The Asian Development Bank (ADB) is funding the third stage of the Chashma Right Bank Irrigation Project in Pakistan, the first stage of which began in 1978. Under the project, a 274-kilometer (171-mile) canal is being built along the Indus River, beginning at the Chashma Barrage. The project also includes the construction of 72 distribution canals, 68 cross-drainage structures, and 91 bridges.

ADB has been the main financier of the US$450 million project. ADB has funded US$308.1 million or 68 percent of the total project cost. KfW of Germany has provided US$42.9 million in funding. The Stage III project is now 94 percent physically complete, and the loan was due to close in December 2003.

The implementation of this project has caused a host of problems, including displacement and compensation disputes, a severe lack of transparency for the planning and implementation of the project, and various other social and environmental impacts such as flooding, land degradation, and deforestation.

On November 25, 2002, local communities submitted an Inspection Function request. The ADB Board of Directors has authorized an inspection; however, against the wishes of the inspection requesters and NGOs supporting their efforts, the Board voted to delay the commencement of the Inspection until December 2003, to allow the Grievance Redress and Settlement Committee (GRSC), a domestic problem-solving process governed by Pakistani law, time to address some of the project’s problems.

The Inspection Panel issued its report in July 2004 and the Board issued its decision in August 2004. The Panel found in favor of the inspection claimants and recommended a number of measures which the ADB needed to follow to bring the Project into compliance. The Board accepted these recommendations and required the newly formed ADB Compliance Review Panel (under the Accountability Mechanism) to monitor implementation on an annual basis.