Performance Standard 5
Land Acquisition and Involuntary Resettlement
Stakeholder Feedback
Frequently Asked Questions
Are the requirements laid out in both the PS and
footnotes binding for the client?
What is the responsibility of the client in
Government-led displacement and is the client
required to fill in the gaps if the government
compensation and assistance do not meet with
the PS 5 requirements? What is the role of the
Government in establishing compensation
rates? Who is responsible for managing the
process?
Who is responsible for the Resettlement Audit?
Under which circumstances is an audit
triggered? When should it be undertaken?
Why is the scope of PS 5 still largely tied to the
issue of land acquisition as opposed to any sort
of impact on economic or physical displacement
for any reason?
IFC Response
Yes, both the main body of text and the footnotes constitute
binding PS requirements.
Government agencies are often responsible for planning and
implementing physical and economic displacement in preparation
for private sector projects or as a direct sponsor of such projects.
Some countries have national legislation guiding the resettlement
process, though this may be outdated or inconsistent with IFC
requirements. Government agencies follow national legal
requirements, while clients are required to ensure that
resettlement undertaken on their behalf meets the objectives of PS
5. This may involve supplementing Government efforts in various
ways. For example, some Government agencies are responsible
for establishing compensation rates. In such cases, clients are
required to verify that these rates reflect current market
replacement values for the assets in question. Any gaps identified
between Government-led resettlement conducted on a client’s
behalf and PS 5 need to be addressed in a Supplemental Action
Plan. While Government agencies are often mandated to lead
resettlement efforts, IFC experience indicates that there are
generally opportunities for clients to either influence or supplement
the planning, implementation and monitoring of Government-led
resettlement to achieve outcomes consistent with PS 5. Refer also
to Guidance Note 5, paragraphs 64-70.
The client is responsible for carrying out a completion audit in
circumstances where resettlement is deemed to pose the risk of
significant adverse social impacts, i.e. generally in projects which
have been categorized ‘A’ solely or mainly on the basis of
anticipated resettlement impacts, particularly if the affected
population is poor or vulnerable. The Audit should be completed
once all of the key commitments in the PS 5-compliant
Resettlement Action Plan or Livelihood Restoration Plans have
been implemented. The timing of an audit may also be linked to
the tenure of financing. The Audit should include a report which
may include a time-bound corrective action plan to address any
identified gaps.
IFC has maintained this primary link to land so as to avoid open-
ended claims on clients which cannot be directly related to their
projects. For example, if IFC supports the establishment of a new
factory which reduces the competitiveness of older factories in the
area, it would be unfair and impractical for a client to be required
to identify the likelihood of problems at competitor plants and/or to
compensate the owners or retrenched workers for associated
‘economic displacement’. Likewise, if a national highway project is
undertaken by a Government and the concession awarded to a
private developer, IFC believes that it would be unfair to expect
that developer to compensate businesses in towns bypassed by
the new highway for loss of business. There are many other such
circumstances in which economic displacement may be indirectly
related to project development in a manner not under the control
of a client. By linking the performance standard to land and those

In a country where women are not given
property rights, should the PSs go beyond local
law by requiring equal land-deed compensation
for spouses? If so, who should enforce land
compensation rights for women?
Why does IFC have restoring and improving
livelihoods, rather than just focusing on
improving livelihoods?
Why are clients not always required to offer
replacement land for lost land?
directly affected by changes in land use, IFC endeavors to restrict
resettlement planning and implementation responsibilities to direct
and identifiable project impacts over which clients have control
and responsibility. In the updated PS 5, IFC has broadened the
scope somewhat to cater for community resource usage in areas
not being acquired by a client as well as certain types of
resettlement not directly tied to land acquisition. In addition, IFC
has expanded PS 5 coverage in situations where direct project
impacts not associated with land acquisition or restrictions on land
use make displacement unavoidable.
