ADB in Bangladesh: More Than Four Decades of Pillage & Devastation

8 May 2017 by Hasan Mehdi

Chittagong, Bangladesh (CC - Flickr - Tanjil Rahman)

The ADB was established in 1966 at the initiative of UN’s Economic and Social Commission for Asia and Pacific (ESCAP). Two years after the great liberation war of 1971, it started working in Bangladesh.

Since then (till 2016) Asian Development Bank (ADB) has contracted 259 loans, 411 technical assistance programmes and 45 grant based projects. It has invested around 1459 billion takas (BDT) equivalent to 18.230 billion US$. 94% of the investments are loans. ADB has 67 member countries including Bangladesh of which 19 are from outside the Asia-Pacific region. With 1.12% of vote share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. Bangladesh stands at the 20th position in ADB’s power hierarchy. On the other hand, the EU has a vote share of 15.72%, Japan 12.84%, US 12.75%, China 5.48 % & India 5.39%. The top five nations, according to vote share control 52.18% of ADB’s shares. Which implies that the other 62 countries, even unitedly, have no capacity to impact on the ADB’s decisions.

International Financial Organisations Order, 1972 of Bangladesh stipulates that the Government of Bangladesh or any other contracting agency would not be able to sue the International Financial Institutions viz. World Bank World Bank
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
, etc. However, a special privilege was granted to the ADB. The Asian Development Bank Order, 1973 (President’s Order No. 3 of 1973), as granted blanket immunity to this institution. Under this act, no citizen can file a case against the devastating projects, initiatives, programme or activities of the ADB or any of its employees or the management. Whereas the other International Financial Institutions operating in Bangladesh viz. the World Bank and its affiliates, IMF, Islamic Development Bank (IDB), International Fund for Agricultural Development (IFAD), AIIB or any other IFIs do not enjoy this special immunity. The ADB is specially privileged compared to the other IFIs.

The ADB has always promoted polluting, devastating and privatisation projects in Bangladesh. This is clear from its investment trends. Till date it has mostly invested in two sectors - energy and power (BDT 333.6 billion US$ 4.09 billion, 22.9%). The other priority sectors are: transport (BDT 324.8 billion US$ 3.98 billion, 22.3%), agriculture, natural resources and community development (BDT 185.6 billion US$ 2.28 billion, 12.8%) and education (BDT 182.4 billion US$ 2.24 billion, 12.5%). On the other hand it has scantly invested in: industrialisation (BDT 41.28 billion US$ 510 million, 2.8%) and health (BDT 22.48 billion US$ 280 million, 1.5%).

The ADB policies have weakened the public sector, promoted liberal markets & the private sector and created markets for the investing countries. The ADB and other IFIs since 1980s have advocated the retrenchment of public sector workers and the reduction of public services under the guise of Structural Adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

Programmes (SAP). As a result, a large number of public sector industries closed down and essential services by the state was withdrawn. With the Bangladesh Agricultural Development Corporation (BADC) being defunct, small and marginal farmers are forced to totally depend on the MNCs and their local agents for seeds. The use of high-yielding and sterile seeds were introduced and expanded which resulted in farmer’s loss of ownership over seeds. In order to ensure the supply of essential commodities Commodities The goods exchanged on the commodities market, traditionally raw materials such as metals and fuels, and cereals. and to keep the market under control the Bangladesh government had earlier implemented the rationing system and established the Trading Market activities
Buying and selling of financial instruments such as shares, futures, derivatives, options, and warrants conducted in the hope of making a short-term profit.
Corporation of Bangladesh (TCB). While these were made redundant, private enterprises started playing a major role resulting in sudden price rise of essential commodities. It heavily impacted the lower middle class and the poorer sections of the society. While the poor lost everything, the rich continued to be richer earning unregulated profits.

The ADB advised energy and power sector reforms since 1980s under the guise of ‘decentralisation’ paving way for the entry of private players in this sector - both in production & distribution - in the financial year 1997-98. The private sector is heavily subsidised by the government since their entry to this sector while the prices of electricity have steadily increased. Slowly but steadily people’s expenditure on energy and electricity has increased and the private companies have increased their profits and have repatriated overseas a part of it. The ADB has financially assisted the foreign companies to enter into the Bangladesh energy sector and has weakened public policies of the country to facilitate the entry of these companies. For example, the ADB funded Asia Energy Corporation a subsidiary of GCM Resources Plc. to implement the Phoolbari coal mining project. This endangered the environment and the lives & livelihood of the local population. A massive struggle emerged against the project resulting in police atrocities forcing the company to beat a retreat. However, the company has not given up its plans for open cast mining projects.

Under the pretext of lending assistances to ensure a healthy balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. of trade, the ADB and the World Bank started lending for prawn cultivation in the brackish waters. As this was heavily subsidised, huge agricultural areas of the coastal areas were forcibly converted for prawn cultivation. Small & marginal farmers and fisher-folks were forcefully evicted from their traditional land using strong-arm tactics, violence and even murders and rapes. The prawn cultivation destroyed the local environment and the social structure fell apart with the disappearance of local agriculture, livestocks and other local production. The ingress of saline water weakened the infrastructure for fighting natural calamities and the lives of the coastal population was highly imperilled.

