*EDIT-OPINION * * The Loan That Looms Over Kerala *
*Is the Asian Development Bank pushing the state's Communists into the market's lap? And what's the CPM doing about it? * *Nilanjana Biswas* The story of the Asian Development Bank's (adb) loan to Kerala for urban development is getting curiouser and curiouser. The recently signed $316.1 million (Rs 1,422 crore) loan agreement between Kerala's Left Democratic Front (ldf) government and the adb has been attacked by none other than the man leading the ldf: Chief Minister VS Achuthanandan who claims that the deal was struck without his knowledge. Even as the debate in Kerala rages on how much (or little) the chief minister knows, the loan documents of the proposed Kerala Sustainable Urban Development Project (ksudp) are being widely scrutinised. And two facts have emerged: one, that the adb deal is fraught with substantive problems; the other, that it has the ldf in Kerala deeply divided, with one newspaper even describing it as the "government's death knell". The ksudp loan targets the five municipal corporations of Kochi, Kollam, Kozhikode, Thiruvananthapuram and Thrissur for urban infrastructure development, services improvement and capacity building. The money for the project will come from three sources: principally, an adb loan of $221.2 million (Rs 995 crore), a Government of Kerala contribution of $59.8 million (Rs 269 crore) and a further $ 35.1 million (Rs 158 crore) from the five civic bodies. Kerala's external debt is already over Rs 40,000 crore which, by the Catch-22 logic of international finance, makes the state even more credit-worthy. Adding to the overhanging debt, the ksudp loan will follow the tried and tested privatisation strategy a standard prescription of international banks like the adb and the World Bank that works to keep Third World countries in the stranglehold of spiralling debt. To ensure privatisation, the ksudp loan agreement outlines a "multi-faceted" approach. This includes the creation of an "enabling framework" and developing technical and managerial skills within municipal corporations to formulate and manage private operations. Other privatisation measures include: - Conversion of existing street taps to metered connections with no budget for new installations, as per policy that the Kerala government "will" formulate by no later than March 2007; - Increased tariffs and new user charges with no exemption for those living below the poverty line; - The hiring of international private consultants, as per adb guidelines, for project formulation, management and supervision at a cost of $10.2 million (Rs 46 crore); - Full cost recovery from the public for operations and maintenance work; - The mandatory introduction of service tax and/or other revenue mobilisation to meet revenue shortfalls. Going by the terms of the project, families living below the poverty line will now have to spend up to two-and-a-half days' wages for drinking water, drainage, sewerage and other urban services. For the urban poor who already face acute water shortage and sanitation problems, two tariff hikes on the anvil over the next five years are likely to turn their battle for survival into a relentless war. The adb is the second largest development bank in the Asia-Pacific region, next only to the World Bank Group. Although adb's involvement in India did not start until the late 1980s, today India is the largest borrower in South Asia, and the second largest, after China, in Asia-Pacific. As in the case of Kerala's recent loan, adb loans are tied to policy conditions. These include: - Adopting legislations and regulations that favour private sector involvement in key sectors; - Market-friendly restructuring; - Corporatisation and privatisation of public enterprises and utilities; - Creating a flexible labour force; - Commercialisation of agriculture and - Trade and investment liberalisation. On December 28, 2006, more than 100 organisations came together under the banner of the People's Forum against adb (pfaadb) to petition Kerala's chief minister to annul the ksudp loan. The petition points out adb's dismal record in urban development, citing two previous adb projects in Karnataka, the 1995 Karnataka Urban Infrastructure Development Project (kuidp) and the 1999 Karnataka Urban Development and Coastal Environmental Management Project (kudcemp), which are replete with design flaws, poor quality of construction, prolonged delays in completion and non-disclosure of project information to local councillors. According to the pfaadb, adb-funded projects in India and elsewhere have led to weakened environmental regulation, increased unemployment, cuts in spending on primary care and essential services, a widening gap between the rich and the poor, often leading to an absolute increase in poverty. The petitioners who include people's movements, environment groups, women's organisations, trade unions, human rights groups and dalit organisations, all agree that urban services needed overhauling but not through financial institutions that could potentially undermine the country's democratic framework. The petitioners say, "The possibilities of internal resource mobilisation are many in Kerala; they include commodity taxes on consumer expenditure, addressing tax evasion in the gold market, collection of tax arrears and mobilising the domestic savings of the state (including foreign exchange remittances) which runs into thousands of crores of rupees." As a result of the pfaadb campaign, the central committee of the cpm referred the adb loan issue to the Kerala State Committee and starting January 8, 2007, a three-member team is expected to study the loan. The Kerala State Committee is, however, deeply divided on the issue. Discussions on the ksudp loan were started back in 2002 by the Congress-led United Democratic Front (udf) government. Notably, the Left, which was in opposition then, fiercely criticised the proposed loan on the grounds that it contained harmful conditionalities. Rifts within the ldf, since it came to power, have emerged sharply with a neo-liberal faction represented by cpm state secretary and Politburo member Pinarayi Vijayan, Local Self-Government Minister Paloli Mohammed Kutty and state Finance Minister Thomas Isaac pushing for the loan while Chief Minister Achuthanandan says it lacks cabinet approval. The cpm Central Committee, in the meanwhile, has reprimanded the State Committee for taking to the streets what it considers should have been a matter for internal debate. But is it just a matter of inner party debate? Many would disagree. For CR Neelakantan, a veteran social activist from Kerala, the loan conditionalities represent a major departure from the ldf's stated policies; a departure that must be explained and discussed. Some time ago, the cpm's political organisational report took the stand that while external loans were unavoidable, certain compromises must never be made. According to the report: "Whenever our governments hard-pressed for funds but duty-bound to provide relief to the people are offered loans by imperialist agencies and Western governments, the party should consent to such loans only if it does not weaken its fight against the imperialist-dictated policies. In all cases, where the party agrees to such loans from international agencies like World Bank, adb, dfid, jbic etc, it must take the people into confidence and explain to them the justification for taking such loan In no case should we go in for loans which involve structural adjustment programmes. Such programmes entail conditionalities like privatisation of certain sectors, downsizing staff, cutting subsidies and fiscal conditionalities." The policy is clear: no diktat; no structural adjustment; complete transparency. The ksudp loan clearly fails on all three counts. cpm general secretary Prakash Karat recently stated that external loans are acceptable if there are no strings attached. The debate in Kerala, however, is about what exactly is attached to the ksudp loan: a string or a hangman's noose? *Biswas is a Bangalore-based freelance journalis* *Jan 27 , 2007* --~--~---------~--~----~------------~-------~--~----~ greenyouth mailinglist is the activist support mailinglist for kerala run by Global Alternate Information Applications (GAIA) To post to this group, send email to [email protected] -~----------~----~----~----~------~----~------~--~---
