itis formally committed to following itsenvironmental policies including theEnvironmental Assessment Requirementsand Environmental Review Procedures ofthe ADB. From the first Inception Reportreviewed, it was evident that thisrequirement was conveyed to theexecuting agent, TASMU and GOPNG. Howthis translates into practice in the fieldremain to be seen.

The following are some issues identifiedto date:

• In accordance with the 2003 guideline,(para 4) ADB’s environmentalassessment process starts as soon aspotential projects for ADB funding areidentified. Environmental assessmentis ideally carried out simultaneouslywith the pre-feasibility and feasibilitystudies of the project. In this project,some information related to theenvironment was captured in the RFAof the first batch of the potentialprojects but they were mostly verybrief and have not included many ofthe components outlined in theguideline.

• It appears that the REA checklists havenot been used contrary to theprovision in the MOU. Relevant RDEchecklists should have been used tocategorize each of the projectsselected during the preliminary rapidappraisal process under the new ADBpolicy.

• It appears that IEE was carried out inthe RRA process which suggests thatTASMU might have assumed that allpotential projects fall into CategoryB without actually following throughthe REA process for categorization.However, the components of the IEEwere different from those specified inthe ADB guideline.

• Only one out of the six projects whichwent through the RRA process hadbeen environmentally categorized.However, the categorization was basedon the PNG Government and not asspecified in the ADB environmentalguidelines. The Bank’s stipulates thatit is the borrower’s responsibility tocarry out the EIA. And this was clearlyreflected in the Loan Agreement.However, corruption and generalgovernance failures within GOPNG aswell as the capacity limitation of theDepartment of Environment andConservation mean that this would bea highly unrealistic expectation.

Lessons to Learn

The project did not assess theenvironmental and social impacts of themain project as well as its sub projects.The project did not properly follow theADB environmental guidelines. The publicparticipation was not adequate or did notexist at all. The project did not producea social program to educate peopleparallel to increasing income.

It created social tension in the localcommunities as their customary landrights was not properly considered duringthe design and implementation.- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -“We, the landowners are developing andwill continue to develop OUR LAND onour own term. We therefore sternly warnall those parties involved in wanting touse OUR LAND for oil palm to STAY OUT!Any attempt to bring oil palm on ourland will be strongly resisted.” Excerptfrom a newspaper advertisement put outby a group of landowners in PNG,February 2003.

(Footnotes)

1 ADB. TA 3545-PNG: Agro-IndustryDevelopment for $500,000, approved on 14November 2000.

2 Address to the New Britain Palm Oil Limited& the business community in Kimbe, WestNew Britain.

3 ADB. “Asian Development Bank PPA: PNG19122 Project Performance Audit report onthe West New Britain smallholderdevelopment project (loan nos. 784[SF]/785-PNG) in Papua New Guinea.” 1999.

4 Tan, Lee. “NGO Forum on ADB BriefingPaper.” Australian ConservationFoundation/Friends of the EarthAustralia,2003.

5 CELCORE. “Case study on Nucleus AgroEnterprise Project.” ADB and Environment.Manila: NGO Forum on ADB, 2003.

6 Ibid.

7 Ibid.

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Impoverishing Laos: The Asian Development Bankand Industrial Tree Plantations

Background

A disastrous and monumental failure. The US$11.2-million Industrial Tree Plantations Project (ITPP) not only destroyedprecious forest but also pushed affected communities deeper into poverty. By its own reckoning, the Asian DevelopmentBank (ADB) rated the loan project “unsuccessful” and its performance as “unsatisfactory”.1 It cited the following reasonsfor the failure: poor site selection; poor planting stock quality; inadequate skills among Department of Forestry (DOF)staff; subsidized credit prone to abuse; inadequate and ill-timed expert inputs; and insufficient supervision of the ADB.

The first phase began in 1994 and wascompleted in 2003. The controversialproject primarily espoused industrialforestry, eucalyptus planting in particular,and initially targeted more than 9,000hectares of rural villages in Laos. Lateron, the ADB financially supported the BGALao Plantations Forestry Ltd, a New Zealandmajority-owned private company todevelop eucalyptus plantations on 50,000hectares of land in Khammouane andBholimkasay provinces in Central Laos. TheLao government handed over theplantations land to BGA rent-free for 50years in exchange for a share in theproject. Moreover, the company paid only5 per cent income tax on its operationsbecause under Lao Forestry Lawplantations are exempt from tax. InFebruary 2005, shortly after taking part inan ADB-supported Private SectorConsultation Workshop in Vientiane, theJapanese pulp and paper giant Oji Paperbought the BGA concession.

These monoculture plantations, some ofwhich destroyed and subsequentlyreplaced land and forests important to thelivelihoods of the local communities,failed. Consequently, ITPP created andincreased poverty among the affectedvillages. Loan funds went missing and theBank began investigating allegations ofcorruption.2 To downplay the adversesocial and environmental impacts of theproject, the ADB released a publicityarticle3 in 2002 claiming that the treeplantations protect the natural forest,that local villagers are involved in decisionmaking, and that the project develops apromising new sector in the Lao economy.Nothing could be farther from the truth.

In 2003, the Bank started planning phaseII of the project (after a 2001-approvedProject Preparatory Technical Assistance).Aside from failing to get the inputs of localresidents, the ADB also withheld relevantinformation from Civil Society

Organizations (CSOs) and Non-Governmental Organizations (NGOs)monitoring the project. It also failed toencourage an open public discussion ordebate on the possible social andenvironmental impacts of the projects.

Despite glaring failures and violations,which have been validated by the ADB’sOperations Evaluations Department(OED), the Bank still approved a new six-year Forest Plantations DevelopmentProject. According to OED, the ITPP faileddue to (1) increased poverty, (2)corruption, (3) weak monitoring, (4) poorenvironmental practices, and (5) loss ofaccess to land by affected villagers. Thatit approved the new project immediatelyafter the release of the OED’s criticalreport and while investigations ofcorruption in the ITPP are ongoing stunnedmany observers inside and outside Laos.

The Bank has contended that the newproject is needed because itspredecessor proved that efficient forestplantations of all sizes are financiallyviable, and the existing Lao institutionshave inadequate capacity to provideeffective support to the emergingsector. Its long-term goal is to developthe plantations subsector to accelerateeconomic development and povertyreduction. It will give US$7-million loanand a US$3-million grant towards theproject costs of US$15.35 million. It willset up a Lao Plantations Authority (LPA)and establish about 9,500 hectares of“small livelihood plantations.” (In a2004 ADB-supported Private SectorConsultation Workshop in Vientiane, aPrincipal Project Economist at the Bankdescribed LPA as “a one-stop window forprivate investment in plantations”. Thesame person added that the ADB viewsLaos as the pulp producer for the regionand projects 500,000 hectares ofindustrial tree plantations in thecountry by 2015.)

Concerned CSOs and NGOs, meanwhile,have expressed fears that the newproject would repeat the mistakes ofITPP and that the new project wouldfurther facilitate private foreignplantations companies to take overmore land and forest while furtherimpoverishing local communities.

Project Impacts

Throughout its involvement inpromoting industrial plantations in Laos,the ADB has consistently ignored theimportance of forests and commonlands to rural Lao communities. Itsentire plantations initiative has beenformulated on a false premise —thatthere are large areas of unused orunderused ‘degraded’ forests and thatreplacing these with industrialplantations would be an improvement.However, ADB’s own reports reveal thatmany villagers have refuted ADB’sassertions, saying that they have nodegraded lands.4 Thus, they have beenprovided with tree plantations that theydo not want.

One blatant example occurred in BanNao Nua in Xiabouli district in the mid-1990s. Some 100 hectares of drydipterocarp forest were destroyed tomake way for the eucalyptusplantations. Villagers observed that theforest resources could no longer befound in such plantations. But instead ofaddressing their collective concerns, thenon-Lao speaking ADB consultants evenattempted to convince them that theplantations would not cause soil fertilityproblems and that a further 100hectares should be planted witheucalyptus trees. The villagers refusedand they have not planted anyeucalyptus on common lands sincethen.5

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Likewise, instead of acknowledging thereality of current land use by affectedLao villagers, the Bank has continued topander to the needs of multinationalcorporations engaged in the pulp andplantations industry. Forests managed ascommons by communities have beenreplaced with privately-owned industrialtree farms. These have resulted in thefurther marginalization of the poor anddisadvantaged sectors that previouslyrelied on these resources forlivelihoods.

For example, wild mushrooms havetraditionally been one of the mostimportant sources of cash income forvillagers in Ban Palay. The best areas forcollecting mushrooms are in the drydipterocarp forests that have beenconverted into eucalyptus plantations.Affected communities have substantiallylost this critical source of livelihood.6

During the project preparation for thenew forest management project, Bankconsultants reported that farmers in sixappraised rural villages did not includetree plantations in their livelihoodimprovement priorities.7 This hasconfirmed findings from an earlier 2001ADB Participatory Poverty Assessmentwherein most villagers called fordevelopment to center on what theyknow most—swidden fields, livestockand forest.

ADB Safeguard Policy Violations

Environment Policy

The ADB has kept reiterating that treeplantations projects do not poseadverse environmental consequences asthey are all established on degradedlands and not on natural forest areas.However, a 1995 report by consultingfirm Jaakko Poyry revealed thatplantations were to be established on“unstocked forest land.”

In 2001, the sub-district leader of XiangKhai in Xiabouli district toldindependent researchers thateucalyptus plantations are causingforest, soil and water resourcedegradation.

The Bank has also denied that herbicideshave been used to control weeds in theplantations. What has been appliedaccording to the ADB was abiodegradable product called

‘glyhosate’ which in actuality is aherbicide. Glyphosphate herbicidesensure that nothing grows in theplantation except trees. Villagers’knowledge and uses of the wide rangeof plants that grow in the forest havebeen destroyed as their forests wereconverted to monoculture.

A 2003 project preparatory document forthe Bank’s new project revealed thatplantation establishment was notconsistent with environmental care.Among the many environmentalproblems identified by the report werethe conversion of “healthy forest” intotree plantations; the failure to retainprotection strips of forest aroundstreams, lakes, ponds and rice paddies;harvesting or removal of valuablenesting or fruit-bearing trees, and thedestruction of significant trees/plantsfor non-timber products use byvillagers.

Recently, some eyewitnesses andobservers have noted that “degradedforest” in the eyes of the ADB and theLao government means healthy,recovering forest with wide utility valueto villagers and biodiverse in flora andfauna. They added that villagers do notconsider eucalyptus plantations asreforestation and that they deem themvastly different to the forest that theyknow.

