AIIB Transport Sector Strategy- Road to Nowhere?

By Eugene Simonov 

     Rivers without Boundaries

On 10 May 2018, the Asian Infrastructure Investment Bank (AIIB) launched public consultations on its Draft Transport Sector Strategy. The AIIB claims that the draft strategy outlines AIIB’s vision to develop sustainable and integrated transport systems that promote trade and economic growth in Asia. AIIB’s intended approach will embrace innovative and proven technologies, as well as promote environmental and social sustainability. While the energy sector presents a larger infrastructure demand need in Asia, the transport infrastructure sector arguably presents the bigger challenge.

Together with the draft strategy is the Transport Sector Study – a rather eclectic paper telling how the Strategy should look like, but which somehow is not fully aligned with the contents of the Draft Strategy.

“Connectivity infrastructure is crucial for trade and economic growth in Asia and beyond,” said AIIB Vice President for Policy and Strategy Joachim von Amsberg, “we welcome inputs and comments from all interested parties to assist us to further refine our transport sector strategy. “However, unlike the Energy Strategy, which was discussed in two rounds, public consultations are going to be held in just one shot. The public consultations period will last for eight weeks, starting from May 10, 2018, to July 4, 2018. Written comments must be submitted by July 4, 2017, to ts.consultation@aiib.org.

The draft Strategy says: "It is necessary to develop sustainable transport that is financially and economically viable, fiscally responsible, environmentally sustainable, and socially acceptable" which is a complete disregard for sustainability. As we all know, development of transportation systems is one of the leading causes of environmental degradation and social tensions with key impacts related to:

1.    Penetration of trade and industrial activities in previously unaffected areas which creates demand for plundering of natural resources with poor safeguards in place to confront it;

2.    Fragmentation of natural ecosystems resulting in decreasing viability of wilderness areas, species populations, and ecosystem services;

3.    Massive displacement of local communities, conflicts related to hardships caused by transportation;

4.    Intrusion into indigenous lifestyles, influx of migrant workforce, forced transformation of local cultures, and ruining of local productive system by the influx of imported goods;

5.    Political conflicts due to expected shifts in power and influence due to new transportation routes;

6.    Huge, usually inefficient use of resources for development of major infrastructure and inefficient use of energy for transportation of massive amounts of commodities (many of which could be procured locally) across the globe;

7.    Massive pollution from fuels and lubricants used in machinery and additional pollution from waste generated along the transportation routes;

8.    Greenhouse gas emissions generated through full cycle of developing, using, and maintaining transportation systems.

Both the Strategy and the "Study" paper partially address these concerns and only #8 from this list of factors have to be assessed and framed within such planning document on transportation. This means that AIIB has practically zero environmental and social responsibility at the strategic level of planning.

Meanwhile, all factors of negative impact listed above are very evident in Asia, and especially along the Belt and Road economic corridors; from the tropics to the Arctic:

•    Mekong River’s natural riverbed is planned to be blasted and ecosystems destroyed to give way to inland water transportation from China to Thailand and beyond;

•    Myanmar wilderness is being severely dissected by planned transportation corridors with conflicts bursting out in politically unstable indigenous areas;

•    In Russian Far East Primorsky Province, three corridors connecting China to the Sea of Japan threaten populations of tigers, leopards, and other rare wildlife;

•    A bridge and road to a pulp mill planned in intact forest ecosystems across transboundary Amur-Heilong river from Heilongjiang to Zabaikalsky Province in Russia will result in fragmentation and devastation to the last areas of old growth boreal ecosystems and subordinate the area to resource needs of China, which lacks pulp and timber due to forest bans;

•    Dredging in Ob River Mouth to facilitate passage of gas-carriers delivering LNG from Port Sabetta - the location of new Russian-Chinese Yamal LNG project threatens large fish stocks on which indigenous people of the Arctic depend;

The Strategy does not address key questions of broader sustainable development. It has a very backward view of "changing demand conditions and technologies". It basically limits possible innovation to "upper-middle and high-income” countries, where basic transport provision has been met, projects financed by AIIB will come with additional focus on spreading green transport technologies and uplifting transport productivity." Does this directly imply that in low-income countries the AIIB does not plan to promote new green transport technologies?

