EAST ASIA AND PACIFIC INFRASTRUCTURE STRATEGY FLAGSHIP STUDY

1. EAST ASIA AND PACIFIC INFRASTRUCTURE STRATEGY FLAGSHIP STUDY ENVIRONMENTAL AND SOCIAL ASPECTS Jeremy Warford

2. INTRODUCTION • Adverse environmental and social image of infrastructure projects • Uncertainties: estimating damage costs; identifying causality and appropriate remedies • Value judgements unavoidable • Improved information and transparency required

3. ENVIRONMENTAL AND SOCIAL IMPACTS • Positive and negative effects of infrastructure projects • Externalities, incidence, conflict of interest • Poor suffer most, hence close link between environmental and social aspects • Valuation methods are imprecise, but rough estimates suggest importance in terms of GNP or other indicators, warranting concern of highest level decision makers

4. CAUSALITY AND RESPONSIBILITY • Importance of intersectoral linkages • General recognition of inadequacy of project by project approach: need to “mainstream” environmental policies • Gap between rhetoric and reality • But disentangling impact of intersectoral and country-wide economic policies is complex • And underlying social factors play a fundamental role (Japan example)

5. CONVENTIONALMEASURES • Economic and regulatory instruments, polluter-pays principle • Information and participation • Private sector incentives: marketing, voluntary agreements • Public expenditure; environmental agency costs not necessarily a good indicator of effort • Implementation: training, monitoring

6. STRATEGIC ISSUES • General market reforms tend to encourage efficient resource use, but economic growth creates scale problems (Indonesia) • Infrastructure sector policies –”win-win” pricing policies for energy and water; role of subsidies • Intersectoral effects – recognized in project design (multipurpose water projects) but less so at sector and macro policy level

7. STRATEGIC ISSUES (cont) • Social policies and governance reforms often necessary but require longer time frame • Role of Strategic Environmental and Social Assessment (Bali example)

8. ROLE OF EXTERNAL AGENCIES • Role of donors in projects with negative environmental and social impacts:minimize reputational risk to the donor or help minimize negative impact of theproject? • “Safeguards” policies: addressing at project level too late? • Addressing environmental and social impacts in adjustment lending

9. SUMMARY AND CONCLUSIONS • Environmental and social aspects of infrastructure investments and policies are important enough to concern highest level decision makers: due diligence earlier in development process is required • Improvement essentially revolves around governance: in addition to adequacy of conventional environmental and social agencies, the following required:

10. SUMMARY AND CONCLUSIONS (cont, 1) • Improved information and transparency about the magnitude and incidence of environmental and social consequences, and their direct and underlying causes • Empowerment of those likely to be affected by infrastructure projects and policies to participate effectively in decision making at all stages • Sensitivity and technical training in infrastructure agencies about cost-effective and socially desirable remedial measures

11. SUMMARY AND CONCLUSIONS (cont, 2) • Incentives for staff throughout government agencies and development institutions to make environmental and social issues an integral element of their own areas of responsibility