Social

Primarily, the ITPP failed to improve thesocioeconomic conditions of theintended beneficiaries, as people weredriven further into poverty by having torepay loans that financed failedplantations. As part of the project, theLao state-run Agricultural PromotionBank loaned some US$7 million tofarmers, individuals and companies toset up plantations that becameunproductive or yielded low produce.The OED report said thousands ofinexperienced farmers and individualswere misled by prospects ofunattainable gains leaving them withonerous debts, with no prospect ofrepaying their loans.

This may have been a direct result of thelack of meaningful consultations withaffected villagers in the project decisionmaking process. They did not have thepower or sufficient information aboutthe impacts of eucalyptus plantations to

bargain with plantation companies.Thus, many of them have lost their landsand forest to eucalyptus plantations.

The OED report also detailed corruptpractices such as ghost borrowers,misuse of credit funds, inflateddevelopment costs, over disbursementsof loan funds, and fraudulent reports onthe part of the Agricultural PromotionBank.

Regarding the loss of land access, theBank’s own report and evaluation makeclear that there has been an ongoingfundamental difference in perception ofhow land is used and valued between theADB and the Lao government versus localvillagers. It underscored the use offorest along with rice production andlivestock breeding as the threeimportant sources of income of thecommunities. Contrary to the Bank’sassertion that the lands covered by theproject were degraded, the OED reportstated that these have been traditionallyused by villagers for shifting cultivation.

Lessons to Learn

In March 2006, the Indian Aditya BirlaGroup announced that it will investUS$350 million in industrial treeplantations and a 200,000 tons-a-yeardissolving pulp mill in Laos. The Laogovernment has leased 50,000 hectaresto the Group for 75 years. The pulp millis planned to be built seven years afterthe first eucalyptus trees are planted.

Oji Paper’s plantations in Laos willprobably supply raw material to amassive US$1.9 billion pulp project thatOji is planning in Nantong City, in China.

These are precisely the type of projectsthat the ADB wants to encourage inLaos. But it is high time for the Bank tofinally acknowledge the importance offorests and common lands to ruralcommunities in Laos. To avert theirfurther impoverishment andmarginalization due to the plantationsprojects, the ADB must undertakeseveral simple actions. First, conduct acomprehensive audit on the LaosIndustrial Tree Plantations Project(ITPP). It has failed to do so despite itsown critical internal reports. Second,immediately suspend the new ForestPlantations Development Project in Laosand arrange for a truly independentassessment of its entire plantation

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strategy. Such an assessment would mostlikely conclude that the plantationsstrategy would not alleviate poverty orpreserve the environment. Third,prepare reparations for Lao families andcommunities indebted and impoverishedfrom the Bank’s support for industrialplantations in Laos.

(Footnotes)

1ADB. “Project Completion Report of theLoan 1295-LAO: Industrial Tree PlantationProject,” 2005.

2 ADB. “Sector Assistance ProgramEvaluation for the Agriculture and NaturalResources Sector in the Lao People’sDemocratic Republic, SAP: LAO 2005-17,Operations Evaluation Department AsianDevelopment Bank.” December 2005, 37.

3 Edes, Bartlet W. “Back to Trees.” ADBReview. Asian Development Bank, 2002.

4 MIDAS Agronomics, Champa LaoConsulting, Scandiaconsult Natura, andCIRAD Foret. “Tree Plantation forLivelihood Improvement Project: FinalReport.” TA No. 3794-LAO, October 2003,42-43.

5 Shoemaker, Bruce, Baird, Ian and Baird,Monsiri. “The People and Their River: TheXe Bang Fai River Basin, Lao PDR.”Watershed. Vol. 7., No. 3. March-June2002, 40 &42.

6Ibid.

7 Lindskog, Eva and Phengkhay,Chansamone. “Livelihood ConditionsReport.” Appendix I, page 143 in “TreePlantation for Livelihood ImprovementProject: Appendices - Final ReportVolume I.”

References:

Bank Information Center, et al. “CaseStudy: Tree Plantation for LivelihoodImprovement”, NGO Asian DevelopmentFund Briefing: ADB and Forestry., March2004.

Lang, Chris. “Asian Development BankSubsidizing Deforestation in Laos.” WRMBulletin No. 43, February 2001.

Lang, Chris and Shoemaker, Bruce.“Creating Poverty in Laos: The AsianDevelopment Bank and Industrial Tree

Plantations.” World RainforestMovement, April 2006.

Lang, Chris. “Laos: Freedom ofInformation, Industrial Tree Plantationsand the ADB.” World RainforestMovement Bulletin. No. 52, December2001.

Lang, Chris. “Laos: Secret, Lies andTree Plantations.” WRM Bulletin. No. 68,March 2003.

Welford, Richard. “Deforestation andDevelopment in Laos.” Corporate SocialResponsibility in Asia Weekly. Vol. 2,Week 13, March 2006.

“Whose Disclosure Policy?: ADB TreePlantations Projects in Laos.” Focus onTrade. Number 88, June 2003.

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Controversies Continue to Plague the Melamchi Water Supply Project

Background

Six years after its conception, the Melamchi Water Supply Project (MWSP), the Asian Development Bank’s pet project inSindhupalchowk District, Nepal, is still mired in controversy. Three of the project’s original funding agencies—the WorldBank, Swedish International Development Agency (SIDA) and Norwegian Agency for Development (NORAD) —had pulledout in the last three years brought about by several pressing issues. In fact, the water project has been on the donors’priority list in the last two decades but was never pursued due to conflict of interests among donors, mainly between theWorld Bank and the ADB.1

Envisioned by the Bank and its co-financiers to solve the chronic watershortage in Kathmandu Valley, the projectis supposed to improve the health and wellbeing of some two million inhabitants ofthe Valley. Attached to the MWSP is a SocialUpliftment Programme (SUP) designed topromote the socio-economic well-being ofpeople covered by 14 Village DevelopmentCommittees in Melamchi Valley. A pre-condition of the ADB to fund the project isthe privatization of the Nepal Water SupplyCorporation (NWSC).

The inter-basin river project will divert 170million liters of water per day fromMelamchi River to Kathmandu through a26.5 kilometer tunnel. ADB’s loan is US$120million of the initial project costamounting to US$464 million. The costlater escalated to US$531 million in 2005.

In 2002, World Bank withdrew fromMWSP citing the following reasons: (1)important options have not beenexplored to utilize the water resourceswithin the valley; (2) the need to fix thedistribution system first; and (3) MWSPwould only benefit the richest fivepercent of the population.

In 2004, the ADB’s Special ProjectFacilitator (SPF) received a complaintfrom the Water and Energy User’sFederation-Nepal (WAFED) and threeother affected individuals regardingMWSP’s non-compliance in the followingareas: access to information,environmental impact assessment, landacquisition, compensation andresettlement, the rights of indigenouspeople, the social uplift programme, andagriculture and forestry. After itsinvestigation, the SPF concluded thatthere was no evidence of serious orsystematic non-compliance with ADBpolicies in terms of design andimplementation.2 In effect, the reportalso dismissed the complaint saying itwas filed not so much to resolve the

specifics of the complainants’ charges,but to actually question MWSP’scompliance with ADB policies and reopenthe debate on changing the process ofproject consultation and participation.

In 2005, SIDA and NORAD quit theproject, citing their dissatisfaction withthe progress of the project and the ADB,as well as, concerns about Nepal’sunstable political situation following theFebruary Royal Palace coup. After thepolitical turnover in 2006, Norwayrevised its funding support to Nepalexcept for the MWSP. Norway’s decisionto withdraw from the project is linkedto the recently endorsed Soria MoriaDeclaration on International Policy thatrestricts Norwegian aid to projects and/or programs that promote liberalizationor privatization.

In July 2006, Melamchi works inSindhupalchowk district were suspendedfor several days after locals padlockedhalf a dozen offices of the project afterofficials failed to meet their demandsfor employment. The ADB hasannounced that it will continue fundingthe project despite “minor hurdles inthe construction process”.

Project Impacts and Other Issues

Various studies, including thoseconducted by the ADB, clearly show thatthe MWSP is not necessarily the bestoption, since there are several otheroptions within Kathmandu Valley. TheBank and other donors haveconveniently ignored these. Given theKathmandu’s population growth rate, noriver would be able to meet the watersupply demand of its people. Hugegroundwater resources is yet to beexplored/regulated while the largepotential of rain harvesting, andmanagement of ponds and streamsaround the Bagmati River Basin are yetto be tapped.

Another highly sensitive issue is the priceof potable water which will become verycostly once a foreign private operator orprivate management handles the watersupply system. There is no provision yeton how water will be made available tomore than 30 percent of the poorpopulation of the valley. The prescriptionof the Bank and its co-financiers istowards the dismantling of the NepalWater Supply Corporation in favor offoreign private companies.

As regards public participation andconsultation provision of theEnvironmental Impact Assessment (EIA),there has been a lack of transparency anddemocratic process involved in theimplementation of the road survey, landacquisition, compensation, resettlement,and the SUP. Locals, including the ethnicTamang communities, want the SUP to bethoroughly discussed, designed andimplemented with their full consent.

Environmental

The project is not environmentally sound.The construction of the tunnel in betweenthe mountain will cause irreparable lossto the surrounding environment. Theprescribed release of 0.4 cubic metersper second of water in the river afterdiversion is insufficient to sustainpresent and future water demand ofMelamchi Valley. It is not yet clearwhether there is any budget forcomprehensive environmental mitigationplans.

Social

The MWSP has also failed to identify theamount of water that will be required inthe Melamchi Valley by the local peoplefor their livelihoods and ecosystems. Thereduction of existing water flow will leadto the closure of hundreds of existingirrigation canals and ghattas (traditionalwater mills), including those funded by

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ADB loans. Water mill workers, fishingfarmers such as the Majhi ethniccommunity and other locals will lose theirtraditional occupation. Moreover, theissue of guaranteed provisions for skilldevelopment training and employmentfor the locals has caused conflictsbetween the locals and the contractors.In principle, there is a provision for aminimum 30 percent of jobs to localsduring construction.

A potential major conflict over waterright among affected communities alsolooms ahead. People in the MelamchiValley are also demanding a share of theprofits in the form of a levy for theirfreely supplied water to Kathmandu.

On a larger scale, the MWSP hasunwittingly promoted social injustice.While the project will benefit only 10percent of country’s population, theburden of debt will be shouldered by allNepalis. More than 70 percent of thecountry’s tenth five-year budget onwater and sanitation has been solelyallocated to the MWSP.

ADB Policy Violations

Information Disclosure

Claimants didn’t have access to criticalinformation and documents such as EIA,feasibility studies, options assessments,cost-benefit analysis, lendingconditionalities, and agreement withdonors/lenders, specifically in localNepali language before the project wasfinalized. Few documents were providedafter the official claim was made in theOSPF of the ADB, but these were largelyinsufficient. Critical documents likecost-benefits analysis, lendingagreement and conditionalities havestill not been disclosed by MWSP.

