Can Compensation Prevent Impoverishment?

Can Compensation Prevent Impoverishment?

List of Tables, Figures, and Boxes xv Acknowledgements xvii List of Abbreviations t xix Editors' Preface and Overview xxiii Michael M. Cernea and Hari Mohan Mathur 1. REFORMING THE FOUNDATIONS OF INVOLUNTARY 1 RESETTLEMENT: INTRODUCTION MichaelM. Cernea 1 From Anomie to Policy: Between Achievements 2 and Unevenness 2 The Paradox of Impoverishment 4 3 Compensation: How Could So Much Rest on 5 So Little? 4 Methodological Bottlenecks to Reforming 6 Resettlement 5 Resource Scarcity and Sources for Financing 8 PARTJ THEORETICAL ISSUES IN DEFINING COMPENSATION 11 FOR DISPLACEMENT Editors' Note 2. COMPENSATION AND INVESTMENT DM RESETTLEMENT: 15 THEORY, PRACTICE, PITFALLS, AND NEEDED POLICY REFORM MichaelM. Cernea 1 An Underlying Fallacy of Present Policies 16

2 A Global Problem and a Shift to Economics 18 3 An Anomaly: The 'Project within a Project 5 26 4 Defective Economic Evaluation and Budgeting 31 5 The Limits of Cost-Benefit Analysis 38 6 Compensation in Principle and Compensation 43 in Practice 7 The Case for Investment: Pursuing Resettlement 58 with Development 8 Economic Rent as Resource for Investing in 65 Resettlement 9 Regular Project Benefits as Investment Resource 69 10 Political Will: Financing is not Just a Resource 71 Matter 11 Types of Mechanisms for Benefit Sharing 75 12 Novel Compensation Modalities 78 13 A False Objection to Targeted Benefit Sharing 79 14 China's Major Reforms in the Economics of 82 Resettlement THE ECONOMIC EVALUATION OF PROJECTS INVOLVING 99 FORCED POPULATION DISPLACEMENTS ] and Timothy Swanson 1 The Economic Theory of Project Evaluation: 100 The Compensation Principle 2 Problems with the Compensation Principle: 101 Actual versus Hypothetical Compensation and Efficiency Considerations 3 The Law of Compensated Takings: Developing 102 States 4 Towards a New Economics of Project Appraisal 105 for Forced Displacement 5 Measuring Displacement Losses 106 6 The Rights Lost in the Forced Displacement of 111 Individuals and Households 7 The Role for Benefit Sharing in Compensation 112 8 The Empirical Literature on Displacement 113 Economics 9 Conclusion 116

IX 4. FORCED DISPLACEMENT: ALLOCATTVE EXTERNALITY OR 121 UNJUST REDISTRIBUTION? Herman E.Daly 1 Viewing Displacement through the Lens of 121 Opportunity Cost 2 Growth and the Understatement of 123 Opportunity Costs 3 Eminent Domain and Property Rights 124 4 From Allocatdve Efficiency to Distributive 126 Justice 5. DEVELOPMENT ECONOMICS AND THE COMPENSATION 129 PRINCIPLE RaviKtmbur 1 Economics has Struggled within Itself... 129 2 Economics and 'Pareto Improvements' 130 3 Steps to the Compensation Principle 131 4 A Love-Hate Relationship 133 5 Dams, Displacement, and Development 135 6 Safety Nets to the Fore 138 7 'An Inescapable Dilemma? 139 8 Conclusion 140 PART II THE POLICY AND LEGAL FRAMEWORK FOR 145 COMPENSATION Editors'hiote 6. COMPENSATION, RESTORATION, AND DEVELOPMENT 147 OPPORTUNITIES: NATIONAL STANDARDS ON INVOLUNTARY RESETTLEMENT Susanna Price 1 Why Address National Standards? Some 148 Conceptual Issues

X CONTENTS 2 Land Acquisition Laws versus Involuntary 153 Resettlement Policies 3 Rationale for.adb Involvement 157 4 ADB's Regional Initiative 159 5 What are the Next Steps? 173 7. INDIA'S FORCED DISPLACEMENT POLICY AND 180 PRACTICE: IS COMPENSATION UP TO ITS FUNCTIONS? Walter Fernandes 1 The Policy, Displaced'Persons, and 181 Project-Affected Persons 2 Status of R&R Policies in India 185 3 The People's Alternative 186 4 NPRR 2003 and the Principles 189 5 Replacement Value 195 6 Benefits to the Victims 197 7 Rethinking Cost-Benefit Analysis 199 8 The Changes Suggested 201 8. EMINENT DOMAIN, PROTEST, AND THE DISCOURSE 208 ON REHABILITATION Usha Ramanathan 1 Eminent Domain and Zamindari Abolition 208 2 Project Displacement and Land Acquisition 211 3 Mass Displacement 215 4 Land Acquisition Act 1894 and Reducing 217 Transaction Costs 5 Protest, Resistance, and Transaction Costs 219 6 Two Responses to Protest 220 7 Disenchantment with Rehabilitation 223 8 Does Motive Matter? 226 9 State, Sovereign, and Subject 226

