Excerpts from the report, “Peoples’ Convention on Infrastructure Financing: A Peoples’ response to AIIB Annual Meeting”, released as curtain-raiser ahead of Civil Society Organizations’ (CSOs’) meet on June 21-23, 2018 in Mumbai:
The 3rd Annual Governors Meeting of Asian Infrastructure Investment Bank [AIIB] will be held in Mumbai, India from 24-25 June 2018. This two-year-old multilateral bank is investing in all major sectors, including energy, without robust policies on environmental-social safe-guards, transparent public disclosure and an accountability/complaint handling mechanism. Out of the total 24 projects, it has financed, USD 4.4 billion has already been approved.
India is the biggest recipient from AIIB with more than 1.2 billion USD supporting about six projects including Transmission lines, Capital City Development at Amravati, rural roads etc. with another 1 billion USD in proposed projects. These data are but a few from among the many that come out periodically which, we are aware, will straightaway affect our democratic systems, land, water, forests, food, livelihoods, structures and the very air we breathe on a daily basis. All these raise our concerns to an alarming level that we are forced to reflect and act on the rapid ‘reforms’ which happen in the guise of development.
Unlike World Bank and ADB who claim their development agenda in the name of reduction in poverty and inequality, AIIB never conceals its huge interests in infrastructure financing. India is AIIB’s second-largest shareholder and is an adored destination for its investments. As many of us are aware, the Indian government, for past few decades, has stressed the need for large infrastructural projects for the country’s development and these projects are being seen as a stimulus to the growth of India’s GDP.
These include power projects, dams, roads, urban projects, industrial zones/corridors, ports, smart cities and other mega projects, including the new super-expensive high-speed rail projects. Mega energy projects are perceived as one of the major components and enablers of these infrastructure projects. This aggressive growth for the economic elite and the upper classes will come at the cost of displacing the lives of people who are dependent on land and natural resources for their livelihood and devastating the environment.
This also often comes at the cost of displacing farming and pastoralist communities who are pushed to a life of poverty and whose life and livelihood cannot be commensurably compensated by money – in most cases, not even that. The huge projected increases in the energy infrastructure will also demand similarly massive financial investments.
The Global Infrastructure Outlook report was brought out by the Global Infrastructure Hub in collaboration with Oxford economics, largely as a response to – a) the sharply down investment demands in the ‘developed’ economies after the global economic crisis starting 2007-08, and b) a demand by profit-hungry capital stocks for future investment and profit areas.
This report takes 50 larger economies and seven of the most investment intensive sectors and aims to fill the “knowledge gap” about specific country level and sector wise investment demand. This data is now being used to line up capital invasion, of course with sweetened pills of ‘development’. The projections are based on three factors –
1) that by 2040, the global population will grow by nearly 2 billion (200 crores, most of it in Asia and Africa), an increase by over 25% from today’s 760 crores
2) the rural to urban migration will continue creating a huge urban infra demand for the 46% more people who will be living (or forced to live in search of survival) in urban areas, and
3) the adoption and implementation of the Sustainable Development Goals (SDGs) will require large additional funding.
The second and third factors have big implications for many of the issues raised by social movements. Based on these data/projections, the report forecasts that there will be a global ‘infrastructure investment need’ of over USD 97000 billion till 2040.
The report also analyses the investment shortfalls, and pegs this at USD 18000 billion (1 billion USD is roughly INR 6500 crores). While the global infrastructure spending is roughly 3% of global GDP today, the report forecasts this to rise to 3.7%. And over half of this is forecasted to be in Asia, giving the rationale for focus by the big ‘development’ and investment banks on this region.
India, over the period from 2008-2013, has spent a far larger part of its GDP, averaging 5.2%, on ‘infrastructure’, most of which has gone into highways and roads, and power and energy efficiency. This also partly explains the rise of two big infrastructure development financing institutions in Asia – the AIIB and the New Development Bank (NDB).
Where do development banks fit into the scheme of infrastructure investment? This question is a useful to tackle AIIB, the newest kid on the bloc. As the world struggles to find funds to meet the Sustainable Development Goals (SDGs), development banks could be instrumental in narrowing the gap is the oft-heard populist rhetoric.
However, misusing development banks can lead to fiscal risks and credit market distortions. To avoid these potential pitfalls, development banks need freedom from political influence to develop well defined mandates, focus on addressing significant market failures, concentrate on areas where the private sector is not present, monitor and evaluate interventions and adjust as necessary to ensure impact, and, finally, be transparent and accountable. All of these are the ideals, which more often than not go the other way.
The AIIB was officially launched in Beijing on January 16th, 2016, with 57 founding members, including 37 in Asia and 20 non-regional countries. Being the largest shareholder of the AIIB, China has an initial subscription of $29.78 billion in authorized capital stock in the AIIB out of a total of $100 billion, and made a grant contribution of another $50 million to the AIIB Project Preparation Special Fund on January 16th, 2017. India is the second-largest shareholder, contributing $8.4 billion. Russia is the third-largest shareholder, contributing $6.5 billion, and Germany is the largest non-regional shareholder (also the fourth largest shareholder), contributing $4.5 billion.
AIIB, unlike the older banks, does not have a clear line on reducing poverty, providing equitable access sans discrimination based on gender, disability and the peripheral. These are imminent safeguard issues that are obligated to be in the written decree of AIIB without any element of ambiguity, which are un-fortunately mired in dubiousness.
The reasons thereof are lack of consultations with those who fall directly in line of impact. The reasons are further complicated when these stakeholders are not even acknowledged existentially, as was the case with World Bank’s private arm International Finance Corporation refusing to acknowledge fisher families while funding Tata Mundra UMPP. Not only are these grave errors in full consciousness, but these rule out any recourse to grievance redressal mechanisms as a last resort establishing parity between the affected and those directly or indirectly perpetrating it.
This is consequent to discrimination. Public disclosure standards at AIIB are extremely weak contributing to undermining the ability of concerned stakeholders to flag potential problems to the Bank. Even with the environmental and social framework now a part of AIIB, the language of the safeguards parallel those of the World Bank and the Asian Develop-ment Bank bringing in a lot of implementation ambiguity.
Moreover, there is a lack of procedurally drafted mechanisms that are unique to AIIB and all they do are reflexive of country systems, thereby questioning what is international about its standards. In the words of Curtis Chin, former U.S. ambassador to ADB, “Development in Asia need not, should not and must not mean shortchanging a nation’s own citizens, particularly its most vulnerable people and communities, or sacrificing the environment. No matter how welcome and successful AIIB’s safe-guards are on paper, the true test will be whether the environment is harmed and whether people are made worse off by the operations of this newest multilateral institutions.”
This gains prominence for the formulation of environmental and social safeguards for all multilateral institutions, not just of AIIB, should not be a race to the bottom, which is precisely what seems to be lurking. With concerns about transparency, accountability and engagement with the stakeholders, it becomes an absolute imperative for other bank member countries to press the bank to resolve these concerns.
With still no oversight body in line with principles of transparency, openness, independence, and accountability, it is obligatory to demand for the same with utmost urgency underlining that such a mechanism should be functioning independently of AIIB management and any likelihood of political influence; should be inclusive of representations from peoples’ movements highlighting responsive, time-bound plans to respond to rights abuses and findings that it has not complied with its own policies; and providing the mechanism with the mandate to monitor and publicly report on whether rights abuses and policy violations have been remedied. Unless this commitment is exhibited in letter and in spirit, there would be an extremely thin line to walk on as far as validating the existence of AIIB is concerned.