There was lack of meaningful publicconsultation. The project did not makesincere attempts to inform local people.It also did not make public thedocuments and information in time.Because of pressure from WAFED andthe local people, MWSP was forced torelease few documents.

Environment Policy

The EIA failed to study and incorporateall the environmental/ecologicalimpacts of MWSP on the local ecologyand people’s livelihoods. The suggested

mitigation plan is also grosslyinadequate.

As far as forest issues are concerned,the project has been causing seriousimpacts in some of Melamchi’scommunity managed forests. Thecurrent problem is the lack of adequatearrangement for the continuing accessand management of these forests.

In terms of agriculture impacts, theproject has seriously affectedMelamchi’s agricultural system due tothe construction of access roads throughthe most fertile land. The loss of smalland large scale irrigation canals afterthe diversion of the river has impactedadversely on food security, as well as onlocal ecology and biodiversity. There isalso a question of inadequateinvestigation on the downstreamimpacts of the river diversion to thelong-standing agricultural lands of theindigenous people and others inMelamchi Valley.

Involuntary Resettlement

The land acquisition, compensation andresettlement process and relatedactivities have been grossly arbitrary.There has also been no reasonable offerfor resettlement. Not only did MWSPalso fail to assess all the direct andindirect impacts of its activities, itlikewise failed to provide adequatecompensation and relocation (i.e.displacement of ghattas or water mills,and electricity-run economic activities.)

Meantime, the Social Uplift Program hasbeen grossly criticized and rejected bythe claimants and other affectedcommunities in Melamchi Valley. Theprogram has failed to address the localneeds, priorities and democraticprocess. It has also failed to include themost economically and sociallyneglected and marginalizedcommunities and integrate them intothe local development activities; andthe trafficking-prone Tamangcommunities that suffer from worseningsocial and economic conditions andcultural exploitation.

Indigenous Peoples

There has been a gross denial of therights and interests of IPS who havebeen directly and indirectly affected bythe project. They include the Majhis

(traditional fishermen/women) in thedownstream as well as the majorityTamang communities in Melamchi Valley.

ADB’s Denial

True to form, the Bank has denied allthese accusations and has maintainedthat the vast majority of affectedpeople is supportive of MWSP and issatisfied with the compensationreceived notwithstanding the slowprocess. In terms of information flow,the ADB said improvements have beenimplemented. Apart from availabledocuments in Nepali, the project hasundertaken workshops and consultationmeetings. Three hundred of the 328cases related to land acquisition,compensation and resettlement havebeen settled. A significant part of theSUP budget has been allocated to upliftthe socially disadvantaged sections ofthe population, including women andethnic groups.

The Bank has further claimed thatmitigation of environmental andagricultural damage caused by accessroad construction is ongoing. Rigorousmonitoring of water flow in theMelamchi River is ongoing with a view toensuring adequate water for agricultureand irrigation. Forests and residents infour of the seven communities affectedby the project have already been takencare of. Newly created conflict responseteams operate regularly in the MelamchiValley and have handled grievances.

Lessons to Learn

Despite the Bank’s so-called efforts tomitigate the negative environmentaland social impacts of MWSP, the projecthas failed to satisfactorily resolve/address its many controversial issues,concerns and problems. According toWAFED-Nepal, which has represented alarge number of project-affectedfamilies over the years, the Bank and itsco-proponents need to recognize therights of and adhere to the basic humanrights (civil, political, economic, social,cultural and environmental rights) ofthe Nepali people with regard to theMelamchi Water Supply Project. Thegroup has asked the MWSP proponentsto stop funding the project in view of itsenormous social, environmental, andeconomic repercussions that are beyondmitigation.

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The Bank must ensure that all personsdirectly and indirectly affected by theproject would be properlycompensated. All affected families andstakeholders, including NGOs critical tothe project, must be involved in everypublic consultation and decision-makingprocess. Relative to this, the Bank needsto re-examine its present accountabilitymechanism, which tends to be toobureaucratic and unfriendly to project-affected individuals/families.

Likewise, there is a need to redo the EIAwith active participation of the peoplefor the following reasons: (1) the sitefor the water tunnel is located in aseismic region. Natural disasters such asearthquakes and landslides will becomefrequent and intense once theconstruction work begins; (2) theprescribed release of water in the river

after diversion will be insufficient tosustain the present and future waterdemand of Melamchi Valley.

Moreover, the outdated and failedprivatization of public water utilitieswill not ensure adequate and safe waterto all. Instead, the collaborationbetween the Nepal Water SupplyCorporation and the five municipalitiesin Kathmandu Valley will be a modelpublic-public partnership in watersupply management and development.

Above all, the Bank and its co-financiersshould consider empirically verifiedbetter and cheaper alternatives toMWSP in Kathmandu Valley. Rain-waterharvesting, judicious use of groundwater and better management ofexisting surface water sources likestreams and ponds around Kathmandu

are the good alternatives to meet thewater demand of its populace. Thesealternatives must be harnessed tosupply water at a reasonable cost. TheNepalese government should supportcheaper, quicker, and better watersupply alternatives within theKathmandu valley, and thus, put a stopto the MWSP.

(Footnotes)

1 Siwakoti, Gopal ‘Chintan’. “Donors’Rejection of Governance and HumanRights: Two Case Studies of Hydropowerand Water Supply Projects in Nepal.” TheReality of Report 2004.

2 ADB. “Report of the Special ProjectFacilitator on Melamchi Water SupplyProject Nepal.” Manila, 2004.

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Flooding Central Pakistan: The Chasma Right Bank Irrigation Project

Background

The Chasma Right Bank Irrigation Project (CBRIP) was approved by the Asian Development Bank (ADB) in December1991. It involves construction of a 274-kilometer canal along the Indus River that will run through two districts inPunjab and Northwest Frontier provinces. According to the Bank, it will irrigate 606,000 acres of land in D.I. Khan andD.G. Khan Districts in central Pakistan.

The project primarily aims to provide adependable perennial irrigation supply,ensure efficient distribution water andprovide necessary drainage and floodrelief. Aside from the main canal, 72distribution canals, 68 cross-drainagestructures and 91 bridges will beconstructed.

However, the local community heldmassive protests citing the followingcomplaints: (1) lack of comprehensiveand participatory socioeconomic, culturaland environmental project assessments;(2) project-induced flooding andresettlement; (3) forced and illegal landacquisition and compensation; (4)lifestyle disruption, in-migration anddisintegration of community networksand support systems; (5) termination oftraditional irrigation system; (6) projectmanagement, irregularities andcorruption; and (7) adverse socialimpacts;

The implementation of the project hasbeen problematic. Due to numerousdelays, the project incurred costoverruns. The project cost hasballooned to Rs17,000 million from theoriginal Rs1,570 million. With only 15percent of the project completed in1999, there were already extensivedelays and cost overruns. (ChasmaStruggles, 2003) The project was due forcompletion in December 2002, but untilnow the project is not yet completed.

Environmental and Social Impacts

According to villagers, the constructionof CRBIP has interrupted the naturalflow of the floodwater that resulted inmassive flooding in the west side of themain canal and in the riverine belt ofthe Indus River. They attribute theincreased ferocity of the flooding to thedisruption of rowed-kohi nullah (hilltorrent streams).

The 274-kilometer main canal cutsthrough the flow of more than 150

natural hill torrents which come from themountain range. In addition, some ofthe flood carrier channels (FCCs), whichwere built to redirect water flows fromthese torrents to the main canal orchannel the water to the eastern side ofthe canal (which includes the riverinebelt), were also blocking certain hilltorrents. Some hill torrents endabruptly before reaching the river, whileother torrents were combined into asingle channel, increasing the amountand force of water that resulted massiveerosion and silt deposition. (ShanonLawrence & Mishka Zaman, 2004)

In the eastern side of the Chasma canal,the destructive project-induced floodingbroke through the mud banks anddumped water into fields which werestill planted with cotton crop. Manyhuts and mud settlements collapsed orwere damaged by the flood. (Lawrence &Zaman, 2004) This resulted to loss ofincome and food insecurity.

On the west, farmlands remained underfloodwater for months. Villagersattribute this to faulty design of theproject. The canal and theembankments have blocked thefloodwater from running towards theriver on the eastern side.

The villagers submitted petitions aboutthe flood damages. However, localofficials, elected council members northe Grievance Redress and SettlementCommittee (GRSC) conducted acomprehensive survey of flood-relateddamages caused by the project.

The strong flood also eroded thesurrounding hills that serve asprotective barrier between the hilltorrent and villages. It also eroded anddegraded acres of arable land. Grazingland was also inundated that resulted inselling of livestock. Drinking waterschemes and tubewells were also washedaway by the destructive flood.

Villagers fear the coming rainy seasonfrom March to April that could lead tomore flooding disasters. Farmers werereluctant to plant the next seasonalcrop for fear of suffering additional croplosses and accruing more debt. This ledto loss of income. Farmers also have tohire tractors and other equipment tolevel and plow the soil in the fields thatcracked and hardened under floodwater.(Lawrence & Zaman, 2004)

During floods, mobility of the villagerswas restricted. Some villages were notable to access essential social facilitiessuch as hospitals. The floods also forcedmen to migrate in cities as day laborersto earn enough income to feed theirfamilies.

The floods increased women’s labor.Now, women have additional burdens dueto loss of livelihoods and income causedby floods. Destruction of drinking waterschemes has also forced women to walklonger distance to fetch water,dramatically increasing their workloads.Due to the destruction of potable watersupply, women have to work doubletime to care for their young childrenafflicted with stomach illness, causingmore pressure to their time and meagerfinances.

Safeguard Policy Violation

Environment Policy

The project was erroneously classified asCategory B despite it being large-scaleirrigation and water management.According to the Panel, no initialenvironmental examination (IEE) wasproduced prior the conduct of afeasibility study. Further, theenvironmental impact assessment (EIA)was not completed before the approvalof the loan. (ADB Compliance PanelReport, 2004)

By not making full appraisal of theprobable impact of the project, the ADB

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failed to identify the project’senvironmental impacts and neglected toincorporate provisions in the loanagreement warranting theimplementation of mitigating measuresagainst adverse environmental impact.Further, the Bank failed to secure therequired funding for identifiedmitigating measures. (CRP, 2004)

For more than 10 years, anEnvironmental Management Plan (EMP)for CRBIP has not been implemented, norhas a Hill Torrents Management Plan(HTMP) been produced. HTMP serves asa guide flood management based on thetraditional “rowed-kohi” system.(Lawrence & Zaman, 2004) The Panelsaid that “there are still no satisfactoryplans or financial arrangements in placefor securing the implementation of theplan. Moreover, there has been noadequate process that has enabled theinformed and meaningful participation ofaffected communities of the projectarea in the implementation of the EMP.”(CRP, 2004)

According to the Panel, the ADB failedto sufficiently understand and addressproblems relating to flooding; use ofagricultural chemicals; forests andgrazing lands; water-logging andsalinity; and possible pollution andwaste management issues.

