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The uneasy norms of doing business

Joe C Mathew     November 23, 2015

Joe C Mathew, Senior Associate Editor
One of the most controversial projects, the World Bank has ever supported, happens to be in India - the Sardar Sarovar dam project in the Narmada river valley. The fact that the Bank stopped funding the project mid-way did not insulate it from the continuing blame and accusations over problems associated with the rehabilitation and resettlement measures undertaken as part of the project. The environmental damage caused by the Narmada project is another continuing concern.

Seen from this context, the on-going exercise of the World Bank to review, update and strengthen its environmental and social policies to protect vulnerable people and the environment in World Bank investment projects is a corrective move that is long due.

As it stands today, the proposed environment and social framework (ESF) of the World Bank are pretty stringent. The Bank states that the draft Free, Prior, Informed Consent (FPIC) provision, is a major step forward from the Bank's prior position of Free, Prior, Informed Consultation.  Unless FPIC is in place, World Bank will not support projects that impacts indigenous population in future.   The proposed labour standard talks about the rights to freedom of association and collective bargaining.  The scope of the proposed labour provision also provides increased coverage for contractors, primary supply workers, and workers involved in community labour.

On biodiversity, the Bank plans to introduce the concept of ecosystems, which means, unavoidable biodiversity damage or impact will be scrutinised more rigorously and may even overrule the need for economic development. It also calls for detailed resettlement plans, including conduct of baseline studies, and clauses for advance compensation before displacement.  Benefit sharing for project-affected people and a requirement to assess risks and impacts caused by land titling activities has also been proposed.

From a development perspective, one cannot, but support these initiatives; though Narendra Modi led National Democratic Alliance (NDA) government finds the proposed ESF measures as regressive. In its single minded pursuit towards moving up the "ease of doing business" ladder, the government wants nothing to slow down the country's pace of economic growth. It fears that several of the "reforms", planned by the government could contravene the ESF provisions, if adopted in the existing form. The NDA government wants to relax environmental norms, it wants to bring about land acquisition laws that prioritise industrial and infrastructure development, and it wants to make labour laws as industry friendly as possible. ESF, in its present structure, could be a hurdle. Hence, the opposition.

Incidentally, this is not the first time India is finding fault with the World Bank. It has for long said that the structure and operations of institutions such as World Bank does not reflect the current reality. The formation of the New Development Bank (NDB) with Brazil, Russia, India, China and South Africa (BRICS) as founding members was itself an attempt to reduce the influence of institutions such as World Bank and International Monetary Fund (IMF). The creation of parallel global financial institutions for equitable lending norms is fine. But to ignore the concerns raised by climate change problems, environmental pollution, and human right violations to push economic development may not be prudent. It will not provide long lasting and sustainable results.

It is time to watch out for the project lending norms of the BRICS bank now.

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