CIOB International News (The Chartered Institute of Building)
October 13, 2004
The World Bank would do well to take more than usual care over this decision: powerful people in the U.S. Government are taking a close interest in its lending policies and aren’t happy with the Bank in relation to development funding.
Though a decision was expected this year, the World Bank says it has still not made up its mind whether it will provide a partial risk guarantee for the Nam Theun 2 hydro-electric power project, a joint venture between the electricity generating authorities of Thailand and the People’s Democratic Republic of Laos. This controversial scheme will on the latest estimates cost more than $1.3 billion to implement, based on a proposal from the Nam Theun 2 Power Company led by Electricite de France. Construction is due to start in mid-2005.
According to one view, the scheme has the potential to provide a model for major development projects involving environmental and resettlement issues; according to another, it would be a costly, unreliable and environmentally damaging addition to Thailand’s power system.
The World Bank appears at present willing to listen to both sides of the argument: it puts the situation like this: “The Bank is interested in NT2′s potential ‚’if properly designed and implemented ‚’to benefit the Lao people by increased revenues for poverty reduction and environmental conservation. Others are not so sure, and claim that the assorted issues make the project too big, too complicated and/or too risky to warrant the Bank’s ‘green light’.”
So as part of an effort to engage more directly with international stakeholders, the Bank organised a series of international workshops to discuss differing views of the project, based on background research and analysis.
In partnership with the Asian Development Bank, the series of workshops met in such fashionable locations as Bangkok, Tokyo, Paris and Washington. The series ended on September 24, 2004, with a meeting in Vientiane at the invitation of the Laos National Committee for Energy. The purpose was “to ensure that the project’s objectives, potential benefits and impacts are transparent not only to the citizens of the Lao PDR but also to a broad-based group of international stakeholders.”
Ian Porter, the Bank’s country director for Lao PDR, said: “These workshops are just the latest step in what has been for the World Bank at least “an unprecedented process of research, consultation and disclosure on a single project. The intensity of this effort reflects our strong desire to ensure that the project would deliver real, durable benefits for the people of Laos. That is the only basis on which we would support it.”
The prospect of real and tangible benefits for the people of Laos has not convinced Canada’s Energy Probe Research Foundation. On the contrary its policy director Grainne Ryder believes that NT2 would give the French and Thai power corporations a hand-out at the expense of consumers in Thailand and the rural poor in Lao PDR.
“Bank financing for the Nam Theun 2 power deal” she says, “would ensure that the Thai power market is over-supplied with cheap power; discourage investment in higher-value, lower-cost generating options; and sink Electricite de Laos further into debt.”
The International Rivers Network based in the USA weighed with another line of attack, alleging that the $1.3 billion project would forcibly displace 6,200 indigenous people and affect more than 100,000 villagers who depend on the Xe Bang Fai River for fishing and agriculture. The ecology of two major river systems would be permanently altered, says IRN, if the hydro-electric project is built: $300 million or more of donor funds and guarantees would be better utilised on poverty alleviation programs that do not carry the enormous risks associated with working in Laos.
In common with other NGOs, the International Rivers Network does not give much credence to what the World Bank regards as an unprecedented process of research and consultation. The civil society organisations believe that the consultations should give an opportunity for participants to discuss whether the NT2 project meets the World Bank’s criteria for funding.
“Instead”, they say, “the World Bank has decided to hold ‘technical workshops’ to solicit input into the project documents, not to debate the merits of the project. Reports from those already conducted indicate that the workshop formats did not allow for meaningful dialogue and debate. Critical questions from the floor were sometimes ignored or answered only superficially, and one moderator did not allow for views critical of the project to be fully expressed.
World Bank staff defend the project
“Despite World Bank assertions that it has not yet made a decision on whether or not to support the project, the World Bank staff present at the consultations defended the project rather than acknowledging the many legitimate concerns of the participants. These workshops cannot and should not be considered credible international consultations, but rather promotional workshops for the project developers.”
The statement points out that Nam Theun 2 hydropower scheme is the first large dam project to be supported by the World Bank since declaring last year that it would re-engage in high risk/high reward infrastructure projects. NT2 may well be high risk, but the question is, high reward for whom? Further concerns about the Bank’s lending policies have been raised by the recently announced decision to adopt Development Policy Lending as a replacement for what the World Bank describes as one of its main lending instruments, Adjustment Lending. James Adams, head of the Bank’s Operations Policy and the Country Services Network, said the new policy acknowledges that there is no single blueprint for reform that will work in all countries. Therefore, he said, governments must take ownership of reforms to develop a program that meets their countries’ needs.
The Bank has learned that one of the key ingredients to successful economic growth is greater scope for the private sector. This is certainly the aim of the Nam Theun 2 proposals. As well as promoting the rule of law and a functioning judiciary, said Mr. Adams, the new policy also seeks to ensure broader participation in government policy-making by emphasising that reforms should not be implemented without consultation with stakeholders, nor without deeper understanding of the social and environmental impact.”
He added: “There is a much clearer statement about the desire to see governments working with civil society and other actors in the development front in putting together policies to reduce poverty. The Bank is willing to support a country’s agenda, if we think the policies are sound, workable and are truly owned by the government and its citizens.”
Has that test been passed? Last year, as the Energy Probe Research Foundation in Toronto records, the Thai electricity authority EGAT faced an unprecedented challenge from the country’s National Economic and Social Advisory Council–including among others the Law Society of Thailand–which called for an end to the power supply monopoly and recommended separation of the State-owned transmission system from EGAT’s generating business, allowing new producers to gain access to the grid.
This is surely a situation in which the World Bank is called upon to act in conformity with its redefined development policy, as Mr. Adams said, to ensure broader participation of the stakeholders and working more closely with civil society. Reports about the outcome of the recent workshops do not indicate that this shift of attitude on the part of the World Bank has had much impact on the discussions over Nam Theun 2. The Bank would do well to take more than usual care over this decision: powerful people in the U.S. Government have been taking a close interest in its lending policies of late and are none too happy about the way the Bank has been working in relation to development funding.