The World Bank and Big Business no longer seem capable of fighting the Dam Busters. So, this may be the beginning of the end…
In April 1997, there was a unique gathering at Gland, Switzerland. It consisted of people who have been on opposite sides of the most fierce and bitter of environmental controversies – the building of large dams. They were all there, the World Bank, the dam-builders and consultants on one side, and scholars and activists from the dam-fighting groups on the other.But the meeting did not descend into acrimony. Instead, it unanimously resolved to appoint an independent commission to review the experience of large dams worldwide. The commission would be asked to review the “development effectiveness of large dams” and to evolve standards and crite ria for the building of large dams.
The commission was to have been set up in November 1997, but protests from the ´anti-dam´ organisations about “lack of balance” in the names proposed delayed the process. Finally, in January 1998, all sides agreed on the makeup of the body; 12 individuals, representing a broad spectrum of ´stakeholders´. (Representing the Subcontinent at the Commission are its Vice-Chairperson Laxmi Chand Jain, who, among other things, served in the Government of India´s independent committee to review the Sardar Sarovar Project and Medha Patkar of the Narmada Bachao Andolan.) The setting up of the World Commission on Dams itself signifies, as nothing else can, success after years of struggle against large dams. But why would the World Bank and private industry, whose interests are at such variance with the activists on the ground, want such a commission?
The fact is that all over the world, it is getting more and more difficult – if not impossible – to build large dams. Today, there is hardly a region where large dams are not being challenged. To give but a few recent examples, a fierce struggle in France culminated in 1994 with the scrapping of the Serra de la Fare Dam on the Loire River. The last two phases of the James Bay project in Quebec in Canada were suspended following intense resistance, particularly by indigenous people. In Thailand, the six-year-long campaign against the Nam Chaon Dam has forced the indefinite postponement of the project. And although the major fight against Pak Mun Dam was lost, enough awareness and pressure had been built in the country for the Prime Minister´s Office to declare in 1995 that for the sake of environmental protection, Thailand would no longer build dams for power production.
The truth is that as experience of large dams emerged from around the world, reaching as far back as the 1950s Echo Park Dam in the US and in Tasmania in the late 1960s, the protestors gained strength. In fact, some anti-dam movements are now going beyond objecting to new projects; they are demanding that existing dam structures be pulled down and reservoirs emptied. In January 1998, the Quaker Neck Dam on the Neuse River in the US state of Maine was demolished: it was found ´guilty´ of obstructing fish migration.
However, it is not only the dam struggles that are suggesting dam removals. Recently, Harza North West Incorporated, a consulting firm known for its large water projects, recommended that four dams in Oregon state be dismantled. These structures are on the Snake River, with a total installed capacity of 3033 megawatt, and had been blamed for the river´s declining Chinook Salmon stocks.
World Bank no-no
Perhaps what has ruined the prospect of large dams most is the dwindling interest among financing institutions. Till now, the World Bank has been the largest single source of funding for large dams. The Bank´s involvement has also helped pull in finances from other sources. Between 1970 and 1985, an average of 26 dam projects funded by the Bank were being completed every year, with annual lending at around USD 2 billion (at 1993 rates). Subsequently, the figure went down: from 1986 to 1995, the Bank approved 39 projects that included dams, i.e. about 4 per year.
The Bank has pulled back mainly because of the storm of opposition it drew for involvement in dams. This has had an immediate and significant impact on co-financing arrangements. Other sources of public funding are also in decline. This is how Martin Neuhas, Head of Energy and Waterpower Department of ITECO, Switzerland, described the financing of hydropower scenario in Asia, at a conference in November 1996:
According to World Bank estimates 290 GW of new generating capacity will be required in Asia through the year 2004, meaning every month 2 to 3 standard combined cycle and/or hydropower equivalent would have to be brought on line. To finance this almost incredible and environmentally questionable target growth Asia requires in the running decade an investment of USD 450 billion or 30 to 60 billion per year… The international agencies such as the World Bank, Asian Development Bank, etc, with respect to the economic situation of member/donor countries, are rather reducing lending. In the meantime… institutional and commercial banks as well as the policy making governments are realising that scarcity of funds is the paramount limiting growth factor… Predictably, the new slogan, even panacea seems to be that there is no alternative to private industry.
