Lessons of Experience | September 2006 | Number 2 38216

The Baku-Tbilisi-Ceyhan (BTC) Pipeline Project Public Disclosure Authorized

he planning, design and and, community investment. The project T construction of the Baku-Tbilisi- also yielded many valuable “process” Ceyhan (BTC) pipeline provides a lessons that may be useful to IFC staff and good example of an IFC-financed project clients working on future projects. that faced a wide variety of complex and often difficult social and environmental The BTC pipeline was developed by a challenges. From the outset, both the company (BTC Co.) formed by the sponsor and the lenders were committed affiliates of eleven national and to achieving sustainable outcomes and international oil companies with BP as the striving to ensure that the project was majority shareholder and operator of the

Public Disclosure Authorized constructed and operated to international company. Construction began in spring best practice environmental and social 2003 and export from the new terminal at standards. At the time of its Ceyhan commenced in June 2006. commencement, BTC was the largest Approximately 70% of the project costs cross-border infrastructure construction were funded by a group of lenders project in the world. The scale and including IFC, the European Bank for multitude of environmental and social Reconstruction and Development (EBRD), aspects on such a mega-project should the export credit agencies of seven not be underestimated nor should the countries, and a syndicate of fifteen amount of resources and level of effort commercial banks. Financing was agreed expended by BTC staff during the in February 2004 after over two years of planning and construction phases, or IFC appraisal of the potential environmental Public Disclosure Authorized staff during project appraisal and and social impacts relating to the project. supervision. The pipeline is over 1,760 km long and is of ThisLessons of Experience has been regional significance as it provides the first prepared by staff of the Environmental direct transport link for exporting crude oil and Social Development Department of between the land-locked but hydrocarbon the IFC for the purposes of internal learning throughout the institution. While it is impossible to capture all the CONTENTS complexities and challenges encountered during the design and construction phase 3 Environmental and Social Impact of the BTC project, this paper focuses on Assessment and Management Lessons of Experience six key areas where lessons learned were 11 Regional Review

Public Disclosure Authorized thought to be most valuable and applicable to other IFC-financed projects. 14 Stakeholder Engagement and Disclosure These are: environmental and social 19 Land Acquisition and Compensation assessment and management (including contractor management); the regional 22 Monitoring and Reporting review; stakeholder engagement and 27 Social License to Operate disclosure; land acquisition and compensation; monitoring and reporting; 32 Acknowledgements The Baku-Tbilisi-Ceyhan (BTC) Pipeline Project

Source: BTC Co.

rich Caspian Sea and the Mediterranean. small and medium sized enterprises, have the Running through Azerbaijan and Georgia to potential to contribute to economic stability a terminal facility at Ceyhan on the Turkish and sustainable development within each Mediterranean coast, the pipeline has the country, as well as promote regional capacity to transport one million barrels of integration and interdependence.1 crude oil every day. The pipeline is buried along its entire length, however, the pipeline The pipeline route passes through a wide system requires more than a hundred above range of land-use types impacting over ground installations of varying types. 17,700 parcels of land utilized by local households in 515 villages. Social and Until now, countries in the region such as environmental issues encountered included: Azerbaijan, which have oil reserves far severely limited regional routing options due exceeding their domestic requirements, to complex environmental, social, geo- have had to rely on a combination of hazard and geo-political constraints; pipelines, rail and shipping potential impacts on sensitive flora and fauna to export oil to world markets. A large habitats as well as on groundwater resources; percentage of these exports passes through temporary land acquisition under complex the narrow and congested Turkish Straits, land tenure systems; disturbance to local posing an increasing environmental and livelihoods and activities affecting large public safety risk to the city of Istanbul and numbers of people; community safety; local surrounding areas. The BTC pipeline offers an employment; potential impacts to inherently safer means of transporting oil marginalized and vulnerable groups over long distances and relieves further (including ethnic minorities, women and the congestion through the Turkish straits. elderly); and, the implementation of a major Azerbaijan will derive substantial economic public consultation and disclosure program. benefits through the generation of royalty The project also attracted intense scrutiny by and tax revenues, while Georgia and Turkey stakeholders, press, and civil society, will gain financial benefits through transit including international NGOs. fees. These revenues, combined with the indirect benefits associated with the IFC and the wider lender group worked purchase of local goods and services, closely with the sponsor in designing an employment, and specific programs designed to encourage the development of 1 Source: Environmental and Social Overview, BTC, September 2002. Page Two Lessons of Experience | September 2006 | Number 2

oversight mechanism to address the potential environmental and social impacts of the project and to monitor performance. This included the development of a comprehensive environmental and social action plan, the design and implementation of a transparent land acquisition and compensation program, local employment The end result of and training, community investment the ESIA was programs, and NGO capacity building. In many areas, the BTC construction program thirty-eight exceeded expectations in terms of R. Wyness volumes of environmental and social management, Pipeline construction passes near a hillside community in Turkey. publicly disclosed setting new benchmarks in transparency and environmental and social standards for documentation construction programs, and developing covering 1,760 km innovative practices along the way. Among wider institution. Although the project of pipeline and the highlights of the BTC project was a sponsor has been consulted and BTC ground breaking Regional Review which environmental and social staff have 515 villages addressed macro-issues of concern such as contributed their perspective to the issues stretched over human rights, revenue management, and raised, the content of this paper reflects the three culturally security; an extensive public consultation opinions of its authors. and disclosure program; a 25 million dollar diverse countries. Community Investment Program undertaken on a scale unprecedented in BP's history; a Environmental and Social program of NGO capacity building; an 8.8 million dollar Environmental Investment Impact Assessment and Program, and the enhancement of Management development impacts through linkages with small and medium enterprises (SMEs). Both the Environmental and Social Impact Assessment (ESIA) and the Environmental For IFC as a lender, the process of capturing and Social Action Plan (ESAP) were lessons of experience from projects is an considerable undertakings for the BTC important one in which the objective is not project and a number of lessons were to criticize or dwell on shortcomings but to learned along the way and in looking back. learn. Analyzing events in retrospect and This section focuses on six key areas of with hindsight is, of course, always easier than assessment and management where taking action and making difficult choices in process lessons and good practice were real time. The sponsor deserves significant thought to be most relevant and applicable credit for its management of the to future projects. These include: (i) ESIA environmental and social aspects of the scoping; (ii) Commitments Register; (iii) project and our attempt to distill lessons from Environmental and Social Action Plan; (iv) BTC for future projects should not in any way Management of Change; (v) Contractor detract from this fact. In the pages that Management; and, (vi) Contracting follow, IFC environmental and social staff Strategy. look back on an extremely challenging process and endeavor to extract some of the The ESIA program carried out for the BTC key operational lessons and good practices pipeline project was an enormous task and for the benefit of colleagues, clients and the in many ways a remarkable achievement in

Page Three The Baku-Tbilisi-Ceyhan (BTC) Pipeline Project

its scope and comprehensiveness. The This poses a risk because, in scoping, one is process was unique in that there were three designing a data gathering process that will separate ESIAs, one for each country, done extend far beyond the ESIA through to by different consultants—a fact that led to implementation and monitoring. As such, variations in quality and contributed to the having a credible baseline against which to complexity of the process. The end result was monitor future impacts is vital. For these thirty-eight volumes of publicly disclosed reasons it is critical that the most experienced documentation covering 1,760 kilometers of specialists familiar with the project area be pipeline and 515 villages stretched over sought to provide input to the scoping three culturally diverse countries. The Turkey process. ESIA, in particular, is considered by IFC technical staff to be “best in class.” One example from the BTC project relates to However, all involved agree that in hindsight the collection of social baseline data there were aspects of the process that could appropriate to the project. The sponsor be addressed differently in future projects. invested substantial resources in collecting social baseline data. However, there was a sense at the end of the ESIA process that ESIA Scoping while this exercise yielded good basic information on affected villages, too much unnecessary social data might have been A valuable lesson learned was that effective collected in some areas while not enough in “scoping” of an ESIA program for a complex others. This highlighted the importance of a project such as BTC is critically important. good scoping process at the beginning to The objective of scoping is to set the terms of help focus the data collection. Prioritizing the reference for subsequent ESIA studies. It key social issues for investigation at the study involves four main elements: characterization design stage, and clearly defining what the of the project and the region; an initial information collected will be used for during screening and prioritizing of issues; the implementation, will narrow the focus and defining of project boundaries; and, the help clients save on both time and money. design of any studies required for the analysis While it is unlikely that every impact and issue of potential impacts and opportunities can be accurately predicted ahead of time, associated with the project. How scoping is targeting social data collection as much as done in the beginning largely determines the possible is particularly important for a large focus, quality and utility of the future ESIA. project like BTC with over 515 villages (comprising nearly one million people) in the Despite the importance of scoping in the project affected area. For example, the BTC ESIA process, IFC experience has shown that ESIA program could have benefited from a on many projects the scoping stage is not clearer identification at the scoping stage of allocated the sufficient time, budget or the complexity of the land use and land rights expertise required to get it right. In some issues that would be encountered during the cases this may be due to the uncertainty of subsequent land acquisition and construction whether the project will actually go forward, phases of the project. (Discussed further on or the importance of scoping may be page 19.) underestimated resulting in insufficient resources being committed. In other cases, While more effective scoping may have the time allocated for the scoping phase helped focus the social baseline data may get squeezed within the overall gathering requirements, it is also true that at timetable of the project. the time of the BTC project there was a growth in interest (by NGOs and other parties)

