Borrowed life: Asian Development Bank projects failing Uzbeks
Bankwatch Mail | 13 March 2012
Under its new Country partnership strategy (CPS) for Uzbekistan to commence this year, the Asian Development Bank (ADB) will be guided by the evolving development needs of Uzbekistan, as well as the long-term ADB strategic framework for 2008-2020.
This article is from Issue 51 of our quarterly newsletter Bankwatch Mail
(This article is not available in the pdf version of Bankwatch Mail 51.)
The ADB is looking to be a focal point for regional cooperation and integration, and in the case of Uzbekistan, the ADB will concentrate on those projects that will dominate the portfolio of investments in the country, namely in the energy, transport, agriculture, and water and sanitation sectors.
In support of this, in February this year an agreement was signed on the joint implementation of 35 projects totalling USD 8.6 billion, with ADB financing expected to amount to USD 3.8 billion. At the signing ceremony in Tashkent of the Memorandum on the establishment of the International Research Institute for Solar Energy, the president of the Asian Development Bank, Haruhiko Kuroda, said that the ADB will also provide Uzbekistan with a USD 200 million loan in 2012-2015 for start-up generators; in 2012 a grant was provided for a feasibility study for six projects with a solar power capacity of 500 MW.
After India, Indonesia, Nepal, Sri Lanka and Vietnam, Uzbekistan is currently one of the largest borrowers from the ADB, and there has been a significant increase in the number of loans taken in the last five years. Between 1995 and 2010 the ADB provided 34 loans to Uzbekistan worth USD 1.945 billion; by March 2012 the ADB portfolio in Uzbekistan had risen to 40 loans totaling USD 2.42 billion.
According to the World Bank, in 2014 the total amount of Uzbekistan’s unpaid and payable debt will amount to more than USD 13 billion dollars compared to USD 8.66 billion by the end of 2011 – that is 23.1 percent of GDP as opposed to 17.58 percent in 2011. At the same time, net payments on foreign debts will increase during this period to USD 2.45 billion compared with USD 1.01 billion in 2011. In the language of international standards, this level of debt falls into the category of ‘less than moderate debt level’.
In the period 2012-2015, Uzbekistan plans to implement more than 300 investment projects valued overall at USD 55.4 billion. For these investments roughly 50 percent of the costs will come from foreign investment, approximately 30 percent from the funds of Uzbek enterprises and companies, and 20 percent from the finances of the national Fund for Reconstruction and Development and the commercial banks of Uzbekistan.
Thus, a large proportion of the economic outlook of the country is being influenced by the ADB. The constantly growing external financial debt burden compels the country’s budget to primarily address the payment of external debts, with adverse knock-on effects for budgetary social spending on education, health, pensions, salaries, etc.
Ironically, then, the ADB’s declared goal of reducing poverty is impacting on ordinary people with big problems at the household level, and even more impoverishment. Uzbek people, not surprisingly, are very much concerned about the provision of information on upcoming projects. They are asking, why do these multi-million dollar loans need to be borrowed and paid with interest if the country is supposedly self-sufficient with its large reserves of strategic raw materials such as gas, oil, gold, other metals and uranium that are exported, and could provide significant income for the country’s development. Yet, Uzbekistan continues to drown in high debts and, according to Transparency International, has the worst corruption rating in the Central Europe and Central Asia region.
The ADB’s road projects in Uzbekistan
When it comes to the implementation and effectiveness of ADB projects in Uzbekistan, there are serious questions to be asked, not least of which are whether they correspond to the debt obligations taken, the finances budgeted and the goals set. Moreover, some of the projects are having negative impacts on the environment and human health.
A striking example is the construction of the A-380 road, where the activities financed by the ADB have caused severe harm to the environment and the Bukhara and Kungrad regions of the Karakalpakstan Republic. Principally, the four-lane road “Gusar – Bukhara – Nukus – Beineu” runs in close proximity (200-300 metres) to two protected areas:
- The eco-centre “Djeyran”, where there is ongoing specific work to restore populations of gazelles, Asian wild ass, the Prezewalski horse and the Bocharen sheep and goat.
- The “Saigachiy” nature reserve.
Gazelles have an extremely excitable nervous system. Exposure to noise and contact with people results in a stressful condition for gazelles, that leads eventually to serious consequences or death. The construction of a four-lane road in the immediate vicinity of the reserve would have an extremely negative impact on the population of gazelles. An increasing flow of the vehicles would adversely affect the breeding of wild asses and Prezewalski horses. Already now small animals – such as turtles, hedgehogs, lizards, gerbils, ground squirrels – are being killed by vehicles.
Impacts on houses
The construction of the A-380 four-lane road, funded by the ADB, has resulted in a lot of problems for people living on the Bukhara-Gusar road section as local authorities have begun construction of the road without proper public hearing procedures, putting house-owners in the position where their houses will be destroyed.
The people concerned had two options. First, if residents wanted to stay in the area of residence, they were obliged to build new houses at their own expense under a single architectural plan. Second, if they did not have sufficient funds for the construction of new houses, they were offered apartments in housing areas without facilities and toilets. Therefore, many remained in their land plots and constructed only facades for their houses, where behind walls there were only bare fields, no water supply, and food cooked on fireplaces with firewood.
