Peoples Forum Against Asian Development Bank (PFAADB)


28 December 2006

Sub: Urban Development in Kerala: Opportunity to forge a new vision

Dear Chief Minister VS Achuthanandan:

It is hardly surprising that the proposed Asian Development Bank (ADB) loan for the Kerala Sustainable Urban Development Project (KSUDP) amounting to a total of $ 316.1 million (Rupees 1422 crores) has come up against significant opposition from the people of Kerala, including your august office.

While much of the debate, so far, has centered on procedural lapses and the supposed absence of harmful conditionalities there are more substantive reasons for an annulment of this loan.

Fundamentally Flawed model:

The basic problem is that the ADB’s approach is premised on the ideology that the role of the government is to create an enabling environment for private sector participation in urban development. In the KSUDP the ADB clearly spells out its strategy to advance private sector participation in urban services; a) creating an enabling regulatory framework b) building technical and managerial skills within municipal corporations to formulate and manage private operations c) transparent tendering and contracting processes and d) implementation of charges and fees at ‘reasonable’ levels. In the policy matrix for the KSUDP, the ADB outlines several conditionalities to achieve this; one of which includes revising the role of the Kerala Water Authority (KWA) into an enabling regulatory authority that facilitates private sector participation in the water sector. Other conditionalities imposed by the ADB include ensuring that all municipal corporations formulate a policy for reduction of non-revenue water and conversion of public water standposts to individual metered connections.

Subverting local self governments:

The KSUDP loan comes with specific project outcomes, international consultancies and procurement policies over which the Government of Kerala and municipal corporations have no control whatsoever.

The ADB conditionality is that an international consultancy firm will be the Project Management Consultant and all procurement for civil works, software, goods and related services will be in accordance with the ADB’s guidelines and much of this will be through an international competitive process.

The role of local elected representatives and public officials will be relegated to that of implementers of ADB policy. The ADB loan is a choice that will benefit some groups (such as consultants and technocrats) and impose risks on citizens who will have to repay the loan. When there are alternatives and choices available, democratic political processes should be at the centre of decision-making –not technocrats.

Adding to Kerala’s debt overhang situation:

It is well known that Kerala is already steeped in debt, leading economists to classify the states finances as being in a debt overhang situation. This means a situation when crucial government investment is constrained by existing high levels of debt. Today the outstanding debt is over 40,000 crores and another external loan will only put the state in greater jeopardy.

ADB’s dismal track record in urban development:

2 similar ADB projects in Karnataka – the 1995 Karnataka Urban Infrastructure Development Project (KUIDP-completed) and 1999 Karnataka Urban Development and Coastal Environmental Management Project (KUDCEMP-under implementation) are dismal failures. In all 14 towns, both projects are replete with design flaws, poor quality of construction, prolonged delays in completion and non-disclosure of project information to local councillors. There were several instances of ADB project managers coercing local municipal authorities into accepting terms and conditions that they were unable to justify to the public. The ADBs insistence that key operations of the project be prepared by expensive foreign consultancy companies added to the overall debt burden created by the project. The KUIDP towns are grappling with repayment schedules due to erroneous estimates by ADB consultants on raising resources through new taxes and cost recovery in water distribution. The ADB project was out of purview of the Karnataka Transparency Act and hence affected people were unable to use the Right to Information to get vital information on the project.

Urgent need for democratic scrutiny of ADB loans:

In India, governments take loans and sign legally binding agreements with the ADB without the approval of the parliament or state legislative bodies. Given the far-reaching impact of ADB loans, this has to change. There are several countries where governments require some degree of prior approval from parliament for loans from International Financial Institutions. We believe that democratically elected representatives at the national, state and municipal corporation level should be the final arbiters of all economic policy. It is vital that MPs, MLAs and corporators have the right and obligation to be fully involved in the development and scrutiny of the KSUDP project. This is crucial because the ADB is not accountable to any country’s legal system. Its Charter clearly states that it is immune from all lawsuits and criminal proceedings. The present status of the KSUDP leaves much to be desired in terms of involvement of elected representatives.

Time to take a new direction:

That the 5 municipal corporations urgently need upgradation of existing infrastructure brooks no argument. But we also believe that your government must favour internal resources over institutions such as the ADB or the World Bank for urban development; this is not only the most democratic but also the politically correct option. The possibilities of internal resource mobilization are many in Kerala; they include commodity taxes on consumer expenditure, addressing tax evasion in the gold market, collection of tax arrears, under taxation of the tourism industry and mobilising the domestic savings of the state (including foreign exchange remittances) which run into thousands of crores of rupees.