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in certain types of social issues that had not mitigation measures that the sponsor had traditionally been included in past impact committed to implement. These assessments. Given the complex and often commitments were scattered across various sensitive cultural, social and political issues sections of the documentation and, initially, surrounding the BTC project, new and the sponsor experienced difficulty organizing emerging issues arose such as worker welfare, these commitments into actions, so that the human rights, and security which neither the environmental and social management sponsor nor the lenders had foreseen at the program for the project could be developed. Effective “scoping” time of the ESIA as requiring significant To overcome this, a comprehensive list of all of an ESIA program additional attention. This demonstrates that of the commitments was developed in a for both sponsors and lenders alike, keeping “Commitments Register”. The register clearly for a complex up with an ever evolving range of social issues laid out each commitment, its original source, project such as BTC that may need to be covered as part of the and where in the management program the is critically scoping and assessment process can be a commitment would be covered. challenge. Indeed since the time of the BTC important. project appraisal, IFC's own Performance Once established, the commitments register Standards have been expanded to include was a valuable tool in the development of issues such as labor, community health and the environmental and social management safety, and security based on the structure and arrangements necessary for the corporation's experience of many recent project. It served as a link between the ESIA projects including BTC. IFC has also documentation and management system developed good practice guidance for its and provided a mechanism whereby clients on undertaking social impact commitments made could be followed assessment entitled, “Addressing the Social through to actions on the ground. Dimensions of Private Sector Development.” However, extracting the commitments into a This is not to say, however, that all of the issues register for the BTC project after the fact was identified during scoping must be covered in a time-consuming process. It was also found the subsequent ESIA. Rather, early that once extracted from the original identification of potential issues through a documentation the commitments were often robust scoping process will allow an early vague or poorly phrased, responsibility for judgment on the approach required. It will implementation of the commitment was not help determine whether additional studies always clear, and there was significant might be necessary and if so, what form they duplication of the same commitment might take. For example, because the BTC throughout the ESIA documentation. project involved three countries and numerous cross-border issues, the company In future, commitments being developed as chose to address the analysis of macro-level part of the ESIA should be carefully reviewed regional and strategic topics in a separate as they are included in the project “Regional Review” document. (Discussed documentation. Clear and concise further on page 11.) language should be used and a register of commitments is recommended as part of the ESIA documentation deliverable. Ideally, Commitments Register commitments registers could then be organized into a structure that is in line with the project phases (e.g. construction or The BTC ESIA documents provided a wealth of operations) and sorted by issue (e.g. waste baseline information and impact analysis management) to provide greater clarity for along with numerous management and both the sponsor and the contractor as to responsibilities for implementation. Page Five The Baku-Tbilisi-Ceyhan (BTC) Pipeline Project

The Environmental and Social Action From IFC's perspective, an ESAP needs to Plan (ESAP) have legal teeth when things go wrong but sufficient flexibility to anticipate issues that were missed or come up later during An essential component of an ESIA is the implementation. Change is inevitable specific measures and actions developed to particularly in large construction projects such mitigate and manage the environmental as BTC. At certain milestones in a project of and social impacts identified in the this scale there should be a means to review assessment and committed to by the the management arrangements in an ESAP sponsor. These measures are typically and make changes if necessary. Unfortunately organized into a management plan for in the case of BTC, the ESAP became a legally implementation. IFC and the other lenders binding document and the difficulties of the required that BTC prepare an ESAP which negotiations during the ESAP development comprised the environmental and social made both the sponsor and some of the actions and mitigation measures to be taken lenders unwilling to reopen the agreement to for the project before financial closure. potential renegotiation and changes in the However, an ESAP was not included in the future. This made change difficult to initial ESIA documents submitted by the implement which undermined the objective sponsor. Final management arrangements of having a “dynamic” environmental and were yet to be developed based on the social management mechanism within the commitments included in the ESIA and ESAP that can change and respond to other project documentation. developments on the ground as needed.

In the case of BTC, what would otherwise be Based on BTC and other experiences, IFC a straightforward ESAP or management should exercise caution in future when system evolving out of the ESIA, became agreeing the legal requirements of an ESAP. complicated by a range of factors unique to Legal language should be separate from the the project, including: timing issues, the large environmental and social management volume of ESIA documentation and related system, plans, and policies. In future, clients documents containing the management should be encouraged to limit the commitments for all three countries, the involvement of their legal representatives in multiplicity of lenders involved, and the drafting of environmental and social management arrangements for the management system language and action numerous contractors involved. As a result, it plans. was initially difficult for all parties to determine how to establish an appropriate action plan. The ESAP content negotiation Management of Change process between the project sponsor and the lenders became protracted and overly legalistic and the final ESAP, while containing While the above may suggest that changes to a useful framework for an environmental and the environmental and social management social management system, turned into a procedures were not made as circumstances long, negotiated legal document whose changed on the ground, this in fact was not provisions were in many ways quite rigid and the case. Change is inescapable and not did not possess the flexibility needed to surprisingly the project had to make numerous respond to the changing realities of the changes to its original planning during the project on the ground. construction program using their Management of Change (MoC) mechanism.

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MoC is essential, it ensures that significant changes are managed and recorded and that all project disciplines are consulted and agree to the change. A single unified project MoC is required which recognizes that whatever the source of the change (e.g. design, engineering, construction, health and safety or environmental and social issues) the An ESAP needs to implications of the change are assessed have legal teeth by all. when things go

IFC and the other lenders needed to be R. Wyness wrong but notified of any material changes to project Pipeline construction operations. sufficient flexibility implementation that would result in significant environmental or social impacts to anticipate that might not have been sufficiently issues that come covered in the ESIAs or catered for in the One of the reasons for disagreements among up later during ESAP. A specific MoC mechanism was the parties on this issue was that any change therefore included in the ESAP and used to that triggered notification to the lenders implementation. notify lenders. While the inclusion of an MoC required a review of MoC documentation by process was necessary, the criteria the Independent Environmental Consultant developed to determine when a “change (IEC) and confirmation by them to the wider notification” to the lenders should be lender group that the changes were being triggered did not work particularly well in accompanied with appropriate mitigation practice. The criteria were somewhat measures. While a system of review was ambiguous and, as such, open to necessary, the process specified in the ESAP interpretation. They were also too narrowly was not entirely satisfactory. In particular, the focused on pipeline route changes and not IEC found it difficult to be flexible when other possible changes. The ambiguity led to responding to change since their principal disagreements between BTC, the lenders requirement was to ensure compliance with (including IFC) and the independent the ESAP. In some cases, however, flexibility environmental consultant (commissioned to was necessary so that pragmatic solutions to monitor compliance with the ESAP) as to ground conditions could be quickly agreed. what constituted a “significant” change and whether lender notification was warranted. In The MoC process on BTC was a clear future, criteria need to be better defined to example of an aspect of the ESAP that was differentiate between what is considered a not flexible enough to respond to the minor change and what is significant across measures required by changes during project all project related activities. From a lender's implementation and which led to an overly perspective, the MoC mechanism should be cumbersome process for all parties. While able to identify any changes in project MoC is an essential component of a implementation that would require an company's environmental and social amendment to the provisions of the original management program, the mechanism to ESAP and allow for the adjustment of ESAP notify lenders of changes to the project procedures to effectively deal with needs to be carefully considered. In environmental and social impacts on the particular, criteria that trigger notification of ground. change should be developed with unambiguous language, and the “change

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BTC Project Operator Responsibility

Environment & Social Commitments

Contractor Control Plans (CCP) BTC Management Plans

Contractor Responsibility

Contractor Implementation Plans and Procedures (CIPP)

review procedure” should be sufficiently environmental and social staff on the ground flexible to enable a discussion of the issues in all three countries. BTC had initially and timely agreement on the best way presumed that the environmental and forward. social management requirements to be implemented during construction were the responsibility of the contractors since these Contractor Management contractors had signed up to the project's environmental and social commitments included in their contracts. Once the In pipeline projects such as BTC, the contracts were awarded however, it quickly construction phase usually carries the highest became apparent that many of the risk of potential environmental and social contractors did not in fact have a full impacts and unforeseen events. As such, understanding of all of their commitments substandard performance by the with respect to environmental and social construction contractors involved in a management (which, for BTC, were set at a project can lead to adverse impacts and very high standard) and they did not the exposure of both the project sponsor necessarily appreciate what the requirements and project lenders to financial and entailed in terms of implementation. For reputational risks. Active management by example, as is typically the case, the the project sponsor of contractor contracts included a requirement for the performance on environmental and social contractor to develop measures to meet their issues is therefore critically important to environmental and social commitments and ensure successful outcomes, and to prevent document these in management plans subsequent time consuming and expensive before they started construction. But the corrective action. contractors, in reality, lacked the capacity to develop and implement the type of There were numerous contractors involved management plans BTC required. At the in the BTC construction program. The same time, the lenders required that the amount of time and level of effort required contractor's management plans be ready for by the sponsor for effective contractor inclusion in the ESAP before financial closure. management was underestimated at the outset of the project. As a result, BTC had In order to ensure contractor compliance to significantly increase its number of with their environmental and social

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commitments, and at the same time For future projects where there is significant demonstrate to the lenders how they contractor involvement, a similar control intended to manage their contractors, BTC mechanism is recommended as good had to find a simpler way of communicating practice. However, the CCPs would be of to the contractors what their obligations greatest benefit if they were included from were. A mechanism was developed the beginning as part of the initial contracts. whereby a series of “Contractor Control Plans” (CCPs) were prepared by BTC that A more general lesson for both IFC and their Passing all the contained detailed and specific control and clients is that passing all the environmental environmental mitigation measures that each contractor and social requirements to the contractor must implement in order to meet their and making it their responsibility, involves risk. and social contractual obligations. These specific Sponsors need to be sure of the contractor's requirements to measures then allowed the contractor to in capacity in this area and understand that in the contractor turn develop “Contractor Implementation the lenders' eyes it is they, and not the Plans and Procedures” (CIPP) that contained contractor, who will ultimately be held involves risk. procedures and method statements responsible for meeting lender commitments specifying how the contractor would and ensuring positive outcomes. In order to implement the measures included in the effectively manage this risk, the sponsor CCPs. needs to actively monitor contractor implementation on the ground by having a Individual CCPs were developed based on “contractor control system” in place, and if specific environmental and social areas that necessary, as was the case for BTC, be needed to be managed (e.g. waste prepared to step in with training and management). The main benefit of the CCPs technical assistance as required. was that they clearly translated the many commitments made in the ESIA documentation into specific actions; Contracting Strategy assigned responsibilities between the contractor and the sponsor; and, provided a means to monitor contractor performance For all projects, getting the right contractors while at the same time providing assurance on board and avoiding problems down the to the lenders that the environmental and line requires that environmental and social social commitments made by the sponsor considerations fit within a company's overall were being implemented by the contractor. contracting strategy. The Invitation to Tender The CCPs followed a “performance based (ITT) documentation for BTC consisted of a approach” so that contractor compliance series of documents describing the and performance could be monitored and environmental and social management measured using key performance indicators, requirements to be met by each contractor inspections and audits. throughout the contract term which the contractors agreed to implement. However, Although the CCP mechanism of contractor as outlined above, many of the contractors control was considered a very useful tool for initially did not have the capacity or the BTC project construction program in understanding to meet these obligations. working with the contractors on The costs of not spending sufficient time and implementation requirements, the plans were focus on contractor environmental and developed and issued retroactively, after the social management and capacity issues main construction contracts had been upfront proved substantial to all parties awarded and as a response to contractor involved. Both BTC and its lenders were management difficulties and capacity issues. exposed to non-compliance risks, while the

