Fwd: [ESG-INDIA-LIST] A Call to Action Against Misdirected Development: Karnataka's Forfeits its fortunes in the hands of International Financial Institutions!
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From: "ESG India S2L" <esg@...>
Date: Sat, 16 Oct 2004 16:36:45 +0530
Subject: [ESG-INDIA-LIST] A Call to Action Against Misdirected Development: Karnataka's Forfeits its fortunes in the hands of International Financial Institutions!
The Enclosed release was made in a joint Press Conference held in Bangalore today. Though the Release focuses on Karnataka's experience with IFI's, it reflects on experiences of other states in India. Following this release a networked initiative will prepare a statement of concern to present to the Deputy Chief Minister and Finance Minister of Karnataka, Mr. Siddaramaiah, to press for the demands made in the enclosed release.
Joint Press Statement: 16 October 2004: Bangalore
A Call to Action Against Misdirected Development
Karnataka Forfeits its fortunes in the hands of International Financial Institutions!
IFIs in Karnataka
The World Bank group is poised to increase its lending to India to US$ 3 billion annually in the period 2005-2008, up by a billion from the previous corresponding period. The Asian Development Bank (ADB) has also increased its lending to India to US $ 6.47 billion for the period 2005-07. These institutions combined, now provide loans and “policy advice” in a number of key sectors such as fiscal management, revenue collection and management, governance, agriculture, forestry, education, health, physical infrastructure, energy and water.
With its liberalised investment regime and willingness to undertake market oriented economic reforms in practically every sector, Karnataka has been an attractive destination for multilateral and bilateral International Financial Institutions (IFIs) over the past decade. Karnataka was the first state to implement the new agriculture policy in 1996, which ushered in corporate dominated agriculture including floriculture, aquaculture and also the production of special gherkins for export. The State has amended land reform laws to facilitate corporate agriculture and has systematically opened up its agricultural markets, thus exposing its farmers to unregulated competition from outside. The State Government has actively supported the expansion of the Information technology (IT) and Bio-Technology (BT) sectors by facilitating land acquisition, power and water supply, and offering other economic incentives to private companies in these sectors.
While such developments have boosted investments in the IT and BT sectors, they have substantially contributed to the displacement of small and marginal farmers, whose lands are acquired for a pittance in compensation, while the benefits accruing to investors by such grants are immense. At the same time, the conditions of the state’s farmers have worsened, as indicated clearly by the increasing rates of suicides in farming communities. There is no thought to writing off their debts, or extending low, or no interest periods of credit to farmers, while the IT sector, for instance, continue to enjoy tax haven status, thus depriving the state’s exchequer of much needed resources.
The World Bank’s focus in Karnataka has included comprehensive structural adjustment measures through the Karnataka Economic Restructuring Loans (KERL), as well as urban and rural projects including watershed management, highways development, the Karnataka Municipal Reforms Project and the Karnataka Urban Water Supply Improvement Project (KUWASIP). The ADB has largely focused on urban projects: the Karnataka Urban Infrastructure Development Project and the Karnataka Urban Development and Coastal Environment Management Plan. In a recent statement issued to the Bangalore press, the World Bank’s Country Director stated that consultations are on with Karnataka Government to sanction the Karnataka Economic Restructuring Loan Phase III in excess of US $ 200 million, primarily for urban sector reforms and health sector projects. The ADB is planning to expand financing to ten North Karnataka towns.
While the World Bank has expressed interest in poverty alleviation programmes such as literacy, health care and rural development, its involvement in Karnataka is driven by its interest in the state’s power and infrastructure sector. The World Bank has pushed hard for structural and economic reforms in the power sector, which would result in wide ranging privatization of the sector and provide lucrative contracts for external power corporations. In fact, one of the main reasons for a delay in sanctioning of the KERL III was the World Bank’s condition demanding that Karnataka privatise one of its electricity supply companies. Despite various attempts the Government of Karnataka was unable to fulfill this demand and the proposed disbursal was contained to USD $ 200 million. Subsequently, the Government of India stepped in and vetoed the loan in Nov 2003.
The State Government has clearly veered away from its commitments to providing energy equitably, as is evident from its continuing emphasis on meeting Bangalore’s growing power needs largely by establishing green field projects. Little attention has been paid to improving the extraction benefits from existing installed capacity, or improving the energy security of rural areas. In addition, considered inputs from local experts have been pushed aside by World Bank and ADB selected consultants, whose expensive consultancy reports add to the loan burden of the people of Karnataka. During the Bangalore consultation in July on the World Bank’s Country Assistance Strategy (CAS), Mr. Vijay Gore, Addl. Chief Secretary of Karnataka charged Mr. Michael Carter, World Bank Country Director, with promoting consultants who the State had blacklisted!
