Brookings: Experts - Michael M. Cernea

Safeguard Social Policies in Africa: A Continent-Wide Public Debate

Michael M. Cernea — Sat, 31 Mar 2012 00:00:00 -0400

Internal displacement caused by conflicts or by development projects is one of Africa’s major social and economic problems, raising critical challenges to national governments and to international donors alike. These displacement processes—some erupting unexpectedly as a result of conflicts and others being planned deliberately under both public and private sector projects—are now likely to get a thorough scrutiny due to a major initiative taken by the African Development Bank (henceforth, AfDB). Indeed, in 2011 the AfDB decided to update and improve its set of protective social policies, often known collectively as “safeguard policies” and has chosen a welcome and transparent form for this policy re-examination: the form and structure of a vast public consultation that started in March 2012.

The detailed “Plan” for conducting this broad public discussion, approved by the AfDB’s Board of Executive Directors, is now posted on the Bank’s website, being itself submitted to comments and suggestions. The goal of AfDB’s international Public Consultation (PC) is to design a new, comprehensive Integrated Safeguard System (ISS) policy. Obviously, this is a most important exercise, apparently the first of its kind undertaken by AfDB. It may have far-reaching impacts, not just on AfDB’s performance, but also on the development of the continent’s countries and the livelihood and rights of Africa’s people, especially the poorest.

The AfBD’s public consultation is one of those initiatives in which the process is almost as important as the product. It is therefore important that the consultation be conducted in a way which will achieve well-informed and in-depth communication of experiences and opinions between all those who have a stake in the mission with which AfDB is entrusted by the African countries and the international community: to support development and reduce poverty in Africa. AfDB’s supporters and clients expect the Bank to be open to all inputs, even when such inputs are critical of AfDB’s performance and approaches to date. After all, the aim of the consultation is to improve not only the wording of the new Integrated Safeguard System, but to actually equip AfDB and its staff with the knowledge and approaches needed to implement these policies consistently, more effectively than they have been implemented so far.

For these reasons, AfDB’s initiative deserves the praise, full support, and attention of all stakeholders, including first and foremost, African governments, as well as other development agencies, civil society organizations, private sector corporations, and academic institutes, including the Brookings-LSE Project on Internal Displacement. As the consultation unfolds and the Bank learns from the feedback about the population’s expectation the “Plan” itself must be seen as a “living document,” one that can be adjusted and improved as the PC advances.

The three principal objectives of this public consultation, as defined by AfDB, are to:

(I) Enhance AfDB’s understanding of stakeholders’ perspectives on development’s various impacts, and thus the Bank’s responsiveness to all its stakeholders’ needs;

(II) Establish a shared understanding with its member countries of the goals, principles and requirements that must be embodied in AfDB’s future safeguard policies and the protections these must provide against the risks of adverse impacts; and

(III) Guide and craft, through this consultative process, the formulation of the new ISS.

Over the last decades, the understanding of safeguard policies by the international community and the humanitarian community has considerably evolved. Research on “the politics of protection” demonstrates the built-in great power of these policies, but also underscores that their success ultimately depends on the political will of governments and project sponsors to implement them effectively.[1] It is therefore important that as it moves forward, AfDB’s Public Consultation remains fully consistent with these objectives.

The Need for Some Adjustments

After some preliminary working meetings in 2011, the AfDB took an important “transparency step” by announcing that the PC will comprise five sub-regional open consultative meetings, to cover East Africa (in Nairobi), West Africa (in Dakar), North Africa (in Rabat), South Africa (in Pretoria) and Central Africa (in Yaoundé). To AfDB's credit, scheduling no less than five public consultations that will blanket all African sub-regions testifies to its serious interest in feedback and offers a promising approach to grasping regional differences relevant to the future ISS.

However, it is well known that a vast amount of expertise on African issues is also available outside Africa, primarily in Europe and the USA. In light of this, AfDB could consider holding consultations in the United States and Europe. In the U.S., these consultations could perhaps occur in Washington, D.C., with development agencies, civil society groups, and universities, while those in Europe could be open primarily to specialists, researchers and development practitioners from various countries. By the same token, squeezing the five sub-regional consultations in Africa into only a three-four month period is too short an interval for absorbing and digesting the rich feedback that each one is expected to generate and to accordingly better prepare subsequent consultations. Therefore, spacing out the sub-regional consultations and including meetings in Europe and the U.S. may help enhance the quality of the envisaged consultations and their policy and operational benefits.