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financial consequences of retrofitting, cost » To assess whether adequate funds have overruns, and delays were borne by BTC and been allocated for environmental and its contractors. social management in a tender submission, the sponsor should consider requesting an It is not the role of IFC to dictate a sponsor's itemized budget for environmental and contracting strategy, however, certain social expenditures given as line items as lessons from the BTC project have led to a part of the “lump sum” contract, or number of very useful contracting strategy consider a provision for environmental and suggestions by the sponsor which may be social management separate from the appropriate for future projects. For example: “lump sum” contract.

» The sponsor should ensure that specific, » Sponsors should consider involving their clear and consistent information is environmental and social staff in drafting included in the ITT in relation to the environmental and social portions of environmental and social requirements so the ITT and in reviewing tenders submitted that contractors know what their by contractors. obligations are upfront. (Contractor Control Plans provide a good mechanism » Depending on the extent of environmental for this.) and social obligations involved in the contract, the sponsor should consider » The sponsor should, where possible, requiring the contractor to have a qualified schedule the ESIA program so that it has Environmental and Social Manager. been completed and the environmental and social commitments identified before » The sponsor should consider sub- the ITT is released so that all contractor contracting specialist companies for some environmental and social obligations can of the more specialized aspects of be included in the ITT documentation. environmental and social management such as waste water treatment or waste » In the absence of a completed ESIA, the management and disposal. sponsor should include as many standard environmental and social measures in the ITT as possible based on previous projects Summary of Key Lessons or past experience, but should keep close and Future Recommendations track of any commitments arising from the final ESIA which were not included in the » Scoping is a strategically important component ITT or contractor's tender. In this case, the of the ESIA program, it should be considered an sponsor should make sure these important milestone in the program and outstanding obligations are managed, sufficient time and expertise (including input either by themselves or by specific from experienced specialists familiar with the agreement with the contractor. project area) should be allocated to get it right.

» The BTC project demonstrated that the social » The sponsor should make best efforts to aspects of a project can cover many issues that ensure that the contractors have a clear have not traditionally been covered in impact understanding of what is expected of assessments. Future scoping exercises should be them from a technical, resource broadened to identify all potential social issues allocation, time input, and cost that might be important to the project including perspective, as well as the capacity to new and emerging issues such as worker deliver. welfare, human rights and security.

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» All the issues identified during scoping do not » A “contractor control” mechanism should be in necessarily need to be covered in the ESIA place as part of the management program but the results of the scoping exercise arrangements and sponsors must be prepared should include an early judgment on the most to step in with training and technical assistance appropriate approach for each issue and as required. should establish any studies in addition to the ESIA that will be required for the project. » The contractor control mechanism developed by BTC is considered good practice. It Macro-level » The ESIA documentation should contain a translated the commitments made in the ESIA “register” of environmental and social documentation into actions to be assessment is commitments made by the sponsor. Clear and implemented on the ground. The mechanism particularly concise language should be used for the consisted of a series of Contractor Control Plans project commitments with a clear indication of containing the mitigation measures that the relevant in responsibility for implementation. contractor must implement. The contractor emerging markets then developed Contractor Implementation » The legal language in a project ESAP should be Plans and Procedures (CIPPs) that specified where complex kept separate from the environmental and how the contractor would implement the cross-border social management program in order to allow measures laid out in the CCPs. for sufficient flexibility in the management projects raise procedures to respond to the changing realities sensitive issues that of the project on the ground. IFC should exercise caution when agreeing the legal have implications requirements within an ESAP. Flexibility is Regional Review beyond the particularly important in a large scale project such as BTC where change is inevitable. usual project One of the clear good practices to emerge from the BTC project was the preparation of boundaries. » A Management of Change (MoC) mechanism is an essential component of a project a Regional Review. The sponsor assembled a management system (and ESAP). The criteria well-qualified team and devoted that signal a change (and the trigger for the considerable time and resources to notification of a change) should be carefully undertake what has proven to be a ground considered and the criteria should contain breaking approach. Originally suggested by unambiguous language. IFC, the Regional Review provided a much needed contextualization of the project » The arrangements for an MoC document review within the larger geopolitical setting of procedure in the ESAP should be carefully considered and, if possible, should not be Azerbaijan, Georgia and Turkey. While entirely based on compliance. The procedure perhaps not needed for all projects, this should be sufficiently flexible to enable macro- level assessment is particularly discussion of the issues and timely agreement relevant in emerging markets where between all parties involved on the best way complex cross-border projects raise sensitive forward. issues that have implications beyond the usual project boundaries. On BTC, the » Sufficient time and focus on contractor Review undertook a higher level analysis of environmental and social management and capacity issues upfront (and prior to contract regional issues, documenting considerations award) is critical. The sponsor should be sure of and actions taken with respect to macro the contractor's capacity in this area and that concerns such as: regional export options the contractor fully understands what is examined in pipeline route selection; expected of them. revenue management; local employment and supply chain management; the non-oil » Active management and monitoring of economy; poverty and inequality; access to contractor performance on environmental and energy; climate change; governance and social issues is vital and sufficient resources should be allocated to this activity. corruption; and human rights, among other

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issues. As such it addressed issues not Review was a less important document than covered in the project-specific ESIAs the ESIA. However other staff reflect that, in undertaken for each of the three countries, retrospect, doing a Regional Review made but nevertheless important enough to the company focus on difficult issues that warrant a separate study. were not necessarily covered in the ESIAs (e.g. governance, human rights, the oil fund, Given the numerous geo-political concerns security, private sector vs. government and constraints in the region related to responsibility) and that they benefited from exporting oil from the landlocked Caspian the process of having to think through these Sea, as well as the sensitivities involved in questions in depth. In addition, BP, as the publicly disclosing them, there had not been project operator, garnered significant praise sufficient public discussion about pipeline in terms of external reputation for undertaking route selection or the alternatives the review. Carrying out the process on a considered. This sparked criticism of the voluntary basis demonstrated leadership by project from the international media and the company and a willingness to be NGO community, along with concerns about progressive, open, and forward-looking in the lack of discussion of cumulative impacts. their approach. If done at the earliest stages, In this respect a Regional Review can be an this type of advance preparation can also important discussion tool for the sponsor and help to pre-empt and allay many of the the project by: (i) providing a coherent concerns expressed by the shareholders of explanation of the impact of oil the lending institutions, civil society, and development on the region and the NGOs. Although some BTC staff felt that no alternatives considered; (ii) serving as a amount of effort to provide information baseline of sorts for assessing the cumulative concerning the regional context of the effects of other pipeline projects in the project would alter the views of certain NGOs region; (iii) proactively demonstrating that fundamentally opposed to the project, IFC the sponsor is aware of and committed to staff believe that the value of the Regional addressing some of the broader Review process lies in laying the groundwork environmental, socioeconomic, and to interact with those stakeholders and development issues; and, (iv) contributing to interested parties who do want to engage the project's desire to be transparent. constructively to find solutions.

Another lesson learned by the sponsor had to The Benefits do with balancing the demands of NGOs with positions outside the mainstream who wanted BTC to assume responsibilities far beyond In the case of BTC, the Regional Review those of a private sector company. By proved particularly important given the lack consulting and soliciting views of a wide array of formal Strategic Environmental Assessment of stakeholders (more than 100 organizations (SEA) studies by the relevant governments were interviewed as part of the Regional available for any of the three host countries. Review process) the company gained a From IFC's perspective, the Review filled a more moderate and pragmatic set of critical information gap and bolstered the recommendations from the majority of development justifications for project stakeholders as to what they thought BP's role financing which was extremely important to should be with respect to issues such as its Board of Directors. For some BTC staff who human rights and corruption. This helped to were focused on day-to-day issues at the demonstrate that the views of some of the project level rather than the larger strategic more extreme critics were not representative questions faced by the project, the Regional of the larger majority.