Involuntary Resettlement Policy

No Resettlement Action Plan has beenprepared for those who were movedeven though land acquisition beganmore than seven years ago. (Lawrence &Zaman, 2004) Resettlement of villagersaffected by flooding was not anticipatedduring the project approval in 1991. Theneed for resettlement was onlyidentified in 1994; actual resettlementwas only conducted in 2001. (PanelReport, 2004)

The Panel Report concluded that noresettlement plan was ever preparedwhich is a clear violation of ADB policy.The Bank also failed to include thenecessary provisions in the loanagreement and budget for aresettlement program. The Panel alsosaid that affected groups were notconsulted in the valuation of theirassets, nor the ADB providedcompensation to protect the interests of

the poorest affected persons by theCRBIP.

The Panel further stated that the ADB didnot take action to assess accurately theneed for resettlement plan after floodrisk was identified in 1994; noresettlement plan was prepared. ThePanel said that a resettlement programdid not become part of the 1999 LoanAgreement on supplementary financingfor CRBIP. Further, it said that the ADBdid not conduct a proper consultationwith the affected people in decision-making and valuation of their assets.

The Panel said that the Bank violated therights of the affected people to beinformed. Many villagers still face thethreat of flooding. No new houses werebuilt for the displaced families. Norproper compensation and rehabilitationof the community were conducted bythe ADB to ensure that the resettledfamilies’ living conditions would berestored. (CRP, 2004)

Indigenous Peoples Policy

According to the Panel, the feasibilitystudy and appraisal document do notaddress the issues on the rights oftribal/ethnic minorities, culturalintegrity and traditional land usecontrol. (CRP, 2004) This can be seen inthe disruption of the rowed-kohi systemby the project.

Also, the Panel stated that the ADB hasnever made an attempt to apply itsIndigenous Peoples Policy andInstructions to the project. It said thatthe Bank did not come up with anyanalysis regarding indigenous peoples forthis project based on Pakistani Law andthe Bank’s policy. Nor a consultativeprocess was done in this regard. ThePanel said that it did not find anyevidence that specific measures weretaken by the Bank to address problemsor issues that concerns ethnic or culturalidentity. (CRP, 2004)

Lessons Learned

The CRBIP clearly shows that theconduct of a meaningful consultativeprocess is very essential in the successof a project/program. The failure of theBank to provide a venue for theparticipation of the community in theplanning, implementation and

assessment stages of the projectresulted in disruption of natural rivercycles and destructive floods that causedloss of income, dramatic change in thelifestyles of communities, displacementof a lot of families, and disintegration ofcommunity networks and supportsystems.

The CRBIP experience shows that faultyengineering and ADB’s hasty approval ofa project could lead to adverseenvironmental and social impacts.

References:

Asian Development Bank. “ExecutiveSummary of Panel’s Report.” Report andRecommendation of the BoardInspection Committee to the Board ofDirectors on the Request for Inspectionon Chasma Right Bank Irrigation Project(Stage III) in the Islamic Republic ofPakistan. July 2004.

Chasma Struggles. Chasma IrrigationProject. 2003. (www.chasma-strugles.net/project/index#concerns)

Lawrence, Shanon and Zaman, Mishka.NGO Visit to the Asian DevelopmentBank’s Chasma Right Bank IrrigationProject (CRBIP) in Pakistan: Trip Report.December 2003.

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The Hazardous Masinloc Coal-Fired Power PlantBackground

The toxic-emitting, 600-megawatt Sixteenth Power Masinloc Thermal Power Project (MTTP) in Zambales, Philippines startedoperating in 1998. The two-unit plant uses imported high-quality bituminous coal, which produces 385,000 tons of ash peryear and releases massive amounts of carbon dioxide that is toxic to both human health and the environment.

The US$441-million project was jointlyfinanced by the Asian Development Bank(ADB), Export-Import Bank of Japan andthe local executing agency, NationalPower Corporation (NPC). The Japanesebank reportedly required that NPC attain“100 percent social acceptability” beforeit agreed to fund the project. The ADB,meanwhile, provided risk insurance.

MTTP was primarily commissioned toprovide reliable and inexpensiveelectricity in Luzon Island, and diversifythe country’s energy sources. Though theADB approved its counterpart loan inOctober 1990, the project only took offin December 1994. This was due toproblems concerning land acquisition,resettlement, and obtaining the much-needed environmental compliancecertificate (ECC). An attached technicalassistance grant aimed to improve NPC’senvironmental monitoring andmanagement capacity.

In 2002, the Bank’s Operations EvaluationMission (OEM) report rated the project“successful”1 saying that MTTP wasrelevant, highly-efficacious, efficient andsustainable. It also found the design andequipment in conformance withenvironmental standards while theoperation and maintenance were deemedsatisfactory. Unsurprisingly, the OEM saidthe project has had moderateenvironmental and socioeconomicimpacts.

This was in direct contrast to a 2002report2 by Greenpeace which revealedthat fly ash samples taken from theMasinloc Coal Power Plant and two othercoal-powered plants were contaminatedwith a range of toxic and potentially toxicelements including arsenic, chromium,lead and mercury.

In terms of socioeconomic impacts, theproject directly affected 198 families oraround 1,000 individuals in Barangay Bani.It has also impacted on communities whouse the Lawis River (where the plant getswater for cooling). The warm water fromthe cooling device goes directly into Oyon

Bay. The Bank said these people wereresettled in 1996, two years before thecommissioning of MTTP. What the OEMfailed to include in its report was thestrong community opposition to theproject during the projectimplementation period as well themilitarization of the area.

In 1994, newspaper columnist Father ShayCullen, who witnessed some of theprotests against the project recountedthat that NPC was desperate to convincepotential funders that the project wassocially acceptable. This was whileprotesters gathered noisily in oppositionof the project and members of the clergyled candle lit processions mourning thecutting of trees and forced relocation ofresidents. NPC claimed they had settledamicably with residents when, in fact, ithad to file cases against the landownersand send them threatening letters.

Cullen’s earlier 19923 article reported thatthe people of Masinloc strenuouslyobjected to the project, stating that theirhealth and that of their children will besacrificed while their land, sea, and skieswill be polluted and poisoned. Theystarted an international letter campaignto then ADB President Kimi Masa Tarumitzuand Bank’s donor governments to stop theproject. The entire clergy of Zambalesalso denounced the project asenvironmentally unsound.

The Masinloc mayor, who was initiallyagainst the project, was invited by thenPresident Fidel Ramos, for a meeting inMalacanang in the mid-‘90s. After hisvisit to the presidential palace, themayor changed his position and stoppedopposing the plant. Another report4

alleged that the mayor changed hisposition because he was coerced by thePresident. Ramos eventually used hisemergency powers to build the plant toaddress the regularly occurring 8-hourto 12-hour blackouts in Luzon.

As of 2002, there was no longer strongcommunity opposition. One of the oldcommunity leaders was eventually hired

by the plant as its chief security officer.One of the previous youth leaders alsonow works for the plant.

In 2003, the ADB through the ElectricPower Industry Reform Act pushed forthe privatization of the Philippine powerindustry, including the Masinloc Coal-Powered Plant. Tasked to sell the powerplant is the privatization agency, PowerSector Assets and LiabilitiesManagement Corporation (PSALM). In2004, the controversial plant wasawarded to the winning bidder, YNNPacific Consortium of Malaysia. Theconsortium in turn failed to put up therequired down payment because it wasundercapitalized and had no experiencein power industry.

In November 2005, a GermanGreenpeace volunteer was hit by acrowbar in the face and beaten up byarmed guards of the Masinloc plantafter he and other activists forced theirway into the compound to stage aprotest rally related to climate change.A New Zealander and some Filipinoswere also injured when they were hitwith stones hurled by the guards. Theguards also fired warning shots. NPCdenied that a violent scuffle everoccurred as it deplored the“premeditated illegal intrusion ofGreenpeace activists.”In August 2006, PSALM announced that itwould re-bid the Masinloc Power Plantfollowing the termination of its assetpurchase agreement with YNN PacificConsortium.

Project Impacts

Environmental

Coal is the dirtiest, most carbon intensiveof all fossil fuels, emitting 29 percentmore carbon per unit of energy than oiland 80 percent more than gas. It is one ofthe leading contributors to climatechange, the single biggest environmentalthreat facing the planet today.Furthermore, a study conducted by theEuropean Commission in 2003 on different

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types of power generation bared that coal-fired power plants registered the highestexternal cost. External costs arise whenproject impacts such as damages to humanhealth are not fully accounted orcompensated for by a power plant likeMasinloc.

Ash samples taken from Philippine coal-fired power plants such as Masinloc allrevealed the presence of mercury—adeadly neurotoxin, arsenic—a knowncarcinogen, as well as the hazardoussubstances lead and chromium.5 Hostpopulations/communities, like those inMasinloc, have been exposed to suchhealth risks. This report runs counter tothe Bank’s pronouncements that theenvironmental impacts of MTPP are wellwithin the limits set by the Departmentof Environment and Natural Resources(DENR).

Likewise, bleaching of coral reefssurrounding the coal plant in Masinloc hasbeen reported.

Social

When the NPC developed andimplemented a resettlement program incollaboration with the Municipality ofMasinloc, the Bank did not have aninvoluntary resettlement policy yet.This has resulted to several issues thatthe OEM recommended for immediateresolution. These were: (1) lack ofdrinkable water at the resettlementsites; (2) lack of job opportunities andreduces incomes for some of thedisplaced households; (3) delayedtransfer of titles to affected families;and (4) disputes over compensation ofamounts.

A 1999 Balik Kalikasan Online6 reportedthat the displaced Masinloc farmersbenefited much from farming rice andmangoes before, enough to put theirchildren through college. A provincialboard member of Zambales was quotedas saying that the fruit yield dropped by1/3 since the plant began operations.Many also grew a sustainable living fromfishing. At present, their fish catch havebecome few and the bangus (milkfish)have disappeared. One fisherfolk saidtheir catch has dwindled from 50 percentto only 10 percent. Meantime, aBarangay Bani officer said MTPP failed toprovide jobs, at the same time damagedOyon Bay. They no longer have incomefrom seaweeds which have been

gradually killed by the hot water comingfrom the coal-fired plant.