On the Nukus-Kungrad section of the road the poorest people were hit due to the demolition of houses with no compensation – people have lost not only the roofs over their heads, but also their livelihoods.
Local people have tried to submit a complaint to the ADB’s Accountability mechanism regarding the non-compliance of contractors with the ADB’s standards and the road construction violating constitutional rights to private property (Article 27 of the Constitution, Republic of Uzbekistan) regarding the demolition of houses along the road without the consent of the owners, with no compensation provided, and forcing affected residents to build two storey houses on a single architectural plan.
In the end the complaint was not prepared as none of the owners wanted to formally finalise it and expose their names (required in this case as the issue related to property and compensation) because of fear of prosecution. Dialogue with the local office of the ADB regarding obstacles for submitting complaints is ongoing, with no conclusions so far.
Human rights situation remains bleak in Uzbekistan
Confirmation of the uneasy situation with NGO work and people’s appeals in Uzbekistan are reported by Freedom House. In the recent Nations in Transit 2011 report, Uzbekistan received the lowest ranking for civil society taking into account assessment of non-governmental organisations’ growth, their organisational capacity and financial sustainability, and the legal and political environment in which they function; the development of free trade unions; and interest group participation in the policy process.
The European Bank for Reconstruction and Development has for some time now acknowledged problems with human rights in Uzbekistan, as the situation there prohibits free business from existing. The EBRD made its first attempts to deal with the situation through its 2003 country strategy for Uzbekistan that clearly linked EBRD lending to progress in the human rights performance of the country. However, to date there is still no progress in Uzbekistan to allow the EBRD to start lending to the private sector.
As far as the ADB is concerned, the situation might be even more complicated – the ADB sees its mission as tackling poverty in the region, yet it does not place much weight on human rights considerations.
The ADB’s water and sanitation projects
The ADB is attempting to address sectors that are essential to people’s lives, particularly with water supply projects. For example, a loan was made in 2001 to improve the water supply of three regional centres – the cities of Jizzakh, Gulistan and Karshi at a total cost of USD65.5 million – and in 2005, USD 25 million for a project to improve the drinking water supply in Navoi and Kashkadarya district.
Ten years have now passed, and the problems related to water supply in Jizzakh, Gulistan and Karshi have become even more acute. Those ADB funds allocated to improve the water supply are completely spent, yet the population of Gulistan in the Syrdarya region continue to drink water from wells installed back in the Soviet era.
In the Jizzakh area practically all independent NGOs are closed, leaving only NGOs that are in the pocket of the authorities. Local community representatives were not aware that the work on the water supply has taken place within the framework of ADB loans. The media reports on the projects as the prudent policy of the state authorities and as if the funds had been allocated from the budget to address urgent water problems. In addition, it should be noted that people’s unawareness is worsened by bureaucratic barriers. For example, to go to the ‘hokimiat’ (the local authority), one needs to go through many barriers of police stations, that leads to the unwillingness of individuals to appeal, as this can bring risks such as dismissal from work, reduced wages, or pressure from the police.
Is the ADB aware of such problems, and what is it doing?
During the ABD’s Annual meeting of 2011 in Hanoi, Vietnam, a question was raised with the ADB’s President Kuroda regarding these bureaucracy barriers that prevent people from complaining to the local resident mission office of the ADB, but it received no feedback.
Recently, a new USD 300 million water project has been approved (a water and sanitation project in Karakalpakstan, Khorezm, and Djizzak provinces, and in Andijan), that is expected to be just as easily exploited by officials and the standard problems remain: the debts will be paid out of the pockets of the poor population.
A lack of public control over these projects and the information vacuum that surrounds the loan money is resulting in a rise of both social and environmental problems in the country. As the practice shows, the goals declared by the ADB as part of its loan projects often go unfulfilled.
Such projects in Uzbekistan deserve an ADB recourse mechanism to address these difficulties. However, the main problem is that the affected population is under pressure and is reluctant to submit complaints with their names openly because of fears of prosecution. Efforts are being made to establish contact with the local office of the ABD and to negotiate on the issue of how people can appeal to the bank without endangering themselves.
The NGO Forum on ADB has already on many occasions raised questions concerning the deficiencies of the Accountability mechanism of the ADB during its last review in 2010 (pdf). The biggest problem with this body is that it is too bureaucratic and too formalised. In the last submission of comments the issue of community mistrust was emphasised. The recommendations were that the Accountability mechanism should be very concerned about the different political realities in the member countries where affected people fear their respective oppressive governments and do not show their disagreement to projects, not to mention not filing complaints against projects. Thus, the grievance mechanism of the ADB should have in place provisions stipulating that the identities of those complaining will be kept confidential if requested. However, these proposals have not been taken on board.
Improved transparency of the ADB’s projects’ implementation as well as improvement in the possibilities for people to appeal and express their concerns with no threat to their lives, would probably help to break the stalemate and improve the tension resulting from the ongoing social and environmental problems in Uzbekistan.