Message to the Asian Development Bank’s Board of Directors: Do not approve the Integrated Citarum Water Resource Management Investment Program until significant improvements and corrective measures are made. Safeguard documents and project preparations do not comply with the ADB policies. Social risks can far outweigh the intended benefits of the proposed loans.

ADB enters into Citarum
The Citarum River is one of the most critical river basins in Indonesia. Located in the province of West Java, the basin extends over 13,000 square kilometers, which provides home and life to over 10 million people. It supplies about 80 percent of metropolitan Jakarta’s water needs, irrigates over 240,000 hectares of rice and other agricultural crops, and is the source of 1,400 MW of hydroelectric power.

Aiming to address the complex challenges in managing the Citarum water resources, the ADB is offering a package of assistance called Integrated Citarum Water Resource Management Investment Project (ICWRMIP). The proposed Program aims to promote integrated water resources and environmental management within the Citarum River basin that will address challenges to water conservation and allocation. ICWRMIP has many sets of projects that cover watershed management, agriculture, water supply and energy.

With over US$ 600 million financing, ICWRMIP is the first ADB project in Indonesia that uses the Multi-tranche Financing Facility (MFF), which will be rolled out over 10-15 years. The Bank has recently entered into an agreement with the Government of Indonesia (GoI) with the former providing loan, technical assistance and a grant to prepare and manage ICWRMIP. On December 4, 2008, the ADB’s Board of Directors is scheduled to approve the following projects whose funds constitute the bulk of ICWRMIP financing, namely:
1. TA – Institutional Strengthening for Integrated Water Resources Management in the 6 Ci’s River Basin Territory
2. MFF – Facility Concept: Multitranche Financing Facility – Integrated Citarum Water Resources Management Investment Program
3. Loan – Integrated Citarum Water Resources Management Investment Program – Project 1

The Aliansi Rakyat untuk Citarum (ARUM) or Peoples Alliance for Citarum, a growing network of West Java and Jakarta civil society organizations, has been monitoring the project preparation of ICWRMIP since February 2008. It has engaged with the ADB’s project management, central government’s implementing agencies and local governments, and the communities who will be impacted by the Program. It has developed a collective assessment of ICWRMIP that identified the gaps in the draft Resettlement Plan of the Phase 1 based on ADB’s Involuntary Resettlement Policy. It also examined the soundness of integrated water resource management (IWRM), gender strategy and anti-corruption strategies of the ICWRMIP and the risks involved. The findings were based on fact finding missions, meetings with the ADB project management team, project document review, and in reference to relevant materials including the applicable ADB policies.

Resettlement Plan in the 1st ICWRMIP Loan – Project 1: Flawed, risky
The loan for Project 1 includes the rehabilitation of West Tarum Canal (WTC) as a sub-project. WTC is a 68.3 km long artificial waterway that diverts water from the Citarum River which is used as a vital source of water for irrigation, industries, and households in West Java and the metropolitan Jakarta. The total loan for this sub-project is US$50 million, which is a slice from the US$500 million program fund or “facility”.

The rehabilitation of West Tarum Canal will displace 872 households and indirectly impact other residents in the three districts of West Java namely Kabupaten Karawang, Kabupaten Bekasi and Kota Bekasi. However, the Resettlement Plan (which remains draft up to this stage) has many serious flaws and poses high social risks. It does not comply with the ADB’s Involuntary Resettlement Policy and its implementing requirements.

Key Findings
On the draft Resettlement Plan
• The estimated number of project affected peoples (resettled and host) is inadequate. It identified 872 households will be directly affected and displaced from their land but it has no clear benchmark and transparent process upon which affected persons that will be negatively impacted were determined. The direct and indirect affectees can be higher and the risks of excluding and marginalizing others from proper compensation and livelihood restoration are high.
• It does not have clear mechanism to address land scarcity and land acquisition issues for people to be displaced. It has no clear relocation program and no clear relocation site. It identified a privately owned land as possible relocation site but it does not guarantee legal protection to secure people’s access to and use of land.
• There are no proper compensation, livelihood restoration and rehabilitation assistance measures. It will leave relocated people without clear options to restore or defend their livelihood.
• It does not guarantee livelihood restoration to the affected people given the gaps in the assistance measures. The social preparation strategy is unclear and unacceptable.
• The resettlement processes have not been clear and participatory.