ADB Safeguard Policy Violations

Environment

In its OEM report, the ADB admitted thatcoal-fired power generation generally havemajor environmental impacts in the formof emissions, discharge of cooling waterand wastewater, and ash handling. It hasemphasized though, that environmentprotection has been well incorporated inthe project design such as various formsof emission control and monitoring that arewithin the standards prescribed by theDENR. The Masinloc plant reportedly triesto control the emission of sulfur dioxideand nitrogen dioxide. It is equipped withelectrostatic precipitators or ESPs, whichthe Bank says has 99.5 percent removalefficiency.

However, fly ash samples analyzed by theGreenpeace Research Laboratory in theUK showed significant levels of mercury,which almost exclusively escapespollution control devices. The ash fromthe Masinloc plant contained arsenic,lead, and chromium as well.

Fly ashes pose a potential environmentalhazard due to the very large quantitiesproduced, as well as the toxic elementsthey contain that leach into theimmediate environment. Fly ash particlesthat are extremely small and are notcaught by pollution control equipmentpose additional dangers since they can beinhaled into the extremities of lungairways and can lead to adverse humanhealth effects. Likewise, these“respirable” particles can even be morepoisonous than fly ash as a whole.Treatment processes to reduce thequantities of these harmful elements inthe fly ashes will result in the productionof additional waste-streams.

Ongoing use of coal combustion for powerproduction will result in future releasesof toxic and potentially toxic elements tothe environment.

Resettlement and Other Issues

The appendix section of the OEM was evenmore telling of resettlement problems. Afurther evaluation of the resettlementprogram exposed issues like lack of keyinformation on social planning and incomerestoration, absence of legal basis in the

computation of compensation, andunverified environmental impact study(EIS) of the relocation site. Moreover, theresettlement site has been found to bevulnerable to soil erosion and flooding.NPC has also failed to define theresponsibilities of its offices and theaffected families in planning,implementing, monitoring and evaluatingthe resettlement program.

The report also downplayed the case formore compensation which was filed andwon by a group of affected familiesagainst the MTPP management. NPC hasfiled for reconsideration, which is nowbeing reviewed by the Philippine Court ofAppeals.

With regard to the militarization of thearea, a Greenpeace volunteer7 disclosedthat soldiers were sent to harasscommunity members even during timeslike Earth Day. There where times whenmilitary personnel even lived in the area,especially upon approval of the plant’s ECC.While community consultation did occur,the proponents glossed over the fact thatthe community opposed the plant.

Although many residents from BarangayBani, were employed by NPC during theMTPP construction, promises ofemployment were unfulfilled when itstarted operations. Those who appliedwere deemed unqualified. Only a few fromBarangay Bani and Masinloc wereemployed. The Mayor of Masinloc has hadseveral exchanges of letters with NPC dueto the non-priority of his constituents inthe hiring of plant employees even for non-technical positions. The latter pointed outthat 57 percent of their workers were fromZambales.

The local officials of Masinloc admittedthat the Multi-Sectoral Monitoring Team(MMT) was incompetent. The MMT wasestablished to monitor all that wererelated to the power plant operations.According to the Mayor of Masinloc, noreal monitoring can be performed becauseof lack for funds. He said the coal-firedpower plant is already an obsoletetechnology in the western world. Headded that the country must maximizeinherent resources like geothermal andnatural gas.

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Lessons to Learn

Communities hosting coal plants like inMasinloc have always ended up shoulderingthe massive costs and impacts created byburning coal for energy. The Masinloc coal-fired power plant has been found toproduce fly ash contaminated with a rangeof toxic and potentially toxic elements.Despite the use of highly efficient pollutioncontrol devices such as ESPs, hazardouselements present in fly ash particles andin gaseous forms will be released to theatmosphere along with flue gases. Particlesemitted to the environment either directlywith flue gases, or a result of inadequatefly ash storage, pose a threat to humanand animal health.

This can only be avoided with through thecessation of coal combustion and theimplementation of sustainable productiontechnologies such as solar and wind-powergeneration. Based on a study by U.S.based-National Renewable EnergyLaboratory, the Philippine wind energysource potential can supply over seventimes the current power demand of thecountry. Similarly, the country’s abundantsolar energy possesses one of the highestefficiency ratings in the world.

According to Greenpeace, there is no needto build or expand new coal-fired powercapacity in the face of virtually untappednew renewable resources. The Philippinegovernment and funding agencies such asthe ADB should conduct a full-scaleenvironmental audit of existing coal plantslike Masinloc to determine the extent ofrisks faced by host communities,municipalities, cities and populationcenters. They should also ensure that theexternal costs of coal are fullyinternalized by proponents and thatpreferential policy treatment favoringnew renewable energy is put in place.

In terms of resettlement issues, the Bankas well as the NPC should adhere to someof the OEM recommendations. Thatresettlement should be based on a time-bound action plan of documentedmeasures, be founded on a sound legalbasis and a cogent assessment of pre-project socio-economic situation. ThatNPC should provide affected families thefollowing: a water supply system, theirlong-overdue land titles, and basicmarket.

On the part of the ADB, it should providemore supervision on resettlement issuesduring project implementation and

conduct monitoring on resettlement afterprogram implementation.

(Footnotes)

1 ADB. “Project Performance Audit Reporton the Sixteenth Power (Masinloc ThermalPower) Project (Loan 1042-PHI) in thePhilippines.” Manila: ADB, 2002.

2 Greenpeace. “Hazardous Emissions fromPhilippine Coal-fired Power Plants: Heavymetal and metalloid contents of fly ashcollected from the Sual, Mauban andMasinloc coal-fired power plants in thePhilippines.” Greenpeace, 2002.

3 Cullen, Fr. Shay, SSC. “Kimi MasaTarumitzu and Masinloc Power.,” PhilippineDaily Inquirer, July 14, 1992.

4 Marasigan, Michael.“The EnvironmentalistMayor.” Mobile Media, October 11, 2000.

5 Greenpeace Southeast Asia. “BringingCalamities to communities: Coal-FiredPower Plants and Mirant,” 2005.

6 "Coal Nightmares”, Balik Kalikasan Online,October 1999.

7 Interview with Danny Ocampo,Greenpeace campaigner, November 2004.

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The Grievous Mae Moh Coal Power PlantBackground

The Mae Moh Coal Power Plant has 13 generating units with a total capacity of 2,625 megawatt (MW). It is located inthe mountains of Lampang province in northern Thailand. According to the Asian Development Bank (ADB), it has beeninvolved in Mae Moh mine for financing several units. It approved a series of loans amounting to more than US$352million for the past twenty years.

The Electricity Generating Authority ofThailand (EGAT) constructed the plantsin four phases from 1978 to 1996. Itowns and operates the Mae Moh PowerPlant which is fueled by an open pitlignite mine which produces 40,000 tonsper day. With an area of 135 squarekilometers, it is considered the largestcoal-fired power plant in Southeast Asia.

The project aims to answer the growingelectricity demand in MetropolitanBangkok and rural areas. According tothe ADB and EGAT, the project is highlysuccessful since the project objectivesinvolving least-cost nature, system lossreduction, and system stability andreliability have been met.

However in reality, taking intoconsideration the social andenvironment impacts, the project is farfrom being successful.

Environmental and Social Impacts

According to Greenpeace, the Mae Mohpower plant approximately contributesmore than four million tons of carbondioxide emission in the atmosphere,annually. In addition, around 1.6 milliontons of sulfur gas is released from thepower plant into the air everyday. Suchhave caused severe health problems forthe people near the site and have led tothe deterioration of the environment.More than 200 people have died due torespiratory diseases and lung cancerever since Mae Moh power plant wasoperated. (Jessica Rosien, 2004)

Greenpeace further said that from thetime of the implementation of the MaeMoh coal power plant, more than 30,000people have been displaced andthousands acquired severe respiratoryproblems. This was due to theinhalation and exposure to sulfurdioxide emitted from the mine.

The fly ash has also affected the cropsof the villagers. According to onevillager, her planted vegetables and

fruits died because of the toxic that thecoal power plant emitted. Anothervillager recounted that her pineappleplantation wilt over the years.Farmlands have been negativelyaffected by acid rain which is attributedto the sulfuric dioxide released by thecoal power plant.

In October 1992, when EGAT operatedthe 11 units at Mae Moh, people residingwithin the seven-kilometer radius of theplant fell ill with breathing difficulties,nausea, dizziness and inflammation ofeyes and nasal cavities. After twomonths of operation, 50 percent of therice fields were damaged by acid rainand around 42,000 people were found tohave breathing ailment.

In April and May 1996, six people in MaeMoh died of blood poisoning.Greenpeace further said that in 1999,more than 600 people suffered fromrespiratory problems caused by sulfurdioxide emissions. (Saksit Meesubkwang,2006)

In October 2003, the State NaturalResources and Environmental Policy andPlanning Office found high levels ofarsenic, chromium and manganese inalmost all water sources within thevicinity of the plant.

In May 2004, the Thai Provincial courtawarded US$142,500 to the villagers forcrop damages caused by the coal powerplant. Greenpeace believes that thiscompensation is the government’s wayof recognizing the plant’s disastrouseffect to the lives of the people.

Safeguard Policy Violations

Environment Policy

In its technical assistance completionreport, the ADB admitted that “the MaeMoh power station, including the MaeMoh mine, has caused environmentaland social problems, in particular, local

air pollution causing public healthproblems.” (ADB, TA-CR, 2002)

In 2002, Greenpeace ResearchLaboratories conducted a study on theMae Moh coal power plant. Results ofthe study showed that Mae Moh powerplant releases around 4.3 million tons(MT) of fly ash along with 39 tons ofneurotoxin mercury annually. Finepowders of fly ash sample werecollected which contained elementsthat are highly toxic to theenvironment, animals, humans andplants.

Greenpeace said that sample from MaeMoh coal power plant contained veryhigh concentrations of arsenic, mercury,lead and chromium. Arsenic is known tobe carcinogenic to humans. It couldeasily enter groundwater andwaterways. Mercury is a well-knownneurotoxin. Lead is highly toxic andcould damage the environment. It has along residence time compared withmost pollutants. Chromium is also aknown carcinogen.

To mitigate the negative impacts of theplant, pollution control devices, such asflue gas desulfurization (FGD) andionizing wet scrubbers, were installedby the government. However,Greenpeace Research Laboratoriesstated that the sample ashes stillcontained very fine particulates, calledrespirable particles. These elementsinclude arsenic, cadmium, chromium,cobalt, lead, mercury and zinc.Pollution control devices fail to containthese respirable particles. In the case ofMae Moh, mercury was not completelyremoved and still reflected highconcentration in the sample collected.

Greenpeace stated that end-of-pipetechnologies cannot destroy toxicelements that were released to theatmosphere in gaseous form. Treatmentof these hazardous elements will onlyresult in the production of additionalcontaminated waste streams.

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Involuntary Resettlement Policy

Due to the implementation of theproject, more than 30,000 people havebeen displaced. According to reports,Thailand’s cabinet previously offered tobuild houses for those who wereaffected. However, there has been noprogress about this plan until now.

