Unsettling Settlements

In 2019, the Asian Infrastructure Investment Bank (AIIB) approved its first two projects in Sri Lanka. The bank provided financing for the  Colombo Urban Regeneration Project  and the Reduction of Landslide Vulnerability by Mitigation Measures Project. Now, the AIIB has a total of five projects in the country totaling USD 562 million. The bank provided a USD 200 million loan to assist the implementation of the  Colombo Urban Regeneration Programme , an initiative of the Ministry of Megapolis and Western Development and the Urban Development Authority of the government of Sri Lanka. 

The loan is intended for the construction of 5,500 affordable housing units in residential complexes in the city of Colombo for low-income communities. Aside from infrastructure development, the project also aims to redevelop the land that will be vacated by those receiving housing units. The available land will then be sold to businesses to be used for commercial purposes or allotted for public use, such as public parks. The revenue from the sale of land is said to contribute to the fiscal sustainability of the project, especially due to Sri Lanka’s context of debt distress and shortage of foreign currency reserves. The project is slated to finish by June 2025. 

The Urban Regeneration Programme has been implemented by the government since 2010, during the aftermath of the civil war in Sri Lanka. The program aims to  “eliminate slums, shanties and other dilapidated housing from the city of Colombo by relocating dwellers in modern houses”  and to utilize their land for economic activities and promote urban development in Colombo. Underlying the project’s purpose is the view that the  urban poor serve as impediments to economic growth and development . 

The first two phases of the project, which was financed and implemented by the government of Sri Lanka, were very problematic as people’s rights were violated with faulty infrastructure, loss of livelihood, inadequate compensation, and militarized responses. Furthermore, the programme provides more benefits to the private sector rather than its supposed beneficiaries, as their land is being sold to corporations for commercial activities. 

The complexes previously built by the government also failed to take into consideration the needs of its tenants. A household was  only assigned a unit each , despite the number of families and people living in their old home. There were no public areas where families could dry their laundry, children could play, and small enterprises could sell goods. There was also no upkeep and maintenance by the government ministries responsible for the programme. This was due to the lack of consultation and inclusion of the communities in the planning, design and implementation of the project. 

The urban development program has led to forced eviction of the urban poor from their homes and communities, and relocating them far from the center where they worked. They also experienced a decrease or loss in income since the home-based businesses they had were forcibly closed. Some families had land titles and deeds that were just disregarded completely by the government. Their right to due notice, appeal, and adequate compensation were not upheld. Instead, the government used security and armed forces to intimidate, harass and force families to leave their homes. 

They were also required to pay LKR 100,000 upfront to get the keys, with no sufficient documentation of their payment and ownership of the apartment unit. A lot of the families had to  borrow money at high interest rates  just to pay the fees. There was also a lack of transparency over the costs of the housing unit, with no breakdowns given. Households were also forced to sign contracts in a language they did not understand. Communities have noted that these apartment complexes felt  “more like prisons than houses.”  Despite these rights violations and other adverse impacts, the AIIB still continued to fund the Urban Relocation Project. 

Initially, a total of USD 180 million is to be used for the construction of 5,500 apartment units where families will be relocated, with USD 153 million coming from the bank. However, in 2022, due to the debt crisis faced by Sri Lanka, the  budget was reallocated . While USD 70 million was disbursed for health initiatives, the remaining USD 108 million was intended for the construction of 4,100 housing units in six sites. As of 2022, the construction has already started but  faced delays  due to the pandemic and lack of available materials. 

Most of those receiving the units will be from “underserved settlements”, such as those from older housing complexes that have deteriorated. Others who agreed to vacate their land will be compensated and given new housing units. The housing unit is described to have a living room, two bedrooms, kitchen, dining area, toilet and balcony.  Each unit is 550 square feet big and costs LKR 1.2 million (or USD 7,200)  to be paid for 33 years, amounting to a monthly installment of USD 18. This is still in addition to the electricity and water bills they have to pay.

The AIIB asserts that this project is sustainable despite the challenging fiscal situation of the Sri Lankan government. After the demolition of the homes and displacement of communities, the bank plans to redevelop the land with the help of private sector partners. A  total of 92 acres will be freed up , with the majority going to commercial redevelopment (86 acres) and only a small part (6 acres) to be allotted for public use. While some parts of the land will be auctioned off, the bank is also promoting a public-private partnership modality for the construction of sites over large blocks of land. The land sale and development is estimated to generate USD 377 million in ten years. 

Recognizing the gaps in the implementation of the project in the previous phases, the bank prepared a Resettlement Action Plan (RAP) and an Environmental and Social Management Plan (ESMP) to address and mitigate risks. The bank’s grievance redress mechanism or the Project-Affected People’s Mechanism (PPM) is also to be set-up at the project-level to address complaints. According to the bank, the three-tiered mechanism they set-up has  received a total of 154 grievances , which they claim to have been resolved in a timely manner. 

The proper implementation of these plans and mechanisms have yet to be seen. However, the poor implementation by the government of the programme, coupled with the  bank’s history of negatively harming the people and the environment through its large infrastructure projects , affected communities and civil society continue to raise their concerns with this project. The PPM, which is meant to provide an avenue for affected peoples to communicate their grievances,  remains to be inadequate to address people’s needs and to exact accountability  from the bank and its partners. 

Furthermore, as Sri Lanka is still reeling from its debt crisis and political instability, development financing must be able to contribute in relieving people’s debt burden and providing basic needs. Loans from international finance institutions must not contribute to further debt and should not be accompanied by policy conditionalities that further impinge on states’ capacity to deliver basic goods and services. Urban development must not be pursued at the expense of urban poor communities, as they should be able to determine their development needs and priorities. Cities can only be regenerated when the people are able to enjoy their rights, have proper livelihoods and homes, and are part of development processes. 

For more information on the development projects financed by the AIIB, please refer to this  page . Explore other reports on development projects in the  CSO Aid Observatorio .