Additional Comments

Additional Comments

Senator Lee Rhiannon for the Australian Greens

Introduction

1.1        The African Development Bank Bill 2013 enables Australia to become a member of the African Development Bank Group by authorising the payments required to subscribe to membership shares in the African Development Bank and meet membership and ongoing subscriptions to the African Development Fund (the AfDB Group). The third entity in the African Development Bank Group, the Nigeria Trust Fund, has not been considered in this inquiry.

1.2        This inquiry has examined the purpose and provisions of the African Development Bank Bill 2013 with particular attention to the substantial financial and human resources that must be provided by the Commonwealth Treasury and the Australian Agency for International Development (AusAID) to support Australia's engagement with the AfDB Group.

1.3        The committee has also considered the effectiveness of the African Development Bank and African Development Fund group's governance structures.

1.4        The additional comments to this report provided below give consideration to the work of the African Development Bank and Australia’s potential membership of this organisation in the context of the United Nation's eight Millennium Development Goals.

1.5        As the MDGs unite international development efforts around the single focus of tackling poverty they provide a useful frame for this assessment.

The Greens

1.6        The Australian Greens believe Australia has a responsibility to contribute to long term development that is aimed at eliminating global poverty and enhancing self-reliance and community empowerment, while facilitating positive and equitable change in the social, economic and environmental conditions for the citizens of aid-recipient countries.

1.7        Australia should work to ensure that multilateral development banks adopt programs consistent with a human rights-based approach to development; be economically and environmentally sustainable; should promote local participation and gender equality; and should enhance the political, economic and social rights of the communities affected by funded projects.

1.8        Funding for long-term aid and development through multilateral development banks like the AfDB should be directed towards enhancing self-reliance in developing nations. Affected communities should be empowered with decision-making abilities informed by free, prior and informed consent, and with transparent mechanisms ensuring a right to accountability. The facilitation of environmental, economic, and social justice should be embedded into Australia’s multilateral and bilateral aid work.

1.9        Our aid and development dollar should never subsidise or favour Australian businesses in recipient countries. Nor should our aid funds be used to facilitate Australian businesses' claims to a developing country's natural resources or access to contracts that lead to profits being exported from the recipient country, displacement or disempowerment of local communities and workers, or environmental degradation.

1.10      While many communities benefit from aid and development projects, some large infrastructure and resource development projects can cause widespread social injustice and disempowerment. Many communities have suffered the dispossession of their land, destruction of their environments, and ruin of their livelihoods, cultures and identities as a result of aid-development projects. 

1.11      The Greens note that regional development banks, such as the African Development Bank, often focus on mega infrastructure project. In 2005 the AfDB dedicated almost 40 per cent of its funds[1] to large infrastructure projects, particularly in the energy and transport sectors.

1.12      While such projects may assist a country’s overall economic development people living in poverty rarely receive any direct benefits. They often face eviction, loss of access to their land and local environmental damage. Regional banks also often fail to involve local people in the projects they fund.

1.13      Australia’s involvement with the AfDB also needs to be assessed in the context of our priorities for Africa which include food security, natural resource management, water and sanitation, maternal and child health and human resource development.[2]

1.14      The intentions behind Australia's joining the AfDB Group have been identified as "growth in Australian commercial interests in Africa", "increased trade opportunities continent wide," and the ability for Australian firms "to bid for AfDB work in all 54 African member nations".

1.15      In short, the majority report's claim that substantial benefits are likely to flow from Australia's investment in the AfDB Group if Australia takes every advantage from its membership[3], suggests the overriding reason for joining the AfDB Group is one of commercial advantage for Australian companies "via procurement opportunities and infrastructure development".[4]

Cost to Australia

1.16      The Greens do not subscribe to the idea that the giving of aid and development funding should have a commercial benefit to the donor country. Aid money should be used to alleviate poverty around the world. Australia’s official mission statement on overseas aid requires that it “serves Australia’s national interests”. This approach is inconsistent with the MDGs.

1.17      The Committee report notes the “substantial benefits" of joining the AfDB Group but the report fails to quantify or describe these benefits.

1.18      The costs of joining and continuing membership costs of being a member of the AfDB are substantial.

1.19      $3.9 million has been allocated to Treasury and AusAID in the 2012-13 budget, for the preparation work to join the Group, and ongoing program engagement, which is expected to take up a substantial portion of time for a senior officer from AusAID. Ongoing membership obligations and engagement strategies is also expected to take up much time of AusAID staff from all levels.

1.20      Initial membership payments for the purchase of the maximum allowable shareholding of 1.43% in the Group total $88.2 million over 3 years from 2014-15 to 2016-17, and the one-off capital subscription is budgeted at $160.9 million for 2014-15 and 2016-17. 

1.21      Subscription to the African Development Fund also requires regular three-yearly replenishments by donor countries that will be determined during each pledging round, and an emergency contingent liability of around $1.4 billion in the event of default of the bank would also be expected.

Recommendation: That the government publicly disclose details regarding the benefits of joining the AfDB and who will gain from those benefits.

