Strengthening and Use of Country Safeguard Systems 2008 AECEN Forum Bali, Indonesia Strengthening and Use of Country Safeguard Systems 2008 AECEN Forum Bali, Indonesia Helen B. Cruda Environment Specialist, ADB

Scope of Presentation Rationale ADB’s approach Results from preliminary assessments Potential role for development partners including AECEN

Country Safeguard Systems Country safeguard systems (CSS) - country’s institutional and legal framework pertaining to a safeguard policy area

Why strengthen country systems? Strengthening country safeguard systems is key to improving development effectiveness of public-sector managed activitiesStrengthening country safeguard systems is key to improving development effectiveness of public-sector managed activities Accra Agenda for Action, Sep 2008: “Donors agree to use country systems as the first option for aid programs in support of public sector-managed activities”Accra Agenda for Action, Sep 2008: “Donors agree to use country systems as the first option for aid programs in support of public sector-managed activities” Focus to date is on the Use of Country Systems (UCS) for financial management, procurement, and environmental and social safeguard policiesFocus to date is on the Use of Country Systems (UCS) for financial management, procurement, and environmental and social safeguard policies

MFIs on Use of CSS World Bank – 1 st phase pilot launched in 2004 tested use of CSS in 8 projects in 7 countries World Bank – 1 st phase pilot launched in 2004 tested use of CSS in 8 projects in 7 countries After evaluating its first phase, Jan 2008, initiated three-year extension with incremental scaling up from project to country level Inter American Development Bank’s Environment and Safeguards Compliance Policy (2006) provides for “considering the UCS” Inter American Development Bank’s Environment and Safeguards Compliance Policy (2006) provides for “considering the UCS” ADB’s proposed Safeguard Policy Statement expected to be approved in early 2009 also includes a provision for “strengthening and use of CSS” ADB’s proposed Safeguard Policy Statement expected to be approved in early 2009 also includes a provision for “strengthening and use of CSS”

3 SPs – Environment Policy (fifth thrust on Environmental Assessment), Policy on Involuntary Resettlement, and Policy on Indigenous Peoples3 SPs – Environment Policy (fifth thrust on Environmental Assessment), Policy on Involuntary Resettlement, and Policy on Indigenous Peoples seek to avoid, minimize or mitigate adverse environmental impacts, social costs to third parties or marginalization of vulnerable groups that may result from development projectsseek to avoid, minimize or mitigate adverse environmental impacts, social costs to third parties or marginalization of vulnerable groups that may result from development projects “do no harm” requirements that must be met for all projects“do no harm” requirements that must be met for all projects if SP is triggered, borrower has to meet relevant ADB requirements in a project. ADB’ SP also requires borrowers to meet own requirements. ADB’ SP also requires borrowers to meet own requirements. ADB’s Safeguard Policies

Borrowers’ Response In complying with ADB’ SPs, borrowers: meet requirements that are missing and/or not similar to their own requirementsmeet requirements that are missing and/or not similar to their own requirements such new/additional requirement improves safeguard outcome, but in a certain case could increase transaction cost and delay preparation of safeguard planssuch new/additional requirement improves safeguard outcome, but in a certain case could increase transaction cost and delay preparation of safeguard plans

Strengthening and Use of CSS: Proposed ADB Approach

Criteria in Use of CSS In context of using CSS to manage, for example, the environmental impacts and mitigation measures for a project to be financed by ADB, borrower may propose the use of CSS provided two criteria are met Equivalence – borrower’s CSS must achieve objectives of and adhere to ADB’s safeguard policy principles, andEquivalence – borrower’s CSS must achieve objectives of and adhere to ADB’s safeguard policy principles, and Acceptability – borrower must have relevant capacity and commitment to implement applicable laws, regulations, rules and procedures in relevant sector.Acceptability – borrower must have relevant capacity and commitment to implement applicable laws, regulations, rules and procedures in relevant sector.

First phase ADB assesses equivalence of borrower’s CSS at national, subnational, sector, or agency levelADB assesses equivalence of borrower’s CSS at national, subnational, sector, or agency level if gaps could be addressed reasonably, ADB and borrower agree on gap-filling measures to be included in action plan.if gaps could be addressed reasonably, ADB and borrower agree on gap-filling measures to be included in action plan. If gaps are big, process will not reach second phase. Borrower’s laws, regulations, or procedures, may need to be strengthened first.If gaps are big, process will not reach second phase. Borrower’s laws, regulations, or procedures, may need to be strengthened first. Country Assessment

Second phase ADB assesses acceptability of borrower’s implementation capacity, practices and track record.ADB assesses acceptability of borrower’s implementation capacity, practices and track record. if gaps could be addressed before or during project implementation, then CSS will be used for an ADB-financed project in relevant sector.if gaps could be addressed before or during project implementation, then CSS will be used for an ADB-financed project in relevant sector. Country Assessment

