Use of Country Safeguard Systems at the Asian Development Bank: Increasing "Flexibility" but Lowering Standards

 

November 2008

The Asian Development Bank's proposed Safeguard Policy Statement (SPS) adopts the use of a "country safeguard systems" (CSS) approach to addressing the environmental and social impacts of projects the ADB funds. Pursuant to this approach, the ADB would use a country's "system" - its legal and institutional framework - rather than the full suite of ADB environmental and social safeguard requirements and ADB institutional units, to attempt to address impacts of Bank-supported projects.

The ADB's proposal generally requires that, prior to use of a CSS approach, the ADB determine: (1) whether a country's laws, regulations, rules and procedures are "equivalent" to the principles of ADB safeguard policies; and (2) whether the country's institutions are "acceptable," having the capacity and track record to implement those laws. If gaps in equivalence or acceptability are identified, the ADB may seek agreement with the country on gap-filling measures rather than deny use of the country's system. Such gap-filling measures are to be listed in an action plan. The specific methodology for performing the CSS assessments, however, has not yet been developed.

The ADB claims to be drawing from experiences of the World Bank's use of a country systems approach. However, the World Bank conceded in its most recent evaluation of its approach that it cannot draw any conclusions from its country system pilot projects, noting that "most of the data obtained from the pilots reflect the experience of project preparation rather than project implementation."

Moreover, the ADB approach is different, and riskier, in several key respects than the World Bank approach. For example, the ADB approach applies not only to public but also private-sector financing. A host of new questions is raised by this angle on CSS that have not been broached by the World Bank, including significant questions related to transparency and accountability. Additionally, under the ADB approach, it does not appear possible for communities to file a claim with the Accountability Mechanism if communities believe the equivalency assessment will not adequately ensure that a country's system will be equivalent to the Bank's for a given project.

The ADB's County System Safeguard approach, similar to the World Bank's approach, raises three sets of issues: Will environmental and social standards approved under the CSS approach be as high as standards used when a CSS approach is not employed? Will accountability of the Bank to communities be as effective under a CSS approach as it is under the current Bank approach to safeguards? Will use of CSS actually strengthen a country's system - secure enduring improvements in borrower countries' systems that last beyond the life of the project under consideration?

Dilution of Standards

Similar to the World Bank's country systems approach, the ADB's CSS approach introduces several opportunities for dilution of environmental and social standards. For example, using "principles" distilled from the ADB safeguard policies as the basis for assessing the adequacy of a country's standards is intended to provide the space for a broader range of measures that secure the same results. However, with this increased flexibility comes increased risk that a country's measures are actually not as effective as measures under the ADB's safeguard requirements.

For example, the ADB safeguard "principles," for involuntary resettlement fail to include several key details regarding grievance mechanisms that are included in the safeguard requirements. The principles fail to provide details about the content of an appropriate grievance mechanism, require that under the mechanism concerns must be addressed efficiently and in an understandable and transparent manner, require that affected people need to be informed about the very existence of the grievance mechanism and other key details.. The absence of these details from the principle leaves very real possibilities that these, or similar requirements, will not be part of the ADB's standard applied under CSS.

Another significant opportunity for dilution of standards under the CSS approach exists in the lack of a requirement for a clear description of, and timeframe for implementation of, gap-filling measures. The World Bank, for example, has consistently failed to specify in detail the gap-filling measures that are required and when they must be implemented, leaving countries able to pursue deficient requirements without public scrutiny

Finally, dilution of standards is almost certain to occur through inadequate implementation of the standards. The CSS approach relies much more on a government agency's capacity than on the Bank's capacity to implement standards. In many/most cases, this capacity is lacking. Even assuming this capacity can be built - quite an assumption when governance structures are shaky - financial and technical resources to ensure that adequate capacity building occurs are likely not to be available. This continues to be one of the most significant challenges for implementing the country systems approach at the World Bank.

Reduced Accountability

Under the CSS approach, communities may have a more difficult time using the Accountability Mechanism because identifying the specific standards that apply to a given project will be much more difficult.

The ADB "principles" provide only the general standards applicable to a project. A host country's laws, policies, and procedures are to flesh out and give greater definition to these general standards. When gaps in the countries laws, policies and procedures exist, the gap-filling measures are designed to provide this further definition.