The Plan for conducting the PC leaves out one significant element, which is how the AfDB staff will become apprised about the comments, criticisms and constructive proposals that the five consultations will generate. No explicit provisions are made in the Plan to ensure significant participation of key staff, including mid- and high-level AfDB managers in the consultations. Yet these AfDB staff members will play an essential role in implementing the Integrated Safeguard System. Relying only on the very small group of staff members charged with organizing the consultations to convey the substantive results of the PC to other key staff is risky and insufficient.

A useful lesson for the AfDB in this respect can be derived from the recent experience of comparable public consultations on safeguard policies carried out in 2010-2011 by other multilateral development agencies such as the Asian Development Bank (ADB) and the International Financial Corporation (IFC). Their experience has shown that absorption by agency staff of the messages that such consultations generate is an indispensable condition for improving the implementation of revised policies. After all, change is always difficult. Past habits and dogmas are deeply entrenched and tend to create resistance to internalizing critical feedback and improved policy norms. This is why the direct participation and exposure of a significant number of relevant AfDB staff to the envisaged public consultations on safeguards, content and practices must be incorporated into the organization and implementation of the sub-regional meetings. In fact, it appears that the AfDB staff group charged to organize the PC and keep track of its outputs is itself small and understaffed. Hence, reinforcing the PC’s human and financial capacity would serve to facilitate both the consultations themselves and the distilling of the vast volume of feedback produced by the process. Distilling that material and translating it into ISS provisions are certainly complex tasks which should be carried out transparently (as IFC did, posting the additions and improvements made on their website). The scale and importance of this pan-African and international consultation are such that they deserve commensurate intellectual and financial resources, adequate to each stage, in a manner that ensures high-quality final results.

The Need for Information on AfDB’s Practice and Performance

The success of the Public Consultation will also depend on the informational inputs that AfDB itself will offer to PC participants about its own performance in implementing the Bank’s previously existing safeguard policies and the approaches it used including staffing and resource allocation patterns for ongoing monitoring and oversight. In fact, the unspoken premise of the Consultation itself is that previously existing policies are no longer sufficient to carry out AfDB’s development responsibilities as they are presently defined. Yet, serious weaknesses have come to light not only in terms of the policy itself, but also in the operational practices of the AfDB, particularly those regarding due diligence in project preparation, in the economic analysis and financial resourcing allocated for safeguard measures, and in ongoing project monitoring and the evaluation of final outcomes.

A further logical question that the AfDB and the managers of the PC should ask themselves is: how are the participants in the public consultation going to discuss and contribute, if AfDB does not provide them with its own analysis and evaluation of its successes and weaknesses in executing the prior safeguard policies? Surely, participants in the Public Consultation will bring much fresh information and facts from their own experiences with AfDB projects. But the institution that convenes the Consultation has itself an implicit fundamental duty to inform the public about its own self-evaluation of past performance and its own identification of the good practices that deserve to be continued as well as persisting weaknesses which should be overcome. Regretfully, however, the AfDB Plan for conducting the PC does not promise to offer such retrospective analyses as its input into the discussions and as a starting point for public comment. The Plan does provide for very few, perhaps only two, broad studies which are still to be commissioned. The date when they will become available is unknown while the sub-regional consultations are scheduled to unfold very soon. This discrepancy between information made available and the PC appears to be a shortcoming in the planning of the PC. AfDB would be well-advised to reexamine this aspect because its self-analysis of past performance is an indispensable ingredient for the success of the forthcoming ISS and the planned Consultation.

One example could demonstrate how necessary such incisive self-evaluations are as background for the Public Consultation. In January/February 2010, AfDB finalized an independent evaluation report examining how AfDB carried out its supervision of projects over a period of eight years (2001-2008) focusing in particular on how supervision dealt with the risks in AfDB-financed projects. That report made a strong theoretical argument for including risk-related concepts and analysis in AfDB’s on-the-ground work and evaluations. But even a cursory review of that report reveals that the report papered over most of the specific risks present in AfDB projects, or caused by the projects themselves, particularly in displacement and involuntary resettlement components. Rather the discussion of risks was non-specific and remained at a general level. Except for a few references to AfDB’s own financial risks from lending for those projects, the report was conspicuously silent about the severe direct risks which the project imposed upon the to-be-displaced populations, despite the fact that these populations are usually poor, vulnerable, and risk-averse.