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Timing those with sensitive issues and that generate significant revenues and/or involve more than one country. The practice is already being While BTC assembled a multi-disciplinary team replicated in other private sector projects not of experts and devoted considerable time being financed by the IFC. Another and resources to producing this important approach, building on the BTC experience, document, both the sponsor and IFC agree has been to bring the big picture issues such that the Regional Review came too late in the as revenue management, security, and The Regional process. The exercise did not begin until much human rights into the ESIA rather than Review filled of the ESIA work was well underway and the undertake a separate regional review Review itself was not released until much later. exercise. Either way, such practices a critical Part of this had to do with the fact that this demonstrate an increasing recognition of the information was a new approach without examples for need to broaden the scope of issues to be gap and bolstered BTC to draw upon. Many of the issues assessed on projects of this nature beyond addressed in the Regional Review (especially the set of typical environmental and social the development on the social side) were new, sensitive, and issues covered in an ESIA. justifications outside the scope of traditional ESIAs, and for project therefore required careful consideration prior to publication. In hindsight, the delayed Summary of Key Lessons financing. timing reduced the overall effectiveness of and Future Recommendations the document as an informational tool and ideally would have commenced prior to, or in parallel with, the early scoping and pre- » From IFC's perspective, the BTC Regional Review feasibility studies for the project. provided an important analysis of macro regional issues relevant to the project. The It is likely that having BTC publicly state its document complemented the ESIAs, filled information gaps, increased transparency, and position on a number of these issues early on publicized some of the important issues with would have saved much time and effort on respect to crude oil export options in the region the part of both the sponsor and lenders in and pipeline route alternatives. providing responses to NGO concerns since certain potentially controversial topics would » The BTC sponsor benefited from discussions with have already been addressed publicly. a wide array of stakeholders in the preparation Timing issues aside, the Regional Review of the Regional Review as well as from having to was nevertheless successful in complementing think through a number of difficult and sensitive issues not traditionally considered as part of a the work done through the ESIA process and project impact assessment such as revenue in providing insights into key risks and management, governance, human rights and opportunities at the national and regional security among others. This provided a better levels. From the lenders' perspective it had understanding of the key risks and opportunities great value in providing further comfort that presented by the project. these larger issues were being considered seriously. » A Regional Review should be considered for complex projects in emerging markets. For maximum effect, the timing of the review is important. Early preparation of a review that Replicability considers sensitive and difficult issues in the region can help pre-empt and allay many of the concerns expressed by the shareholders In terms of replicability of this good practice, of lending institutions, civil society and the the IFC would recommend that such a review international NGO community. Ideally the be considered for large scale complex Regional Review would be most effective if commenced in parallel with the earliest scoping projects in emerging markets, particularly and feasibility studies for the project. PagePage Seven Thirteen The Baku-Tbilisi-Ceyhan (BTC) Pipeline Project

data collection phase of the ESIA. IFC's Stakeholder Engagement perspective on this early consultation was that and Disclosure the scope was very impressive. Every affected community within 2 km either side of the International standards for public pipeline right-of-way and within 5 km of consultation and disclosure for private sector permanent facilities was contacted via initial projects in emerging markets are meetings and then a second time once the continuously evolving. In this respect, BTC draft ESIA was produced. To achieve this, BTC was perhaps precedent-setting among brought in local academics to provide projects of this type and size in terms of the knowledge of the area and socio-cultural extent of local consultation carried out and issues as well as a social research company, the amount of information disclosed as part and undertook training of these teams. of the ESIA process. IFC staff (and in However, due to the logistics and personnel particular social development and demands of consulting along 1,760 kilometers, environmental specialists) spent a BTC had to subcontract and, as a result, the considerable amount of time meeting with quality of consultation in some locations may BTC and their specialists, affected have been inconsistent. In addition, given the communities, and other interested parties amount of information that had to be along the pipeline route over a period of provided in a short time, there were inevitably eighteen months before presenting the significant information gaps. From IFC's project to IFC's Board. IFC and EBRD set a perspective, the amount of time and precedent as well through the Multi- resources put into the consultation process by Stakeholder Forum in which a series of BTC was commendable. However, one meetings were held in all three countries to recommendation for future projects would be enable the lenders to hear feedback directly to incorporate more participatory techniques from members of affected communities, civil and methodologies into the consultation society, local authorities and other process in order to create more opportunities stakeholders. From both the client and IFC for meaningful interaction and two way- perspective, the comprehensive stakeholder dialogue between the project and affected engagement process yielded a number of stakeholders. valuable lessons including good practices in some areas and ways to improve in others. One aspect that was not fully addressed in Overall, the considerable amount of IFC staff these early consultations was the complex set engagement with the sponsor, affected of issues around impacts to land use and land communities, and interested parties in- acquisition which was a primary concern of all country helped IFC achieve an in-depth affected communities. This was due in part to understanding of the key issues and BTC concerns about managing expectations concerns relating to the project. This when there was still uncertainty about the final enabled IFC staff to respond effectively to routing of the pipeline. The consultation intense scrutiny and questioning by the exercise was undertaken based on a 500 World Bank Group's Executive Directors and meter corridor, so the company was unable to international NGOs during the disclosure tell the communities at that time exactly period, which ultimately facilitated support where the pipeline and permanent facilities for the project by allaying the concerns of would be within this corridor. However, once IFC's Board. the details and complexities of the land acquisition and pipeline right-of-way issues Because IFC involvement came later in the were more clearly understood by both the process, BTC had already commenced an sponsor and their consultants, a separate and initial program of consultation as part of the very comprehensive process of consultation

Page SixFourteen Lessons of Experience | September 2006 | Number 2

Learning from Criticism

In addition to consultations with locally affected communities, BTC consulted extensively through workshops and face to face meetings with local, regional and BTC was national government authorities; national, regional, and international NGOs; academic precedent-setting institutions and other interested parties. in terms of the

T. Pollett However, despite the extensive consultation extent of local carried out and the considerable effort by Consultation meeting with villagers in Turkey. BTC, much criticism of the local consultation consultation process was received from international carried out and NGOs. In hindsight, perhaps more should the amount of have been done to publicize the local on compensation and land acquisition public consultation process on a national information commenced. BTC carried out its and international scale, and to engage commitment that every individual whose disclosed. directly with those international NGOs willing land was affected by the project would be to discuss the issue constructively. This is an contacted and consulted—no small feat for area where the client expressed the over 100,000 people with claims to land. frustration that, with certain organizations fundamentally opposed to the project, no IFC social development and environmental amount of time and effort devoted to specialists visited a large sample of villages dialogue would change their position or along the pipeline route and were able to understanding of the project, or result in a observe many of the ESIA consultations, constructive dialogue. While such frustrations particularly around the time of disclosure of are understandable, IFC continues to hold the draft ESIA. They also observed on several the view that the process of engaging all the occasions the interaction between the project's critics is an important one and sponsor’s land acquisition and compensation ultimately valuable to the client because it program teams, and affected households. demonstrates a willingness to listen, learn, The lesson here is that a thorough process of and discuss possible solutions. consultation benefited the project by providing valuable information that informed the project planning process and helped to improve outcomes, for example: in helping The Multi-Stakeholder Forum to identify re-routes for the pipeline to avoid sensitive cultural and archaeological sites, and contributing to the formulation of There were a number of factors that led to employment, community relations, and IFC and EBRD jointly carrying out a Multi- community investment initiatives. Stakeholder Forum (MSF) consisting of meetings with local stakeholders in Azerbaijan, Georgia, and Turkey, which cost a significant amount in terms of resources and staff time. During lender appraisal of the project, concerns and criticisms by international NGOs were escalating in anticipation of the date for loan approval

PagePage Seven Fifteen The Baku-Tbilisi-Ceyhan (BTC) Pipeline Project

by IFC's board. Ultimately, the MSF resulted vocal international NGOs. The lesson learned from pressure from IFC's Senior Management by IFC in this case is that while international to have an “independent process” to assess NGOs can often help in giving voice to the local community support for the project concerns of the local population, this is not along the BTC pipeline by creating a direct always the case when agendas and interests platform for discussion. differ. Moreover, in certain situations, local public opinion in support of the project does The purpose of the meetings was to allow IFC not receive attention at the international level and EBRD staff to hear directly from local and the voices of local communities go stakeholders about issues related to their unheard in the international media. potential financing, and present their respective Boards with firsthand information On the downside of the process, the MSF before making final lending decisions. The caused tension between IFC/EBRD and the exercise was not meant in any way to sponsor for a number of reasons. BTC rightly supplant or detract from the comprehensive felt that they had already undertaken an process of consultation undertaken by BTC. extensive consultation process and that this In the run up to Board approvals, these had already been verified on a number of meetings were intended to provide the occasions by field visits of IFC and EBRD lenders access to local communities specialists. In this respect, the MSF risked affected by the pipeline and to allow undermining the sponsor's own program and verification of opinions of local people. This creating expectations by being perceived as constituted an important component of the an alternative consultation and grievance lender’s 120 day public disclosure period. process. The sponsor also expressed a Consequently, two separate day-long legitimate complaint about double standards: meetings were held in each of the three BTC had undertaken a thorough, in-depth and countries with a total attendance of over ongoing process of consultation (some of 800 people. which was considered best practice by the lenders) whereas IFC/EBRD's own stakeholder Reviews on the effectiveness and value of engagement through the MSF was one-off the MSF are mixed, and vary significantly and superficial by comparison. IFC specialists depending on whom one asks. On the agree that while the concepts of stakeholder positive side, the MSF helped to facilitate engagement and lender verification of broad board approval to finance the project by community support for prospective projects giving needed additional comfort and (now a requirement in IFC's new Sustainability confidence to the lenders and their Policy) are good and necessary, more shareholders. While the process was not thought is needed on how best to achieve perfect, it did increase stakeholder these objectives. The model of large public participation and access to IFC by ensuring forums, as embodied by the MSF process, that the Corporation widened its circle might not be the only nor most effective beyond a small cadre of international NGOs means of engendering meaningful interaction and created a forum in which to hear local between lenders (including members of their NGO and civil society concerns directly. senior management) and local stakeholders. Many of the more critical international NGOs For example, rather than public meetings with declined to participate in the MSF, but this hundreds of people, smaller focus groups with facilitated local civil society organizations key representatives—as was done as a speaking for themselves. In fact, in Georgia follow-up to the MSF in Georgia—might be a in particular, the MSF meetings revealed that more productive way of fostering dialogue on there was little local support for some of the key issues. In either case, care must be taken positions advocated by some of the most not to duplicate or undermine the work of the sponsor. Page SixSixteen Lessons of Experience | September 2006 | Number 2

