Journal Issue

Population Resettlement and Development

International Monetary Fund. External Relations Dept.
Published Date:
January 1994
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FOR DEVELOPMENT purposes, involuntary population displacement is sometimes inevitable. Reestablishing resettlers on a sustainable, productive basis is costly. Yet doing resettlement badly is even costlier—and socially disastrous.

Infrastructure is the physical scaffolding that shoulders economic growth and widens people’s access to electricity, clean water, transportation, communication, and other services. In developing countries, infrastructure attracts annual investments in the $200 billion range. Tangible social welfare improvements, in addition to economic benefits, are the result: the share of households with access to clean drinking water has risen by 50 percent in the past 15 years; per capita access to electric power and telephones has doubled; and over half of the increase in food production has come from investments in irrigation. Yet the building of infrastructure also has some negative social effects. Among these, the most difficult and complex is the involuntary displacement and relocation of local populations.

Involuntary resettlement has been a companion of development throughout history, indelibly written into the evolution of industrial as well as developing countries. Installing major hydropower dams, irrigation and drinking water systems, or extending highway networks have entailed displacements too often fraught with hardships and deprivation. The beautiful master-plan of today’s Paris was made possible by painful relocation in the XIXth century under the firm hand of Baron Haussmann. New York’s impressive Cross Bronx Expressway slashed through many neighborhoods, of which some could have been saved. The huge hydroelectric complexes in Canada required the uprooting of many indigenous groups, often with scant regard to traditional rights and cultures.

But in recent decades, the scale of development-related population displacement has grown rapidly in developing countries—especially in Asia—reflecting the accelerated provision of infrastructure and growing population densities. A recent World Bank study estimates that this type of displacement affects at least 10 million people in the developing world annually: 4 million people displaced by the some 300 large dams (above 15 meters high) typically begun each year, and 6 million people displaced by urban development and transportation programs. Over the past decade, an estimated 80—90 million people have been forcibly resettled by such investments.

Given these numbers, involuntary displacement is fast becoming a matter of worldwide concern. The main problem is that this type of displacement usually goes hand in hand with loss of livelihoods and impoverishment—the opposite of developing countries’ poverty reduction and development goals. This is especially serious since many of those adversely affected are already very poor, and live in disadvantaged areas where infrastructure is lacking and social services are limited. The remote locations of many dam sites are often inhabited by indigenous people, ethnic minorities, or pastoralists.

When people are forcibly displaced, production systems are dismantled. Many jobs, much valuable land, and other income generating assets are lost. Health care tends to deteriorate. Kinship groups and informal social networks for mutual help are scattered. Links between producers and their customers often are severed and local labor markets are disrupted. Ancestral shrines and graves must sometimes be abandoned, breaking links with the past and with people’s cultural identity. And not only the affected people are worse off: when displacement is massive, it weakens also the local and regional economy.

Not surprisingly, therefore, doubts are being raised about the economic wisdom and social justification of investing in infrastructural projects, unless advance measures are taken to re-establish the affected people on a productive basis. In an effort to better understand the resettlement implications of development programs worldwide and the solutions to the social problems they raise, the Bank undertook a study of all 1986–1993 Bank-financed projects entailing resettlement, as well as of many resettlement operations outside Bank-financed projects. The study—perhaps the most important social impact assessment ever carried out by the Bank—found that although progress has been made in recent years, major difficulties and failures remain, with implementation performance often lower than expected.

The Bank’s role

Within the worldwide picture of development-caused resettlement, projects financed by the Bank account for a relatively small, but significant, share of the total. In 1993, projects in the Bank’s active portfolio accounted for some 3 percent of the resettlement caused by dam construction worldwide and about 1–2 percent of the displacements caused by urban and transportation projects in the developing world. In total, these Bank-financed projects are expected to entail the resettlement of 2 million people over an eight-year period. Although these projects are spread over 39 countries, the vast majority—60 percent of all projects and 82 percent of displaced people—are concentrated in South and East Asia.

Individual resettlement project components vary enormously in size and complexity. Some may affect only 200–300 people, while the largest operations move tens of thousands. In India, the Bank-assisted Upper Krishna II Irrigation dam project has to resettle some 220,000 people and the Maharashtra Composite Irrigation III project 168,000 people. In China, the Shuikou project has displaced and resettled already close to 70,000 people, and the recently approved Xiaolangdi Dam project—181,000 people. In Indonesia, the Jabotabek Urban project displaces nearly 30,000 people.