The report, which examined Bank project documents, was also totally silent about the fact that AfDB’s own appraisal reports routinely avoided mentioning even the risks identified in AfDB’s own safeguard resettlement policies for projects causing population displacement. Neither the appraisal, nor the supervision reports for the Bank’s projects under review had described and examined candidly the risks that were mentioned verbatim, and correctly so, in AfDB’s own policy document. Indeed, the AfDB safeguard resettlement policy, valid for the period of the evaluation review, had explicitly listed the impoverishment risks inherent in displacement, expropriation and involuntary resettlement, such as: the risk of landlessness; the risk of homelessness; the risk of joblessness; the food insecurity risk; the increased risks to the health of the IDP population; and the risk of IDPs losing access to common property assets. Contrary to this, the so-called “independent evaluation report of project supervision” shied away from mentioning by name any of these actual risks. The same “independent report” glossed over the inconsistencies in the staff’s and middle management’s work, between the correct identification of these risks in the Bank’s policy document and their failure to monitor the same risks in real-life project practice. This incomplete reporting and evaluation left AfDB’s top management and Board of Directors uninformed about that dangerous inconsistency. This case illustrates a category of previous weaknesses in dealing with safeguards, which needs to be brought under public scrutiny during the forthcoming Public Consultation.

To meet this need, AfDB should take two key steps. It should commission and prepare the needed, and genuinely independent, background studies on its previous safeguard policy implementation performance and should also make available existing studies on the issue which have not yet been published. AfDB’s evaluation of its own performance must tap into the rich repository of lessons from its past performance that are still uncollected and unexamined. It is not too late to pursue these two options in order to increase the effectiveness, transparency, and actual benefits of the important PC exercise that AfDB management is initiating.

To read more, download the full opinion here.

[1] See Elizabeth G. Ferris, The Politics of Protection: the Limits of Humanitarian Action. (Washington, D.C.: Brookings Institution, 2011).

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Michael M. Cernea

Population Displacement and Export Credit

Michael M. Cernea — Tue, 06 Dec 2011 00:00:00 -0500

The Safeguards for Human Rights and Livelihoods Need
Professional Support and Reinforcement

Internally displaced persons (IDPs) are increasingly a product not only of conflicts and natural disasters, but also of a growing number of private or public sector infrastructure projects building mines, plants, dams, roads, etc. The footprints of such projects collectively displace large numbers of people. The number and size of such projects are rapidly growing in developing countries, in particular due to the financial facilitations made available to private constructing companies and banks through, inter alia, the Export Credit Agencies (ECAs) of the 34 OECD countries. Lately, some non-OECD countries as well (Brazil, China, India and South Africa among others) have expanded their ECAs’ role, which has compounded the incidence of displacement as well.

Altogether, financial insurance by ECAs has increasingly become a powerful engine driving international development. Today, the combined financial resources marshaled by ECAs are huge by any measure. The Berne Union, which includes the majority of the world's ECAs, reports that its members insured the investment of almost USD 1.2 trillion in 2010 alone. This amount exceeds the total lending currently provided by formal aid assistance through institutions like the World Bank and the regional development banks in Asia, Africa and Latin America combined.

How does the risk insurance process work in practice?

The construction of many infrastructure projects in developing countries is performed by private companies, financed through loans from commercial banks. However, given the high risks to the timely repayment of these loans by the beneficiary countries or the risks of internal military conflicts, civil war, and other unanticipated events, it becomes indispensible that state Export Credit Agencies of developed countries step in. They do so by providing state insurance which takes the form of guarantees for repayment to the commercial lending banks in case of default by the recipient country. This crucial ECA helps unlock vast resources for accelerated development and plays a major worldwide role.

Risks that Demand Structured Counter-Risk Measures

Problems emerge, however, from the fact that while ECA guarantees now insure against some types of risks, they omit other essential risks. For instance, one entire category of risks not addressed is the risk that the projects themselves will negatively impact some populations. This risk, and the people who by no fault of their own incur them, are not insured by the ECAs’ financial guarantees.

Indeed, the internal displacement entailed by some ECA assisted projects inflicts on the affected populations a set of grave risks of impoverishment, documented by empirical scientific research worldwide. Because of such risks, one possible consequence of ECAs’ expanding activities– while unintended, yet nonetheless real and highly toxic– is the severe pauperization of those displaced, despite the quasi-symbolic compensation paid them. Regardless of the benefits of those projects (that usually accrue to other segments of the population) the impoverishment of those forcibly displaced is certainly the polar opposite of ECAs’ own development ambitions. This paradox of unintended consequences is something that demands a firmer response from ECAs, national governments, building corporations, banks, NGOs, and other development actors.

What could and should be done further to prevent or mitigate such counter-purpose risks and effects from occurring?