We are convinced that the ADB loan will not only fail to deliver on its stated goal of promoting sustainable development, but also would instead undermine democracy in local governments and lead to furthering Kerala’s burgeoning debt burden.

The neo-liberal logic that privatisation, the ADB and the World Bank are here to stay has to be politically and economically countered. Your government has the opportunity to reject the ADB loan and instead work towards creating an urban model that can deliver on the promises of development, poverty reduction and environmental sustainability.

We look forward to working with you to achieve this objective.

Signed by:

Kerala Independent Fishworkers Federation
National Alliance of Peoples Movements
Narmada Bachao Andolan
Asia Pacific Movement on Debt and Development (APMMD)
Freedom from Debt Coalition
Philippines Rural Reconstruction Movement (PRRM)
Karnataka Rajya Raitha Sangha (KRRS)
Nadi Ghati Morcha
River Basin Friends
Environment Support Group
ADB quit Kerala Campaign
Urban Research Centre,
Focus on the Global South
Citizens Concern for Dams & Development
Delhi Forum
National Forum of Forest People & Forest Workers
Mines, Minerals & People
Shaheen Centre
Consumer Protection Forum
Water Initiatives
Civil Society Initiatives on IFIs (NE)
DICE foundation
Intercultural Resources
NGO Task Force on ADB
Nagarika Hitharakshana Samithi
BalakedararaHitharakshana? Vedika
Anikethana Trust
India Centre for Human Rights and Law (ICHRL)
Palni Hills Conservation Council
National Fishworkers Forum
Polavaram Project Andolan Samithi
Naga Peoples Movement for Human Rights
Movement Against Uranium Project
Centre for Environment Concerns
Aman Vedika
People’s Alliance of Central East India
Japan Centre for a sustainable environment and society (JACSES)
Centre for Economic Justice
Jharkhand Jangal Bachao Andolan
Bureau for Human Rights
Adivasi Mukti Sangathan
Peoples Movement in Subansiri Valley
Krishak Mukti Sangaram Samithi
Arunachal Citizens Right
Indigenous/ tribals Peoples Development Centre
Rural Volunteers Centre
Human Rights Initiative Tamil Nadu
Parisava Badokidara Vedika
Human Rights Law Network
SAKSHI human rights watch
Jharkhand Labour Union
Dalit Women Forum
National Hawkers Federation
Net work of persons with disabilities organization ( NPDO)
Lok Raj Sangathan
Consumer protection council
Manthan Adhyayan Kendra
South Asia Network of Dams, Rivers and People
Grassroot options
Dwarf Peoples’ organization
New Trade Union Initiative
National campaign on dalit human rights
Women’s collective
Bangla Praxis
Nagarik Udyog
Corporate Accountability Desk of the Other Media
Chasma Lok Sath
National Centre for Advocacy Studies
Open Space
Peoples Voice
Gangpur Adivasi Forum
Daluit Mukti Maocha
Plachimada Solidarity Committee
Pani Committee
Kaselu Palu Group (PNG)
Save Chara River Campaign
Gono Udhyog Forum
Green Movement of Sri Lanka
National Conference of Dalit Organisations (NACDOR)
South Asia Network on Dams, Rivers and People (SANDRP)
JAGORI – Delhi
Human Rights Forum – Andhra Pradesh
Act Now for Harmony and Democracy (ANHAD) – Delhi
People’s Media Initiative , Mumbai
Orissa Development Action Forum, Orissa
People’s Science Institute, Dehradun
Kriti Team, Delhi
Global Alternate Information Applications (GAIA) Kerala
Collective for Environment, Social and Economic Justice, Chennai
Community Environmental Monitoring, The Other Media, Chennai
KABANI – The other direction – Kerala
Environment support group, Bangalore
Grassroot India Trust
World Peace Envoy Bombay


Saraswati Kavula, Film maker, Andhra Pradesh
Maj Gen (Retd) S.G.Vombatkere , Mysore
Bidulata Huika
Badal kumar Tah
Malavika Mohanan
Karen Coelho, Researcher, Chennai
K.C. Santhosh Kumar, Social Activist and Film Maker
J. George
Piyush C.Sharma
Simon Joseph M

Sr.Elsa Muttahu
Jim Holdom, New Zealand