At this 54th annual meeting of the Board of Governors of the Asian Development Bank, we challenge the leadership and staff of the ADB to reflect seriously on its legacy.
For more than five decades, the ADB has left a trail of projects that have met strong and persistent resistance from citizens’ groups and peoples movements in many countries across the region. These projects have led to the displacement of communities and brought harm to health, livelihoods and environment.
The ADB has pushed loans that contribute heavily to the debt burdens of Asian countries, loans paid for by taxpayers money at the expense of essential services urgently needed by the majority of the peoples of Asia who struggle against pervasive poverty and inequality. These essential services have been further undermined by ADB’s push for privatization including in water and power sectors.
Contrary to its so called commitment to “achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty” – the ADB has been promoting a neoliberal paradigm that pins development on the growth of the private sector and of markets, insisting that profitability and commercial success is “correlated with development outcomes.”
We reiterate some of the long standing calls and demands of communities, peoples movements and civil society organizations in Asia, supported and echoed by our colleagues in the north in countries whose governments sit in the leadership of the ADB:
1. ADB must end its financing and support for new fossil fuel projects and withdraw its involvement in those under construction and in the pipeline.
Fossil fuel projects have negative impacts to the communities and environment around these projects and contribute heavily to the escalation of the climate crisis.
The ADB knows that fossil fuel energy accounts for about 75% of global greenhouse gas (GHG) emissions and that excessive accumulation of GHGs in the atmosphere drives global warming and climate change. Despite its pledge to address climate change, fossil fuel generation projects from 2009 to 2018 comprise 50% of the total installed capacity of all ADB funded energy generation projects. More than $8.9 billion went to fossil gas and $2.6 billion to coal.
Last August 2020, its own International Evaluation Department (IED) recommended that ADB revisit its Energy Policy and formally withdraw financing new coal energy capacity. This came in the wake of decades of campaigning by climate and environmental groups against ADB investments in coal and critique of the ADB energy policy adopted in 2009 that still left many loopholes, allowing ADB to continue funding coal power projects.
Early this year ADB embarked on a review of its Energy Policy Review, the first time in over a decade, and aims to have a new policy in place by November 2021. We demand that this new policy categorically states an all-encompassing end to involvement in coal energy. And the ADB must go further than this. It is urgent that ADB also declare withdrawal from expanding gas and oil projects in the region.
From 2018 to 2020, the ADB provided more than $2 billion worth of financing for gas and oil projects. And all signs point to its promotion of fossil gas as transition fuel. Fossil gas as a clean energy replacement for coal is a dangerous myth. Fossil Gas energy also emits GHGs including methane which is one of the most GHGs in its toxicity and impacts. New fossil gas projects will lock us into many years of dirty energy which people and the planet cannot afford. Immediate steps and a clear plan to phase out of oil is also needed as the process will be complicated and requires time which we are running out of.
Each year, our call against the Bank’s support for dirty energy intensifies in urgency. For every inaction towards the problem of fossil fuels, Asian lives and livelihood grow all the more vulnerable as they are situated at the frontline of climate change’s adverse impacts. This decade is most critical, as global climate actions in this period will determine whether it will still be possible to keep global temperature rise below 1.5 degrees Celsius from pre-industrial levels. The current level of warming is at close to 1 degree and peoples of Asia and around the world are already suffering devastating effects of extreme weather events and as well slow-onset changes.
2. ADB must heed the global clamor for cancelation of debts as one of the critical responses needed to enable countries of the Global to deal with the multiple crisis of the COVID pandemic, the economic crisis made much worse by the pandemic, and the escalating climate emergency.
The last few weeks have seen many countries in Asia suffer a huge resurgence of COVID, further swamping public health systems weakened by decades of neglect, and underscoring the need to address the inequality of access to vaccines. Public spending must prioritize peoples’ survival, instead of being spent to service debts.
In 2019 alone, just 16 of ADB’s ”low to lower-middle income” developing member countries paid more than $6.4 billion to service public sector debts owed to ADB. Cancelling these debts could have freed up public money for peoples’ survival.
ADB should begin immediately by canceling illegitimate debts incurred from harmful projects, such as fossil fuels and other dirty energy, failed projects, and projects which led to massive displacement of communities. The cancelation of these debts are not just based on need, it is a matter of justice.