In response to this question and to related concerns, as well as to sharp criticism from civil society groups,[1] the ECAs collectively adopted in 2003 a fundamental document known as the “Common Approaches” (CA). This document expresses ECAs’ collective adherence to the principles of sustainable development and to the set of World Bank-formulated social and environmental policies known as “the safeguard policies.” The Common Approaches are predicated on the idea that all ECAs would implement them; this is essential to avoid client-flight to the agency with the lowest level of protective norms. The CA call for coherence and consistency in social and environmental standards, binding implementation, greater transparency, public consultation, the adoption of human rights criteria and other major requirements. In essence, the Common Approaches have emerged as a means by which the governments of OECD democratic and developed countries seek to influence what private sector companies are doing. Especially, since the economic risks to IDPs families cannot be technically addressed in the same way as the loan repayment risks, the CA aim to introduce alternative safeguards and counter-risk measures that would protect the livelihoods of IDPs. In this respect, it is also significant–and an indication of convergent thinking on this matter–that in 2005 the UN established a Special Representative of the UN Secretary General for Business and Human Rights, an initiative particularly relevant to displacement and resettlement processes.

What if the General Policy is Improved yet Violations Remain at Project Level?

Over subsequent years, a number of additions to the 2003 Common Approaches were introduced. NGOs demanded consideration for the Guiding Principles on Internally Displaced Persons. And most recently, during 2010-2011 the CA document itself was submitted to public discussion and improved. The result is a new and stronger CA version, presented for approval at the October 2011 meeting of OECD countries and expected to be adopted (possibly with further adjustments) by the end of 2011.

Yet despite the constant efforts between 2003 and 2011 by individual ECAs to enforce the CA norms, many violations of the Common Approaches continued at the project level–for which the responsibility belongs to both the building corporations and host-country governments. The worst corporate-related abuses of human rights have taken place in areas affected by internal conflicts and the tensions of post-conflict situations. Many internally displaced people suffered the consequences. As John Ruggie, the Special Representative of the UN Secretary General on Human Rights and Transnational Corporations, recently stated to OECD/ECAs, without mincing words: "…Transgression instances included forced displacement of populations with no or inadequate compensation, or more generally, a lack of due process for land acquisition; labor rights abuses; denial of access to livelihoods; pollution.Companies have impacted just about all internationally recognized human rights in many ways, including by interfering in the exercise of classic civil and political rights like freedom of assembly”.[2]

In other words, despite the commitment of the Export Credit Agencies to condition and gear their loan guarantees towards ensuring sustainable development, neither governments nor private companies have been held to account for violating the Common Approaches. Because of such violations, people displaced from these projects have suffered the most, as they were deprived of the protection inscribed in the CA and international guarantees. In response, affected populations increased their active resistance to brutal displacement divorced from resettlement and livelihood restoration. Construction companies, in their turn, have not received the requisite help from host governments for countering the kind of risks and losses that trigger both the political and physical opposition of affected populations. And a frequent facilitating factor of such transgressions appeared to be ECAs' lack of capacity (and time) to effectively monitor consistency between their CA platform and project execution on the ground. Indeed, and paradoxically so, after insurance guarantees are agreed upon, there is no adequate ECA monitoring or supervision on whether projects actually implement the social and environmental safeguards that served as the premise and basis for granting credit insurance in the first place. The CA only notes that ECAs should–for projects with major social or environmental impacts–require ex post monitoring reports and related information. In other words, monitoring is required only after the fact, rather than in an ongoing fashion when there is a real chance to correct distortions and prevent further deteriorations of the CA standards.

In sum, credit guarantees for projects with large environmental and social impact are still being delivered based only on paper promises and reports, but without verification in the field. ECAs are hampered in this respect also by insufficient professional environmental and social expertise among their staff. However, in fairness to ECAs’ enormous agendas and efforts, it must also be recognized that given the extremely broad span of projects they insure it would be unrealistic to expect the ECAs’ staff, however enlarged, to do all the direct monitoring themselves. This is largely the task of each project and its public or private owners. Logically therefore, capacity for such monitoring must be included into the pattern of regular project governance, with information accruing both to the project and to ECAs.

Along this line, some remarkably positive experiences ought to be highlighted as well, however insular. A recent case was the Ilisu Dam in Turkey, the largest dam to be started in Europe in the last decade. To support it, three major European ECAs (from Germany-Euler Hermes, Switzerland-SERV, and Austria-OeKB) devised sound tools for assessing the consistency of execution with CA norms and the export credit agreement. Insurance was issued for no less than half a billion USD, one third of the Ilisu Dam’s estimated cost, and the three ECAs decided in this case to translate the Common Approaches into explicit monitoring Terms of Reference (ToRs) on displacement and resettlement, the environment, and the protection of cultural heritage. Turkey’s government agreed with the ToRs, committing itself to their time-bound implementation. The ECAs and Turkey jointly appointed Committees of Experts (CoEs) consisting of independent professionals and scholars of widely recognized competence to monitor project progress in line with the ToRs and the Common Approaches. The agreement was concluded but the CoEs were allowed by Turkey to go to the field only one year later, at the end of 2008.

