Even as the Asian Infrastructure Investment Bank (AIIB) announced its long-awaited review of its Project-affected People’s Mechanism at its annual meeting in Egypt 25-26 September 2023, a new research, published by Recourse, Inclusive Development International and Accountability Counsel, has highlighted that the AIIB has not accepted a single complaint since its establishment five years ago.
A note on the report said, nearly half of all AIIB projects were found to be ineligible for the accountability mechanism, meaning that the mechanism cannot address complaints from communities adversely affected by those projects, adding, AIIB’s accountability mechanism lags behind those of its multilateral development bank peers* on nine key indicators.
The report seeks urgent review of AIIB’s “roadblocks to accountability.”
As the Asian Infrastructure Investment Bank (AIIB) met for its first in-person annual meeting in four years, civil society groups are questioning the bank’s track record on accountability. In seven years, with 233 projects funded and over $44 billion spent, the AIIB has yet to accept a single complaint from people adversely affected by its investments.
The AIIB, the world’s newest multilateral development bank, established an accountability mechanism, known as the Project-affected People’s Mechanism (PPM), in 2019 to provide recourse to communities affected by projects and to learn from the mistakes made in previous projects. The AIIB announced a long-awaited review of its PPM at its annual meeting in Egypt 25-26 September 2023.
However, a new report, Roadblocks to Accountability, released by Recourse, Inclusive Development International and Accountability Counsel, endorsed by groups from around the world, shows that the AIIB is lagging behind its peers on nine key indicators and exposes the reasons why the PPM has not accepted a single complaint to date. The report looked both at the AIIB’s current portfolio and also at policies guiding the scope and implementation of the PPM. It found that, of projects funded by the AIIB:
- Nearly half of projects are ineligible: Of 219 projects funded by end June 2023, 46% (101 projects) are not eligible for consideration by the PPM, meaning that communities adversely affected by those projects cannot hold AIIB accountable.
- The main reason for ineligibility is investments being co-financed with other MDBs: Under AIIB’s rules, this excludes them from accountability under the PPM, with some exceptions. The AIIB is an outlier among multilateral development banks on this exclusion – it is the only one to exclude co-financed projects from accountability to its mechanism.
- Largest proportion of eligible projects supported through financial intermediaries (FIs): Of eligible projects funded since October 2021, when the bank’s new Environmental and Social Framework came into force, the largest proportion – 56% – are FI investments. These are difficult to trace as there is extremely limited transparency about where money ends up. If communities don’t know that the AIIB is investing in the project affecting them, then their access to remedy is effectively blocked.
The report also compares the AIIB to its peers among multilateral development banks on nine fundamental indicators of good policy (see diagram below). The AIIB lags behind on every indicator.
Report author Kate Geary, Co-Director of Recourse, said, “The AIIB clearly has an accountability deficit when its accountability mechanism does not apply to nearly half of its portfolio and it has accepted no complaints. This blocks communities affected by the AIIB’s investments from ensuring the AIIB is living up to its environmental and social commitments. We call on the AIIB to close accountability loopholes when it reviews the PPM.”
Lawyer and report author Radhika Goyal of Accountability Counsel said, “The AIIB’s decision to establish its Project-affected People’s Mechanism so soon after it started operations was significant, but unfortunately the PPM Policy that followed and the mechanism’s record in the past five years has failed to meet its mark. When compared to international good practice prevalent at peer financial institutions, AIIB’s PPM Policy falls short on the key indicators of accessibility and remedy.”
The report features three case studies – an infrastructure investment trust project In India, a gas-fired power plant in Bangladesh and a metro project in India – which illustrate what the report calls ‘roadblocks to accountability’. These include an ill-defined requirement to engage with AIIB management in ‘good faith’ before filing a complaint. Despite four years of requests to the AIIB to address their concerns about the Bhola gas plant, communities in Bangladesh saw their complaint rejected for what the PPM deemed lack of ‘good faith’ efforts.
Hasan Mehedi of Coastal Livelihood and Environmental Action Network, Bangladesh said, “AIIB throws up roadblocks to accountability so that communities in Bangladesh harmed by its projects cannot get justice. Only radical change at the PPM will show communities that the AIIB is sincere about being an accountable and responsible bank.”
Annabel Perreras of NGO Forum on ADB said, “AIIB can no longer hide behind the excuse that it is a young bank thus it should be held to a different standard. Excluding co-financed projects from the PPM’s mandate essentially deprives communities of their options in filing a complaint.”
Natalie Bugalski, Legal Director at Inclusive Development International said, “Independent accountability mechanisms can be a lifeline for communities who are harmed by development projects, but only if those communities can actually access the mechanisms. The AIIB must ensure that the PPM is fully accessible to anyone at risk of harm from projects that it finances, both directly and through intermediaries.”
Read and Download the full report here: Roadblocks to accountability.
This article was originally published in Counterview and can be read here.
Centre for Financial Accountability is now on Telegram. Click here to join our Telegram channel and stay tuned to the latest updates and insights on the economy and finance.