Beyond Buzzwords: Development Banks' Fail to Remedy Harm Caused by Their Own Projects

Beyond Buzzwords: Development Banks' Fail to Remedy Harm Caused by Their Own Projects
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Co-authored by Julia Radomski, Information Services Coordinator at Bank Information Center

Are development finance institutions held accountable when their projects cause harm to communities and ecosystems? While "accountability" has become an oft-used and broadly-defined buzzword in development, much work remains to be done to ensure that institutions are indeed held to account in their everyday operations. According to a recent report by eleven international NGOs, including the Centre for Research on Multinational Corporations (SOMO), Accountability Counsel, Center for International Environmental Law, and Inclusive Development International, the evidence suggests that development finance institutions are failing to provide remedy to those harmed by their projects.

The first independent accountability mechanism created by a development finance institution was the World Bank's Inspection Panel, established in 1993. The Inspection Panel reports directly to the Board of the World Bank on complaints from local communities. The Panel investigates whether the World Bank has violated its environmental and social policies, and recommends actions to mitigate damage and prevent further harm. Many other development finance institutions now have their own complaints mechanisms.

"Glass Half Full? The State of Accountability in Development Finance" assesses the extent to which the development banks, such as the World Bank Group and the regional development banks, and their complaint mechanisms (also known as accountability mechanisms) are equipped to handle complaints from affected people. The report draws on analysis of the policies and procedures of the development banks and their mechanisms, and the outcomes experienced by communities that had filed complaints. According to the authors, when it comes to development finance accountability, the glass can be considered either half full or half empty.

From a positive perspective, project affected people who may have been displaced, impoverished, or otherwise harmed by development projects are generally better off than they would be without accountability mechanisms. Accountability mechanisms like the Inspection Panel are sometimes the only avenues for communities to affect projects and policies financed by the international development institutions, and can be their best--or only--hope for receiving compensation for damages incurred. Cases filed through accountability mechanisms often generate widespread attention, which can lead to improved outcomes for affected communities through international advocacy and media naming and shaming. On the other hand, the process itself cannot be relied upon to deliver results. That is primarily because the outcome relies on the willingness of the bank itself and/or its client to provide remedy. The banks do not provide the accountability mechanisms with sufficient mandate and authority to make binding decisions.

An example cited in "Glass Half Full?" is the World Bank's Protection of Basic Services Project (PBS) in Ethiopia, which provided block grants to sub-national government budgets to improve basic services. In September 2012, representatives of Anuak indigenous people submitted a complaint to the Inspection Panel detailing mass forced displacement from their ancestral land, and relocation to sites that were unsuitable for farming and lacked access to services such as schools, clinics and wells. This was a result of the Gambellan Government's villagization program, which the government justified as a way to make it easier to access the basic services in the very same sectors targeted by PBS.

In their report, the Inspection Panel concluded that the Bank's design, risk analysis, and supervision were insufficient, and that the Bank failed to take the Anuak's well-being into account. Nonetheless, the Panel concluded that the Bank was not responsible for the harm suffered by complainants. Although complainants believed that the international attention generated by the complaint prevented further harm from the villagization program, the process did not result in redress for the immense harm already inflicted.

The authors of "Glass Half Full?" recommend strengthening current accountability systems. One basic measure that the banks could adopt is to require their clients to inform those affected by the project about the accountability mechanisms. The current system relies on luck or chance for project affected people to learn that there is the possibility of filing a complaint should they be harmed by the project. Ultimately, though, the development banks have demonstrated over the last 20 years that they are either unwilling or unable to make the current system function. Too often the banks seek to defend and justify their actions, rather than committing to compensate and protect the communities that development finance is intended to benefit. Instead, a more fundamental change is required that would empower accountability mechanisms to make decisions that are binding on the bank and the client. Remedy cannot rely on the willingness of the party who committed the abuse.

Beyond action specific to accountability mechanisms, a fundamental shift in development finance models is necessary to prevent harm from occurring in the first place. Development banks must incorporate human rights into their overarching concept of development if communities are to be consistently and meaningfully protected.

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