The outcome was sobering for all concerned. All three CoEs reported that the agreements reached with the ECAs on safeguards were not implemented. In fact, they were not even known to the staff of the Turkish agencies tasked to implement the project. The Experts' reports triggered ECAs’ concern, and were followed by repeat joint field-visits by CoEs and ECAs. Substantial support and advice were given to project authorities as to how to improve policy, correct the violations of the agreement and improve performance. Unfortunately, the response from project authorities was unsatisfactory. Default warnings were issued by ECAs, in line with the credit agreement. Nonetheless, corrections were not made in time. Starting construction despite the lack of preparedness on the ground threatened to cause precisely the kind of displacement, catastrophic impoverishment, damage to cultural heritage sites and the further tarnishing of ECAs’ reputation that the ToRs aimed to prevent. Civil society groups– in both European countries and Turkey itself–critiqued the project’s defective set-up, sub-standard preparation for execution, and Turkey’s irresponsible under-compensation and under-financing of resettlement (contrary to current international norms) on equity, cultural, and environmental grounds. Additional advisory efforts were mobilized by the ECAs in support of improving Turkey’s policy and preparations for project start. But even up to the deadline project authorities failed to genuinely implement the advice received and did not bring the project into compliance with the agreement.

Under these conditions, the three ECAs took the undesired but necessary decision to cancel the insurance agreement for the Ilisu project. The ECAs had done in this case virtually everything in their power to implement the CA. But they declined to support–financially and morally– the unpreparedness that was morphing into a disastrous displacement and impoverishment of some 60,000 people and as a massive loss of important cultural heritage. They also had to preempt grave reputational loss to their own standing as agencies promoting sound development. In the end, this meant warning country authorities about the predictable consequences and calling off their support of the project.

This significant experience in one of the ECAs’ biggest projects led to valuable insights into how the Common Approaches can and must be improved and monitored further, beginning with the preparation stage before the final agreement is reached. The essence of llisu’s lessons was that the ECAs need to not only adopt policy declarations on sustainability, but–in cases with internal displacement and severe impacts on human rights– they also need to create a reliable mechanism for verification on the ground and for advice and professional monitoring during implementation, through competent CoEs.

Appropriate Next Steps: Addressing Human Rights

Fast-forward now to the revised version of the Common Approaches, adopted at the October 2011 OECD meeting. The new version of the CA document benefited from public discussions leading up to its approval. It marks a significant improvement over the previous version, but it also displays lingering weaknesses and loopholes that threaten to undermine its “traction power” at the operational level.

It is not the purpose of this commentary to discuss these gaps one by one.[3] Yet two general and important issues need to be mentioned.

First, it appears that the lessons of Ilisu are still to be translated into explicit operational steps, enabling the ECAs to create both better in-house and in-the-field independent capacity for effectively monitoring how the sustainability and safeguard criteria are not only written into the projects' terms, but also applied on the ground during the preparation and execution phases of projects. As a start, the ECAs could first simply do a review and stock-taking exercise to identify the projects that involved relevant social impacts and distill their own best practices into standards and operational procedures for going forward. This would help pinpoint their own methods to help overcome the obvious existing weaknesses in implementing and monitoring the Common Approaches.

Remarkably, one of the major innovations and highly constructive elements included in the revised 2011 version of the Common Approaches is an explicit reference to the human rights context of supported projects. Development agencies and practitioners are now increasingly expected to include human rights protections in the policy templates for development projects; for the first time, the Common Approaches do respond to this call.

In this light, the assessment exercise we propose on consistency, accountability and best practices in monitoring could also be designed as an opportunity and tangible practical step towards including the protection of human rights into ECAs’ concerns. The potential benefits from this novel element of the CA are indeed vast. The gains will not only be in terms of human rights proper, but also in terms of sheer economic benefits from doing business free of the social tensions always triggered when human rights are disregarded.

Until now, the ECAs have bent over backwards to ensure the flow of financing and to proclaim better standards in their Common Approaches, but they have not helped the countries themselves to get the expert knowledge necessary to competently understand and apply these standards. Such knowledge is still missing in numerous developing countries: for example, surprising as this may be, the majority of developing countries have not yet formulated their own domestic policy on development-inducedresettlement to guide in practice the involuntary resettlement entailed by development. The international development aid community, however, has found means to provide knowledge support in such limit situations by incorporating into the very fabric of major projects the provision of expertise for advising recipient countries and for monitoring the consistency of project practice with the adopted standards.

