AIIB must give communities a voice in development projects

In its eight years of operation, the Asian Infrastructure Investment Bank (AIIB) has grown to be the second-largest multilateral development bank in terms of membership and has invested more than US$50 billion in more than 250 projects. While some might laud the AIIB, it’s impossible to determine whether its investments have hit their mark.

This is because the AIIB has made it hard for communities negatively affected by its financing to raise environmental and social concerns. This raises the question of whether the AIIB is afraid to hear about the true impact of its investments.

After years of raising the alarm over the AIIB’s lack of accountability, there is some hope. The bank has agreed to review the effectiveness of its accountability mechanism, called the Projectaffected People’s Mechanism (PPM).

Despite the perception of multilateral development banks as forces of good, it is undeniable that such organisations do, in fact, cause harm. From my work at the Accountability Counsel, representing communities affected by international investments, it is clear that well-intentioned development projects can harm people and the planet.

With more than 1,800 complaints made against multilateral development banks, including the AIIB, it is all but certain that its financing is causing harm. What matters is whether the AIIB is able to correct the harm from its projects. To achieve that, its accountability mechanism must be fit for purpose.

Independent accountability mechanisms (IAMs) were first developed in the 1990s in response to incidents of harm associated with financing from multilateral development banks. What was novel in the 1990s is now common. Given the inherent risks associated with badly managed projects, they help these organisations ensure their investments meet their mark by hearing from and being accountable to the very people the banks claim to benefit.

Civil society organisations were therefore buoyed in 2016 when the AIIB became the first multilateral development bank to explicitly include an oversight mechanism in its founding documents. This culminated in the establishment of the PPM in 2018. However, in more than five years of existence, the PPM has not accepted a single complaint. Through a complex mix of eligibility and accessibility rules, the AIIB has made it nearly impossible for communities to actually access the mechanism.

The AIIB excluded nearly half of its portfolio from the PPM’s mandate when it decided that the mechanism could not review projects co-financed with other multilateral development banks. The AIIB considers this an innovation, one that prioritises efficiency.

However, outsourcing accountability to a co-financier completely ignores that the AIIB also has a legal and institutional responsibility to provide a remedy for its impact, learn lessons and hold staff accountable.

Even if a complainant can approach the

PPM, they must first jump through unfair hoops. For example, it requires people to first make prior “good faith” efforts to resolve the complaint with borrowers in charge of implementing the project and bank management.

While some other multilateral development banks’ independent accountability mechanisms also put in place unfair requirements, the AIIB is the only one that requires going through two levels of grievance processes before being allowed to access an independent mechanism.

The AIIB describes this minimalist approach to oversight as being efficient and in line with its broader “lean, clean and green” strategy. The value of a lean institution lies in its ability to quickly and effectively respond to challenges faced by the world today, but when leanness means avoidance of responsibility, the cure can become worse than the disease.

When the Chinese government unveiled plans in 2015 to establish a new regional multilateral development bank, there were concerns about whether it would truly adhere to environmental and social rules for its investments. Unfortunately, without accountability to project-affected communities, no one – including the AIIB – can answer that question.