On transparency and consultation practices
• The public information disclosure has been inadequate. Many affected people, even the local officials, were not consulted. There were no prior information about the agenda and the disclosure of the concerns and outcomes in those consultations is very scant.

On gender, anti-corruption and IWRM,strategies
• The resettlement plan has no clear and sound gender strategy vis-à-vis ADB’s gender policy. It has not conducted an in-depth assessment of the differential needs and impacts of the project to women, men and children. No initial poverty and social assessment has been disclosed either.
• There is no anti-corruption framework in place for this Program. It does not have clear mechanism to prevent and combat corrupt practices in the project management at the local and national levels.
• It has no empirical evidence that demonstrates any successful IWRM projects in Indonesia or in SEA. Yet, it is pushing for this strategy without paying attention to the issue of transaction costs of allocation such that it is not inclusive of different parties from the upper and downstream (having their differential power and competing claims in water allocation and resources) in the project management and decision making. In Indonesia, there have been recent controversies surrounding the creation of a river basin water board whose mandate cuts across the municipal and provincial boundaries, because some local governments refuse to have their authority in river management (inc. charging and collecting user fees) delegated to a river basin board as this will affect their local revenues. The ICWRMIP has no clear strategy how to address national and local conflicts over Citarum river management.
• The rehabilitation of West Tarum Canal project fails to address the growing problems of farmers’ declining access to Citarum water to irrigate their rice fields due to significant increase of water allocated for industrial and drinking consumptions.

Conclusion
The project objectives are hardly met by the proposed methodologies. Serious flaws in the project design pose impoverishment and political risks that can be far higher than the expected benefits (which remain unclear). The draft resettlement plan of the Phase 1 projects does not have sound and clear mechanisms that ensure compliance with the Involuntary Resettlement Policy at the design and implementation stages. The lack of explicit, verifiable, monitorable and workable gender, anti-corruption and integrated water management strategies also pose high risks in terms of sparking or reinforcing vertical and horizontal conflicts in the project area. The resettlement plan and other safeguard preparation activities in the Project 1 have no strong guarantee that the directly affected people will be safeguarded. Also, what is more critical in sustaining water supply and and esuring equitable water allocation is the “rehabilitation” of the upstream Citarum and the integrative planning and decision making that encompasses the upstream and downstream stakeholders and communities, not the rehabilitation of West Tarum Canal.

It is questionable how ICWRMIP could address the fundamental challenge of promoting a proper, accountable and participatory governance of Citarum water resources. We believe that this proposed Program might result in incurring bad debt, burdening people with loans that do not help ensure their sustained access to Citarum river resources. ICWRMIP is an initiative designed largely by technocrats that may obstruct local governments and people’s initiatives in managing their common resources.

Our call
Since ICWRMIP has no strong and broad community and stakeholder support and given that the high impoverishment and political risks far outweigh the potential benefits (which remain unclear), at the maximum, the ADB Board should seriously consider pulling out from investing into the whole MFF-ICWRMIP unless a significant, meaningful and strongly and broadly supported re-assessment of the entire program is undertaken. If the Board proceeds with approving the whole MFF-ICWRMIP without such reassessment, it is a validation that they put legitimacy to the Program that clearly and seriously violates ADB’s safeguard policies and all relevant policies and operating procedures.

We urgently demand, among others, that the ADB Board should immediately postpone the approval of the MFF-ICWRMIP and the Phase 1 projects on December 4, 2008 until significant improvements in the project and corrective measures that comply with the bank’s policies, best practices and international standards are in place. Critical project documents should be disclosed and subjected to informed, inclusive and multi-stakeholder consultations, especially the directly and indirectly affected people.

Signatories (Name/Organization – Country)