The mechanisms most frequently used (e.g., by the World Bank, ADB, and other agencies) are panels of experts (PoEs), whose periodic visits and assistance can easily become part of the project’s fabric itself. The private sector banks that extend the actual loans guaranteed to them by the ECAs also have a deep vested interest in the implementation of the Common Approaches. But it isn’t even clear if the ECAs require consistency and accountability on their side as well, as it is fully possible to do under the Equator Principles[4] adopted by the world’s largest private transnational banks. However, the newly adopted version of the Common Approaches does not yet have an article recommending the creation of such a monitoring capability or of flexible functional alternatives to it.

It would be both efficient and relatively simple for all concerned– the ECAs, the lending banks, the client corporations and the benefiting country governments – to rely upon and substantially gain from such competent and independent specialists, once such panels become a normal procedure rather than an exceptional and happenstance one. Such small panels of experts (PoEs) could be tasked with a combination of advisory, monitoring and reporting functions. They could serve in a practical manner to aid countries that do not yet possess such expertise and independently inform ECAs on the quality of the implementation of the Common Approaches provisions. The composition of such panels must surely vary by project size and sector, and their specific tasks should be supported and included as a project cost, since the project owners will primarily benefit economically and socially from the panel's expert advice. Findings and recommendations of these specialist groups should be reviewed jointly by ECAs, the companies benefiting from loan guarantees and the project owners themselves in the host country. The operational procedures for such panels could probably be specified in an Annex to the Common Approaches so as to build into them both uniformity and the needed flexible adaptation to project specificity.

Broadening the ECAs Family under the Common Approaches

A second important issue on which the new CA version brings new elements (but not yet fully clear provisions) is the need to promote a level playing field for officially supported export credit guarantees by both OECD countries' ECAs, and non-OECD countries' ECAs, such as those of China (Sinosure), Brazil (SBCE), and other developing countries whose resources now allow capital export for international development. The application of international safeguard standards by ECAs of non-OECD members is of great importance for both international development and their own efficiency, as well as for their countries’ reputation in promoting sustainability standards universally. Yet the ECAs of non-OECD countries are today still lagging far behind in promoting such safeguard standards in the countries where they operate.

The non-OECD ECAs invoke various rationales, like the lack of statutory authority in benefiting countries, or claim that they are just commercial entities and thus have no role in relation to social safeguards or human rights. Such arguments have no standing in the real world. They only compromise the political reputation and standing as development actors of those agencies. It is true that the ECA itself cannot alone succeed in implementing these improved approaches, but their political, moral and corporate responsibility as state agencies is to demand that the private corporations they insure and enable to work do so accountably. These companies obtain profitable contracts by receiving official credit guarantees on condition that they abide by the same reasonable safeguard and sustainability standards as other ECAs. In the case of China's ECA, for instance, there is still a vast distance between the high standards for overcoming the ills of displacement applied in China itself, and the weak or absent policy standards in comparable projects executed with Chinese insurance in African or other countries lacking adequate standards and capacity.

The failures in the social and environmental performance of such projects breed social and environmental disasters, as well as political instability, which can easily feed and ignite conflicts. The credit agencies of either OECD or non-OECD countries cannot be relieved of their responsibility when such disasters occur in the wake of projects they insure. Feedback from such projects indicates that the populations that are badly harmed tend to become more hostile to the hand they see inflicting harm on them, which is often the foreign company executing the project. Their anger is less often turned toward the more distant responsible actor, which is the government of the respective country itself, which owns the project built by the foreign companies. The non-OECD ECAs could also productively rely on professional independent panels in many projects, which would ease and support the non-OECD ECAs’ own work by providing the monitoring, advice, and knowledge that the foreign technical construction companies cannot supply themselves within alien cultural contexts.

In sum, the measure for success in applying sound Common Approaches and social and environmental safeguards is not given by financial dimensions alone, or by wishful provisions inserted only in project papers and seldom practiced. A tougher real-life measure is the size of the damage that unsustainable approaches in development can inflict both on people's livelihoods, human rights and on the sustainability of the affected countries' economies as well.

This is the most important reason why further improving both the content and the effective application on-the-ground of the Common Approaches is indispensable.

[1] See, for example, among many other documents, the Jakarta Declaration, 2000, by 347 NGOs from 45 countries. http://www.eca-watch.org/goals/jakartadec_endorselist.html, http://www.eca-watch.org/ECA/race_bottom_take2.pdf

[2] Ruggie, John. "Engaging Export Credit Agencies in Respecting Human Rights," OECD Meeting, June 23, 2010.

[3] See, for instance, comments made as part of the public discussion of the latest CA version: ECA-Watch, “Comments submitted to OECD on the Revised Recommendations on Common Approaches…”, November 8, 2011.