XI PART III EMPIRICAL EVIDENCE ON THE LIMITS OF 231 COMPENSATION Editors' Note 9. CAN DISPLACEMENT BE TURNED INTO DEVELOPMENT 233 BY COMPENSATION ALONE? THE SOUTH ASIAN EXPERIENCE RuwaniA.Jayewardene 1 Laws, Policies, and Procedures 235 2 Who is a Resettler? 241 3 Compensation and its Practice 243 4 Replacement Value 250 5 What is the Objective? Distributive Justice and 251 Adequate Legal Instruments for Re-establishing Livelihoods 6 Conclusion 255 10. MINING COAL, UNDERMINING PEOPLE: 260 COMPENSATION POLICIES AND PRACTICES OF COAL INDIA Hari Mohan Mathur 1 Coal India Limited 261 2 Approaches to Compensation 263 3 Limitations of Job-Centred Compensation 265 4 Coal Sector Environmental and Social 266 Mitigation Project 5 The New CIL Resettlement Policy 268 6 Implementing New Policy Focused on 269 Self-employment 7 Self-Employment as Compensation and its 271 Failure 8 What Went Wrong? 272

Xll CONTENTS 9 Complaint to the Inspection Panel 276 10 Conclusion 278 11. CONSERVATION, DISPLACEMENT, AND COMPENSATION 286 FrancesJ. Seymour 1 Costs Imposed on Displaced Communities 287 2 Assumptions Underlying Decisions to Displace 290 3 Who is Targeted for Displacement? Who is 292 Eligible for Compensation? 4 A Range of Approaches to Displacement 295 5 Reasons Advanced for Denying Compensation 297 6 Estimating the Cost of Compensation 299 7 Obstacles to Providing Compensation 301 8 Conservation Impacts of Displacement 305 9 Implications for the International Conservation 306 Community PART IV CONSTRUCTIVE SOLUTIONS: SUPPLEMENTING 315 COMPENSATION WITH INVESTMENT AND BENEFIT SHARING Editors'Note 12. BENEFIT SHARING TO SUPPLEMENT COMPENSATION 317 IN RESOURCE EXTRACTIVE ACTIVITIES: THE CASE OF DAMS Dominique Egre, Vincent Roquet, and Carine Durocher 1 Definition and Objectives of Benefit 318 Sharing 2 The Rationale for Benefit Sharing in 321 Dam Projects 3 Types of Benefit-Sharing Mechanisms 330 4 Criteria to Evaluate Types of Benefit-Sharing 337 Mechanisms 5 Preliminary Evaluation of Benefit Sharing 340

Xlll 6 Practicalities and Processes in Implementing 343 Benefit Sharing 7 Assessing the Likelihood of an Agreement 345 8 Conclusion 348 Appendix Examples of Economic 350 Rent Measurement A.1 The Columbia River Basin Development 350 in Canada A.2 The Lesotho Highlands Water Project 351 13. FROM EXPROPRIATION TO LAND RENTING: 357 JAPAN'S INNOVATIONS IN COMPENSATING RESETTLERS Mikiyasu Nakayama and Kumi Furuyashiki 1 Searching for Innovative Approaches 357 2 Innovative Resettlement Schemes Proposed 361 3 Sharing of Existing Farmland with Present 362 Owners by Increasing Productivity 4 Creating Capacity: The Tone River 364 Development Agency 5 Previous Case of Compensation through a 366 'Rent 3 Scheme 6 Rent Scheme Adopted for Jintsu-Gawa Dams 367 7 Merits of the Rent Scheme 369 8 Issues to be Considered for Large Dam Projects 370 9 Conclusion 372 14. BEYOND COMPENSATION: SHARING OF RENTS ARISING 375 FROM HYDROPOWER PROJECTS Barry P. Trembath < 1 Resettlement as a Development Opportunity 376 2 Benefit Sharing and its Theoretical Basis 379 3 Magnitude of Economic Rents 381 4 Types and Experiences of Rent Sharing with 383 Affected Communities 5 Conclusion. 390

XIV CONTENTS 15. CAN IMPROVED RESETTLEMENT REDUCE POVERTY? 394 Susan D. Tamondong 1 Are All Displacements Bad? 396 2 Case Studies of Success 399 3 Using Compensation to Provide Shareholding 401 in Project-Created Assets 4 Risks of Impoverishment and Development 403 Potential in Resettlement 5 ADB's Poverty Reduction Initiative vis-a-vis 406 Resettlement 6 Conclusion - 410 Notes on Contributors 418 Index 423