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p. 2 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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I. Current ADB Inspection Function

A. Background

1. 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.¹ The ADB Inspection Function was the third accountability mechanism established by multilateral development banks (MDBs), following the creation of inspection mechanisms at the World Bank (WB) in 1993 and the Inter-American Development Bank (IDB) in 1994.

2. At the time of approval of the ADB Inspection Function, the Board stipulated that:

[T]he operation of the Board Inspection Committee and related inspection procedures, and consideration of the application of these inspection procedures to the Bank's private sector operations, should be reviewed by Management within two years after the Board's approval of the initial Roster, and the results of this review, together with any proposals for improvements in the operation of the Committee or in the related inspection procedures, should be submitted to the Board.²

3. In 1998, ADB commenced the review of the Inspection Function. During the initial review ADB sought the views of civil society including nongovernment organizations, private sector lenders and investors, and the ADB Management and Board. An initial working paper was submitted to the Board in September 1999.³ That working paper considered the functioning of the Board Inspection Committee (BIC), reviews by WB and IDB of their inspection mechanisms, issues and lessons learned, and the application of the Inspection Function to ADB's private sector operations.

4. At that time, 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 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.⁴ The review continued, and in 2002, ADB carried out extensive external and internal consultations on the review. Also, 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 both inside and outside ADB. The first full inspection also raised concerns about independence, credibility, transparency and information dissemination, and effectiveness of the Inspection Function.

5. In 2002, the first and second draft working papers were extensively discussed at both internal and external consultations during the review of the ADB Inspection Function. 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.⁵ The comments received were also posted on the ADB web site⁶ and were forwarded to the Board before its consideration of the working paper. This paper takes into account the various comments of the Board.

B. Purposes and Objectives of the Current Inspection Function

6. The emergence of accountability mechanisms at ADB and other MDBs was a direct response to broader changes both inside and outside the MDBs. Beginning in the 1980s and throughout the 1990s, the activities of MDBs came under increased scrutiny by civil society groups, parliamentarians, and nonfinance ministry officials in both borrowing and funding countries. At the same time, there was a shift in development models toward sustainable development that was formally recognized at the 1992 United Nations Conference on Environment and Development. In response to these trends, MDBs began to develop new environmental and social policies that aimed at improving long-term development effectiveness by emphasizing the interests of affected communities.

7. The environmental and social policy frameworks set minimum standards for the design and implementation of MDB-assisted projects. The policy frameworks were developed to respond to concerns that MDBs not fund projects that had unreasonable environmental impacts (e.g., environment policy), unfairly disadvantaged vulnerable groups (e.g., indigenous people and involuntary resettlement policies), or were conducted with little or no local knowledge or participation (e.g., access to information and consultation policies). The policies were also seen as improving the consistency of project implementation and as an appropriate way for the boards of directors of MDBs to establish substantive standards for staff operations. These policy frameworks were meant to improve the development effectiveness of MDBs and the quality of MDB-assisted projects.

8. Soon after these policy frameworks were developed, concerns arose from civil society groups and member governments that these policies were not being effectively implemented or adhered to properly or consistently. Additionally, MDBs faced an increasing need to carry out independent and objective investigations into the complaints of groups and communities affected by MDB-assisted projects. A number of high profile citizens' complaints arose in the 1980s, particularly against WB, and stakeholders inside and outside MDBs identified the need to create mechanisms to handle these complaints constructively. Due to the immunities and privileges enjoyed by MDBs under international law and through their charters, MDBs are shielded from private citizen lawsuits in member countries. This immunity basically denied affected people an effective forum to air their grievances and seek redress.⁷

9. These factors led first WB, and then other MDBs, including ADB, to create accountability mechanisms aimed at enhancing public accountability and compliance with their policies. The WB Inspection Panel was created in 1993, followed by the IDB Independent Investigation Mechanism in 1994, the ADB Inspection Function in 1995, and the International Finance Corporation/Multilateral Investment Guarantee Agency (IFC/MIGA) Compliance Advisor/ Ombudsman (CAO) Office in 1999. These accountability mechanisms have all aimed to improve the institutions' development effectiveness both by enhancing staff accountability to their board of directors through monitoring compliance with underlying policy frameworks and by increasing MDBs' responsiveness to complaints from project-affected people. In 2002, two leading bilateral export credit agencies (Export Development Canada and Japan Bank for International Cooperation) announced their intention to create accountability mechanisms. In 2002, the European Bank for Reconstruction and Development (EBRD) developed a proposal for an independent recourse mechanism, which was approved by its board of directors in April 2003. Appendix 1 summarizes the accountability mechanisms at other MDBs, and Appendix 2 summarizes the accountability mechanisms at institutions other than MDBs.

10. ADB identified similar objectives for establishing its Inspection Function. According to the 1995 Board paper, the rationale for establishing the Inspection Function included the following:

1. Establishment of an inspection function and related inspection procedures would be consistent with ADB's policy of encouraging transparency and accountability in its operations.