[4] The “Equator Principles” (EPs) are a credit risk management framework comparable to the Common Approaches that were adopted in 2004 by another segment of the international financial architecture: this segment consists of the major transnational and national banks involved in direct project finance. The Equator Principles are used by their adherent institutions for identifying, assessing and managing social and environmental risks in transactions for extending the actual finance credits to states and/or construction corporations directly. Project finance is predominantly used to directly fund the development and construction of major infrastructure and industrial projects. The Equator Principles were initially issued and adopted by 10 leading mega-banks. Between 2004-2011 the number of co-signatory banks has increased to 72 banks, including among them many of the largest banks of Australia, Britain, Brazil, Canada, Egypt, France, Germany, Japan, Netherland, Nigeria, Scandinavian countries, South Africa, United States and other countries. (As of 12/01/11)

The EPs are adopted voluntarily by these financial institutions and are applied when total project capital costs exceed US$10 million. The EPs are primarily intended to provide a minimum standard for due diligence to support responsible risk decision-making. The content and norms of the Equator Principles are based on the International Finance Corporation (IFC) Performance Standards on social and environmental sustainability and on the World Bank Group Environmental, Health, and Safety Guidelines (EHS Guidelines or “safeguard policies”). They are intended to serve as a common baseline and framework for the implementation by each adopting institution of its own internal social and environmental policies, procedures and standards related to its project financing activities. These mega-banking institutions have in turn taken actions themselves to promote the Equator Principles and norms through the loans they extend for financing development projects by state and non-state clients. The Equator Principles Financial Institutions (EPFIs) committed formally to not provide loans to projects where the borrowing client will not–or is unable to–comply with their respective social and environmental policies and procedures through which the EPs are carried out and monitored.

Authors

Michael M. Cernea

Preparing for Resettlement Associated with Climate Change

Multiple Coauthors and Michael M. Cernea — Fri, 28 Oct 2011 00:00:00 -0400

Editor's note: Follow up articles to this piece by Michael Cernea and other scholars were written for the Population-Environment Research Network Cyberseminar. In his follow up article, Mr. Cernea asserts that the climate change literature underestimates the risks of poverty and impoverishment. He argues the voluntary decision of some inhabitants living in climate change high-risk areas to migrate earlier than others will represent an important trend, which may sharpen the risks of dispossession and impoverishment for the migrants and their former communities.

This article was authored by the following people: Alex de Sherbinin, Marcia Castro, François Gemenne, Michael Cernea, Susana Adamo, Philip M. Fearnside, Gary Krieger, Sarah Lahmani, Anthony Oliver-Smith, Alula Pankhurst, Thayer Scudder, Burton Singer, Yan Tan, Gregory Wannier, Philippe Boncour, Charles Ehrhart, Graeme Hugo, Balaji Pandey, Guoqing Shi

ABSTRACT: Although there is agreement that climate change will result in population displacement and migration, there are differing views on the potential volume of flows, the likely source and destination areas of migrants, the role of climatic versus other factors in precipitating movements, and whether migration represents a failure of adaptation. The authors argue that climate change mitigation and adaptation actions, which will also result in significant population displacements, have not received sufficient attention. Given the emergence of resettlement as an adaptation response, it is critical to learn from research on development-forced displacement and resettlement. The authors discuss two broad categories of potential displacement in response to (i) climate impacts themselves and (ii) large-scale mitigation and adaptation projects. Additionally, they discuss policy approaches for facilitating migration and, where communities lack resources to migrate, suggest guidelines for organized resettlement.

View the full article at sciencemag.org » (subscription required).

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Multiple Coauthors
Michael M. Cernea

Publication: Science Magazine

On the Front Line of Climate Change and Displacement: Learning from and with Pacific Island Countries

Michael M. Cernea, Elizabeth Ferris and Daniel Petz — Tue, 20 Sep 2011 09:39:00 -0400

The Pacific Island countries are internationally regarded as a barometer for the early impacts of climate change. Their geophysical characteristics, demographic patterns and location in the Pacific Ocean make them particularly vulnerable to the effects of global warming. Small Island Developing States, a UN-established category which includes most Pacific Island countries, are characterized by a high ratio of shoreline to land, low elevation, settlement patterns concentrated in coastal areas and a narrow economic basis—all of which put them at heightened risk. Perhaps more than in any other region, the populations and governments of Pacific Island countries are keenly aware that they face severe and multifaceted risks as a result of climate change. Their lives and livelihoods are linked to the Pacific Ocean; rising sea levels and other effects of global warming threaten not only their physical assets and coastal zones, but also their way of life and perhaps their national identities.

