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p. 1 of 16 BACK | NEXT Executive Summary Current ADB Inspection Function Consultations on the Review of the ADB Inspection Function Proposal for a New ADB Accountability Mechanism: A Two-Step Approach of Consultation and Compliance Review Recommendation

ADB Accountability Mechanism

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Executive Summary

In December 1995, the Asian Development Bank's (ADB) Board of Directors approved the establishment of an Inspection Function to provide a forum for project beneficiaries to appeal to an independent body relating to ADB's compliance with its operational policies and procedures in ADB-assisted projects. ADB established the Inspection Function in the context of increased attention to accountability, transparency, and public participation by ADB and other multilateral development banks (MDBs). Approval of the Inspection Function was designed to complement ADB's existing audit, supervision, and evaluation systems.

At the time of approval of the ADB Inspection Function, the Board stipulated a review within 2 years from its approval of the initial roster of experts as panel members; the review would assess the operations of the Board Inspection Committee (BIC) and related inspection procedures, and review the Inspection Function's application to ADB's private sector operations. In 1998, ADB commenced a review of the Inspection Function, but ADB had limited experience with the inspection process, and few conclusions could be drawn regarding the existing system. Only two requests, both regarding the Korangi Wastewater Management Project in Pakistan, had been filed by then, and BIC had deemed them both ineligible. Support for strong accountability mechanisms at ADB and other MDBs has continued throughout the past decade. In 2000, ADB's donors recommended a strengthened and more independent inspection function, and that it should also have oversight of private sector projects.¹

The review continued, and in the last quarter of 2001, the President set up a steering committee (to oversee the review) and a working group (to carry out the review). The first full inspection process, relating to the Samut Prakarn Wastewater Management Project in Thailand, was conducted from April 2001 to March 2002, and it became evident that the current inspection process and procedures were lengthy, confusing, and complex for most stakeholders inside and outside ADB. The first full inspection also raised concerns about independence, credibility, transparency and information dissemination, and effectiveness of the Inspection Function. In 2002, ADB engaged two consultants to assist in carrying out the review of the Inspection Function as well as to act as resource persons during external consultations. In 2002 and early 2003, ADB carried out extensive external and internal consultations.

In 2002, the first and second draft working papers were extensively discussed at both internal and external consultations. These two drafts analyzed the issues raised by the current Inspection Function and offered various options for a future mechanism. Following the end of public consultations in August 2002, more internal consultations took place from September to November 2002, and, as part of internal consultations between Management and the Board, a preliminary working paper was prepared in November 2002 to solicit the Board's views at an informal seminar. In January 2003 the informal Board seminar was held, and in February 2003 the working paper was prepared reflecting the outcome of the internal and external consultations, including the various comments made by the Board at the informal seminar. The working paper was posted on the ADB web site, inviting public comments. The comments received were also posted on the ADB web site and were forwarded to the Board before its consideration of the working paper. The present paper takes into account the various comments of the Board.

The proposal for the new accountability mechanism consists of two separate but complementary functions. The two functions are (i) a consultation phase consisting of a special project facilitator (SPF), who will respond to specific problems of locally affected people in ADB-assisted projects through a range of informal and flexible methods; and (ii) a compliance review phase consisting of a panel (the compliance review panel [CRP]) to investigate alleged violations of ADB's operational policies and procedures that have resulted, or are likely to result, in direct, adverse, and material harm to project-affected people, and to make recommendations to ensure project compliance, including recommendations, if appropriate, for any remedial changes in the scope or implementation of the project. Although the Offices of the SPF and CRP will be physically and functionally separate from each other, they will be linked for the purposes of responding to the complaints of affected people, and enhancing ADB's development effectiveness and project quality.

The consultation phase will consist of the SPF, who will be assisted by one professional staff member and two administrative staff/national officers. The SPF will report directly to the President. CRP will consist of three members, one of whom will be the chair. CRP will be assisted by an office of CRP, serving as secretariat, with two professional staff members, one of whom will also act as the secretary of CRP, and three administrative staff/national officers. CRP will report directly to the Board on all activities, including postcompliance review monitoring and its outcomes, except on specific activities where CRP will report to the Board Compliance Review Committee (BCRC). The present BIC will be restructured as BCRC, which will have an oversight function for the following: (i) clear CRP's proposed terms of reference and time frame before they are released by CRP, and (ii) review CRP's draft reports on monitoring implementation of any remedial actions approved by the Board as a result of a compliance review before CRP finalizes them. BCRC will consist of the same Board members as BIC.

In addition to public sector operations, the new ADB accountability mechanism will apply to private sector operations (loan, guarantee, equity investment to the extent that ADB's operational policies and operational procedures are covered by it, or technical assistance grant).

Section I of this paper provides information on the current ADB Inspection Function. The experiences with accountability mechanisms of other institutions are provided in Appendix 1 (MDBs) and Appendix 2 (institutions other than MDBs). A summary of inspection requests received under the current Inspection Function is provided in Appendix 3. Section II provides information on the consultations about the review of the ADB Inspection Function. Appendix 4 gives a summary of the consultations, including the four non-exclusive options presented in the first and second draft working papers. Section III describes the proposal for the new ADB accountability mechanism with its two-step approach (consultation and compliance review), including resource implications, effective date, and transition arrangements. Appendix 5 provides the institutional setup of the new ADB accountability mechanism. Appendix 6 gives an account of the specific issues on the application of an accountability mechanism to private sector operations that were raised during the consultations. Appendix 7 summarizes suggested modes of response to complaints and the dispute settlement procedure. Appendix 8 contains the draft reorganized table of contents of the Operations Manual. Finally, Section IV provides a recommendation on the establishment of the new ADB accountability mechanism and related matters.

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