Other IFC Lessons on Engaging “consultation tracker” and spent much time with Stakeholders responding to issues raised by stakeholders. A key lesson is that the time and resources required to initiate and maintain a robust Separate from the sponsor's process, IFC staff process of consultation with stakeholders spent considerable time engaging with should not be underestimated. stakeholders. This occurred on two levels: in the field and in Washington, D.C. IFC's The time and Executive Vice President at the time wanted Disclosure of Documents resources required IFC staff in the field as often as possible in to initiate and order for the Corporation to gain its own independent understanding of the issues on The quantity of environmental and social maintain a robust the ground. As a result, IFC environmental information on the BTC pipeline that was process of and social development specialists disclosed locally and in the IFC's InfoShop consultation with undertook close to twenty field visits during was vast (38 volumes). The documents were project appraisal, often remaining in country translated into local languages and made stakeholders for two or three weeks at a time and available at local libraries, regional centers, should not be spending time in the villages along the and offices of local government, NGOs, and underestimated. pipeline. While this is costly from a resources BTC in all three countries. These locations point of view, it proved extremely beneficial were announced through the national and in terms of IFC's ability to respond to questions local newspapers and through radio. A lesson and critiques. Direct experience enabled learned during this process was that the staff to respond with confidence (i.e. “this is disclosure of excessively large volumes of what villagers told me.”) information does not necessarily facilitate effective communication with, and use by, IFC staff also spent an enormous amount of affected stakeholders. The quantity and time responding to comments from NGOs presentation of relevant material for prior to and during the 120 day disclosure disclosure must receive special attention, period for the ESIAs and related documents. particularly on large complex projects. One month prior to Board, the team Where possible there is a need for more prepared a 60-page response to NGO focused summary reports to be disclosed that questions and continued responding to local people can readily digest and comments right up to the eve of the Board understand, rather than the voluminous suite date. Again, from a resources point of view, of technical documents that have been this response proved very time-consuming, prepared. (The latter can always be made but it was very effective in addressing the available upon request.) To help address this, concerns of IFC's Executive Directors. BTC produced community pamphlets, non- technical summaries, posters and case Another practical tool that the team found studies on specific issues, and held many useful in managing the engagement process village meetings on disclosure of information. was maintaining a “Stakeholder Log” which In Turkey, for example, simplified tracked every meeting IFC staff held with presentations were made at the village level interested parties, including the date, as it was found that oral communication was location, and key issues discussed. A written a more effective means of conveying key record or “paper trail” is important both to ESIA findings. retain institutional memory and to be able to demonstrate the frequency of engagement This is a view shared by the sponsor who felt and range of stakeholders with which IFC that some of IFC's disclosure requirements dealt. The sponsor also developed a regarding what to disclose, and to whom,

PagePage Seven Seventeen The Baku-Tbilisi-Ceyhan (BTC) Pipeline Project

were overly burdensome and in certain » The independent Multi-Stakeholder Forum cases not sensible. They found the logistics carried out by IFC and EBRD to communicate and relevance both difficult and the lenders' position on the potential financing of questionable especially with an ESIA the project and to listen to stakeholder views document numbering over eleven thousand helped facilitate board approval for the project pages. The cost to the client of printing, by confirming that the project did have local photocopying, translation, and dissemination community support. However, in undertaking of the documentation was considerable. such initiatives, IFC must take care not to duplicate or undermine the sponsor’s own Some of these concerns have been recently consultation program by raising expectations, or addressed in IFC's new Disclosure Policy. giving the perception of being an alternative grievance channel.

» In addition to the MSF program, significant IFC Summary of Key Lessons time and resources were invested in engaging and Future Recommendations with the sponsor, affected communities, and NGOs during project appraisal. This level of engagement provided in-depth understanding of the project and improved IFC's ability to » The BTC project benefited greatly from the respond to questions and critiques which was comprehensive process of consultation with a significant factor in facilitating board support affected communities that the company for the project. carried out. Consultation provided valuable information that informed project planning » IFC staff developed a “Stakeholder Log” for the (such as route selection to avoid cultural and BTC project which tracked every meeting IFC archaeological sites) and contributed to the staff held with interested parties, including the formulation of employment, community date, location, and key issues discussed. This relations, and community investment initiatives. written record was important in retaining institutional memory and demonstrating the » In addition to the community consultation, BTC frequency of engagement and range of consulted extensively with local, regional and stakeholders IFC dealt with during project national government, national academics, appraisal and supervision. This should be specialist organizations, and national, regional, considered as good practice for future projects. and international NGOs regarding the project. BTC personnel were not always convinced that » The disclosure of excessively large volumes of the effort expended in their interaction with information as was the case for BTC does not certain international NGOs fundamentally necessarily facilitate effective communication opposed to the project was worthwhile, but with, and use by, affected stakeholders. IFC IFC specialists maintain that the process of should be attentive to the quantity and engaging with all of the project's critics is an presentation of relevant and appropriate important one. It demonstrates a willingness to material in summary form to ensure meaningful listen, learn and discuss. disclosure.

» For a project of this scale, the extent of the public consultation process should be publicized both nationally and internationally to reduce potential criticism of the process due to lack of awareness.

» Skilled consultants with experience in participatory techniques and methodologies are needed to facilitate an effective two-way dialogue between the project and affected communities.

Page SixEighteen Lessons of Experience | September 2006 | Number 2

Land Acquisition and required temporarily for construction purposes and will be returned to the original Compensation land right holders. All land users on the more than 17,700 affected land parcels along the A key principle in land acquisition (which is route (many with multiple owners) were also a requirement under IFC policy) is to try visited by BTC land acquisition teams, and to avoid or minimize the physical considerable effort was made to contact resettlement of households to the greatest absentee land owners. The land teams were The land degree possible. BTC successfully achieved assisted by local NGOs, and NGOs in each acquisition and this objective through careful initial planning country were also commissioned to give that avoided all villages and towns, and by independent advice and counsel to land compensation making subsequent minor route changes to owners and users. process for avoid any homesteads that were BTC was encountered in finalizing the pipeline right-of- way. Given the statistics involved—a 1,760km Timing Issues complicated, pipeline, 515 villages, and land acquisition difficult, and affecting over 17,700 parcels of land and not without more than 100,000 people—it is remarkable In hindsight it is fair to say that, at least that not a single household was forced to initially, BTC underestimated the scale and problems. move on account of the project. This was complexity of the land acquisition process achievable because the BTC pipeline and how much lead time and resources this traverses mainly a rural environment with few would require in countries where land large settlements, and may not be possible registration systems and land records were for other projects in more densely populated weak or non-existent. Part of this resulted areas. Nevertheless, the BTC example from the fact that such a comprehensive serves to demonstrate that taking social land acquisition process for a pipeline considerations into account in project design project (including compensation for physical can significantly reduce impacts to the local and livelihood impacts) had not been population. Other notable good practices undertaken in any of these countries before, emerging from the BTC land acquisition so there was no direct experience to draw process include the preparation of a “Guide upon. In many cases BTC found they had to to Land Acquisition and Compensation” start from scratch, initiating land survey work (GLAC) as a supplement to traditional and identifying thousands of rights holders, Resettlement Action Plans (RAPs), and the which ultimately resulted in a significantly development of a RAP Fund to cover improved land management system, but miscellaneous impacts not covered by took considerably longer than originally Turkish legislation. anticipated. Contributing to the timing issue was the fact that the original scoping studies The land acquisition and compensation had not sufficiently emphasized the extent process for BTC was complicated, difficult, and nature of the land issue early on and not without problems. A comprehensive (although it was known that this was an program was required to address mostly important issue) and that the subsequent temporary impacts to the livelihoods and ESIA and RAP studies were not integrated. activities of a very large number of Instead, much of the data on land issues households, exacerbated by complex land required for the RAP was not collected tenure systems in all three countries. A specifically as part of the ESIA process but relatively small proportion of land was undertaken separately and later on by required permanently for above ground different consultants with specialized installations such as pump stations and block expertise. While this approach seemed to valve stations. Most land acquisition was PagePage Seven Nineteen The Baku-Tbilisi-Ceyhan (BTC) Pipeline Project

make sense to the sponsor at the time, in they needed from the sponsor before any retrospect, integrating the two processes land acquisition took place. would have likely been more efficient from both a timing and resources point of view. The lesson here is that land acquisition and The GLAC resettlement should be addressed as part of, or in parallel with, the ESIA process. The “Guide to Land Acquisition and Disclosure issues also affected timing. For Compensation” (GLAC) came into being as example, there was a lack of clarity a practical compromise between IFC and between IFC and the sponsor over when the the sponsor to prevent the resettlement plan resettlement action plan had to be timetable from bringing project construction disclosed. On BTC, the ESIA reports and the to a costly halt, while at the same time, RAPs were required to be disclosed for 120 safeguarding the rights of project affected daysbefore IFC's Board decision. However people to receive key information prior to the the sponsor wanted to commence land commencement of land acquisition. In acquisition in advance of the 120 day advance of the full resettlement plans, GLACs disclosure date and hence, before the were prepared for each of the three relevant reports were ready. At the time, countries traversed by the pipeline and IFC's policy was not explicit about the need translated into local languages. They to disclose RAPs before commencement of consisted of a shortened and easily digestible land acquisition, and only stipulated summary of the land acquisition and disclosure requirements in terms of the Board compensation process, targeted at the level date. IFC, however, insisted on the need for of the individual farmer. The GLACs RAP disclosure to precede the land summarized the project land needs for the acquisition (in the event this was to happen pipeline and the compensation framework. before the Board date) based on the Key areas covered were clear descriptions of principle that affected people needed to the terms of eligibility for compensation; land have such information in advance of valuation; and the calculations to be used for 2 agreeing to compensation packages. compensation of crops, pasture loss and This misunderstanding caused a timing crisis damage to orchards, trees and so on. for the sponsor because work on the RAPs Methods to be used for compensation had started late and time for completion payment to affected households, and and disclosure could delay implementation restrictions to land use and access during the of construction contracts, which had already pipeline construction and operational been awarded, and could result in costly phases, were also summarized in each GLAC contractual penalties. as well as other practical information such as whom to contact and how to register In the end, construction was delayed for grievances. other reasons, but in the meantime a solution to ensuring adequate disclosure of land Although, in the end, the complete and acquisition information was found. BTC detailed resettlement plans were actually prepared and disclosed a concise “Guide to released before land acquisition Land Acquisition and Compensation” commenced, the GLACs proved extremely (GLAC) to affected villages so that land useful for local households since they owners and users had the basic information presented the information in a clearer and simpler form than the detailed resettlement plans, and did much to clarify compensation