This clearly shows that the ADB and EGAThave no concrete plan and program toaddress the issue of resettlement ofaffected villagers. Compensation for theincome loss due to farmland degradationwas not even included in theimplementation of the project. Thevillagers have to go through the processof filing law suits against thegovernment just to receive justcompensation.

Lessons to Learn

The case of the Mae Moh Coal PowerPlant is another proof that burning fossilfuel to generate electricity isdetrimental to the environment andhuman health. This has been proven bythe many people who acquiredrespiratory diseases and numerousindividuals who died due to toxicelements that were produced by theplant. In the long run, the use of coalpower plants does not promotesustainable development.

In spite of pollution control devices,hazardous particles are still present athigh levels in the environment. This onlymeans that the only way to end thesocial and environmental disasters thata coal power plant brings is through acomplete stop of its operation. Thisleaves the ADB and the government toresort to sustainable, renewable andenvironment-friendly sources of energysuch as solar and wind-generationpower.

According to Greenpeace, there is aneed for the ADB and the hostgovernments of coal power plants toconduct an environmental audit. Basedon the Mae Moh experience, there is aneed to institutionalize resettlementprograms. Just compensation andmedical treatment should be providedto the victims of the coal power plantreleases.

The ADB should begin acceptingresponsibility for the social andenvironmental disaster that the coalpower plant has caused the people ofMae Moh. The story of Mae Moh pointsout that the demand for electricity isnot enough reason to take theenvironment and human life forgranted.

References:

Asian Development Bank. “ProjectPerformance Audit Report on the ThirdPower Transmission (Sector) Project(Loan 1170-THA) and Fourth PowerTransmission (Sector) Project (Loan1245-THA) in Thailand.” Manila: ADB,September 2002.

Asian Development Bank. “TechnicalAssistance Completion Report.” Manila:ADB, March 2002.

Brigden, K., Santillo, D., and Stringer, R.“Hazardous Emissions from Thai Coal-Fired Power Plants.” UK: GreenpeaceResearch Laboratories, 2002.

Greenpeace Southeast Asia. “AllEmission, No Solution: Energy Hypocrisyand the Asian Development Bank inSoutheast Asia.” Greenpeace Briefing.May 2005.

Greenpeace Southeast Asia. “An ADBSkeleton in the Closet: Mae Moh.” 2005

Greenpeace Southeast Asia. “Mae Moh:Coal Kills.” Bangkok: GreenpeaceSoutheast Asia, May 2006.

Meesubkwang, Saksit. “More LocalsClaim Poisoning by Mae Moh PowerStation in Lampang.” Chiang Mai Mail.Vol. V, No. 26, June 24-June 30, 2006.

Probe International. “New GenerationTechnology.” May 2000. http://www.threegorgesprobe.org/pi/index.cfm?DSP=content&ContentID=714

Rosien, Jessica. “ADB’s DirtyInvolvement in Coal-Fired Power.”Bankwatch. Vol. III, Is. 2, December2004.

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Marinduque Mining Project: The Worst Mining Disaster in the PhilippinesBackground

In 1969, Marcopper Mining Corporation (MMC) began the mining copper operation in Marinduque, Philippines. With aUS$40-million loan from the Asian Development Bank (ADB), Placer Dome, Inc. managed and controlled MMC, promising30,000 tons of run-of-mine output per day. Placer Dome, which is 40 percent owner of MMC, secured and guaranteedthe loans from the ADB.

However, Marinduqueños experienced aseries of environmental mining-relateddisasters in the last 30 years. From 1975to 1991, Calancan Bay became thedumpsite for millions of tons of minetailings by Placer Dome’s operation.MMC-built Mogpog river dam burst in1993, flooding the downstream villagesin Mogpog. Two children died in theincident.

In 1996, about 4,400 people or 700families were isolated by flash floodsresulting from the cracked of 2.6-kilometer long drainage tunnel which wasconnected to the mine’s waste disposalpit, spilling out a total of 1.6 millioncubic meters of mine tailings intoMakalupnit and Boac rivers. In 1998,President Fidel Ramos ordered theprovince of Marinduque in a “State ofCalamity.”

In spite of numerous moves by localcommunities and non-governmentorganizations (NGOs), and survivingcease-and-desist orders by the NationalPollution Control Commission during theMartial Law, MCC continued itsoperation. It was later found out that 50percent of the company was owned bythe late dictator Ferdinand Marcosthrough four front companies. (RojaSalvador, 2001)

In March 1997, the ADB and Placer Domeagreed to transfer the bank’s interest toMR Holdings, Ltd., which is a companycreated by Placer based in the CaymanIslands. (Keith Damsell, May 1999)Around US$20 million was paid to theADB. After the payment of theoutstanding loan and return of theCovenant, the project documents at theBank were no longer accessible. The ADBsaid that it was no longer involved in theproject and the project is not covered bythe 1994 Information Disclosure Policy.(James Esguerra, July 2003) In effect,the ADB washed off its hands from thetragedy.

Environmental and Social Impacts

The Marcopper Mining disaster directlyaffected the municipalities of Sta. Cruz,Mogpog and Boac. Marinduqueños relyheavily on fishing and farming. But dueto the mine spill, Calancan Bay, Boacand Mogpog rivers were contaminated.Marcopper’s destructive impact did notonly lead to the death of Marinduque’srivers but also the contamination of thepopulace. Not to mention the lives thathave been lost. The communities wereleft with a dead river system,contaminated environment and very illpopulation.

Calancan BayFor 16 years, Marcopper dumped 200million tons of mine tailings in CalancanBay via surface disposal. This was donewithout the consent of the villagers whomainly rely on the bay for food andlivelihood. The mine spill covered 80square kilometers of the rich corals andsea grasses of the bay. This affected2,000 fishing families, leaving them inthe brink of starvation. (CatherineCoumans, 2005) Houses and rice fieldswere covered with dust storms.

At present, the tailings are exposed inthe bay and are driven into villagesalong the bay. The villagers have notbeen compensated by Placer Dome untilnow. Metal contamination and chroniclead poisoning of victims remainuntreated until today. (Rowill Aguillon,2004)

Mogpog RiverIn 1991, a dam was constructed in theMaguila-Guila Creek despite theobjections of the local communities inview of its potential negative impact ontheir source of food and water. Theproject aimed to hold back thecontaminated silt from the San Antoniopit.

However, after two years, the damcollapsed. Downstream villages wereflooded, houses were swept away,

livestock and poultry were killed, andcrops were destroyed. Two children werealso swept by the flash flood. Thecollapse of the dam did not only causecontamination of the river but alsoeruption of skin diseases, plastic anemiaand metal poisoning of the villagers.(Aguillon, 2004)

Placer Dome denied its responsibility,blaming the tragedy to a typhoon.However, the rehabilitation of the damincluded an overflow, which is in a wayacknowledging that faulty engineeringcaused the disaster. (Coumans, 2005) Atpresent, toxic waste behind the damcontinues to overflow into the river.Bagtuk, a specie of crab that peopleconsume for subsistence, completelydisappeared after the tragedy.

Boac RiverIn March 1996, massive tailings spilledinto the 26-km long Boac River. Theriver was contaminated with three tofour million tons of metal enriched andacid generating tailings immediatelyafter a badly-sealed drainage tunnel atthe base of Tapian pit burst. Thistranslated to around 1.6 million liters ofwaste that spilled into the river, killingthe river instantly.

This prompted a team from the UnitedNations to investigate the extent of theimpact that the Marinduque Mine Spill,as what the tragedy has been calledever since, has caused the environmentand the townsfolk. UN identifiedunacceptable levels of heavy metals insome parts of the river and toxic wastesleaching into the river due to faultywaste rock siltation of the dam.

In March 1997, the Department of Healthand the University of the Philippines(DOH-UP) conducted health studies andconcluded heavy metal contaminationdue to the use of the river as run-off forMarcopper’s disposal site since the1970s.(Aguillon, 2004) The DOH-UPinvestigative team found outunacceptable lead and mercury level in

26

seven of the 22 children tested; twoadults tested positive for leadcontamination.

In October 1997, DOH-UP also collectedblood, air and soil samples in and 7 kmout from the causeway. All of the 59children tested proved to haveunacceptable levels in their blood; 25percent of them had unacceptableblood cyanide levels. Also, the soilsamples have unacceptable levels oflead, cadmium and elevated levels ofcopper and zinc. Lead values werepresent in the air samples, exceedingthe standards of the US EnvironmentalProtection Agency. (Aguillon, 2004)

In March 1998, President Ramosdeclared Marinduque in a “state ofcalamity” based on the findings of DOH-UP investigative team.

Placer Dome spent almost US$80 millionfor compensation, medical treatment,infrastructure development, riverrehabilitation, flood risk assessment andwater projects. However, it stillmaintains its position that it is notresponsibile for the tragedies inCalancan Bay and Mogpog River, claimingthese events as accidents. Until now,Boac River compensation andrehabilitation are not yet completed.Compensation to communities in andrehabilitation of neighboring townsremain uncertain. (Roja Salvador, 2001)

Lessons Learned

Sound Design. Evidence that came fromthe numerous investigative teams, suchas UN, Oxfam Australia, DENR andNPCC, among others, showed that theenvironmental assessment did notensure the achievement of sustainabledevelopment. There was poorintegration among the social, economicand physical aspects of the project.(James Esguerra, 2003)

Corruption and Poor Governance. Giventhe Marcos’ large stake in Marcopper,the former dictator overruled the cease-and-desist orders from the NPCC andallowed Marcopper to continue itsoperation.

Accountability and Transparency. Thecase of the Marcopper Tragedgy clearlyshowed how the ADB made it difficultfor CSOs monitoring the disaster to

access relevant documents, such asEnvironment Management and MitigationPlan, internal assessment of the Bank,and its basis to finance the project,among others. (James Esguerra, 2003)Such could be used to strengthen thecase of the claimants.

The ADB withheld information from thepublic stating that the Bank is no longerinvolved in the project and that theproject is not covered by the 1994information disclosure policy. This iscontrary to what the ADB claims that itis committed to improving the welfareof the people in the Asia and thePacific.

Environmental management. TheMarinduque Mine Spill clearly shows theneed for a stricter enforcement ofenvironmental policies. The governmentshould not prioritize attracting investorsto generate profits over environmentalprotection and sustainable developmentof the community. Mining investmentsshould not be railroaded but should gothrough tedious processes.

Participatory planning and governance.The Marinduque Mine Spill clearly showsthe importance of the participation ofthe local community in planning,monitoring and evaluation of projectsgiven that they have better knowledgeof the project site and socioeconomicstatus at the local level. Not conductingconsultation and securing the consent ofthe local community is just the same asviolating their human rights that couldlead to tragedies like the MarinduqueMine Spill. In spite of public clamoragainst the project, Marcoppercontinued with it.

