ADB urged to raise infra loan safeguards

MANILA, Philippines – The Independent Evaluation Department (IED) of the Asian Development Bank (ADB) is urging the multilateral development institution to raise the standards for environmental and social safeguard systems required of member countries borrowing funds for infrastructure projects.

In a new report, the IED said narrowing the wide infrastructure gaps in Asia is vital to ensuring strong and sustained growth in the region but strong safeguards to protect the environment and affected communities are needed amid the risk of increasing environmental degradation and rising threat of climate change.

Examples of such environmental and social safeguards are the provision of livelihood support to persons who would be displaced by the construction of infrastructure projects as well as direct mitigation of various ill-effects to the environment of hard infrastructure projects.

The report said few government agencies in borrower nations employ regular environmental specialists to enforce safeguards in ADB-financed projects and that “ADB’s specialists were over-stretched.”

“ADB and its client governments have made significant progress in assessing the environmental and social risks of development projects and in designing measures to mitigate them,” said Tomoo Ueda, the report’s main author. “The implementation of safeguard measures remains a big challenge because of regulatory, institutional and budget constraints in borrowing countries, and this was a common theme throughout the evaluation.”

As such, Marvin Taylor-Dormond, director general of the IED, said ADB must intensify its work with borrowing countries to strengthen their country safeguard systems particularly at the local government level where implementation capacity is weak.

“Many ADB borrowing countries already have sound laws and regulations on environmental and social safeguards. Our main concern is that many institutions and agencies, particularly in local government, do not yet have the resources or the skills needed to implement them in ADB-supported projects,” he said.

With improvements in country safeguard systems, Asia stands to attain greater financing from ADB and other development banks, said the report.

By IED estimates, developing economies in Asia would require $8 trillion in investments between now and 2020 to finance its infrastructure buildup. Governments are also increasingly seeking alternatives to public funding and looking at the private sector to help bridge the infrastructure gap.

“The states are too high for safeguard standards to slip at a time of rapidly unraveling development pressures across Asia; the response needs to be stronger safeguards, not more flexible ones,” said Taylor-Dormond.

IED said ADB member countries should consider this as more financing for infrastructure is becoming available from established and new developmental institutions.

Such lenders have also begun lending to governments for the very purpose of strengthening their environmental and social safeguards for infrastructure projects funded by development banks.

The bank also noted that the cost of strengthening safeguards are recovered through various economic benefits such as tourism.

“The take-home message of the benefit-cost analysis is that safeguards create positive net value, and this increases with higher safeguard standards,” said Ueda.