However, the private sector seems to be in no hurry to finance large dams – the uncertainties are just too high. This is the report of Patrick McCully of International Rivers Network on a September 1994 conference held in Frankfurt on private financing of hydropower projects: An air of gloomy resignation pervaded the meeting. Several speakers from the financing side of the industry emphasised that private industries are discouraged from backing hydrodams because of their high initial construction costs, long capital payback periods, terrible record of construction time and cost overruns, and high operating risks, especially because of their vulnerability to drought… financiers are dissuaded from funding dams because of “environmental” risks: delays because of opposition to resettlement and anti-dam campaigns, and new environmental legislation to regulate how darns are built and operated. Several speakers agreed that with few exceptions the only dams likely to be built on a wholly private sector basis in the near future are small to medium-size run-of-the-river hydrodams…
The private sector as is its wont certainly would not hesitate to move in to reap the profits, but it is simply not prepared to take the massive risks that have become inherent in large projects. In fact, it is now clear from recent experience that private financiers will not enter the large dams business at all unless heavily backed by cheap public funds and governmental guarantees. They want the risks and costs to be handled by someone else, including the local people.
The private sector´s occasionally mercenary attitude in the building of large dams is reflected in India´s 400 MW Maheshwar Hydro Power Project, part of the ambitious Narmada Valley Development Project. Around five years ago, a memorandum of understanding was signed with S. Kumars, a private Indian textile company with no previous experience in hydropower, to build, own and operate (BOO) this dam. It has been clear from the beginning that the Maheshwar project would rely heavily on public funds, and ´externalise´ all social and environmental costs. The land which would be submerged is being compulsorily acquired by the government under the antiquated Land Acquisition Act. Neither is S. Kumars responsible for the resettlement of the displaced people. Further, this USD 428 million project will be financed substantially from public funds, including public financial institutions like the Power Finance Corporation (itself partly financed by the World Bank) under liberal terms.
S. Kumars has been given the project under an assured 16 percent rate of return, and the company is protected against payment defaults by the Madhya Pradesh state government. The government has also agreed to absorb losses on account of the reduced flow in the Narmada, which means that the Company is assured full payment even if power is not generated. Fortunately, there is now a check and balance against profiteering companies in the form of an aware citizenry. A strong people´s movement has emerged against the Maheshwar project. In January 1998, 25,000 | people protested at the project site, occupying it for 20 days, and sitting through a five-day hunger strike. The government was forced to order complete stoppage of work and a total review of the project, including not just the social and environmental aspects, but also the viability, the I terms and conditions under which the project has been given to the private company, and the possible alternatives.
There are other examples, elsewhere. The Nam Theun II is a proposed hydropower dam on the Theun River, a tributary of the Mekong, in Laos. The project, with an installed capacity of 681 to 908 MW, is being touted as a dream venture to uplift the Laotian economy, with over USD 250 million of annual revenues projected – almost completely from sale of electricity to Thai- -land. The project, which will cost a whopping USD 1.5 billion, has been given under the BOOT (Build-Own-Operate-Transfer) scheme to a consortium, the Nam Theun II Electricity Consortium (NTEC). The NTEC comprises of Transfield, one of Australia´s biggest private companies, and the Electricite de France, the world´s largest state-owned utility, and three Thai companies. Here, too, the private companies want the profits, but are not willing to share in the risks. They are demanding that the World Bank step in with a new guarantee mechanism, likely to be used for the first time. The Bank is asked to as sume certain risks of the project on behalf of the consortium; if these risks do materialise, then the Bank will make good the loss. The Bank in turn will recover its investment fully from the Government of Laos. Thus, the risk is effectively taken up by the Laotian Government and people. The profits are the Consortium´s, risk free. Transfield has now announced that it is not prepared to proceed without the World Bank guarantee. It is in-stead ready to opt out of the project even though that would mean losing the USD 30 million it has already invested.
Even as finances for large dams are drying up and the private sector shies away, the anti-dam movement has received support from the most-unexpected quarter: the official agencies. These agencies, and that includes the World Bank itself, have begun reassessing dam projects and for once are seriously considering issues that have long been raised by non-governmental organisations and people´s movements. The results have generally vindicated those fighting big dams. One of the earliest, and perhaps the most influential, of these studies has been the World Bank´s Independent Review of the Sardar Sarovar Project in 1992, which finally forced the Bank to opt out of the Narmada project. The report, an outcome of over 10 months in the field and examination of every possible document related to the project, is considered a classic. There have been other significant reassessments as well.
World Bank OED Review of 50 Large Dams
In August 1996, the World Bank´s Operations Evaluations Department (OED), a semi-independent audit department, came out with a desk review of 50 large dams funded by the Bank. The review used three criteria to evaluate the dams: economic, social and environmental. But, as is usual with most Bank reports, the review´s conclusions did not quite agree with the actual find ings for the simple reason that in order to justify continued funding, the conclusions tend to gloss over the serious, even shocking, nature of the information revealed.
