By Toby McIntosh
The Asian Infrastructure Investment Bank fails to disclose adequate information about its projects, particularly about their environmental and social consequences, according to a report from Just Finance International and the Heinrich-Böll-Stiftung foundation.
“The AIIB standards contain the right words and tick all the boxes,” wrote Korinna Horta and Wawa Wang, “But a closer reading reveals loopholes and caveats that undermine transparency and fail to ensure public access to information.”
In its efforts to be efficient in making infrastructure investments, the AIIB is “sabotaging the very due diligence safeguards that should ensure minimum harm to the affected communities across Asia,’’ said Wang, program director of Just Finance International.
Transparency is of growing importance, the report says, because the AIIB, which thus far has mostly contributed funds to projects initiated by other multilateral development banks, is increasingly developing its own lending pipeline for infrastructure projects. The Beijing-led AIIB opened in 2017 and has 104 member countries (including many European countries, but not the US and Japan).
“AIIB shareholders must fully employ their political capital to ensure that AIIB-supported, large-scale infrastructure projects do not cause both local and global harm,” the authors conclude.
Problems Seen in Disclosure Policy
The report finds a variety of weaknesses in the bank’s Policy on Public Information (PPI) and in the related Environmental and Social Framework (ESF).
“The PPI is largely limited to listing general principles and does not include a listing of documents to be made public,” the 32-page report says, also noting various exceptions to disclosure. Nondisclosure can be justified “if a government considers the information to be sensitive.” An exception concerning “Due Regard to the Efficiency of the Bank,” the report says, “translates into a loophole where efficiency and cost considerations may override the stated intention of maximum transparency.”
Documents about proposed projects are not uniformly released in advance of their approval by the AIIB Board, according to the report. In addition, the AIIB does not disclose monitoring reports on its projects or its Early Learning Assessments.
The related Environmental and Social Framework addresses public access to information on the environmental and social impacts of AIIB investments, but disclosures “can be deferred or not take place at all, as in cases where transactions may be commercially sensitive,” the report says.
Transparency is weak and sometimes arbitrary when the bank relies on financial intermediaries, such as private banks, to handle investments and also to conduct the environmental and social assessments, the report says.
The AIIB’s claims that financial intermediaries (FIs) will follow environmental and social review policies, but the report comments, “…this is not convincing in the absence of publicly available assessments of the FI’s environmental and social management systems, implementation capacity, and track record.”
The AIIB does not disclose its assessments, according to the report, stating, “Although the AIIB claims that all will be done in accordance with its own environmental and social policies and that it will retain an environmental and social review function in initial sub-projects, this is not convincing in the absence of publicly available assessments of the FI’s environmental and social management systems, implementation capacity, and track record.”
Disclosure gaps exist at other development finance institutions that delegate to financial intermediaries, as is being documented by the NGO Public What You Fund. (See most recent EYE article.)
The Horta-Wang report also says that the AIIB is becoming more closely associated with China’s Belt and Road Initiative (BRI), with the AIIB “now to take over the management of one of the BRI’s financial programs at Beijing’s request, although these activities will not be submitted to the international supervisory body,” according to the press release.
The AIIB annual meeting is being held Oct. 26–28 in the United Arab Emirates. The media office did not respond to a request for comment.
A report released by Recourse and Urgewald says that the AIIB’s an accountability mechanism, the Project-affected People’s Mechanism (PPM), has yet to receive a single complaint.
Report author Kate Geary of Recourse said, “The AIIB clearly has an accountability deficit, when its accountability mechanism does not apply to half of its portfolio. This leaves communities affected by AIIB’s investments no way to ensure AIIB is living up to its environmental and social commitments. We call on the AIIB to close accountability loopholes when it reviews the PPM.”
Separately, a coalition of civil society groups on Oct. 26 urged the AIIB Board of Directors to refuse making a loan to Belarus.
Criticism by UN Human Rights Office
The AIIB early this year was criticized by the UN human rights officials for a lack of diligence to identify, prevent, mitigate adverse human rights impacts relating a project in Indonesia backed by the AIIB. The UN statement expressing concerns about land grabs and forced evictions.
“In light of the dark history of human rights violations and land grabs in the region, the AIIB and businesses cannot look the other way and carry on business as usual. Their failure to prevent and address risks of human rights abuses is tantamount to being complicit in such abuses,” said Olivier De Schutter, a United Nations Special Rapporteur on extreme poverty and human rights.
The AIIB replied, stating. “We recognize that there is room for improvement in stakeholder engagement by all parties concerned ” and describing “an action plan” to improve stakeholder engagement on the project.
Controversy about the $3 billion tourism development project is continuing, according to a May 24 BBC report, a July 29 article in Benar News and an article on Sept. 13 in Equal Times.
The Horta-Wang report includes the Mandalika Urban Development and Tourism project among several examples about AIIB transparency.