The significance of the Bank’s role, however, far exceeds the size of involuntary resettlement under Bank-financed projects. The key reason is the Bank’s explicit and path-breaking resettlement policy, adopted as early as 1980: it defined a clear goal—income restoration—and innovative procedures and approaches, including a redevelopment plan and timetable, for achieving good resettlement. The difference from common practices is clear: displacement approaches based on eminent domain law and expropriation are only limited to compensation for things lost; by contrast, the Bank’s policy promotes approaches centered on people and restoring their productive capacity and livelihoods. The gradual diffusion of the Bank’s development-oriented resettlement policy focused on people may improve the bulk of involuntary resettlement that occurs outside Bank-financed programs.

Resettlement implementation is the borrower’s responsibility, but the Bank sees as its own role helping the borrower ensure that every effort is made to restore, and if possible enhance, resettlers’ livelihoods. Improving resettlement is necessary yet difficult for developing country governments, particularly in low-income countries with land scarcity.

What the study found

The key message of the Bank’s study is that good resettlement can prevent impoverishment and even reduce poverty by rebuilding sustainable livelihoods. Socially responsible resettlement is also economically beneficial because the heavy costs of poorly handled displacement extend well beyond the immediately affected population. Conversely, inadequate resettlement induces local resistance, increases political tensions, entails extensive project delays, and postpones project benefits; the benefits lost sometimes far exceed the marginal cost of a good resettlement package. Moreover, if resettlement is not planned and financed adequately, resettlers end up worse off than before. Thus, ensuring that involuntary resettlement is minimized—and when unavoidable, is carried out without impoverishing the people displaced—is justified on both economic and ethical grounds.

Experience has shown that resettlement is nearly always more difficult, more expensive, and more time-consuming than generally realized. Yet despite the vast differences among countries and populations involved, much more is now understood about the major common factors—political commitment, sound social analysis, good costing and financing, and public participation—that explain, by their presence or absence, why resettlement worked in some cases and failed elsewhere.

Political commitment. The adoption of legal frameworks and national or sectoral resettlement guidelines is a clear expression of political commitment to contain unnecessary impoverishment from displacement. Since some 97 percent of the worldwide displacement occurs in projects not subject to the Bank’s policy, or to any explicit development policy, the enactment of development-oriented domestic guidelines is critical. With the Bank’s assistance, several borrowers—such as in Brazil, China, and Colombia—have enacted or improved domestic policies for resettlement. Recently, the development ministers of all 23 OECD countries sanctioned unified resettlement guidelines, similar to the Bank’s policy, for all aid agencies of OECD donors.

The Bank’s concern that borrowing countries adopt their own legal framework and policy guidelines results from learning the hard way that the absence of policy is a policy by default. Some agencies prefer to maintain a policy vacuum rather than issue binding norms and legal strictures for activities that they know are going to be problematic or controversial. Avoiding formal policy commitments may leave more operational flexibility in the short term, but at the expense of higher long-term costs. The absence of a resettlement policy sometimes results in the use of violent displacement procedures, without due recognition and protection of the basic rights and entitlements of those uprooted. The Bank has steadily and effectively opposed such practices as unacceptable, and prevented them from occurring in Bank-assisted projects (see box).

From violent expulsion to reduced displacement

Two ongoing forestry projects—both of which seek to eliminate encroachment in gazetted African forests—demonstrate dramatically the difference that policy strictures make.

A few years ago, a forest management project started by the Ugandan Government, with financial assistance from a multilateral European donor agency, undertook the massive displacement of communities living in the Kibale game corridor and forest reserve, without offering them any viable economic alternative. The field assessment of a social anthropologist reported that:”… on March 31, 1992 and for some days following, an attack without prior warning was launched by game wardens, foresters, local government officials, and perhaps prison labor. All houses were burned, and personal property and food stores were either destroyed or looted. A handful of people were killed on the spot. Patrols have kept people from returning since.”

By the end of 1992, about 35,000 people had been violently evicted. Little is known by project authorities about how they have fared. Assistance to these people was not given until a few months later when some of them were placed in new settlements 150 miles away, in the under-populated county of Bugangaizi. They were provided with only a few tools from relief agencies and essentially were left to fend for themselves. Sadly, this is not an isolated case.

By contrast, a World Bank-assisted forestry sector project in Côte d’Ivoire made resettlement an upfront issue. The project was intended to prepare and introduce forest management plans for several high priority areas. Learning at appraisal that the Forestry Department planned to evict up to 200,000 residents in a manner similar to that in Kibale, the Bank insisted on a different approach, one that would: reduce displacement from about 200,000 people to less than 40,000; provide better conditions for resettlers; consolidate existing scattered populations into “agroforestry zones” within the legal limits of classified forests; and integrate resettlers into forest management general plans. What could have been a massive and violent uprooting for tens of thousands of people was averted. Even so, many problems remain, which is why the Bank keeps this project on its problem list, monitoring it closely.