2. Establishment of such a function would complement ADB's policy of allowing greater public access to ADB documents and publications, as well as ADB's increased emphasis on beneficiary participation in the formulation and implementation of projects.

3. Independent investigation of the facts underlying the grievance of a group arguably affected by ADB's failure to follow its operational policies and procedures would permit a fair hearing of the views of the affected group.

4. The activities and recommendations of an inspection body would help to educate the public at large about the variety and complexity of issues involved in development programs in the region.

5. The existence of an inspection body would foster greater confidence in and support for ADB and its operations.⁸

C. Policy and Procedures of the Current Inspection Function

11. The current ADB inspection policy provides a formal channel for local communities and affected people (and in special circumstances, any Board member) to request an independent review or "inspection" of alleged policy violations in the formulation, processing, or implementation of ADB-assisted projects. The Inspection Procedures were approved by BIC⁹ in October 1996. The Inspection Procedures¹⁰ provide detailed guidance on the operation of the inspection policy.

12. Under the current Inspection Function, the following parties can request an inspection regarding an ADB-assisted project: (i) communities, organizations, or other groups residing in the borrowing member country where the project is being implemented or is proposed to be implemented; (ii) similar groups residing in another member country adjacent to the borrowing member country if the group is affected or likely to be affected by the project; (iii) representatives of such groups residing in the same country or, in exceptional cases, where no local representative is available, by nonlocal representatives; and (iv) one or more Board members in special cases involving allegations of serious violations with respect to an ongoing project.

13. Requests must be submitted in writing in English and must describe the following: (i) how ADB has failed to follow applicable operational policies and procedures in connection with the project; (ii) how the requester has been or is likely to be directly and materially harmed by ADB's act or omission, and what rights or interests of the group have been or are likely to be adversely affected; and (iii) a description of the steps taken by the requester to bring the complaint to ADB's attention, ADB's response, and a statement of why ADB's response was inadequate.¹¹

14. Requests that are beyond the scope of the Inspection Function and will not be considered include the following: (i) complaints relating to actions that are the responsibility of other parties or that do not involve ADB action or omission in violation of its operational policies and procedures; (ii) complaints regarding decisions made by ADB, the borrower, or the executing agency (EA) on procurement of goods and services, including consulting services; (iii) complaints relating to completed projects or substantially completed projects where 95% of the loan funding has been disbursed; (iv) complaints that have been already disposed under ADB's inspection procedures, unless the requesters present new evidence not known at the time of the original request; (v) complaints about the adequacy of ADB's existing policies or procedures; (vi) complaints within the jurisdiction of ADB's Appeals Committee or ADB's Administrative Tribunal or that relate to ADB personnel matters; and (vii) complaints involving ADB's private sector operations.

15. The current inspection process includes the following steps. The "days" referred to in these steps are calendar days.

1. An affected party sends a written complaint to the ADB President about an ADB-assisted project.

2. Management responds to the complaint within 45 days from receipt of the complaint by the President.

3. If the affected party is unsatisfied with the response, it can send a request for inspection to BIC. The request for inspection should contain the same information as the original complaint as well as a description of the steps taken by the requester to bring the grievance to the attention of Management, and why Management's response was inadequate.

4. BIC determines eligibility and asks Management for a response to the request within 30 days from Management's receipt of the request.

5. Within 14 days from receipt of Management's response, BIC recommends to the Board whether the requested inspection should be authorized.

6. The Board determines whether to authorize an inspection within 21 days from receipt of BIC's recommendation.

7. Within 7 days from the Board decision, BIC informs the requesters of the Board decision.

8. If the Board authorizes an inspection, BIC selects a panel of available experts from the panel roster to inspect the project.

9. After the inspection, the ADB panel sends a report to BIC.

10. Management submits its response to the panel report within 30 days from receipt.

11. BIC sends a recommendation to the Board within 14 days from receipt of Management's response, along with the panel report and Management's response.

12. The Board makes a decision on the panel report within 21 days from submission to the Board, and recommends to Management appropriate measures.

13. BIC informs the requesters of the Board decision within 7 days from the Board decision.

16. From the above steps, it takes at least 117 days before the requester knows whether an inspection has been authorized. It takes at least 182 days before the requester knows the outcome of the Board decision. These days do not take into account extensions of time to file documents and the duration of the panel inspection, which is not time-bound.

D. Requests for Inspection Received under the Current Inspection Function

17. ADB has received eight requests for inspection to date: three from Pakistan, four from Sri Lanka, and one from Thailand. Six requests have been deemed ineligible by BIC. Only one request-the Samut Prakarn Wastewater Management Project in Thailand-has gone through a full inspection process. The eighth request for inspection-the Chashma Right Bank Irrigation Project (Stage III) in Pakistan-was received by ADB in November 2002. In April 2003, the Board approved BIC's recommendation, including authorizing an inspection and that any inspection process approved by the Board should commence in December 2003 or earlier if BIC brings forward the timetable for commencement of the inspection process. A summary of the inspection requests received under the current Inspection Function is given in Appendix 3.

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