The African Development Bank Group

1.22      The AfDB Group has the potential to contribute to the economic development and the social progress of African countries as a majority African-owned and run institution. Fifty-three regional African countries hold nearly 60% of the voting power and no one country has veto. There is a requirement that its President must always be African, and its operations and offices permanently reside in Africa.

1.23      The USA has the second highest voting power at 6.366%, after Nigeria with 8.739%. Non-regional countries have 40% of the voting powers.

1.24      The delegation of authority is with the Board of 20 Directors elected from member countries; of which 13 represent regional African countries. The Board oversees the daily general operations of the bank and approves all projects, policies and strategies.

1.25      The Group's stated objective is "the sustainable economic development and social progress of the African member countries of the Bank Group".[5]

1.26      The concessional arm of the AfDB Group, the African Development Fund (ADF) provides concessional funding loans and grants to at least 40 Regional Member Countries for projects and programs. ADF loans are interest-free with a 50 year repayment period, including a 10 year grace period. Lines of credit have a 20 year repayment period with a 5 year grace period. [6]

1.27      Despite global financial turbulence, the AfDB continues to be recognised as a strong financial institution with a recently reaffirmed AAA rating and a stable outlook.[7] The Greens acknowledge a number of international reviews have found the AfDB to exercise good governance policies and practices.

1.28      The Greens also acknowledge that the AfDB Group is recognised as an effective and efficient organisation, that its objectives concur with Australia's objectives of helping people overcome poverty and achieve sustainable development, and that it is a trusted partner of African governments.

1.29      The AfDB Group has approved loans and grants to a substantial number of projects that will bring benefits to African households and communities by providing improved access to electricity, and water and sanitation services and more health centres and schools.[8]

1.30      However, concerns raised by Professor Michael M Cernea, a former World Bank adviser, should be considered by Australia as it determines its involvement with the AfDB. Professor Cernea has identified internal displacement caused by conflicts or development projects as one of Africa’s major social and economic problems, raising challenges to national governments and to international donors. [9]

Criticism of the AfDB

Engaging civil society

1.31      A report by the University of Iowa Center for International Finance and Development notes that “the AfDB does not have an extensive history of engaging civil-society stakeholders”. [10] This report notes that while this Bank has proposed a comprehensive policy for integrating individuals, groups, and NGOs into the various aspects of its operations, progress in this area is not occurring.  Other regional banks are seen as stronger in this area than the AfDB.

Transparency

1.32      The Iowa Center has also identified that the AfDB is weak in disclosing information and transparency. It states “even if all of the information the AfDB has agreed to disclose was readily available to the public, it would not promote the effective inclusion of non-state stakeholders—such as non-governmental organizations and individuals—in its decision-making processes”. [11]

Stopping damaging projects

1.33      There are limited opportunities for communities, individuals and organisations to challenge the Bank on damaging projects. AfDB’s Independent Review Mechanism (IRM) appears to have only been used once. Harmful projects cannot be stopped even after the concerned people or their representatives have filed a request. The IRM does not have to respond to lawsuits because the AfDB’s charter provides it with immunity from actions taken in municipal courts. The IRM in its current form cannot directly address problems with its own projects.[12]

Recommendation: The Greens support the recommendation of the Swiss Alliance of Development Organisations (Swissaid, Catholic Lenten Fund, Bread for all, Helvetas, Caritas and Interchurch Aid) calling on the AfDB to “implement its own good guidelines on transparency, the inclusion of the population and possibilities for the filing of complaints”. [13]

Rights of indigenous peoples

1.34      The AfDB is currently the only multilateral development bank without a standalone safeguard policy on indigenous peoples. The Greens do acknowledge the AfDB is nearing completion of its new set of environmental and social safeguard policies which recognise the rights of indigenous peoples in some form.

1.35      However, the Forest People’s Programme has noted that the question of indigenous peoples has proven controversial at the African Development Bank as “many members of the Board and staff are resistant to the notion that indigenous communities merit specific treatment and are imbued with certain rights”.[14]

Recommendation: The Greens support the Civil Society Coalition on the African Development Bank and the Indigenous Peoples of Africa Coordinating Committee's call for a standalone safeguard policy on indigenous peoples, and for the Bank to establish a senior staff position to provide a liaison point for indigenous peoples, to convene an advisory board of indigenous peoples and to devote sufficient attention and resources to training its own staff. [15]

Conclusion

1.36      Considering Australian money allocated to the AfDB will be from our overseas aid budget, Australia needs to work with other members of the AfDB to ensure its projects and programs are accountable and work to empower and educate communities in order to achieve economic development that delivers equality, human rights and independence for the peoples of Africa.

1.37      If Australia uses its membership of AfDB to foster a traditional economic development model, driven by corporate interests such as mining, resource and major infrastructure development, it will be a setback for achieving economic justice, human rights and environmental protection across Africa.

1.38      On the ground experience of major development and infrastructure projects shows that too often they are the drivers of dispossession and poverty.

1.39      As a member of this regional bank Australia should put the interests of the African people before its own “national interests”.

 

 

Senator Lee Rhiannon

Greens spokesperson for International Aid & Development

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