The ADB is also responsible to theincident. It gave Marcopper and PlacerDome a hand by providing a loan in itsoperation. The Bank should not say thatit is no longer involved in the projectjust to escape/deflect the globalembarassment and criticism caused bythe mine spill. The Bank should haveprovided the information needed duringCSOs’ investigation to strengthen theclaims of the victims instead of using itslegal anecdotes to wash its hands off theenvironmental and social mess. TheBank should have also assisted theaffected communities in pursuing thecase against the Placer Dome given itsstrong influence with its membercountries.

References:

Aguillon, Rowil. “Mining Debt: A Victim’sPoint of View.” 1/31/04.(www.jubileesouth.org/journal/mining.htm)

Coumans, Catherine, Ph.D. “PhillipineProvince Files Suit Agains Placer Dome –Background.” 10/4/05.(www.miningwatch.ca)

Esguerra, James. “Case Study Four:Marcopper Mining Corporation(Philippines).” ADB and theEnvironment: A Monitoring Frameworkfor the ADB’s Environment Policy. PRRM,NGO Forum on ADB: Manila, 2003.

Salvador, Roja. “Undermined.”Community & Habitat. Is. 9. PRRM:Manila. 2001.

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The Questionable Tonle Sap InitiativeBackground

The Tonle Sap River Basin is important to some two million Cambodians. Livelihoods of communities living around theTonle Sap Lake depend on its rich natural resources. Further, the seasonal flooding provides spawning grounds for fishin the flooded forests. During rainy season, communities are able to fish and cultivate rice at the same time in theflooded areas. With its diverse natural resources, the United Nations Educational, Scientific and Cultural Organization(UNESCO) and the government of Cambodia identified the Tonle Sap region as a biosphere region in 1997 and wassubsequently designated by a Royal Decree in 2001.

The Asian Development Bank (ADB) hasestablished itself as the leading fundingagency in the Tonle Sap Basin. (JessicaRosien, April 2006) The Bank’sinvolvement in Tonle Sap Basin started in1998 as part of a technical assistance(TA) for the Mekong Region amounting toUS$1.65 million. It has the objective ofidentifying investment projects relatedto community-based natural resourcesmanagement.

With the goal of pro-poor sustainablegrowth and equitable access to naturalresources, the ADB launched the TonleSap initiative in 2002. The initiative hasfour major projects: Tonle SapEnvironmental Management Project(TSEMP) with a total cost of US$19.4million; Tonle Sap SustainableLivelihoods Project (TSSLP), US$19.7million; Lowland stabilization Project,US$1 million; and WatershedManagement Project, which is still in thepipeline.

The holistic approach applied by the ADBto the Tonle Sap is commendable. It usesa basin-wide integrated approach inmanaging the Tonle Sap River Basin.Tonle Sap is part of the Bank’s RegionalCooperation Strategy and Program(RCSP) for the Greater MekongSubregion (GMS). The GMS-RCSP aims tofacilitate growth and development in theregion. However, there are projectsunder the GMS that hinder theattainment of the goals of the Tonle SapInitiative. Specifically, the developmentof hydropower infrastructure in theupstream Mekong River will eventuallyhave significant negative environmentaland social impacts on the Tonle SapBasin.

Environmental and Social Impacts

According to the ADB, built structuressuch as dams, weirs, and flood controlworks could alter water quantity, quality,and timing. (ADB TA Report, October

2005) Said infrastructures have negativeenvironmental and social impacts on thedownstream communities, in particularthe Tonle Sap Basin.

The Tonle Sap Lake is a tributary of theMekong River. Built infrastructures in theupstream Mekong River could modifyflooding patterns. In the case of TonleSap, the disruption of the naturalflooding could lead to the decline of fishsupply due to the blocking of fishmigration. The forests in the Tonle Sap,which serve as rich spawning grounds,will also be significantly affected andbecome inaccessible to fish.

The disruption of flooding patterns inthe Tonle Sap will lead to loss of habitatand will affect the fishery resources.(ADB, October 2005) This in turn willhave major impact to the lives of thecommunities that depend on the naturalresources of the Tonle Sap for theirlivelihoods. With the disruption of theflooding pattern in the Tonle Sap, thevillagers’ practice of simultaneousfishing and rice cultivation in the floodedareas will be severely affected. This willin turn lead to possible loss of incomeand change in the way of life of thepeople living around the Tonle Sap Lake.

One example of the negative impact oflarge-scale infrastructure is thecontroversial Nam Theun 2 hydropowerproject. The cumulative environmentalimpact assessment conducted by theNam Theun 2 Power Company (NTCP)admits that “Water levels at Phnom Penhwill be lower during floods andincreased during the dry season. Annualmaximum level of the lake will also bereduced. Changes in flow patterns willhave a small negative impact on thefloodplain and Tonle Sap lake fisheriesas these are favored by high wet seasonwater levels.”(http://www.namtheun2.com/gallery/libr_eamp/English/chapter%203_sml.pdf,p.6)

Even if the EIA for Nam Theun 2 statedthat the impacts will be “small,” if oneconsiders the total number of existingand planned hydropower projects inADB’s Mekong Power grid, it is not hardto deduct that many small impacts couldadd up to very significant impacts.

The Tonle Sap Initiative paved the wayfor the establishment of communityfisheries (CF) to promote participatorynatural resources management.However, CF members complain aboutthe absence of authority for CFs toenforce regulations. The bureaucracy inreporting illegal activities provides awide space for the illegal fishers toescape captivity.

CF members also complain about thenon-exclusiveness of CFs. Outsiders areallowed open access to CFs and sincethey have less incentive to abide by theCF regulations, they often engage inillegal, unsustainable fishing practices.This means that CF efforts on thesustainable natural resourcesmanagement will be underminedlessening the incentive for CF membersto adhere to the regulations.

Safeguard Policy Violations

Environment Policy

Based on the Report andRecommendations (RRP) of the ADBPresident on the Proposed AsianDevelopment Fund Grant for the Kingdomof Cambodia on the Tonle SapSustainable Livelihoods Project, thecumulative impact of built structures onthe Mekong is a main concern of theBank among the external factorsaffecting the Tonle Sap.(RRP, November2005) However, Rosien pointed out thatADB’s view on the impacts of hydropowerdevelopment on the upstream Mekong onthe Tonle Sap is not consistent with theRRP statement. The Final TA Report forthe Tonle Sap Sustainable Livelihoods

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The Project shows that the ADB is merelyoperating on the assumption that therewill be no significant environmentalimpacts, without having undertakenscientific testing to back thisassumption. This violates theprecautionary approach, to which ADBsubscribes in its Water Policy. If the ADBwere following this approach, it could notuse the lack of scientific evidence tojustify its decisions on infrastructureprojects that affect the Mekong Riverand the Tonle Sap.

This also shows that the Bank has notundertaken cumulative environmentenvironmental impact assessment todetermine the effects of upstreamdevelopment on the Tonle Sap Basin. TheBank failed to holistically assess theimpacts of the transboundary issues ofADB’s project plans. (Rosien, 2006)

Further, the implementation of theMekong Power Grid will have substantialnegative impacts on the Tonle Sap Basinand the lives of the millions ofCambodians who depend on it. Accordingto Rosien, if the ADB is truly adopting anintegrated approach to the Tonle SapRiver Basin, it should not push throughwith hydropower developments that arenot carefully planned. The project shouldalso have meaningful participation fromproject affected people.

The failure of the Bank to conduct acumulative and integrated environmentalimpact assessment (EIA) for the entireGMS shows the shortcoming of the Bankin factoring the environmental, socialand economic impacts of large-scaleinfrastructures, such as dams, to theTonle Sap River Basin and surroundingcommunities.

Based on the independent analysisconducted by the Mekong Watch on theEIA of the Chong Kneas EnvironmentalImprovement Project (CKEIP), the EIAwas lacking and significantenvironmental impacts were omitted.(Rosien, 2006)

Involuntary Resettlement Policy

The ADB came up with a Land Acquisitionand Resettlement Framework (LARF) tosafeguard communities against negativeresettlement impacts caused byinfrastructure projects. However, thereare certain provisions which areambiguous. (Rosien, 2006)

The ADB conducted consultations only onsome of its projects at a very limitedextent. Majority of the villagers havelittle knowledge about the Bank’sprojects. Villagers are unlikely to agreewith their relocation if the compensationgiven them will improve their previoussituation. Therefore, the Bank shouldconsult with the communities to identifysubprojects that will be implemented ina participatory manner.

Other Issues and Concerns

With the present hierarchical andpolitical setup in the communities, thereis a great risk that women will not beheard during discussions.

There is a risk of organizationalcongestion due to the overlaps amongthe different line agencies/bodies of thegovernment. Poor communication andcoordination among these line agenciescould hinder the attainment of the goalof sustainable natural resourcemanagement.

There is also a lack of participation inthe project design. It is not even sure ifthe recommendations from the differentcommunities on some of the Bank’sprojects were even incorporated andadopted.

Lessons to Learn

The inconsistency of the projects,program and approach to the Tonle Sapand GMS clearly shows that the ADBshould improve the coherence of itsoverall policy. (Rosien, 2006) If the Bankis really serious about promoting social,economic and environmentalsustainability in the Tonle Sap RiverBasin, it should conduct an integratedEIA of the entire GMS. Without doing so,the success of the GMS will underminethe gains of the Tonle Sap initiative.

While in the past, it is clear that the ADBhas not conducted comprehensive impactassessments of infrastructure projects,the Bank has now taken a step towardsthis direction through its recentlyapproved TA on the Influence of BuiltStructures on the Tonle Sap which issupposed to provide scientific data onimpacts of infrastructure projects. Thisis encouraging. However, whether theADB will utilize the results from thestudies and be guided in its

infrastructure development projectsremains to be seen.

The ADB should ensure that allstakeholders and affected people of itsprojects be consulted. Based on theprinciple of free prior informed consentof the World Commission on Dams, theADB should conduct meaningfulconsultations. People should have theright to say no to projects or request forchanges in the project design.

The design of the Tonle Sap Initiativerequires that the Bank and the differentline agencies of the government shouldwork together. However, there has notbeen a very good track record of interand intradepartmental cooperation.Without such coordination, the Tonle SapInitiatives chances for success are notvery high.

To ensure voices of women will beconsidered in the decisions for planningand project design, the ADB shouldintegrate gender perspective in itsplanning and design for all projects inthe Tonle Sap River Basin. (Rosien, 2006)

References:

ADB. “Proposed Asian Development FundGrant Kingdom of Cambodia: Tonle SapSustainable Livelihoods Project.” Reportand Recommendation of the President tothe Board of Directors. Manila: ADB,November 2005.