Nevertheless, the findings are interesting in themselves. The review classified the 50 projects into “acceptable”, “unacceptable” and “potentially acceptable”. It found that out of the 50 projects reviewed, five were unacceptable even by the Bank´s own standards which were in force when they were cleared. They should never have been funded, or indeed built. (Among these are the Mangala Dam in Pakistan and the Kulekhani Dam in Nepal which have poor economic performance and unmitigated social and environmental impacts.) In addition, the review states that eight more projects were unacceptable under the Bank´s present-day standards. A further 24 were “potentially acceptable” – defined as “projects associated with significant, albeit probably not major, social and environmental impacts, which would make them unacceptable by current standards unless remedial action was taken”. In actual fact, since remedial action was rarely taken – and indeed, experience has shown that such remedial action rarely makes up for the destruction, these “potentially acceptable” projects would also count as “unacceptable” from an independent non-Bank perspective. Only 13 out of the 50 projects were found to be “acceptable” by the OED review. Interestingly, the 50 dams reviewed do not include many of the recent controversial dams such as Arun III (Nepal), Sardar Sarovar, Subernarekha, Indravati (India), and Yacereta (Argentina). But it was this report that led to the meeting in Gland, and ultimately to the formation of the commission to review large dams. The Jay Hair Report on Pangue Dam, Chile. The Pangue Dam on the BioBio River in Chile is being built by the private utility Chilean company Endesa. The World Bank´s private sector funding section, the International Finance Corporation (IFC), is the funding agency. The project has come under heavy criticism and there is strong opposition on social and environmental grounds. The report of the independent study, headed by Jay Hair, former president of National Wildlife Federation, USA, is said to be extremely critical of the project. The Bank refused to make it public, citing “risks of litigation and legal liability” from Endesa. The company was given the document to indicate which sections should be blocked out before its public release which was eventually done in July 1997. However, even the report censored by Endesa concludes that “The IFC did not follow fundamental World Bank Group requirements in any consistent or comprehensible manner throughout the development and implementation of the Pangue project.” The study also casts doubts on Endesa´s commitment to take measures for environmental mitigation and protection of indigenous populations who would have to be resettled.
Review of the Sardar Sarovar and Tehri Dams, India
Unrelenting activism has forced the Indian government to set up committees to review two of its most controversial dam projects -the Sardar Sarovar (Narmada) Project and the Tehri project. The report of the SSP committee, set up in 1993, acknowledged the correctness of many of the major criticisms against the project -including lack of land for resettlement, overestimated water flow in the river and serious environmental worries. In the case of Tehri, after going back on its word many times, the government finally did set up two review committees. One is to look at the seismic risks, the other at the issue of rehabilitation and environment. The latter committee recently submitted its report, and highlights the serious problems with Tehri in the area of its focus.
One of the key mandates of the World Commission on Dams is to assess the alternatives to large dams. Well-documented and worked-out alternatives to large dams, both for energy and water, have been offered by the ´opposition´, such as for Sardar Sarovar, Tehri and Poyamkutty in India, Arun III in Nepal, and Loire in France. Issues such as regulation of groundwater exploitation, recycling of waste water, especially for industrial use, the so-called “zero discharge” concept where industries are required to use almost 100 percent of their effluents, the need for conservation and efficient use of water resources, all are gaining increasing importance. This demand-side management, along with local community-based water management systems, revival of the traditional water-harvesting systems, and so on, is forming an equally important part of the alternative approach.
The alternatives proposed for irrigation and water are now so well worked out that Fred Pearce, journalist and author of The Dammed (The Bodley Head, 1992), stated that no more large dams will be built in the world, at least for irrigation and water supply purposes. Equally strong are the alternatives emerging in the energy field, such as demand-side management, conservation and efficient use, decentralised renewable resources including micro hydel and biomass, solar power, and the use of some lesser polluting resources such as natural gas as a transition to totally renewable energy sources.
There is enough indication that the worldwide struggle against large dams has entered a decisive, and probably the final phase. Protests are intensifying, large dams are increasingly difficult to build; the issues of biodiversity, social and environmental impacts are actually asserting itself to stop dams. And there are serious financial problems for large dams, with capital looking for greener pastures. All over the world, people are increasingly with the anti-large dam activists. This, more than anything else, makes it clear that for large dams, it is the beginning of the end.