Clear evidence of the value of government commitment is provided by projects in China. Before the late 1970s, China lacked a legal framework for resettlement: the results were tragic displacements, such as those from the Sanmenxia (319,000 people) and Danjiangkou (383,000 people) reservoirs in the 1960s and 1970s. To correct this, a series of laws and regulations were adopted between 1978 and 1992, either with national applicability or tailored to specific investment sectors such as water, transport, industry, and urban. These regulations apply to all types of resettlement projects and, taken together, protect the living standards of those affected, affirming the principle of “resettlement with development.” This principle requires making resettlement a development opportunity and improving resettlers’ livelihood after relocation.

Focusing on income restoration. The most severe risks intrinsic in displacement occur along several lines—landlessness, joblessness, homelessness, marginalization, food insecurity, decrease in health levels, loss of access to common property assets, and social disarticulation.

Overall, the study found that ongoing Bank-assisted projects create better conditions for resettlers than similar projects in the past. Projects that resettle people productively on land and in jobs restore income more effectively, after a transition period, than projects that hand out cash compensation, without institutional assistance. Successful income restoration is achieved primarily when projects enable resettlers to share in the immediate benefits created by the very project that displaces them. Effective strategies include moving resettlers into newly irrigated command areas; helping them start reservoir aquaculture (Saguling reservoir, Indonesia); favoring resettlers to exploit commercial opportunities around newly constructed infrastructure (Shuikou dam project, China); and assisting them in building improved housing.

However, inadequate resettlement design or implementation in a number of completed projects has left many resettlers worse off. Contraction or nonreplacement of income-generating assets reduces the resettlers’ ability to recover in a sustainable manner. For most small farmers, compensation of land in cash has proven to have ruinous effects and must be avoided in favor of land for land.

Costing and financing. A major finding of the resettlement study was that low resettlement performance is nearly always traceable to inadequate economic analysis, externalization of re-establishment costs to the affected population, and underfinancing. The incomplete recognition of the costs accruing to displaced people and the failure to internalize the full costs of resettlement in the overall project costs contribute directly to resettlers’ impoverishment and distort the economic justification of some projects altogether.

Costs for compensation and resettlement can be a substantial component. A sample of 20 completed projects involving resettlement shows that resettlement averaged 9 percent of appraised costs. Resettlement costs tend to climb as high as 35 percent where high compensation payments are involved, large numbers of people are relocated, or the project undergoes a difficult resettlement process.

When resettlement costs are assessed incorrectly, local communities are forced to bear an undue share of the burden. Two problems are typical. First, compensation rates rarely reflect the true replacement value of lost assets, particularly for resettlers who must replace lost land. Depreciation of assets that must be replaced at market costs and property underassessments are both common. In India’s Karnataka Irrigation, local courts raised compensation rates up to five times the value assessed by project officers, but only for those who could afford to bring a case. Recalculated costs for land acquisition and resettlement in Turkey’s delayed Kayraktepe project went from an estimated $30 million in 1986 to more than $180 million in late 1993, an increase due partially to economic growth but primarily to initial underassessments of property values.

Second, delays in payments erode the real value of the compensation and force displaced families to go into debt to survive. Long delays in paying compensation are common. A case study in Nepal found an average delay of ten years between property expropriation and compensation payment. A 1992 Bank study of the Karnataka Irrigation project found families, displaced in the mid-1970s, that had yet to receive their compensation. In Ghana’s Kpong project, governmental shortfalls meant that compensation was never paid to about 7,000 affected people and their host communities.

When the benefits of a project are delayed by one or more years, the economic rate of return can fall by several points. A one-year resettlement-caused delay in project benefits (with no delay in the schedule of project costs) will reduce some projects’ net present value by almost a third; a two-year delay, by more than half. Good economic reasoning suggests that the gains from avoiding such large losses are usually more than sufficient to finance the entire cost of resettlement.

Cost overruns for resettlement are often simple artifacts of initial underestimation of resettlement’s true costs rather than, as some tend to interpret, the result of “gold-plating” resettlement components. The analysis of energy projects involving resettlement found that overall project cost overruns averaged 35 percent for hydroelectric dams and 10 percent for thermal power plants, while resettlement cost overruns averaged 54 percent. The analysis identified shortfalls in the initial financing of all energy projects reviewed.

More recent projects show a significant increase in per capita budget allocations for resettlement, reflecting better financial provisioning. On average, earlier projects (closed in the 1980s) are spending two to three times the per capita GNP of the given country on resettlement, whereas the later projects (started in the 1990s) spent three to five times. Increased financing for re-establishing resettlers is a necessary and positive trend. Dependable census at the outset should prevent unanticipated increases in the number of people to be resettled, which tend to pull down budgetary allocations per capita figures.