A closer look at IFI supported projects in Karnataka and the conditions that come with such financing reveal strong cause for concern. The Greater Bangalore Water Supply Scheme--which the World Bank is likely to fund—demands user fees that are clearly un-affordable by majority of the project’s “beneficiaries.” In the ADB funded Karnataka Urban Development and Coastal Environment Management Project (KUDCEM)--where the ADB’s co-financing component is US $ 175 million--project managers have coerced local municipal authorities into accepting terms and conditions that they are unable to justify to the public; the project is characterised by poor quality construction material, prolonged delays in completion, non-disclosure of important project information to the public, non-transparent and non-participatory decision-making and a refusal to subject project implementation to public scrutiny and supervision. In order to repay the project loans, Municipal Councils were required to hike land taxes mooted as part of the self assessment schemes (SAS) along with other user fees on services covered by KUDCEM project. Unable to carry the public with them, some municipalities have passed resolutions against such increases.
These projects place a mammoth debt burden on the state exchequer and thereby on every citizen of Karnataka. Equally important, they weaken local and state level governance through their undemocratic, non-transparent and non-consultative methods of operation. Constitutionally instituted local governance structures such as Municipal Councils and Panchayats are undermined by the parallel decision making structures that most IFI funded projects require.
The World Bank’s recent “consultations” on its new India CAS were characterised by such a lack of due process, which denied Indians an opportunity to debate the main features of the CAS before the World Bank’s Board of Executive Directors in Washington, DC approved it. Taking a serious note of such arbitrariness a gathering of peoples’ movements and civil society organizations in August rejected the CAS on grounds of:
a) poor and lackadaisical consultation in developing such a critical document, especially considering that it released only a part of the document on its website.
b) flawed country analysis that it used as the basis for developing new projects and
c) unjustified push for large scale privatization of key sectors outlined in the CAS.
Reclaim Development and Government
While development, improved infrastructure and a higher quality of life are urgently needed, economic gains for a few at tremendous costs for many cannot be acceptable as a desirable development model. Nor is it acceptable that the State Government agrees to the policy conditions demanded by the IFIs, and makes policy and project decisions without public debate and scrutiny.
In solidarity with worldwide actions against the World Bank, the IMF and the ADB, various organizations in Karnataka have come together to articulate these concerns. This is part of a process which would be followed by a series of actions that would pressurize the State Government to pause in its negotiations with the IFIs, and shape its development policies and programmes according to the needs and priorities of its own people rather than the vested interests pushing the IFI’s economic agendas.
In specific, we demand that the Government of Karnataka urgently:
1. Immediately review all loans from the IFIs and bilateral donors that carry anti-people conditionalities and undermine sovereignty.
2. Prepare a White Paper that presents the total loan and interest burdens of the state arising from IFI and other donor funded programmes highlighting policy conditionalities that accompany these programmes.
3. Initiate evaluations of IFI and bilateral donor funded loans and projects from the perspective of development effectiveness and impacts on governance. These evaluations should be open to the public; panchayats and municipal councils, farmers’ groups, unions and workers’ organizations, tribal/indigenous peoples groups, and other civil society organizations must be involved in shaping the terms of reference for these evaluations.
4. Release the White Paper and evaluation reports to the public and table them for discussion in the legislature. New guidelines should be developed for the State’s contractual relationships with IFIs and donors based on the impacts of past loans and conditionalities.
5. Start exploring means of development financing development that do not compromise the public interest through policy conditions and heavy debt burdens. This could include the devolution of financial powers from the Centre to State so that States can increase their tax based by taxing corporate sectors on par with others and recovering tax arrears from the wealthy.
Karnataka Rajya Raitha Sangha (Karnataka State Farmer Association)
Leo F. Saldanha,
Environment Support Group
Focus on the Global South
NGO Task Force, Mangalore
Tumkur Citizens’ Forum
Maj. Gen. S. G. Vombatkere (Retd.),
National Alliance of People’s Movement
Address for Contact:
Environment Support Group ®, S-3, Rajashree Apartments, 18/57, 1st Main Road, S. R. K. Gardens, Jayanagar, Bannerghatta Road, Bangalore 560041. Telefax: 91-80-26341977/26531339/26534364 Telefax: 91-80-51179912 Email: esg@... or esg@... Web: www.esgindia.org
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