Activists Worried About BRICS Bank’s Lack of Transparency

Though the BRICS New Development Bank has announced $811 million roll-outs for renewable energy projects in four countries, activists are worried that the lack of civil society consultations and clear economic and social frameworks will adversely impact human rights.

File photo of BRICS leaders ate the G20 summit, November 2015. Credit: GCIS/ Flickr CC BY-ND 2.0

File photo of BRICS leaders at the G20 summit, November 2015. Credit: GCIS/ Flickr CC BY-ND 2.0

New Delhi: The BRICS New Development Bank, a multilateral development bank operated by the BRICS states – Brazil, Russia, India, China and South Africa –  was set up with the mandate to provide an alternative to the existing World Bank and IMF, perceived to be dominated by the United States.

But one year on, it is not at all clear how the New Development Bank is going to be different.

According to the ‘Agreement on the NDB’, “the bank shall support public or private projects through loans, guarantees, equity participation and other financial instruments.” In addition, the NDB “shall cooperate with international organisations and other financial entities, and provide technical assistance for projects to be supported by the Bank”.

On April 13 and 14, the NBD board of directors approved the first lot of projects in meetings in Washington, DC. The first package of loans is worth around $811 million, according to media reports, with projects in Brazil, China, South Africa and India in the renewable energy development sector.  According to bank estimates, the renewable energy field projects (with a combined capacity of 2.37 megawatts) can help reduce harmful emissions by 4 million tons every year.

Activists from the BRICS countries, however, are dissatisfied with the way things are functioning at the NDB, and have called for transparency as well as clear and stringent social and environmental protections.

In a letter signed by five activists (each from a different BRICS country) sent to the president of the NDB on April 4, they state: “It is imperative that robust operational policies dealing with social and environmental management, transparency, and accountability are in place prior to project selection and disbursements. We are deeply concerned that the bank is operating without meaningful engagement with civil society and appears to be selecting projects without the necessary policy framework to identify social and environmental risks and prevent harm. We are additionally concerned that the bank’s plans to fast-track loan approval may come at the expense of necessary due diligence. … Even projects that are deemed socially and environmentally friendly, such as wind power plants, can generate adverse impacts and thus should be subject to environmental and social impact assessment prior to their approval as well as supervision and management throughout implementation. We call upon the NDB and our national representatives to ensure that a robust policy framework is developed through a meaningful consultation process with civil society and that all operational policies are disclosed.”

“This is an unhappy beginning for a development institution,” stated Bonita Meyersfeld, director of the Centre for Applied Legal Studies at the University of the Witwatersrand, South Africa, in a press release issued by civil society organisations. “Given the hopes and aspirations of the BRICS NDB to advance economic development of the BRICS states, it is seminal that it embrace the transparency, openness and commitment to human rights indispensable to stable and sustainable investment projects.”

Srinivas Krishnaswamy. Credit: theecologist.org

Srinivas Krishnaswamy. Credit: theecologist.org

The activists have not received any response to this letter till date. “Our concerns remain that though the NDB has announced a project roll-out, there have not been any consultations with civil society groups on the various policies that the bank has,” Srinivas Ramaswamy, director of the Vasudha Foundation in India told The Wire. “Especially at a time when the World Bank, ADB and others are revamping their environmental policies (though people may have issues with it) and doing several rounds of consultations on environmental and social policies before they give a loan for a project, it is a little concerning that the NDB is announcing loans without doing any of this. They may have internal policies, but none of that is available in the public domain. Working in the clean energy space, I’m fine with the projects that have been announced. But again, we know only the basic, top-level information. We don’t know the processes or the exact locations. Of course there are probably processes in place in individual countries, but it would be good to have in place a set of criteria for identification of projects before the roll-outs.”

Caio Borges. Credit: ihrb.org

Caio Borges. Credit: ihrb.org

“Even if the project risks were assessed in accordance with an environmental and social framework, this is not how a development bank should operate,” added lawyer Caio Borges from the human rights NGO Connectas in Brazil, speaking to The Wire. “The communities who will be directly or indirectly affected by the projects have the right to be consulted prior to its approval by the bank’s competent bodies. Information about the potential impacts of the projects and plans for mitigation should be made available to the public in a timeframe that allows for the interested parties to provide their inputs and express their concerns. Secrecy and lack of consultation must not be the values of an institution that aims to promote a new development model.”

Consultations with civil society groups would be immensely helpful to the NDB when assessing projects, Borges added, given their decades of work in the area. “Civil society groups and social movements have learned a lot in the past decades about the potential adverse impacts of infrastructure projects and about the measures to mitigate the harms to communities. The NDB should not ignore this immense accumulated knowledge and commit the same mistakes of traditional institutions in thinking that it knows what is best for the people, or that it detains the exclusive capacity to determine what true sustainable development really is. Experience shows that projects implemented top-down are more likely to generate human rights-related and environmental conflicts. Consultation with civil society and potentially affected groups would dramatically enhance the NDB’s legitimacy, which in turn would result in better development outcomes. By engaging meaningfully and in good faith with civil society, the NDB would realize that social participation, commitment to human rights and economic returns are not antagonistic objectives, rather they complement each other.”

“Transparency is like a road marking on the path to sustainable development. Locals have to know which projects may come and which effects may emerge and last,” added Alexander Kolotov, director of the Russian Krasnoyarsk regional public environmental organization, Plotina, in a press release, seconding Borges’ view. “These shouldn’t be surprises – the local communities to be potentially affected should receive all necessary information in advance.”

Part of the NDB’s first loans is a $250 million sanction for India’s renewable energy scheme. The money will go to Canara Bank, who will then lend it out to renewable energy ventures.

  • Himanshu Damle

    Well, the usual worries for the activists. But, isn’t the bank already crippled with respective economies (save for India where the statistical jugglery takes care!!) flirting with downturn. One common factor is a decline in credit growth, often from stratospheric levels, leading to a sharp tightening in domestic monetary conditions. China is, of course, the prime example of this phenomenon, but it is far from the only one. Brazil, India, Russia, Hong Kong, Singapore, Indonesia, Philippines and Thailand have all seen bubble-like increases in credit/GDP ratios since 2010, and they now face prolonged workouts from the excesses caused by earlier lax policies. A disappointment on the policy front has been a failure to maintain market-friendly and business-friendly advances in domestic regulatory and taxation policy. The original catch-up in growth rates owed much to closing productivity gaps with western nations as trade expanded, the population shifted to cities and public investment surged (especially, again, in China). It was always assumed that the later phases of catch-up would be more difficult, relying on economic reforms that would prove politically difficult to implement. So, where exactly is all this going on the banking front? As a Bloc, things might look a tad hunky dory, but banking, and with AIIB making strides leaps and bound, the CSOs in whatever garb need to worry on that front. But, it ain’t always flogging the dead horse, its doing it the dying horse.