New Environmental Defense Study Reveals Billions Spent On Wasteful, Harmful Asian Development Bank Projects

Environmental Defense today released a study estimating that at least 70% of Asian Development Bank (ADB) funded projects in Indonesia will fail to produce lasting economic or social benefits for the Indonesian people. The findings, based on publicly available ADB documents, come as Bank officials gather in Honolulu this week for their annual meeting. Indonesia is the Asian Development Bank’s largest client country, owing the Bank over $16 billion by the year 2000.

“The lack of sustainable benefits from these projects for Indonesia spells disaster for such a heavily indebted country,” said Environmental Defense senior scientist Stephanie Fried, the author of the study. Evaluating the Asian Development Bank in Indonesia: The operation was a success, but the patient died can be accessed at www.environmentaldefense.org

The study finds that according to the Bank’s own reports, in both 1998 and 1999 just under 60% of loans underwrote projects rated “generally successful” by the Bank. Given Indonesia’s $16 billion debt to the ADB, these numbers suggest that by the year 2000, at least $5.9 billion went to wasteful or harmful projects. These figures assume that projects rated “generally successful” by the Bank actually were successful. This estimate also does not take into account matching funds spent by the Indonesian government, or additional loans from the World Bank and other lenders for the same projects.

Bank documents, however, disclose that half of the projects that it characterizes as “successful,” in fact are of questionable sustainability, indicating that the project failure rates are much higher. Based on the Bank’s own estimates, the Environmental Defense study finds that as many as 7 of 10 Asian Development Bank funded projects, potentially over $11 billion dollars worth, will fail to provide lasting economic or social benefits for the country.

“The Asian Development Bank’s own project records indicate that many of its loans to Indonesia underwrite projects that contribute to serious environmental harm and social upheaval while failing to create the long-term benefits the country needs to pay back its massive debt,” said Environmental Defense international program director Bruce Rich. “The Asian Development Bank’s irresponsible lending practices are further crippling Indonesia’s economy and harming its environment and people.”