2 IFC's new Disclosure Policy is now much more explicit issues and avoid misunderstandings. As such concerning timing and disclosure of environmental and Page SixTwenty social documents, including RAPs. Lessons of Experience | September 2006 | Number 2

address gaps between the provisions of Turkish legislation and the requirements of IFC/WB Safeguard Policies and set up a separate “RAP Fund” to facilitate implementation of these measures. Essentially the RAP Fund was a pool of extra budgetary resources made available by the sponsor, but its success in the BTC project BTC developed was ultimately determined by what these innovative funds were spent on. The RAP fund covered extras such as expenses incurred by approaches to T. Pollett affected people including legal, registration address gaps Herder affected by land acquisition in Azerbaijan. and transportation costs, or compensation between the for grazing land or forest products which were not covered under Turkish law. (This is provisions of Turkish also the case in many other countries.) In legislation and the IFC now recommends the supplemental Turkey, inherited land is commonly not requirements production of GLACs as good practice for registered and this presents a particular summarizing relevant resettlement problem in formalizing ownership, especially of IFC. information (particularly in cases of complex when the process involves resolving land acquisition situations) for ease of use by entitlements over generations and large affected households. The BTC project extended families. The RAP Fund was used demonstrated that, from the community's to cover miscellaneous expenses incurred to perspective, GLACs may prove more useful formalize ownership and registration and than the more technical resettlement plans. greatly facilitated the land acquisition Detailed resettlement plans are nevertheless process. In particular, a ground breaking essential to record relevant baseline data, approach was developed to compensate regulatory and policy requirements, and fishermen/farmers for partial impacts to the analysis of compensation requirements. They extent of their available fishing grounds also provide details of the total extent and caused by the construction of the oil cost of compensation as well as the terminal and jetty at Ceyhan. This included measures to implement compensation, measures to improve and further develop including establishing land valuation teams, their existing agricultural activities, purchase liaison and grievance mechanisms, and vehicles and agricultural equipment to monitoring and evaluation systems. diversify economic activities, and contribute to household income. They also received assistance to construct houses, pay their debts to social security institutions to The RAP Fund become eligible for retirement, and establish additional entrepreneurial opportunities (e.g. a transportation co-operative which Turkish law does not provide for would receive some contracts from the compensation of certain losses, including: project). Fifteen fishermen were also loss of use of some communal lands used for employed during construction of the livestock grazing (particularly where project. These measures developed to ownership of the land resides with the state); mitigate impacts to fishermen are a first for informal land users using land owned by the Turkey and likely set a benchmark state or others; loss of fishing grounds; and, internationally as they have rarely been other miscellaneous claims. As such, BTC addressed as comprehensively elsewhere. developed innovative approaches to

PagePage Seven Twenty-one The Baku-Tbilisi-Ceyhan (BTC) Pipeline Project

Summary of Key Lessons additional compensation to mitigate losses not and Future Recommendations covered under Turkish legislation. A similar funding mechanism should be considered for » The scale and complexity of the land future projects to address gaps between the acquisition process should be clearly identified provisions of host country legislation and IFC as early as possible in project planning (ideally requirements on land acquisition. during the ESIA scoping exercise); especially where there are weak or non-existent land registration systems as was the case for the BTC project. This will help establish the lead time and resources required to formally register the Monitoring and Reporting land.

» Land acquisition and resettlement should be Due to the size and complexity of BTC and addressed as part of, or in parallel with, the ESIA the high level of international interest it process. These were separate for BTC but in attracted, there were multiple stakeholders hindsight, integrating the two processes would who wanted to be able to monitor the have resulted in efficiencies of resources and project's environmental and social risks over timing, in particular with respect to baseline data gathering. In this way, data on land and and above the internal management and households collected for the ESIA can also be assurance mechanisms put in place by IFC used for the resettlement plan. and the overall lender group. As a result there were multiple layers of internal and external » Land acquisition can be a lengthy and monitoring and oversight being carried out at complicated process. To avoid delays, work any given time during the construction phase on the RAP should begin far in advance of of the project. This included monitoring by the breaking ground and construction. lenders, government regulatory bodies, » Project land acquisition teams should consider independent monitors, NGOs, contractor assistance from local NGOs in providing personnel, BP corporate, and BTC's own staff, independent advice and counsel to land among others. owners and users. The BTC project experience in this regard was mainly positive. The general conclusion to emerge from the construction phase is that monitoring did » IFC should ensure that the sponsor is clearly indeed result in better environmental and informed of the RAP disclosure requirements in social outcomes for the project by helping to terms of the timing required prior to the IFC board approval of financing and/or actual focus management attention on issues that land acquisition proceedings. needed to be addressed. The public disclosure of all external monitoring reports for » The BTC project prepared a concise Guide to BTC is also considered international good Land Acquisition and Compensation (GLAC) practice for a project of this nature and document that summarized relevant should be replicated for similar projects. resettlement information for distribution to However, from the sponsor's point of view the affected communities. The ease of use of the number of layers of oversight, the frequency GLACs by the affected households indicated that they were more useful than the more of monitoring visits, and the quarterly technical resettlement plans. As a result, IFC reporting requirements imposed by lenders now recommends the supplemental production during construction came at a significant cost of a GLAC as good practice, particularly in in terms of time, level of effort, and resources. complex land acquisition situations such as BTC. In terms of external parties, the monitoring » A RAP Fund set up by BTC proved an important that stands out as having provided the most tool and budget mechanism in meeting the value were the three independent monitoring social objectives of the project by providing

Page SixTwenty-two Lessons of Experience | September 2006 | Number 2

Multi-layer Monitoring, Assurance and Oversight of BTC

CONSTRUCTION PHASE OPERATIONS PHASE

Layer 10 Caspian Development Advisory Panel (CDAP) E X Layer 9 Lenders’ Independent Environmental Consultant (IEC) The public T E disclosure of Layer 8 Lenders’ Social & Resettlement Action Plan Panel (SRAP) R external monitoring N reports is A Layer 7 Security monitoring and implementation L considered Layer 6 Azerbaijani Regulatory Georgian Regulatory Turkish Regulatory Regulatory Monitoring Monitoring Monitoring Monitoring Az, Geo, Tk international

NGO Monitoring NGO Monitoring NGO Monitoring Long-term stakeholder good practice. Layer 5 dialogue Azerbaijan Georgia Turkey Az, Geo, Tk

I Layer 4 BP and BTC Shareholder Monitoring N Operations T Layer 3 BTC Co. Project Monitoring E Management R BTC Assurance Team BTC Assurance Team BTC Assurance Team Tk N Layer 2 Azerbaijan Georgia Botas Assurance Team Tk A Construction Contractors Construction Contractors Construction Contractors L Layer 1 Azerbaijan Georgia Turkey

Source: BTC Project Environmental and Social Annual Report (Construction Phase) 2004.

panels—the Caspian Development Advisory On BTC, IFC drew on a number of monitoring Panel (CDAP), the Independent lessons from its experience with the Chad- Environmental Consultant (IEC) to the lender Cameroon Pipeline project. (For more group, and the Social and Resettlement information, see IFC’s Lessons of Experience: Action Plan (SRAP) panel. Multiple field visits External Monitoring of the Chad-Cameroon were also undertaken by IFC social Pipeline Project.) development and environmental staff and are viewed by IFC as necessary and beneficial due diligence for a project of this The Caspian Development Advisory size. In addition, support to local NGOs to Panel (CDAP) enable them to undertake their own monitoring was a good practice initiative piloted during the BTC construction phase CDAP (comprised of members with well- with positive results. With respect to internal established international standing) was monitoring, it was felt that BTC assurance commissioned as an independent, external teams operating in each country to supervise body reporting directly to BP's Chief Executive the work of the contractors on the ground Officer, Lord Brown, with the objective of were the most effective at identifying issues providing advice on the economic, and finding solutions.

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environmental and social aspects of all of where integrated monitoring worked well) the BP's developments in the region, including two teams were separate for the BTC project. the BTC pipeline, in order to ensure The division of labor in this case assisted with implementation according to world class complex logistics to enable field visits to standards. Unlike other monitoring bodies, specific sites and communities all along the the value of CDAP is that it took a “10,000 1,760km pipeline. The SRAP panel, which foot view” of the project and focused on a visited the project every six months, had its number of big-picture, strategic items that hands full dealing with large-scale land and did not get covered elsewhere. For example, compensation issues, and spent the bulk of the Regional Development Initiative (RDI), their time with directly affected communities referenced further on page 29, is a direct and households. The IEC panel made result of CDAP recommendations. The panel quarterly visits, monitoring the implementation travels along the pipeline once a year and of environmental management measures their reports are made public. included in the ESAP for the construction of the pipeline and associated above ground By reporting directly to BP's CEO and having installations and workforce camp sites. The a different monitoring emphasis (i.e. viewing separated monitoring also lent itself well to issues through a lens other than compliance) BTC's organizational structure in Azerbaijan the CDAP approach has some apparent and Georgia which had separate team leads advantages. These include the sponsor's for environment and social issues. The ready acceptance of the advisory panel disadvantage of a separate approach, concept and a willingness by BP Senior however, is the possibility that overall Management to proactively address CDAP coordination and communication may suffer. recommendations, which has not always To avoid this, special attention may be been the case on other projects. This is a needed to foster regular dialogue between different model from the well known Chad- the two teams through integration meetings Cameroon International Advisory Group and coordination of field visits. (IAG) which reported directly to the World Bank Group (WBG) President. A possible disadvantage with the CDAP approach is Costs and Effectiveness that some civil society organizations may not perceive the panel as sufficiently independent, however this has not emerged Perhaps the single most important factor in to date as an issue on BTC. independent monitoring effectiveness is the skill and technical competence of the monitoring team. In order to draw The Independent Environmental and management attention to critical issues and Social Monitoring Panels: IEC and SRAP influence decision-making on actions to be taken, the monitoring team members must be respected for their professional judgment and The Independent Environmental Consultant be able to engage in constructive feedback (IEC) to the Lender Group and the Social and dialogue with the company. Effective and Resettlement Action Plan (SRAP) panel monitors recognize that projects cannot be were contracted as independent third-party 100% compliant all of the time, but work to monitors, a requirement by the lenders. identify and prioritize key issues for attention. Whereas in most cases IFC recommends The identification of risks and continuous integrated environmental and social improvement in compliance are key to monitoring as good practice, (the Chad- ensuring the adequate performance of a Cameroon pipeline project is an example of project. Both IFC and BTC staff agree that the

