The ‘Ease of Business’ Trap

Last month, Trump administration attempted to trim down the permitting process for building new dams to 4 months. “That’s less than half the time that a sixteen year old needs to have a Learners’ Permit before applying for a Maryland Driver’s License”, reads the story. Thankfully though, the advisors were able to  talk some sense into the President, who settled for one year for the permitting process. One year, points the article, is still not enough to carry out all the environmental and social impact assessments and the public consultations, and plan appropriate compliance and mitigation measures, on which the permit is contingent.

This is not a one-off case of government trying to fast-track environmental approval process in a supposed bid to cut ‘green tape’. Such legislative manipulation seems to be typical of right-wing governments (led by religion-pandering nationalist strongmen). The Modi government in India, for instance, has been trying to bring down the turnaround time for environment and forest clearances to 100 days from the earlier average of 600 days. There is no way a 100-day timeframe can provide even a decent assessment of the seasonal patterns in the ecosystem such as those of nesting, breeding and migration of species. Needless to say EIAs conducted in such haste are nothing more than a checkbox activity and fail to capture the full impact of the project on species.

However, systematically but incrementally and gradually diluting environmental regulations to accommodate corporate interests, while all the time staying under the public radar, seems to be working very well for such governments. While Trump at least maintains a facade of job creation, India’s Modi government openly touts such dilution of environmental requirements as a move to ensure ‘ease of business’ and such proclamations come from none other than the Environment Minsitry (see this). The Environment Minister has openly flaunted how faster environmental clearances have unlocked investment worth billions. And one would think the job of the Environment Ministry was to protect the environment.

But businesses would be naive to assume that such relaxing of norms is going in their favor. Clearances accorded so recklessly allow for little assessment of environmental and social risks associated with projects. An overwhelmingly large number of such projects get mired in protests and litigation, causing inordinate delays, financial losses and even project cancellation. The losers in the end are the investors and if they are public banks, then the tax payers. The swelling Non Performing Assets of India’s public banks are a case in point. Many of the loan defaults have been attributed to failed infrastructure and mining projects. Their failure, in turn, has been ascribed to inadequate environmental and social risk assessments by banks. A 2014 civil society report Down the Rabbit Hole: What Bankers Aren’t Telling You presents six cases of big-ticket projects from India that were “stayed, delayed or stopped because of mass resistance by affected communities or proceedings and court cases stemming from environmental and social concerns and violations”, the most controversial being that of Lavasa, an Italian-style private city for India’s elite.

Comprehensive environmental and social impact assessments aid effective project risk assessment. Hurried and sloppy impact assessments benefit no one. Businesses and investors overlook environment and social risks associated with development projects at their own peril.

 

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