Little is said in the draft Strategy on what is being transported and how\why it is expected to change in the next few decades. For example, coal makes huge percentage of past and current shipping (at least in Russia Coal is the King of railroads) but may go down if cleaner energy systems prevail. In broader developments, countries like China are reshaping their export capabilities and instead of shipping around bulk products (like steel or cement) seek to export "overcapacity" to produce steel and cement closer to emerging markets. Finally, in many sectors, it is expected that much of the production of everyday goods may be localized and production facilities scaled down to produce items needed by local clientele (3-D printing is just one extreme example of the trend).

The stated choice of the AIIB is to support destructive mode of business as usual and deliberately close its eyes on well-known social and environmental externalities. The Strategy supports infrastructure for the sake of infrastructure, thus not connecting it to well assessed societal good, but simply serving those who benefit from large infrastructure development: construction companies, traders, producers of machinery and construction materials, high officials benefitting from association with large projects, politicians using such projects to promote themselves. The three indicators suggested for monitoring\judging success of projects have little to with sustainable development e.g. Passengers handled per annum \Tons of freight handled per annum\ Private capital mobilized.

The Strategy and the accompanying “Study” does not address proper assessment of alternative options which are absolutely key issues in planning of transportation routes. The strategy has a complete inappropriate section on "promoting environmental and social sustainability", which "requires projects to minimize environmental and social impacts during project implementation and operation, in line with the requirements of AIIB’s Environmental and Social Framework and Policy". Thus, it deliberately skips most important stages of Project Identification and Project Design\Planning at which most decisions regarding choosing right alternatives and promoting sustainability could be practically made. It is only on the latter part partial mitigation is feasible at higher costs. All it has to say about the key question of spatial planning is the commonsensical phrase "Avoiding excessive traffic requires better land use planning" with a footnote hinting that the question is NOT going to be addressed within this strategy. At the same time, the AIIB does not condition application for projects by the presence of broader spatial development plans that pass strategic environmental assessments.

Development for Whom?

From the "Developing strategic partnership" section, we learn that civil society, local communities or local self-governments are not among partners to deal with when identifying new projects, while commercial banks, institutional investors, and infrastructure funds are. The absence of local communities on the list of partners is not just an omission, but a sign of continued contempt for local people and their legitimate concerns, which was openly proclaimed by the AIIB President at a workshop during the 1st Annual Meeting of the Bank in Beijing in 2016.

Although deprived of any coherent section on environmental and social provisions, the Study correctly calls for "Clearly defining a set of priorities for the transport infrastructure sector and adopting a framework to allow effective project selection”. The set of priorities should include modal and cross-border connectivity and environment sustainability. Some assessment of projects’ strategic value, how well they are integrated with national plans, how important they are in the overall network should be built into the project selection criteria.

Given the obvious absence of conceptual framework on sustainable development, productive ideas, and green daring, the AIIB could opt to focus at the beginning on a safer field of Upgrading of existing infrastructure. However, this is listed as the last choice out of 4 and instead  co-financing of "trunk and strategic infrastructure" (whatever those buzzwords mean) is declared as near-term focus without any clear justification for the choice. In general, the AIIB seeks to fund "Projects with a significant economic return but without sufficient financial return that would attract stand-alone private finance" as other MDBs routinely do.

Another interesting feature is the proposed use of the AIIB’s Special Fund to support the preparation of cross-border projects, including those in middle-income countries (earlier we thought that fund is for the poorest countries). My reading is that "middle-income countries" for AIIB means first of all China, whose Belt and Road Initiative is “serviced” by the Bank’s operations.

In summary, we see that AIIB has failed to develop a draft of its Transportation Strategy for it lacks the essential rigor, key questions, and any criteria and indicators allowing to assess and monitor the sustainability of projects. All it does is to create channels to spend money on conducting the business as usual. In a sense, this draft strategy is a large step backward from its energy twin, which, however crooked, was at least setting some meaningful objectives related to sustainable development although this too has failed to develop a path to achieve them.

The future is highly uncertain but at the same time full of revolutionary promises already supported by obvious precedents, trends, and commercialized technologies. Anyone who wants to participate in shaping this future takes responsibility to choose what trends and needs to follow to support the overall better outcome.