As noted earlier, accessing and understanding a country's laws, policies, and procedures and any gap-filling measures - as well as knowing when they are to be applied - may be very difficult. The ADB's proposal fails to specify the level of detail that will be provided in equivalency assessment or Action Plans, nor does it require that Action Plans be disclosed. Significantly, the proposal fails to identify when measures to fill gaps must be implemented. Additionally, it does not mention specifically when measures to fill gaps must be implemented, nor require that measures be systemic, long-term and mandatory. This should be made explicit, given the deficiencies in gap-filling measures in the World Bank pilot process. Finally, the methodology for CSS Assessments
Simply put, the principles of the ADB policies do not provide the 'full picture' to communities of the standards applicable to a project. A community can file a claim for an apparent violation of a principle, but in the absence of clear and detailed information about what the ADB has embraced in satisfaction of that principle - either the existing laws, policies and procedures of the country or the gap-filling measures and when these must be implemented - it will be difficult for a community to know if a given project or activity is in compliance or not. In the absence of this knowledge, a community could be wasting its time, energy, and resources in pursuing a complaint; it cannot assess the likelihood of success with such a claim until after it knows how the ADB interprets the principle. Alternatively, in the absence of this knowledge, a community could be dissuaded from filing a complaint.

Strong System-Level Changes Are Not Achieved

Proponents of the country systems approach argue that the costs and risks (including the significant risk that safeguard standards will be reduced) of such an approach are worth it for the benefit - stronger safeguards for all projects, not just those funded by the banks pursuing a country systems approach. A stronger country system is a laudable goal, but, for the following reasons, the approach being pursued by the ADB is not an effective or likely way to achieve it.
No clear requirement is included in the proposal to ensure that measures to fill "gaps" in a country's laws or institutions will last beyond the life of a given project. Under the World Bank approach, none of the gap-filling measures to date are long-term substantial measures that truly strengthen a country's system. The failure of the ADB proposal to even describe the methodology by which "equivalency" and "acceptability" will be determined forebodes a lack of transparency throughout the process that leaves corruption of the process likely. Moreover, resources needed to ensure long-term capacity building will be difficult to obtain.

Needed Measures

A much more transparent and participatory approach to CSS is needed to ensure that environmental and social standards are not weakened. Significant additional measures will be required to provide any chance that country systems will be strengthened even minimally.

More substantive opportunities for public participation in the equivalency and acceptability determinations must be provided. At a minimum, this must include the following: a public vetting of the methodology well before Board approval of CSS; making publicly available all laws, policies, procedures, etc. used for the equivalency determinations and all information used to assess capacity of institutions - and making these available in the local language and in English sufficiently in advance of public consultations to allow for a thorough evaluation by interested parties of the ADB's equivalency determination, proposed action plans, and gap-filling measures. Additionally, the ADB must initiate a transparent, participatory process to develop procedures for promoting multi-stakeholder participation (including communities and their representatives) in the development of the country-level reviews of equivalency and acceptability.

The CSS approach must ensure that identified gap-filling measures are specific and detailed (including a description of when they must be implemented), long-term, legally-binding changes to a country's regulatory regime, included in the loan agreement, and disclosed to the public.

The role of the ADB's Accountability Mechanism should be clarified more. It is possible that deficiencies in an equivalency determination and in gap-filling measures proposed at the country, sub-regional or sector level will be - or can be - highlighted only in the context of a given project. Currently, the ADB proposal appears to require that an equivalency determination be performed only one time at each level (national, subnational, sectoral, etc.) The ADB proposal must clarify that for each project communities can challenge the equivalency and acceptability determinations and gap-filling measures when they appear to be inadequate.

Given the ADB's new focus on moving from a front-loaded approach to environmental and social safeguards to a "results-oriented" approach, the ADB must require that every project include benchmarks/criteria by which the ADB and others can judge whether the specific poverty-alleviation goals and objectives of a project will be met. Additionally, supervision reports must be made public.

The ADB must require that the Bank and partners (other donors) demonstrate to the Board, and publicly disclose, that commitments of necessary funding have been secured to implement capacity building measures to remedy identified capacity weaknesses in each relevant institution, before approving projects under country-level CSS approach.

The ADB must require an independent and publicly-available review of CSS projects within the first two years of the program.