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NGO Monitoring in Azerbaijan and Georgia

Monitoring of the Project by national NGOs was a vital funds to support the participating NGOs. It recommendation made by the CDAP panel in also established a registration, training and 2004 and supported by IFC and EBRD. BTC took up mentoring system for the NGOs. Azeri NGOs this recommendation, with a view that subsequently identified five monitoring themes constructive and well-informed NGO monitoring (social, land and worker rights, local content, could be useful to the company in helping to cultural heritage, and environment), formed a improve the performance of the project. group for each theme, and created smaller However, a number of NGOs in the pipeline working groups to perform the monitoring on countries lacked the experience and financial behalf of the others. They also took part in training BTC took a view resources to effectively perform a monitoring role. on monitoring, evaluation and reporting The challenge for BTC was to find a way to provide techniques and received presentations about the that constructive a learning process and financial support for the BTC project. and well-informed NGOs without financing them directly in order to preserve their independence. Sharing Experience with the NGO monitoring Chad-Cameroon Pipeline To achieve this, BTC engaged third-party could be useful in organizations to facilitate the implementation of OSI brought in Catholic Relief Services to provide helping to improve the NGO monitoring program in Azerbaijan and training in monitoring techniques, using the Georgia. (In Turkey, a facilitating organization was expertise of an NGO monitor on the Chad- the performance not engaged because the experience and Cameroon pipeline project. There are few capacity of Turkish NGOs was generally greater projects equivalent to the BTC pipeline, so this of the project. than in Azerbaijan and Georgia and a number of was an opportunity to share valuable experience Turkish NGOs were already involved in the Project.) from a comparable project. The Chad-Cameroon The facilitating organizations were able to establish NGO monitor continued to support the Azeri a number of Working Groups in both Azerbaijan NGOs while they prepared and implemented and Georgia. Members of each Working Group their monitoring plans and wrote their reports. In received training in monitoring and audit five years' time perhaps the Azeri NGOs, like those techniques, as well as presentations and monitoring Chad-Cameroon, will be asked to information sessions about the Project from BTC travel to other countries to train their local NGOs staff. Throughout the monitoring period, BTC in monitoring. The Chad-Cameroon NGO provided access to construction sites and monitoring experience has led to greater documentation, supported by meetings with dialogue and a relationship of mutual respect relevant BTC and contractor personnel. The between the operating company and the NGOs, objectives of the program were as follows: and the same long term result is hoped for in Azerbaijan. » to enable participating NGOs to acquire the skills to plan and implement a program of objective Georgia monitoring and reporting of the BTC pipeline to international standards. In Georgia, the NGO monitoring facilitating organization is the Eurasia Foundation whose » to provide the NGOs with transferable skills to Pipeline Monitoring and Dialogue Initiative (PMDI) monitor environmental and social impacts of is assisting NGOs in Tbilisi and along the pipeline other projects. corridor. PMDI is a “facilitated monitoring” program to build an expert cadre of NGO » to demonstrate to Lenders, CDAP, partners, the monitors and encourage informed participation public and the international community that BTC by a wide variety of NGO representatives in is taking their commitment to transparency monitoring the impact of the pipeline route. Many seriously. NGOs responded to the initial invitation to register, and a selection process resulted in the formation Participants from the Azerbaijan program visited of three Working Groups: Waste Management, Georgia during March 2005 to share their Reinstatement, and Social and Human Rights. IFC experiences, and this cooperation between the provided direct funding to Eurasia Foundation two countries is expected to continue as the and an additional grant to BTC towards the first programs progress. This level of formal component of PDMI. NGO training and collaboration between industry and civil society is monitoring was successfully achieved in seen as providing a model for future developments December 2005 and further capacity building is in the Caucasus region. underway in 2006. Azerbaijan

In Azerbaijan BTC formed a partnership with Open Source:BTC Project E&S Quarterly Reports (Q2 2004 and Society Institute (OSI) Azerbaijan. OSI acted as a Q2 2005), BTC; Social Responsibility Program (Corporate coordinator for the NGOs as well as contributed Citizenship Facility), IFC. PagePage Seven Twenty-five The Baku-Tbilisi-Ceyhan (BTC) Pipeline Project

external monitors were generally successful Reporting at catalyzing management action on a number of environmental and social issues, and some made helpful recommendations The sponsor also expressed similar views when that positively influenced project outcomes. it comes to reporting requirements. BTC was A key lesson here is that external monitors required to produce quarterly and annual are most effective when they can go E&S reports for the lender group during the beyond monitoring and assist the client by construction program. Some found quarterly providing technical advice and helping find reporting to be excessive, suggesting that this pragmatic solutions to identified problems. level of frequency was “overkill” and that the level of effort put into producing such Overall, it is felt that external audits quarterly reports was not commensurate with produced a number of benefits. The very the number of people who actually read it. process of having to prepare for an audit is On the positive side there are benefits to such an important driver for senior management, reporting. For lender purposes—as well as its prompting internal focus, prioritizing of issues own needs—BTC has developed robust and reaction to findings. Environmental and internal monitoring, tracking, and data social staff say that external monitoring tends recording systems. The company has set to strengthen their position internally by benchmarks in terms of the quality and giving them greater leverage with their own comprehensiveness of its environmental and management to act on various issues. social reports which constitute an excellent historical record of the project. Such reports Based on the BTC experience, IFC staff have proved useful in tracking issues over believe that regular third-party monitoring time, demonstrating positive outcomes visits to the sites during construction were and/or defending the project if needed. BTC extremely valuable and significantly helped has also used case studies in their reporting to the lenders demonstrate compliance and document some of the innovations and keep track of a myriad of issues on a project achievements on the ground. of this scale. The monitoring gave lenders the insight required to allow them not only to measure performance but to better Summary of Key Lessons understand the constraints under which the and Future Recommendations operator was working. While the sponsor

agrees with the value of external monitoring, » Frequent monitoring of the BTC pipeline they expressed the view that quarterly visits construction program by internal and external were excessive and overly burdensome on monitors resulted in better environmental and BTC staff and that these should be reduced social outcomes for the project by helping to to a maximum of three times a year. They focus management attention on issues that also point to the significant addition of needed to be addressed. personnel (close to 20 extra people had to » Frequent monitoring and independent be hired for this purpose) and resources verification visits during the construction phase necessary to accommodate lender of large scale projects should be carried out; monitoring requirements. In hindsight, IFC however the frequency of monitoring should be staff agree that three times per annum commensurate with the scale and complexity of would have been sufficient and should be the project. BTC agreed to a quarterly recommended for future projects of this environmental monitoring schedule and social scale. monitoring every six months during the construction program with the lender group. In practice, the frequency of the external environmental monitoring was considered to be

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management and mitigation of “non- too high and three times per year would have technical risk” (i.e. social risk); ensuring the been more appropriate. project's license to operate and expand; » External monitoring teams should be carefully enhancing reputation and shareholder selected for their ability to exercise professional value; improving community and judgment and be able to engage in stakeholder relations; and, promoting a constructive feedback and dialogue with the stable operating environment. Making this sponsor. External monitoring teams were most level of commitment was also in keeping External monitors effective on the BTC project when they were with BP's stated ethic of bringing real and able to go beyond monitoring compliance and are most effective measurable benefits to those communities provide technical advice and solutions to when they can problems. adjacent to its businesses. go beyond » External reporting on environmental and social monitoring and management activities and performance Community Investment Program should be conducted. BTC reports were help find solutions comprehensive and provided an excellent to identified record of the project; however the frequency of reporting requested by the lender group was In establishing a multi-million dollar problems. perhaps excessive at four times a year during Community Investment Program (CIP), BTC the construction phase. decided to go beyond simply providing philanthropic contributions and sponsorship donations. The pipeline traverses some of the most economically disadvantaged Social License to Operate regions in Azerbaijan, Georgia and Turkey and the CIP aimed to provide long-term sustainable development projects in the In order to improve conditions for local local communities while at the same time populations living near to the pipeline route, supporting local social infrastructure BTC broadened its scope from typical project development and stimulating economic impact mitigation and compensation opportunities. The CIP specifically targeted requirements, to a wider concept of income generation and employment sustainable development among locally creation (including strengthening local affected communities. This type of agricultural development), infrastructure sustainable approach to project rehabilitation, health and sanitation development is becoming an increasingly programs, capacity building programs important aspect of IFC-financed projects. and training. However, this approach posed several challenges for the sponsor. First, community From the outset, the approach has been to investment on such a scale had never been avoid fostering dependency by helping to done before by BP. Secondly, the entire build the skills and capacity of local community liaison and community communities, NGOs and other local investment program was outside the organizations to implement community- traditional skill set of both the BTC project identified projects. The community projects teams and the contractors. To address this, have been designed in consultation with BTC hired personnel with specific skills in these local communities and other stakeholders areas to manage the programs. and, following community needs assessment studies, investments were selected from From the sponsor’s perspective there were a proposals submitted by potential number of objectives in undertaking broad- implementing organizations. To implement based community initiatives in each of the the programs, BTC partnered with a number three countries. These included the

