Beijing, June 07, 2021

Applying Best Environmental and Social Practices to AIIB Projects

Located along the southern coastline of Lombok, an island in Indonesia close to Bali, the Mandalika Tourism Project is a far-reaching undertaking by the Indonesia Tourism Development Corporation (ITDC) to create a tourist destination that will make the most of the island’s white sandy beaches while also maintaining the natural beauty and culture of the area. The developers approached AIIB to support the project by investing in the provision of basic services and infrastructure, such as roads, clean water, electricity and community facilities. On completion, the project is expected to help accelerate rural development, create jobs for the people in the community, develop models for efficient resource management, and generate revenue through tourism.

The Mandalika project is part of a series of infrastructure investments AIIB has made across Indonesia, spanning a wide range of initiatives from upgrading urban informal settlements to modernizing irrigation systems to providing increased satellite coverage to remote areas for improved communications. Most recently, the Bank is also aiding government efforts to contain and manage the economic fallout from the COVID-19 pandemic.

While infrastructure can certainly be challenging to get right, it always starts with good project preparation in line with the best environmental and social (ES) practices. Going beyond a “do no harm” approach by consistently assessing a broad set of environmental and social risks and impacts and integrating them into the project plan is how most multilateral development banks, including AIIB, undertake this work. Built into AIIB’s process is the adaptive management of project risks and impacts, where the Bank utilizes feedback from project monitoring to adjust the project design and/or environmental and social risk management as necessary throughout project implementation. Based on development experience, this approach produces better and more lasting development outcomes.

While quality investment in infrastructure can be a catalyst to boost inclusive and sustainable economic growth, it is equally important to be mindful of the impact of infrastructure on communities. The disruption that a large-scale project inevitably brings to residents and businesses can be significant and AIIB has processes in place to help manage the effects on the project-affected people.

Thus, whenever AIIB embarks on any project, it conducts thorough consultations with a wide range of stakeholders. AIIB’s guiding philosophy is that all infrastructure projects should be developed in an open and transparent fashion, with appropriate and well-publicized procedures for effective and timely inputs from interested local and national parties.

In Lombok, ITDC and AIIB worked with affected communities while preparing the Mandalika Project, to minimize and mitigate, if not avoid, adverse project impacts. Consultations were held, guided by the principle that listening closely and constructively to those most affected by the project can have positive results by identifying issues early and keep negative outcomes to a minimum.

This engagement with the community served as an important guide in the development of the resettlement action plan. The objective was to ensure that the people affected were compensated or provided with a way for them to maintain their livelihoods. The overarching goal in the resettlement process was to enable the affected households see an improvement in their living conditions in terms of the quality of their new housing and increased employment opportunities.

Thus, the resettlement action plan for the affected local population of Lombok includes the provision of larger homes for the resettled community. The project-affected people are to be given the opportunity to own both the house as well as the land. The design of the house will also enable affected households to set up holiday homestays that they can rent out to tourists who are expected to visit Mandalika once it is developed as a tourist destination. Each household will receive IDR10 million to cover their mortgage down payment, as well as employment for at least one household member. More than 305 market lots for local vendors, micro, small and medium enterprises and community facilities within the Mandalika Special Economic Zone have been set aside as part of the plan. In total almost 90,000 jobs will be created by the project.

Many of AIIB’s investments, including the Mandalika Project, have components that support building the capacity of clients to deliver effectively on AIIB’s ES requirements. However, implementation is of equal importance as planning. Feedback from the community suggests that communications around the compensation packages and economic opportunities from the Mandalika project was not sufficient. More should have been done to better explain how this project will benefit the local community, and how the project affected people have been compensated, and will be provided livelihood and employment opportunities. The existing grievance redress mechanism has also been strengthened, so that any concerns can be identified and addressed more effectively.

AIIB also recognizes the complex nature of the project and the difficulties that have derived from its proximity to other investments undertaken by ITDC, such as the MotoGP Circuit. Although the MotoGP Circuit was never included in AIIB’s project, once the Bank became aware of the plan for the MotoGP Circuit in mid-2019, it held a series of meetings with ITDC and private investors/operators to better understand the designs and arrangements for construction, operation and maintenance of the MotoGP Circuit, responsibilities of relevant parties, the process of land acquisition and the impact of the MotoGP Circuit on AIIB’s project, including on public access for both tourists and local people to the hotels, tourism facilities and public areas.

AIlB investments in infrastructure will face challenges. The question is what AIIB and its clients are doing to address these challenges, especially those that relate to the experience of local people directly impacted by the project. What is certain is project-affected people must remain a top priority. AIIB is working closely with ITDC and the Government of Indonesia to strengthen their engagement at the local level, so everyone can participate in the benefits this project is expected to bring.


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