Since the 2000s ADB like the other IFIs started investing heavily towards the introduction and implementation of PRSP Poverty Reduction Strategy Paper
Set up by the World Bank and the IMF in 1999, the PRSP was officially designed to fight poverty. In fact, it turns out to be an even more virulent version of the structural adjustment policies in disguise, to try and win the approval and legitimation of the social participants.
which was actually an extension of the SAP. Under PRSP once again essential public services like health, education, energy, etc. was privatised. Public expenditure was reduced and the markets liberalised. Under this head ADB extended loans to the government to shut down running public sector industries. Since 2009 the current government has scrapped PRSP and resorted to its own long-term development framework and reintroduced 5 year plans. However, the earlier loans and its interests weigh heavily on the government with the debt servicing around one-fifth of the annual state budget.

Since the 1960s the ADB along with USAID & the World Bank financed embankments in the coastal region which from 1980s is the main reason for water-logging and inundation in that area. Then in 1995-96, in order to solve the problems of water-logging, the ADB sanctioned loans to the Bangladesh government under the Khulna-Jessore Drainage Rehabilitation Project (KJDRP). However, the project was a failure due to lack of popular involvement, disregard for local environment and faulty planning. The water-logging has increased after the implementation of the project and since 2000 approximately 1 million people are displaced in the monsoons every year. As a result of this the government has to spend additional money from public coffers to mitigate the distress as well as service the earlier debt. The people in the affected areas are left to face a veritable hell.

Similarly, the Sundarban Bio-diversity Conservation Project (SBCP) project funded by the ADB 1998-99 was a failure and had to be cancelled due to popular protests. Several industries like Khulna Newsprint Mill, Khulna Hardboard Mill & Dada Match Factory were closed as per the recommendations of SBCP resulting in the loss of employment of several thousand workers. Additionally, traditional foraging communities were prohibited to enter the forest resulting in loss of livelihood for three hundred thousand minor forest produce collectors (Bawalis). The project did not yield Yield The income return on an investment. This refers to the interest or dividends received from a security and is usually expressed annually as a percentage based on the investment’s cost, its current market value or its face value. any benefit to the local population as a major part of the fund was wasted however, the government is still repaying the debt.

In 2005-06, ADB undertook the Integrated Water Resources Planning and Management in the South-Western part of the country. Lack of popular engagement has also turned this project a failure. A lack of understanding and consideration of the water-flow in the rivers and canals of this part of the country has halted navigation in these water channels due to indiscriminate construction of culverts and sluice gates. The livelihood of marginal farmers and fisher-folk including women is under serious threat and the project areas of Narail and Magura are under constant water-logging.

In the meantime, ADB has undertaken a project to make water supplies profitable in the metropolitan cities of Dhaka, Chittagong & Khulna. This would infringe upon the Right to Water of citizens. Also, the lending under the Pilot Program for Climate Resilience (PPCR) project to help Bangladesh mitigate climate change related risks contradicts Bangladesh’s own strategy paper on climate change. Recently the various mechanisms promoted by the ADB like results-based financing (RBF), PPP, and commodification of nature (nature pricing) are not only opening huge spaces for private corporations to earn ruthless profits in important basic sectors like communications, education, railways & energy; it is also stripping people of their rights to natural resources.

Between 1973-2016, 40% of the ADB loans were contracted during the military regime. According to international laws all these loans granted to unelected governments are odious. The ADB has also co-operated and legitimised military governments. ADB’s own ‘independent evaluation panel’ reports that 37% of the loans to Bangladesh have resulted in failed projects. On the other hand, the ADB claims a list of safeguards: environment protection, indigenous rights, women’s empowerment, forced displacement, accountability, right to information, etc. These safeguards speaks for adequate popular consultation and effective involvement before the project, during the project and for evaluation. However, these are mostly flouted or at best organised as hogwash.

In spite of assassinations, environmental damage and the destruction of lives and livelihoods the ADB continues to enjoy blanket immunity under the The Asian Development Bank Order, 1973. People do not have any recourse to law against the devastations caused by the ADB. We therefore demand:

  1. Cancel ‘indemnity/immunity’ of ADB through a reform of the law;
  2. ADB should be forced to compensate the affected local population;
  3. ADB’s decisions must be made on the basis of ‘one country-one vote’ principle;
  4. ADB projects must protect local agro-ecological environment, gender, and improvement of life and livelihoods of natural resource dependant people and smallholders;
  5. Loans of odious nature lent to military regimes must be repudiated;
  6. A citizens debt audit needs to commissioned for the ADB projects.
  7. All IFIs including the ADB must be brought under the country’s laws.

Translated from Bengali by Sushovan Dhar

Hasan Mehdi

Member of Bangladesh Working Group on External Debt (BWGED)



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