Poor resettlement can also undercut a project’s other economic objectives. First, inadequate preparation can cause project delays, which in turn leads to foregone benefits, reducing the project’s returns (see box). Second, in some cases, failing to account adequately for resettlement costs can exaggerate a project’s attractiveness and, in extreme cases, can encourage economically marginal projects to proceed. Sound resettlement financing, on the other hand, can enhance a project’s returns. It facilitates smooth implementation, and the increased incomes of resettlers can boost a project’s rate of return.

Resettler’s participation. It may seem paradoxical to advocate the “participation” of people in projects that seek to involuntarily displace them, yet securing such participation is essential. Participation takes several forms. The first is to inform the affected populations in time about the need to resettle, entitlements, eligibility, options, due process, and appeal mechanisms; next, these individuals and their organizations should be consulted about alternative options and solutions to avoid or minimize displacement, or to find suitable relocation sites. Many nongovernmental organizations (NGOs) have proven themselves to be effective in either mobilizing the energies of the resettlers for better implementation, or designing resettlement plans and realistic options, acceptable not only to the people but also to government authorities.

Time is money

Delays and cost overruns have contributed to driving down to very low levels the actual or expected economic rate of return of several resettlement projects. This was certainly the case for the World Bank’s Gorgol Irrigation project in Mauritania, Subernarekha Irrigation project in India, and Guatape II Hydroelectric Project in Columbia. An excerpt from the Colombian project audit report shows that the underplanning and underfinancing of resettlement can become very costly:

“. .. the resettlement and compensation of the individuals who were affected by inundation required lengthy negotiations, largely because the Borrower and the Bank failed to anticipate the complexity of the problem involved…. The final costs of the resettlement, in US$ equivalent, was more than double the original estimate and the process took about three years longer than envisaged. This delay, which in turn delayed the filling of the reservoir and storing of water energy, cost the economy the equivalent of … energy generation for an entire year.”

The resulting electricity losses amounted to $25.5 million of unsold energy, equivalent to 18 percent of the total project cost.

Rethinking the Bank’s role

The general conclusion of the resettlement review is that the quality of the Bank’s resettlement project portfolio has improved, particularly since 1991. However, lingering weaknesses were identified. In response, the Bank has adopted three sets of measures to achieve further improvements in resettlement operations.

Strategic priorities. These include: (1) ensuring the borrower’s commitment, by, among other things, making agreement on policy explicit from the outset and requiring the adoption of legal frameworks by borrowers for projects with large scale resettlement operations; (2) enhancing the borrower’s institutional capacity through targeted institutional assistance, including special projects for building local organizational capacity for resettlement; (3) improving project design by avoiding or reducing displacement as much as possible, and by creating explicit timetables that link progress in civil works to the gradual advance of resettlement; (4) promoting people’s participation; (5) providing increased Bank financing to future projects with resettlement, as well as supplementary financing to ongoing projects, when appropriate; (6) diversifying project vehicles, so that future infrastructural operations requiring the displacement of large numbers of people can be processed as twin projects—one for the civil works and another as a stand-alone resettlement project; and (7) strengthening the Bank’s own institutional capacity.

Remedial and retrofitting actions. Near-term remedial actions are being taken in midstream in ongoing projects that fall short of policy and legal provisions, as well as in some recently completed projects; some projects may need substantial restructuring, additional financing, or the creation of resettlement agencies.

Improving project preparation and supervision. Improvements are being introduced in the analysis of resettlement at appraisal, in the design of development packages, in the in-house review of resettlement components, and in the staffing and organization of relevant operational units. The Bank will encourage borrowers to carry out pre-project pilot schemes to test the adequacy of proposed resettlement options. In major operations, especially for dams—resettlement advisory panels will be increasingly used. Supervision of projects including resettlement will be intensified (at least every 12 months) and the Bank will provide more technical assistance for improving the quality of resettlement.

As the attention of governments, donors, and the public shifts more and more to not only the environmental side of development but also to the social aspects, population displacement will increasingly grab the headlines as a painful toll of infrastructural investments. Indeed, the involuntary resettlement of millions of people worldwide will be a key item on the agenda of the March 1995 World Summit on Social Development in Copenhagen—the first summit to focus on the social consequences of economic growth. Clearly, population displacement urgently requires greater attention and resources, although even with such resources, it will remain a formidable challenge. The good news, however, as underscored by the Bank’s study, is that this challenge can be met successfully.

For more details, see “Resettlement and Development: The Bankwide Review of Projects Involving Involuntary Resettlement 1986–1993,” Environment Department, World Bank, April 1994. A detailed summary of this study is available in Spanish and in French.

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