In the Pacific Islands, this acute awareness of the potential impact of climate change comes not only from books and studies, but from first-hand knowledge and ongoing experiences with the effects of the world’s changing climate. The value and relevance of these experiences are not confined to the Pacific Islands, but are relevant for the world at large. This paper aims to conceptualize and distill some dimensions of these experiences, in light of the discussions and presentations made at the ‘Regional Workshop on Internal Displacement caused by Natural Disasters and Climate Change in the Pacific’ (May 2011) organized by the Brookings-LSE Project on Internal Displacement in conjunction with the UN Humanitarian team in the Pacific. The synthesis report on the workshop’s proceedings contains additional information in support of the issues outlined and examined in this paper.

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A Historic Landmark in Development: Reflecting on the First Resettlement Policy

Michael M. Cernea — Fri, 01 Jul 2011 00:00:00 -0400

Editor's note: Below is the introduction from "A Historic Landmark in Development: Reflecting on the First Resettlement Policy - An Interview with Professor Michael M. Cernea by Professor Hari Mohan Mathur"

Some 30 years ago, a historic landmark was set in the thinking and practice of development. On February1980, the world’s first ever social policy on development-caused forced displacement and resettlement (henceforth, DFDR) was officially adopted by the world's leading development agency. The policy’s name was "Social Issues in World Bank Financed Projects with Involuntary Resettlement," code-named the "Operational Manual Statement (OMS) 2.33."

To mark the 30th anniversary. We invited Professor Michael M. Cernea, who in the late '70s initiated and wrote this policy at the World Bank, for an "interview at distance" to share his recollections and reflections on the policy's genesis, its itinerary over 30 years, and its relevance today. As the interview became a dialogue over time and resulted in a transcript longer than what this Newsletter can publish, we are printing only brief excerpts; the entire transcript will likely be published in a full-size journal. We will inform the Newsletter’s regular readers on where the full dialogue will be published and become available.

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Publication: Resettlement News, 23/24

A Historic Landmark in Development: Reflecting on the First Resettlement Policy

Michael M. Cernea — Fri, 01 Jul 2011 00:00:00 -0400

Editor's note: In "A Historic Landmark in Development: Reflecting on the First Resettlement Policy—An Interview with Professor Michael M. Cernea by Professor Hari Mohan Mathur," Michael M. Cernea discusses the origin of the world’s social policy on development-caused forced displacement and resettlement and his role in its creation.

Hari Mohan Mathur: Our Newsletter celebrates 30 years since the adoption of the world’s first official policy framework on population displacement and resettlement caused by development projects. What gave that policy historic significance at that time and subsequently, to this very date?

Michael M. Cernea forced population displacement is one of the most complex problems faced in development, amounting often to a major setback or tragedy for those affected. On the broader social scale it is a costly pathology that must be avoided as much as possible. It occurs on a global scale. The risks and losses it brings cause deep social discontent and may entail political instability.

The adoption of the world's first Resettlement Policy in 1980 was a crucial novelty, both in the theory and in the praxis of development. No other international agency, and no country Government, had ever before crafted and instituted a multisided social policy to reduce and reverse the damaging chain of effects triggered by coerced displacement and state-imposed asset deprivation. Governments and agencies only willingly unprotected people. That "first adoption" the social policies for international development.

Surely, the new policy had its imperfections in its first iteration. But it represented a paradigm change because it was not just a turning point from an old policy to a new one: it was a big leap from NO policy at all to norm-guided institutional behavior. It called for 180 degree reversals of mind sets and entrenched routines. It instituted both a new theoretical model and a new operational model for implementing DFDR processes.

In subsequent years, the historic importance of the new policy evolved and appeared gradually clearer, as it became the template, the model for similar policies adopted by other multilateral and bilateral development agencies, followed later by private sector banks and corporations as part of the Equator Principles. This process is far from finished; it continues now and will continue in the following years. India's draft policy on Land Acquisition, Rehabilitation and Resettlement submitted to the Lok Sabha on July 27, 2011, is part of this vast world-wide process.

Mathur: What triggered the preparation and adoption of that policy, 30 years ago, in 1980? If it was so important, why didn't the World Bank adopt it earlier?

Cernea: A huge social disaster triggered it. Sad as this may sound, the context in which the Resettlement Policy was crafted and adopted re-validates a grim observation: it often takes a disaster to awake Governments and institutions, and make radical change accepted. The social disaster that acted as catalyst in this case was Brazil’s Sobradinho Dam, built by the country's Government through a WB financed project.

Read the full interview »

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Michael M. Cernea

Publication: Resettlement News