ADB prides itself as being rooted in regional realities, and should be able to recognize right away what even a limited debt cancelation could bring. Thus far, it has echoed the World Bank in protecting its credit ratings, starkly manifesting a warped notion of priorities in these acutely difficult and uncertain times. There should be no question as to which path that ADB, with its development mandate, should be taking — to prioritize the needs of developing member countries, already hanging barely above poverty thresholds even before the pandemic, with tens of millions of people who will be pulled into extreme poverty by year’s end.
Further, ADB must not add to the unsustainable and illegitimate debt burden of its member countries in Asia and stop lending as the main instrument in the name of financing COVID 19 responses, economic rebuilding and climate action. As of December 2020, the ADB has provided around $18.2 billion in loans to the public sector as fiscal support in response to these crises. The spike in lending by public financial institutions during the time of COVID will leave countries of the Global South in deeper debts than ever before.
Loans come at a price beyond the financial cost and the impacts of debt servicing. The ADB has and continues to play a leading role in promoting a strategy of leveraging loans to promote private investments. Backed by the weight of its lending facilities and technical assistance, it has cleared the path for big business to take over vital sectors such as health, water and sanitation. By any other name, ADB’s lending compels borrowing governments to systemically reshape their economic, financial, social and environmental sectors for neoliberal directions and ends. This should stop.
Wide swathes of the population are currently without the essential public services crucial to fight COVID-19, let alone surviving on a day-to-day basis. The private sector, the driver of growth privileged by the ADB and the World Bank, remains shamelessly profit-driven in a world gripped by COVID-19, and continues to oppose lifting the intellectual property rights system that serve as a barrier to ramping up supply for universal vaccination.
3. ADB should not promote other policy measures that further undermine the mobilization of domestic resources for responses to the pandemic and other crises.
The world faces the urgency of reforming national and global tax systems to curb illicit financial flows and put a stop to corporate tax abuses that bleed our economies dry, as has been underscored by the UN High Level Panel on Financial Accountability, Transparency and Integrity or FACTI in its report early this year.
Increasing domestic revenues through the adoption of just, progressive and gender-responsive systems and channeling these revenues to finance public services essential to people’s survival are urgently needed for COVID response. Moreover, they are key ingredients for building economies that are sustainable, transformative and less dependent on debt and aid.
However, the recent initiative of the ADB to launch a Regional Hub on Domestic Resource Mobilization (DRM) is disturbing. The strategic direction, assumptions and agenda that lie behind this new initiative need to be challenged. While noting the worsening situation of Asian economies due to the COVID 19 pandemic and falling tax revenues, the ADB worries that this leaves “little room to further increase external borrowing.”
The ADB is now increasing pressures for domestic resource mobilization, without regard for the real constraints and barriers for developing countries to raise public funds. It has created a Regional Tax Hub – without broad public consultation – that will reinforce the gross power imbalances in decision-making around global tax rules. The ADB Regional Tax Hub is explicitly designed to “assist” Asian countries to adopt OECD processes and standards. This is hugely problematic as it is likely to exacerbate one of the flaws in the international tax architecture — the dominance of OECD countries’ agenda and the inequality of decision-making on tax and fiscal systems at all levels.
If ADB is to be true to its word of seriously addressing domestic resource mobilization as one of the key steps in overcoming the multiple crises, , it should begin with plugging the leaks which have been eroding the public funds of developing countries even before the pandemic.
In addition to payments on unsustainable and illegitimate debts, the leaks include the overly generous fiscal incentives regimes across the region, including zero or light-tax special economic zones, that the ADB itself encourages in line with the premium it places on providing an enabling business environment for the private sector as the engine of growth. It also includes the financial secrecy jurisdictions in the region that provide hiding places for corporate tax evasion and avoidance, profit shifting and illicit financial flows, within the region and across the world. In 2015 alone, Asian states lost billions in illicit outflows through trade such as Malaysia ($33.7 billion), India ($9.8 billion), Bangladesh ($5.9 billion) and the Philippines ($5.1 billion). These do not even include potential revenues from money laundering and other criminal activities.
The ADB must be overhauled as an institution – its neoliberal paradigm and strategies, its financial policies and instruments, its undemocratic governance system, its selection of projects and programs to support, its use of loans as leverage to reshape Asian economies according to its private sector and market driven growth framework. Or else, the ADB should be replaced with a democratic, accountable financial institution that will truly contribute to upholding the rights and welfare of the peoples of Asia and paving the way for just, equitable, resilient and post carbon economies.