ADB. “Technical Assistance to theKingdom of Cambodia for the Study ofthe Influence of Built Structures on theFisheries of the Tonle Sap (Financed bythe Government of Finland).” Manila:ADB, October 2005.

Rosien, Jessica. “Can the AsianDevelopment Bank Save the Tonle Sapfrom Povert?: An Analysis of the AsianDevelopment Bank’s Operations in theTonle Sap.” Australia: Oxfam Australia,April 2006.

(http://www.namtheun2.com/gallery/libr_eamp/English/chapter%203_sml.pdf,p.6)

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Background

Erroneous was how a 2004 Far Eastern Economic Review article1 described the scandal-tainted Samut Prakarn WastewaterManagement Project in Thailand. Quoting from the joint report of the Bank Information Center and Terra-Thailand,2 thearticle detailed how corruption problems have transformed this Asian Development Bank-financed public initiative into amajor development debacle. In fact, even the Thai Prime Minister3 publicly conceded that the project was riddled withcorruption. And after years of resistance from affected communities and pressure from an international monitoring campaign,the ADB withdrew from the project in 2003.

How Corruption Ruined Thailand’s Samut PrakarnWastewater Management Project

The ADB and the Government of Thailandconceived the US$230-million wastewatermanagement project in the early 1990s toimprove the environmental quality, as wellas the public health and welfare in SamutPrakarn Province through modern, reliable,cost-effective wastewater collection andtreatment facilities. It was designed as thehub of all wastes (generated by about 1.2million residents and over 4,000 factories)that flows into the Chao Phraya River. TheBank’s US$230-million stake in the projectwas the sum of two separate loans: theinitial loan of US$150 million in 1995 andthe supplementary loan of US$80 millionin 1998.

Initially, the ADB recommended twotreatment plants to be built in both sidesof the Chao Phraya River. Controversyerupted when construction of a singlewastewater treatment plant instead beganin the village of Klong Dan. These wereclear deviations from the original projectdesign and location. The Samut Prakarnproject caught the Klong Dan locals,numbering around 60,000, by surprise.This was due to the failure of the Bankand the executing agency, Pollution ControlDepartment (PCD), to inform and consultthem about the project.

In 2000, the mayor and citizens of KlongDan filed the first-ever complaint withthe ADB over the impacts of the SamutPrakarn project. Thus, the group becamethe first to test the Bank’s accountabilityto those impacted by its projects sincethe Inspection Function4 was establishedin 1995. In their formal request, thevillagers asked the InspectionCommittee to launch a full-scale re-assessment of the project design andthe flawed decision-making process.They contended that the project hasviolated the ADB’s environmental, socialdisclosure, good governance and anti-corruption policies, as well as the

project’s goal of sustainabledevelopment.

The Inspection Panel reported in 2001that the Bank, indeed, did not complywith some of its policies and proceduresin the project processing andimplementation. These were: (1)supplementary financing of costoverruns, (2) bank operational missions,(3) environmental considerations in Bankoperations, (4) involuntary resettlement,(5) incorporation of social dimensions inBank operations, and (6) governance.Furthermore, the Panel concluded thatthe Bank committed a crucial omissionwhen it did not reappraise the 1998supplementary loan proposal, therebyresulting to other consequences.5

Notwithstanding these serious findings,the subsequent recommendations of theInspection Committee to the ADB Boardwere perceived to be weak by theaffected communities, as well asindependent CSO observers. Moreover,the ADB failed to take adequate actiontowards implementing even theserecommendations.

In 2003, the Bank and the Thai Ministryof Finance agreed to close both theoriginal and supplementary loans for thisproject. The undisbursed balanceremaining in the original loan forUS$18.3 million has been cancelled. TheBank said the project remainsincomplete and suspended, and that noprogress has occurred on the remedialmeasures.6

In early 2004, the Natural Resources andEnvironment Ministry was given the go-signal to sue the owner of the Klong DanWastewater Treatment project for Bt20billion for alleged contract fraud andduping the state to buy public land.

In 2005, the ADB reported that the civilsuit filed by PCD against the turnkey

contractor was rejected by the court andno progress has made on this matter.Moreover, no progress has been made onfraud charges versus individualsassociated in the controversial landacquisition; implementation of theresettlement plans and monitoringsystems; community involvementinitiatives; and odor and effluentmanagement. The Bank would not act onthe said issues until the contractualdispute between PCD and the contractoris resolved.

Project Impacts

When Klong Dan residents finally becameaware of the nature of the wastewatermanagement project, they strenuouslyobjected. They raised a number ofconcerns about the negative impacts thefacility would have on theirenvironmental quality and economic well-being. They expressed concern about theill effects of toxic wastes and heavymetals that would be released from thetreatment plant.

According to them, the project wouldthreaten their way of life, the localeconomy and community strength. Thedaily release of 525,000 cubic meters oftreated wastewater to the sea wouldchange the ecosystem of the coast,which is one of Thailand’s principaleconomic bases. The 2001 findings ofthe Bank’s Inspection Panel confirmedtheir fears. The report revealed that theSamut Prakarn project threatens thelivelihoods of people that are dependentto the coastal ecosystem due to thedilution of salinity and release of toxinsor heavy metal. Further, people living inthe vicinities of the treatment plantcould be adversely affected by thelowering of their property value as wellas the odor and potential problems

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caused by the existence of toxin andheavy metal in the sludge management.

Moreover, community members becameconvinced that the decision to move theproject was driven more by the desire toenrich a handful of politically well-connected landholders than by anyconsidered assessment of the publicinterest. They pointed to a number ofirregularities in the relocation of theproject and acquisition of the Klong Dansite.

ADB Policy Violations

Information Disclosure

Citizens never received detailedinformation about the project from theADB. Nor were they ever consulted by thePCD that manages the project. Foryears, the Bank and the Thai governmenthave known about the Samut Prakarnproject but they have excluded theparticipation of the Klong Dan people.Since the onset of the project’sconstruction, the Environmental andSocial Impact Analyses have yet to beseen by the public.

Environment Policy

In their Inspection request, the KlongDan villagers contended that there wasno environmental impact assessmentconducted prior to the plant’sconstruction. Given this, the facilitycould have released toxic heavy metalsinto, and dilute the salinity of localwaterways, in the process jeopardizingthe fisheries that largely support thecommunity. Likewise, documentsobtained from project co-financier,Japan Bank for International Cooperationshowed the plant’s inability to fully treatwastewater with metals remaining intheir original state after treatment.

Social and Involuntary Resettlement

The Bank failed to undertake a socialinitial assessment of the project areathat led to poor project planning anddesign. This, in effect, deprivedaffected villagers of their right toparticipate and have their concernsaddressed by the project proponents.

No resettlement plan was established tocompensate and support any villager thatwas displaced by the facility. Neither was

there any socio-economic survey doneamong the affected families. The fullcost of resettlement was not identifiedor included in the project cost. In fact,resettlement and compensation wereonly mentioned when protests againstthe project began mounting.

Corruption

The land purchased for the facility wasacquired under highly dubiouscircumstances, with the price twice itsofficial rate. This was a clear violationof the ADB’s anti-corruption policy. Inparticular, the purchased land area wasnot the one specified in the projectdesign.

Likewise, the Bank accepted changes inthe bidding documents to allowalternative bids for one facility insteadof two facilities as stipulated in the loanagreement. It accepted the change inlocation of the treatment plant to KlongDan minus the requisite project impactassessments. It failed to adequatelyscrutinize project changes that led to an87 percent increase in costs prior to loansigning. ADB also did not object whenthe contract was granted to the onlybidder in direct violation of Thaiprocurement/bidding regulations.

Lessons to Learn

The botched Samut Prakarn WastewaterManagement Project clearlydemonstrates the devastating impacts ofADB’s failure to exercise its fullmonitoring, oversight and investigativeresponsibilities relative to corrupt-riddendevelopment projects. Its response tothe allegations of corruption raised bythe Klong Dan community has beengrossly inadequate and unsatisfactory.

The ADB failed to consider corruptionissues during the project and appraisalstages. Despite the obvious high countryand project risks, the Bank neglected tomention in its Review and Reports of thePresident (RRP) for neither the originalloan nor the December 1998supplementary loan (which was alreadycovered by the Anti-Corruption Policy)that the Samut Prakarn project wassusceptible to procurement fraud,bribery and other types of corruption.

Similarly, its project monitoring andsupervision during implementation was

unsatisfactory. It failed to question anumber of substantial design changesthat contravened ADB policy, loanagreements or the Thai law, therebyproviding significant opportunities forcorruption.

From the onset, the Bank had all theopportunity to curb the corrupt practicesrelated to the Samut Prakarn project.However, it failed to address theseissues as illustrated by the following: (1)The Bank’s three offices that reviewedaspects of the project did not fullyinvestigate or report the corruptionissues related to the land transaction;(2) Management review of the projectfailed to find any evidence of corruption,and both the Inspection Panel and theAnticorruption Unit declined to considerthe issue at all; (3) The Bank neverpublicly commented on the fact that theThai government has filed criminalcharges against many senior officials ofthe projects; and (4) The Bank did notlaunch a wider investigation of thecorruption issues in view of the saidcharges.

(Footnotes)

1 Gay, Christopher. “Thai Project Yields Graftand New Policies.” Far Eastern EconomicReview, 2004.

2 Herz, Steve.“Zero Tolerance? Assessing theAsian Development Bank’s Efforts to LimitCorruption in its Lending Operations,” 2004.

3 “Making the Case for Graft at Klong Dan,”The Nation, July 2003.

4 This policy became the AccountabilityMechanism Policy in May 2003.

5 ADB. “Final Report of Inspection Panel onSamut Prakarn Wastewater ManagementProject,” 2001.

6 ADB. “Samut Prakarn Waste WaterManagement Project Fourth SemiannualReport to the Board Directors on theImplementation of the Recommendationsof the Board Inspection Committee asAdopted on 25 March 2002,” 2004.

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Marinduque Mining Disaster. Sonny Boy Mataya from Bocboc, Mogpogstands in front of millions of tonnes of mine waste that sit above theMaguila-Guila dam on the Mogpog River. The dam has been poorlymaintained and locals live in fear of a repeat disaster.

Photograph by Ingrid Macdonald/Oxfam Australia

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NGO Forum on ADB is an Asian-led network of non-government and community-based organizationsthat support each other in order to amplify their positions on Asian Development Bank’s policies,programs and projects affecting life forms, resources and local communities.

NGO Forum on ADB, Inc.85-A Masikap Ext., Central District,Diliman, Quezon City, 1101 Philippines

Telefax: +632-921-4412Email: secretariat@forum-adb.orghttp://www.forum-adb.org