The PSs go beyond local law in many instances because local
laws vary considerably throughout the developing world. As a
matter of compliance with PS 5, clients are responsible for
ensuring that women’s’ rights in relation to land and property rights
are not worsened by the project in relation to the pre-project
situation. PS 5 and other Performance Standards encourage and
promote efforts to improve on pre-project conditions. The
opportunities for this depend upon local context, time and
resources available, political will, and many other factors. Clients
are encouraged to raise the profile of gender-related matters in
discussion with Government agencies in the course of
resettlement planning and in so doing, encourage more equitable
treatment of affected women.
PS 5 is necessarily written to cater for a wide spectrum of
magnitudes and severities of project-related displacement. Unlike
some other financial institutions, IFC does not routinely support
large Government infrastructure projects which displace
thousands of people. Only a handful of IFC projects have ever
displaced more than a thousand persons and the typical
magnitude of displacement ranges from less than ten to low
hundreds of households. Likewise, while some projects result in
significant adverse impacts on local livelihoods, others result in
minor and readily mitigated impacts. For example, a small
greenfield manufacturing plant may economically displace one
peasant farmer by acquiring one quarter of one of his/her fields. If
a suitable alternative arable land is locally available, IFC
encourages the client to either purchase it directly or to pay
market-related compensation so that the farmer can replace it, in
keeping with PS 5 objectives. Under such circumstances, there is
no need for a manufacturing company to embark on a complex
and protracted process of facilitating agricultural extension
services and monitoring the livelihood of the affected farmer: it is
sufficient to ensure that the farmer’s livelihood is restored as there
is minimal risk of project-related impoverishment. In other
circumstances, particularly where significant numbers of
households are impacted or when the nature of livelihoods is
altered via project development, significant time and effort are
required to restore livelihoods (as a minimum) and preferably to
improve them.
Some affected persons do not rely on affected land as a key
source of livelihood and as such can receive compensation
monies without associated impoverishment risks. PS 5 stresses
the importance of prioritizing land-based compensation for all
affected persons whose livelihoods are land-based. Exceptions
are allowed in situations where the land taken for the project is a
small fraction of the affected asset and the residual is
economically viable or where active markets for land, housing and
labor exist, displaced persons use such markets, and there is
sufficient supply of land and housing (i.e. where cash

Why does IFC not require clients to apply the UN
Basic Principles and Guidelines on
Development-based Evictions and Displacement
with respect to evictions and adequate housing?
Note: IFC’s responses to questions and comments are based on the current draft (Version 2) of IFC’s Sustainability
Framework. They are subject to change as the Framework is further revised. No text in the Framework or in these
interim comments and responses is final until approved by IFC’s Management and Board.
compensation is deemed likely to result in livelihood restoration).
Where sufficient replacement land is simply not available in the
project area, clients are required to a) verify the lack of
replacement land and b) provide alternative income-earning
opportunities over and above cash compensation to enable
affected persons to restore their livelihoods and standards of living
to levels equivalent to, or better than, those maintained at the time
of displacement.
The UN Basic Principles address the responsibilities of
Governments with respect to adequate housing and development-
induced evictions. The IFC PSs, on the other hand, address the
responsibilities of IFC clients, who generally have no leverage
over Governments and related regulatory frameworks.
Nonetheless, the key resettlement planning and implementation
requirements covered by the UN document are captured in PS 5.
Reference to adequate housing is made in PS 5 and explained in
GN 5. GN 5 (paragraphs G6, G13 and G14) indicates, among
other things, that clients should include improvements to several of
the aspects of adequate housing as well as improved security of
tenure in order to offer improved living conditions at the
resettlement site, particularly to those without recognizable legal
right or claim to the land they occupy such as informal settlers
and/or those who are vulnerable. Generation of improvement
options and priority setting for such improvements at resettlement
sites should be done with the participation of those being
displaced as well as host communities as appropriate. The
reference to ‘several aspects’ of adequate housing – as opposed
to all aspects – is intentional as appropriate technology arguments
often preclude the provision of certain services (e.g. power,
reticulated sewerage) in local contexts where these can neither be
supported nor sustained.