Action Plan for equivalence - will focus on how to enhance the alignment of CSS with ADB’s policy principles through necessary improvements in the policy or regulatory framework Action Plan for capacity building - will address relevant capacity development issues of borrower’s executing agency Action Plans

For equivalence assessment: borrower identifies laws, rules, regulations and procedures pertaining to a SP area borrower identifies laws, rules, regulations and procedures pertaining to a SP area ADB compares with own safeguard policy principles ADB compares with own safeguard policy principles ADB analyzes intent and application of borrower’s requirements to determine similarity or difference in outcomes ADB analyzes intent and application of borrower’s requirements to determine similarity or difference in outcomes ADB analyzes gaps and supports borrower in developing action plan, as required ADB analyzes gaps and supports borrower in developing action plan, as required Methodology: CSS Assessments

For acceptability assessment: challenging - ADB reviews implementation practices and track record to assess the rigor of implementation of laws and regulations - ADB reviews institutional capacity focusing on performance of Ex Ag managing the safeguard issues of a project -ADB undertakes gap analysis and supports borrower in developing action plan Note: Since development partners are expected to collaborate and work together in this area, similar methodology will be used for conducting CSS assessments.

Other Considerations -ADB will conduct consultation workshops -final equivalence assessment reports will be disclosed to the public on ADB website -acceptability-related issues at project level will be part of normal safeguard disclosure and consultation process at project preparation time

Other Considerations-cont’d -CSS may be applied at various levels such as national, sub-national, sector, or agency level -depending on assessments, CSS may be applied for one, two or for all three SPs -CSS will not be applied to highly complex and sensitive projects -in case of changes in CSS during project implementation, ADB and borrower discuss to agree on steps to take to remedy the issues

ADB’s Responsibility - assess equivalence of CSS - help borrower prepare Action Plan - consult stakeholders to discuss and validate findings of equivalence assessments and seek agreement on proposed measures in Action Plan; and -provide financial support to develop and implement Action Plan through program loans and technical assistance, and supervise implementation.

Borrower’s Responsibility Borrower’s Responsibility facilitate sharing of all relevant documents, data, and information with the ADB assessment team, and conduct seminars/workshops, as necessary;facilitate sharing of all relevant documents, data, and information with the ADB assessment team, and conduct seminars/workshops, as necessary; assist in organizing and conducting consultation with stakeholders to discuss and validate findings of assessments; andassist in organizing and conducting consultation with stakeholders to discuss and validate findings of assessments; and develop action plans outlining measures to address needed changesdevelop action plans outlining measures to address needed changes

Preliminary Findings-Country Case Studies -Studies (IND, KYR, PHI, PRC, VIE) show that convergence of CSSs in terms of equivalence with ADB’s safeguard policy principles, is closer in area of environmental safeguard than in area of social safeguards (involuntary resettlement and Indigenous Peoples) -Implementation capacities are uneven; strengthening in various areas, needed

Preliminary Findings on Environmental Assessment -fair degree of equivalence of country policy principles with ADB’s SPs -differences in procedures and practices related to conduct of environmental assessment (EA) and environmental clearance (project categorization schemes, responsibilities and timing for carrying out EA-related activities, extent of info disclosure and consultation, rigor of monitoring during and after EMP implementation) Missing across 5 countries – environmental liability assessment during merger/acquisition or closure/abandonment; post-EA audits not in place and stakeholders resort to the judiciary (IND,PHI) in case of issues on outcomes; policy and procedure still project-centric except recent efforts in PRC, PHI and VIE to introduce strategic and programmatic EAs, but still in infancy and need support

Preliminary Findings on Environmental Assessment Implementation capacity assessment show need for: -establishing mechanism to access quality secondary environmental data -developing guidelines on SEA -institutionalizing EA training -capacity building of local/decentralized institutions (PRC, IND) including compliance oversight and post- project monitoring -introduce need for environmental management system at local financing institutions (growing emphasis in ADB lending to private sector)

Role for Development Partners including AECEN Collaborate to implement action plans to strengthen country safeguard systems or build environmental safeguard capacity of countriesCollaborate to implement action plans to strengthen country safeguard systems or build environmental safeguard capacity of countries Gaps in policy, laws and regulations ADB: program loan, TA to strengthen national legal frameworkADB: program loan, TA to strengthen national legal framework Gaps in implementation capacity TA, twinning arrangement, knowledge networking, training, etc.TA, twinning arrangement, knowledge networking, training, etc.

Benefits in Use of CSS aligns CSS with international good practicealigns CSS with international good practice improves borrower’s capacityimproves borrower’s capacity reduces transaction costreduces transaction cost enhances borrower’s ownershipenhances borrower’s ownership provides focus on harmonizationprovides focus on harmonization

For more information, check ADB Environment Web Site Thank you