PagePage Seven Twenty-seven The Baku-Tbilisi-Ceyhan (BTC) Pipeline Project

of international and local NGOs in Azerbaijan Environmental Investment Program and Georgia and with local NGOs in Turkey. A great deal of effort went into managing

expectations on all sides. This was BTC has contributed $8.8 million to an accomplished in part by the integration of environmental investment program which BTC's Community Liaison and Community aims to promote and conserve biodiversity. Investment programs in order to facilitate a A number of projects are underway and, holistic approach to the company's where possible, projects have been externally-focused activities. In this way CIP selected to complement national and regional biodiversity strategies. Projects benefits could be leveraged to help range from the conservation of vulnerable manage community liaison beyond and floral and faunal species and their habitats outside of the project’s official grievance in each country, forestry projects, and mechanism. public awareness programs. A number of implementing partners are involved In the early phases of implementation, there including NGOs, universities, consultancies were a number of lessons learned by BTC and foundations. staff working on the community side of operations, the first of which is that CIP does not guarantee good community relations in and of itself, but if done right can help foster long-term trust and goodwill with affected communities and other stakeholders. By training and livestock vaccination programs contrast, one can have an extremely as well as numerous examples of micro- successful community development financing. The CIP has provided a wide program, but if the community liaison side variety of training and capacity building is not working well, relations can be activities in relation to project planning and problematic. In other words, the two implementation. BTC staff point to the initiatives go hand in hand. This underscores importance of communicating the a second important lesson: social risk achievements and benefits of the CIP both mitigation is not only about providing money. internally and externally to raise awareness of There are many other intangibles involved the many positive things happening on the when dealing with communities such as ground. communication, transparency, relationships and trust without which no CIP can succeed. BTC staff also emphasize the necessity of Promoting Economic Opportunities having qualified field personnel in both the at the Local Level CIP and community liaison areas and in hindsight would have put their Community Liaison Officers in place sooner. BP, as the operator of BTC, has also taken measures to facilitate the participation of Independent monitoring has shown that the local companies in the supply of services and CIP has resulted in significant progress. Over goods for project construction. In 2002, BP 500 communities have benefited from the opened an Enterprise Centre in Baku, program. Community members involved Azerbaijan. This center has served as a focal with the program are supportive and point for efforts to enhance local business satisfied with the programs accomplishments capacity with the aim of helping local in terms of community mobilization and companies develop their business in support capacity building, medical training and of the BTC development and other major oil support, infrastructure upgrades, farmer and gas developments in the region.

Page Twenty-eight Lessons of Experience | September 2006 | Number 2

Typically the center assists local companies in understanding BP's contracting policies and standards, provides advisory services and training in the competitive tender process as well as in finance and accounting skills. The center also informs these companies of contracting opportunities. Social risk IFC partnered with BP and others in late 2002 mitigation is to implement a small and medium sized enterprise (SME) linkage program specifically not only about related to the BTC project and other BP T. Pollett providing money. operated projects in the region. Operating Georgian women returning from the fields. from BP's Enterprise Centre, this program is part of IFC's ongoing strategy of working closely with its clients to provide developmental support through linkages to IFC's investment projects. The purpose of this SME linkage program is to direct support to

Grievance Mechanism

An effective and well-functioning grievance mechanism is an essential part of managing community relations. For BTC, the sponsor developed a separate grievance process for each country to manage complaints arising from the project. The objectives were to: (i) provide affected people with straightforward and accessible avenues for making a complaint or resolving any dispute that may arise during the course of the project; (ii) ensure that appropriate and mutually acceptable corrective actions were identified and implemented; and (iii) verify that complainants were satisfied with outcomes of corrective actions. In addition, a parallel grievance process was developed by the BTC construction contractors.

Some key elements of BTC's grievance mechanism included:

» Community Liaison Officers (CLOs) based in the field and responsible for receiving complaints and coordinating responses. » A “Complaints Log” recording individual complaints, corrective actions taken and responses to complainants. » A two-week response time to all complaints (even if just a summary of proposed actions that will be taken to resolve the complaint.) » All complaints responded to in writing (or verbally where circumstances warrant.) » Recourse to pre-judicial and judicial process under host country law in cases where satisfactory response to the complaint cannot be negotiated. » Weekly and monthly reports prepared by the lead CLO detailing the number and status of complaints and any outstanding issues sent to the BTC Community Relations Manager in each country.

During the construction program BTC had to continually augment their CLO resources in some locations to manage their response to the number of complaints received by project affected communities in a timely manner. A general lesson learned is that despite extensive community consultation carried out, significant complaints may still arise. Sponsors and contractors need to be prepared for this possibility and be able to source additional skilled resources. Page Twenty-sevenTwenty-nine The Baku-Tbilisi-Ceyhan (BTC) Pipeline Project

expanding local supply and distribution » Community investment programs do not chains and to create more opportunities for guarantee good community relations, but if smaller businesses as well as assist in done right they can help foster long-term trust sustainable community development efforts. and goodwill with affected communities. Good Specifically, the program was designed to community relations and successful community improve the capacity and know-how of investment programs go hand in hand and local companies active in the oil and gas should be integrated from the beginning. service and supply sectors in order to help » Social risk mitigation is not only about providing them benefit from investments in the industry. money. There are many other intangibles Many local companies have already involved when dealing with communities such as received technical assistance and training communication, transparency, relationships and and several additional projects are in active trust without which no CIP can succeed. implementation since the start of this program. » The approach to community development should be participatory and should avoid Following a recommendation made by the fostering dependency. CDAP panel, BP decided to also develop an » Local NGOs and other local organizations should additional program, the Regional be invited to participate as partners in the Development Initiative (RDI). Working in design and implementation of the community partnership with other international development initiatives. development institutions, this program is being designed to contribute to various » Personnel with experience in community liaison selected long-term sustainable development and community investment initiatives are initiatives in the region. The program will essential to successful community interactions and these personnel should be put in place in continue through BTC operations and will the field as early as is practical. focus on enterprise development, effective

governance and access to energy. » Communicating the achievements and benefits of community programs both internally and externally is important. Summary of Key Lessons and Future Recommendations

» An effective and well-functioning grievance mechanism is an essential part of managing community relations. Despite extensive community consultation, significant complaints may still arise. Sponsors need to be prepared for this possibility and be able to source additional skilled resources to manage the process.

» BTC broadened its scope from typical project impact mitigation and compensation requirements, to a wider concept of sustainable development among locally affected communities. This type of sustainable approach to project development is becoming an increasingly important aspect of IFC-financed projects.

Page Thirty Lessons of Experience | September 2006 | Number 2

CIP Mobilizing Communities in Turkey

If local development is to be sustainable, cooperatives has been strengthened. there must be capacity locally to manage Although initially villagers were suspicious and drive such progress. Community about the burdens a cooperative might bring, their concerns faded once they Investment Program (CIP) projects have Community been developed to encourage the experienced the advantages. involvement of community members to investment improve their own living conditions. SURKAL An example of the success of the programs do not and PAR, two CIP Implementing Partners in cooperatives was facilitated by the Kars guarantee good north-east Anatolia, have successfully branch of Ataturkcu Dusunce Derneði community inspired villagers to do just that. They have (ADD), a local NGO. ADD requested been through the challenging process of training in project development and relations, but if bringing people together to identify management to develop projects done right they solutions, agree responsibilities and make addressing the needs of society, can help foster things happen. particularly children, and to give them access to modern education techniques long-term trust SURKAL has organized an intra-village thereby generating resources for local and goodwill. platform so that Village Development development. With training, communities Councils can discuss their joint problems were able to form new cooperatives. Over and Council members get to know each time, several agricultural cooperatives other. The intra-village meetings have also have been awarded significant donations been used as an opportunity to carry out from the Ministry of Agriculture and Rural interact and participatory training sessions Affairs totalling nearly US$1.5 million. These through which Council members came to achievements do not only contribute to understand the meaning of community the rural development of the affected development, community organization villages and increase local income levels, and the importance of participation in but also encourage cooperatives in other development. project affected villages by showing them that such community mobilization can PAR has held community meetings to attract external financial support. encourage villages to set up their own cooperatives as a means to progress local sustainable development. As a result of PAR's initiative, ten new village cooperatives have been established Source: Excerpted from the BTC Project Environmental and and the capacity of three existing Social Quarterly Report (Construction Phase) 2005-Q1.

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Acknowledgements

The BTC Pipeline Project: “Lessons of Experience” is the second in a new publication series prepared by the Environment and Social Development Department of the IFC for the purposes of internal learning and knowledge sharing with clients and the wider private sector. The publication was written by a team of senior specialists comprising Debra Sequeira (Task Manager), Richard Wyness, and Ted Pollett, and carried out under the general direction of Rachel Kyte (Director). Patty Miller provided valuable input and guidance. Vanessa Manuel was responsible for design and layout.

A special acknowledgement is due to the BTC Co. Environmental and Social Team who shared their knowledge and experiences and provided critical insights from the project sponsor's perspective.

The authors would also like to thank the following IFC colleagues who reviewed earlier drafts: Rachel Kyte, Richard Caines, William Bulmer, Felicia Swanson, Christopher Frankel, and Lucie Giraud.

IFC Good Practice Publications available at: www.ifc.org/enviropublications

External Monitoring of the Chad-Cameroon Pipeline Project: Lessons of Experience

“External Monitoring of the Chad-Cameroon Pipeline Project: Lessons of Experience" provides lenders and project sponsors with an understanding of the business case for employing an external monitor, as well practical advice regarding the major steps and key issues for designing, implementing, and operating an external monitoring mechanism for complex projects. To highlight the practical challenges and value of the external monitoring mechanism, the publication draws illustrative examples from the experiences of IFC during the Chad- Cameroon Pipeline Project.

Lessons of Experience

For more information, please contact: International Finance Corporation, Environment and Social Development Department, 2121 Pennsylvania Avenue, N.W., Washington, D.C. 20433, U.S.A.

Disclaimer

The views expressed in this publication are those of its authors and do not necessarily reflect the views of the wider institution. Some of the information used in this document may come from publicly available sources such as company websites and publications. The Lessons of Experience series does not represent a commitment by IFC to require projects it finances to take certain or all of the actions specified in this publication. Instead, any issues arising in an IFC-financed project will be evaluated and addressed in the context of the particular circumstances of the project.

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