It was not the government officials in Laos
who will make a windfall out of resettling 6,000 uprooted villages for
the bank’s latest development escapade, nor the Thai technocrats who
will have lots more electricity to play with. And assuredly it was not
the tens of thousands of farmers downriver whose livelihoods were put
in jeopardy.

Inevitably, for an organization that was deliberately
molded around undemocratic ideals so it could “set the world in order,”
in the words of its United States founders, the green light was given
for Laos’ Nam Theun 2 Dam because European and US money men needed it
to happen.

The World Bank’s decision to release US$270 million (HK$2.1
billion) in loans and risk guarantees for the US$1.25 billion
hydroelectric scheme will open the door to additional funding from the
Asian Development Bank and other financial institutions.

Impoverished
Laos in turn will earn millions of dollars from selling power over the
next 25 years, mostly to neighboring Thailand. But most importantly,
from the perspective of the global banking community, big dams will no
longer be on the blacklist.

Dams offer attractive investment returns
for international financiers, as soaring fuel costs have left much of
the Third World struggling to harness the energy and water resources it
needs to maintain income levels. East Asia alone will need to spend
US$90 billion over the next five years to meet electricity demand,
according to the World Bank.

Only 17 percent of Cambodian households
were connected to a power grid in 2003, compared with 41 percent of
Laotians, 55 percent of Indonesians, 79 percent of Filipinos, 81
percent of Vietnamese and 84 percent of Thais. Investors are already
heavily committed: Vietnam’s power capacity rose 180 percent in
1990-2000, while Thailand achieved 125 percent growth, followed by
Indonesia, 98 percent, and Laos, 92 percent. But most new output has
either come from costly gas-operated turbines or relies on finite – and
often dirty – coal deposits. Asia’s abundant water resources have
drained quietly into the sea since a vocal environmental lobby
convinced politicians a decade ago that hydro schemes were bad for
business – the business of local communities, that is.

Big dams will
forever be linked with the 1960s excesses of development hawks such as
the US Pentagon’s Robert McNamara, who, when he wasn’t meddling in
Indochina, helped bolster an ad hoc alliance with financiers that led
to the creation of a dollar standard after World War II. Set up in 1943
to make sure the democratic states of the anti-Nazi alliance had the
biggest say in reconstruction after the war, the bank was designed from
the start as a cozy Euro-American club, based on a client relationship
binding Third World borrowers to Western banks.

By the time the Bretton
Woods accord was pushed through a year later, replacing the old gold
standard with an international exchange system based on the US dollar,
the bank had in effect become an extension of US lending and trade
policies. Washington insisted from the outset that bank control, vested
in an inner sanctum of governors drawn from central banks and other
monetary institutions, be based on the scale of financial contributions
– the more a country paid, the greater its voting strength.

Under an
arrangement with its European partners, the US also gained the right to
appoint the bank president, though in practice he defers to the board
of governors. Western Europe was given control of the International
Monetary Fund, a sister institution that deals with global financial
stability, and Japan later entered the frame at the helm of the Asian
Development Bank.

The US extracted one more concession at the World
Bank that has had a vital impact on its recent course: a veto right,
based on the desire by its founder, American economist Harry Dexter
White, that Washington should have “enough votes to block any
decision.”

Certainly McNamara did not feel constrained when he began to
redefine the bank’s development thrust. Convinced that health and
poverty nets brought only incremental benefit to income levels – and
none at all to US exporters – he switched funding programs to
large-capitalization projects that could draw in contractors and money
men.

Countries such as India, Thailand and Indonesia gained expansive
road systems, deep sea ports, power grids and telephone lines to keep
the new generation of foreign investors happy. But these countries also
inherited crippling debts that had to be repaid in US dollars because
Bretton Woods decreed this was the only currency that would be accepted
for converting development loans. Incidental debts also were
accumulating. Among them, the cost of rehabilitating vast swathes of
forest swamped by hydro plants, the social burden of uprooting entire
villages, creating new communities and rebuilding livelihoods.

The
current bank president, Aust-ralian-born businessman James Wolfensohn,
was astute enough to recognize the risks of alienating stakeholders.
After taking the helm, he ordered a reappraisal of funding priorities,
which had already dropped sharply since the mid-1990s.

In truth, this
coincided with a drop in demand as dollar costs rose, culminating in
the East Asian debt spiral of 1997-98, and the bank never actually
declared a moratorium on cashed-up infrastructure projects. It did pull
out of India’s huge Sardar Sarovar scheme in 1992, canceling the
balance of a US$170 million loan, but this was because Delhi had
violated the loan and credit agreements. Repayments are still
outstanding on the loans.

As World Bank president, Wolfen-sohn improved
the bank’s consultative framework and gave an appearance of returning
the development focus to its root purpose of fighting poverty. But
critics, including a powerful alliance of non-governmental
organizations, said he was only going through the motions, as the bank
let the tide of criticism over its debt legacy subside.

Whatever his
personal beliefs, Wolfensohn owes his well-paid job to the silent
Washington caucus, in essence an arm of the US Treasury that decides
where the money is spent. The message last week was that it will be
spent on more dams. With Wolfensohn due to retire, the US has nominated
Paul Wolfowitz, a conservative warlord in the McNamara mold, as his
successor. But don’t hold your breath waiting for the bank to return to
funding health clinics and building schools for poor children.

The Laos
scheme fits neatly into the World Bank’s image makeover because it
fulfills the criterion of shifting the financing responsibility from
lending institutions to the private sector: the bank itself will
primarily be acting as a form of guarantor.

Project contractor
Electricite de France and its two Thai partners have calculated that
over the 25 years of the dam’s operating concession, the government in
Vientiane will earn almost US$2 billion in revenues, which can be used
to improve the welfare of local people – presumably the thousands who
will be forced out of their homes when their valley is flooded.

What
the World Bank has not said is that the capital needed to make this
dream materialize will be coming from Western financiers, as will the
technology, equipment and most of the skilled labor.

The projections
assume that Thai-land, with a substantial supply surplus, will have an
overriding need to import electricity from Laos. Last month, however,
Thailand’s main planning agency, the National Economic and Social
Development Board, concluded that the Laotian power was not
cost-effective and probably should be canceled.

Some 93 percent of the
Nam Theun River’s flow will have been diverted into the adjacent Xe
Bang Fai River basin for the benefit of Thailand’s electrical grid, and
nearly 40 percent of the Nakai Plateau will have vanished beneath a
reservoir stretching for 450 square kilometers. Fishing industries will
be destroyed as water levels plummet and crop irrigation will become
untenable.

Meanwhile, villagers who were ordered to move when the Nam
Theun-Hinboun hydropower project, only 50km downriver, opened in 1998
are still waiting for the compensation they were promised for the loss
of their market gardens and fishing traps.