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DEVELOPMENT: AsDB Soliciting Private Investments

Marwaan Macan-Markar

MADRID, May 6 2008 (IPS) - When he was not attending seminars at a conference centre in the Spanish capital, the Asian Development Bank’s (AsDB) Seethapathy Chander was trying to broker deals to attract European investors to developing regions of Asia.

By Monday afternoon, Chander had at least four prospective investors lining up to seek his views on the climate for foreign projects in fields such as clean energy. One company, based in Spain, had its eye on a future venture in India.

Yet Chander, deputy director general for private sector operations at the Manila-based bank, is about to get busier. At the AsDB’s 41st annual board of governors meeting, held in Madrid from May 3-6, it was revealed that that the private sector will be in the driving seat for development projects in Asia in the decade ahead.

"We will see a two-fold increase in private sector investment in development projects," Chander told IPS. Under the AsDB’s ‘Strategy 2020’ – the agenda for the bank from 2008 till 2020 – the bank is hoping to secure private investment to fund 50 percent of the development projects on the continent that is home to the largest number of people living in absolute poverty, some 600 million on less than one dollar a day.

In 2007, the bank attracted private investment to the tune of 1.7 billion dollars, which made up nearly 26 percent of the development funds directed to the region, added Chander. "There were 26 projects last year, like water supply in Jakarta and an airport in China."

Previous projects that the AsDB highlights to attract private investment are the Nam Thuen Two hydroelectricity project in Laos, a power transmission line project in Cambodia and an electricity supply company in Karachi, Pakistan. During the last six years, the bank has helped to finance 89 projects totalling nearly five billion dollars through such private sector involvement.

Last year, public loans by the bank amounted to 10.1 billion dollars, a marked increase from the 7.3 billion dollars in loans that were dispersed in 2006. The bulk of these loans have been for the energy, transport and communications sectors. Less money was also loaned last year for water supply and sanitation projects, education and agriculture.

Vietnam, one of South-east Asia’s fastest growing economies, is hoping to cash in on the new direction the AsDB is heading. "We would like private sector investment in the remote or disadvantaged areas of our country," Tran Xuan Ha, the country’s vice minister of finance, said in an interview. "They could be for agriculture processing that uses high technology or clean energy projects."

But the bank’s plan to place greater faith in the private sector to lift Asia’s millions out of poverty is running into a wall of criticism from non- governmental organisations (NGOs). Civil society is worried that a larger footprint of the private sector in such areas as water supply, sanitation in cities, and energy-generation projects could result in Asia’s weakest and most vulnerable communities being stepped on – losing their livelihoods, homes and rights.

These worries stem from the prevailing record of private sector projects that the bank has been trying to spearhead in some of Asia’s poorest countries. The case of the Phulbari open pit coal mine in northern Bangladesh was singled out by activists during a meeting here with Haruhito Kuroda, the AsDB’s president.

Under this ‘on-again, off-again’ venture still to be implemented, a British- based company is planning to establish a nearly 60-square kilometre mine in rice cultivating area with bountiful supplies of river water. The extraction of the polluting coal in this 1.4 billion dollar project, potentially one of the world’s largest open pit mines, is to last for 30 years.

Such extraction will impact local communities and the environment adversely, says Ahmed Swapan Mahmud, executive director of Voices for Interactive Choice and Empowerment (VOICE), a Dhaka-based NGO. "At least 150,000 people will be displaced and there will be a huge impact on the people’s food security, since it is in a very productive rice area."

The bank has already been warned about the troubles that lie ahead if it pushes ahead with this project, Mahmud revealed in an interview. "In 2006, there was resistance to it – some 70,000 people demonstrated against the mine. During that clash with the police, five people were killed and hundreds were injured."

The bank’s announcement this week that it wants to attract more private sector capital for "climate change investments" has also failed to impress international development NGOs like Oxfam. This stems from the seemingly contradictory record of the bank in its funding of the power sector, where it wants to "move fast enough towards promoting renewable energy [while] it continues to fund fossil fuel projects on a large scale," says Jessica Rossien, advocacy coordinator for people, infrastructure and environment at Oxfam Australia.

"Regardless of whether the ADB funds public or private sector projects promoting climate change, the bank needs to develop consistency between its environmental projects and other operations," she added in an interview. "In many instances, environment initiatives funded by the bank are undermined by its own infrastructure projects that fail to consider environmental impacts."

Some of Asia’s poorest countries have other reasons to worry as the AsDB prepares to woo foreign capital for development programmes. "We are concerned about the emphasis of the private sector in Strategy 2020," Aun Porn Moniroth, secretary of Cambodia’s finance ministry, said during a panel discussion on Sunday. "In poor rural areas, the role of the private sector is very low. ADB must keep focus on the rural poor, who have been ignored for a long time."

To calm such worries, Chander confirms that the bank is not espousing a new development ideology that proclaims the answer to poverty lies in the hands of companies driven by profit. "We have not pursued privatisation dogmatically. We have promoted it where it works," he said. "We agree that privatisation is not a solution."