The AIIBs vision must comprise multi-dimensional aspects, including social infrastructure like health and education. It should focus on people, their involvement and fundamental rights in the city.
The Asian Infrastructure Investment Bank (AIIB) has come out with a draft for ‘Sustainable Cities Strategy’ — financing solutions for cities in Asia to make them economically, environmentally and socially sustainable by being Green, Resilient, Efficient, Accessible and Thriving (GREAT). The AIIB had earlier been criticized for implementing projects without adequate policies and frameworks. The draft strategy was open for public consultation for an eight-week period ending October 21, 2018, for civil society organizations and other concerned organisations to give their comments.
The earlier policy consultations of the AIIB on environmental and social safeguards saw a number of groups — including human rights groups and UN bodies — commenting on the draft with alternate suggestions. Indian civil society groups had earlier petitioned the AIIB on a number of issues, including environment and social framework, on concerns on transparency and the opening up of space for the backdoor financing of coal projects through financial intermediaries without adequate environmental and social oversight.
The consultation on sustainable cities has come at a time when the AIIB has initiated funding for projects like the Amravati Capital City Project in Andhra Pradesh, which has seen a concerted and massive backlash due to the land pooling system and construction of the capital on the floodplains of the Krishna river. The project has been severely criticized by farmers, farm workers, environmentalists and civil society groups.
It has also received adverse comments from the Inspection Panel, the World Bank’s grievance redressal mechanism, which was looking at the multiple violations of this World Bank co-financed project. Even after the panel’s report, the AIIB chose not to take any position in this regard.
The current strategy shows that neither has it learned anything from its own experience, nor from that of other multilateral development banks. Moreover, the AIIB could have drawn on the experience and frameworks developed by rights-based groups, or, by the UN rapporteur on housing. The Amravati project does not seem to have influenced their strategy.
The AIIB city strategy seems to over-emphasize on urban infrastructure over other forms of social infrastructure, like education or health. The strategy fails to understand the differential impact infrastructure will bring to the various social groups in the city, with some people benefitting, with others getting seriously affected. There is nothing new in the strategy as it follows the same path of investment in urban transport, energy, water, waste management, as is being done by other multilateral development banks.
The overall projection of the infrastructure gap of $1 billion in Asia seems to be the interest with which the AIIB is stepping in. The strategy has no unique vision. It seems to be a sales pitch to finance ‘bankable’ projects and reap profits from it.
The AIIB’s strategy identifies that many Asian cities experience inadequate access to clean water and sanitation, unreliable power supply, traffic congestion, air and water pollution, inefficient land use, and lack of decent shelters for low-income groups. This, however, has not translated into an enquiry on the people who are left out. Why?
The draft strategy comes with an automated solution of lack of finance and management capacity. There is inadequate attention given to the urban poor communities who provide services and live in ecologically sensitive spaces of the city and their role in building sustainable cities.
A number of projects identified in the AIIB’s strategy have earlier resulted in the displacement of the urban poor, thus negatively affecting their housing and livelihood. The preference of the metro systems over other means of public transport has created huge debts on local governments, thereby creating a ‘class transport’ to a few, gulping public investments on transport. The study by the Centre for Financial Accountability (CFA) on Delhi Metro clearly establishes that the extent and equity of access to transit can’t be realised by a transportation system dominated by the metro network.
The AIIB considers infrastructure financing which will create possibilities such as Land Value Capture, which is ‘premised on the principle that the benefits of infrastructure projects are capitalised into land value, and refers to tapping into the increments in land value to fund the respective infrastructure projects’. This policy has a thematic priority to mobilise private capital through public-private partnerships (PPP) and commercially financed solutions. This model of financing has excluded informal workers, slum-dwellers, and even small and marginal landholders, as reflected in the case of the Amravati Capital City Development Project.
The AIIB city strategy seems to promote the ‘financialization’ of land and housing as an effective financing strategy. This converts land and housing from its social use (either for housing or for productive activities) to a commodity, which would fetch returns. ‘Financialization’ of urban land and housing has a negative impact on low-income housing which is often pushed back to margins, while limiting their spaces within the city.
The UN Special Rapporteur has pointed out the volatility and predatory nature of ‘financialized’ housing markets and the potential for a catastrophic outcome for both individual households and the global economy. This is reflected in the 2008 global financial crisis.
Moreover, ‘financialized’ housing markets have caused displacement and evictions at an unparalleled scale. In many countries in the global ‘South’, where the majority of households are unlikely to have access to formal credit, the subversion of housing and land as social goods to commodities for the accumulation of wealth, has resulted in widespread eviction and displacement.
The AIIB strategy about land value capture will lead to ‘financialization’ of land and housing and bankability of the projects, while prioritising investments in residential housing and commercial development that have huge private benefits and little social value. This is a contradiction as the idea of social value is not followed up anywhere, including in investments in water, sanitation, smart cities or in supporting industrial parks and SEZs.
This, read together with the financial strategy of mobilisation of private capital into infrastructure development and promotion of urban PPPs, expose the contradictions.
In the draft, the AIIB has identified ‘sub-national’ entities as a large potential client base. It hopes to earn trust through timely and flexible investment approach. The large flux of finance at the sub-regional level without adequate oversight through democratic institutions will create an unequal power equation due to high debt at the municipal levels. It may also lead to a debt trap with a certain stream of revenue at municipal levels pawned to repay debt.
In order to build a true ‘Sustainable Cities Strategy’, the AIIBs vision needs to move beyond merely physical infrastructure. It must comprise multi-dimensional aspects, including social infrastructure like health and education. Certainly, the strategy should focus on people, their involvement and fundamental rights in the city.
Any sustainable city must be built with an inclusive and equitable perspective, which is clearly missing from the AIIB’s strategy. Indeed, the current strategy does not seem ‘GREAT’ at all. Instead, it will further lead cities into the inevitable global capital debt trap.