May 29, 2001

Executive Director, World Bank Group

Re: Bujagali Dam project, Uganda

Dear [Executive Director]:

We are writing to you to express our concern about the Bujagali Dam project in Uganda, which is currently being considered for funding by the World Bank (IDA), the IFC, and possibly MIGA.

We have been following developments related to this project very closely and have carefully evaluated its pros and cons as well as the concerns already conveyed by Ugandan and international NGOs. It is our opinion that the project is too flawed to go forward as planned, as it does not respond directly to the core needs of the vast majority of Ugandans. It is also likely to seriously impact Nile River fisheries, possibly including very rare species. The project also does not meet the guidelines and recommendations of the newly released report of the World Commission on Dams (WCD) on many important issues. Perhaps most disturbingly, it is likely to set off a wave of dam building on the White Nile whose cumulative impacts could be catastrophic.

A number of lenders have already declined funding and guarantees for this project, including Proparco, a subsidiary of Agence Francaise de Developpement (over corruption); the German development bank DEG (on environmental grounds), and the Export Credits Guarantee Department of the UK (for “unacceptable financial risks arising from the Ugandan power sector”). In addition, Swedish International Development Cooperation Agency (SIDA) has stated that the project seems “unfeasible” to them and that they are not likely to fund it.

MEETING THE NEEDS OF THE POOR

The WCD calls for a “needs assessment” to ensure that a project will actually meet local needs: “In countries where a large proportion of the population does not have access to basic services, a key parameter should be the extent to which basic human needs will be met.” This information is not available on Bujagali. The Bujagali project is not likely to produce the positive developmental impacts for the poor that are expected to be at the core of all IFC and World Bank projects. The dam will not help meet the basic energy needs of the rural poor, as its exclusive focus on a conventional grid-extension approach will leave out the vast majority of the Ugandan population. The fact remains that the number of Ugandans who can afford grid electricity are a small elite.

This aspect was made clear by the 1996 Energy Sector Management Assistance Programme (ESMAP) report, “Uganda Energy Assessment,” which states: “The prospects for Uganda Electricity Board (UEB) to significantly strengthen its national coverage to non-grid areas in the next 20 years are remote. Even if all of Uganda’s urban consumers were connected to the grid, it would still leave 75% of Ugandans without UEB grid electricity.” Moreover, ESMAP goes on to affirm that “It is, however, unrealistic to think that more than a fraction of the rural population could be reached by the conventional, extend-the-grid approach. A more promising course is to rely, instead, on ‘alternative’, ‘non-conventional’ or ‘complementary’ approaches to electrification.”

It is not just the cost of electricity from Bujagali Dam that is prohibitive to local people (and only the project developer AES seems willing to assert will cost $.05 per KwH), but also the capital costs of first extending the grid to remote regions ($10,000 per km) and, more importantly for the consumer, paying for individual extensions. The notion that the majority of Ugandans could afford this capital cost is unrealistic.

While the Bank’s Energy for Rural Transformation loan has some components which would address the energy needs of Uganda’s majority, overall, this loan is also dominated by an “extend the grid” mentality – an approach which ESMAP and energy experts around the world say is not the best approach for countries with weak energy sectors like Uganda, and certainly not for the Uganda’s rural poor majority.