(January 16, 2006) The World Bank has given Ertan, China’s second-largest hydro project, a satisfactory rating on the resettlement of 46,000 people, despite having no data to assess whether anyone is better or worse off.

The US$2.2-billion Ertan dam, now in its eighth year of operation, received more than US$1-billion in loans and a decade of technical assistance from the World Bank, the biggest loan package ever extended by the world’s leading financier of large dams.

But a performance assessment by the World Bank’s operations evaluation department last year concluded that it is “impossible to quantify the degree of progress [on resettlement at Ertan] or the extent of the income shortfall of those resettled” because no income information was collected from resettled households.

Ertan dam on the Yalong River in Sichuan

Bank policy stipulates that Bank-funded dam projects must boost the incomes of resettlers to higher than pre-project levels.

Of the 46,000 people moved, about 4,000 people had to be moved a second time because the land allocated to them was either prone to landslide damage or too poor to farm. Another 900 people are still waiting for replacement land more than a decade after the World Bank approved the project.

Despite the lack of data, the Bank’s assessment team concluded that “resettlement appears to have been successful” based on observations in one resettlement village they visited.

The Ertan resettlement program cost nearly US$300 million or $6,300 per person, about three times the original budget approved by the World Bank. This included $64 million for “independent monitoring and evaluation” led by a panel of international resettlement and environmental experts hired by the Bank.

The panel “proved its worth,” the report says, without elaborating.

In addition to the official resettlement budget, Ertan Hydropower Development Corporation has imposed a 10-year surcharge of 0.003 yuan per kilowatt-hour on power consumers, which could amount to US$56 million over 10 years.

The funds are for environmental protection around the reservoir, infrastructure maintenance and “income-boosting activities for the resettlement villages.”

No accounting of how the resettlement funds were spent or how the 46,000 people resettled would rate the program is offered.

The World Bank approved the first Ertan loan of US$380 million in 1991 and a second of US$400 million in 1995 along with a loan guarantee of US$150 million for commercial financiers. Another Bank loan of US$270 million went to construction of the transmission lines used to move power from Ertan to the Sichuan capital, Chengdu, and Chongqing municipality.

Ertan Hydro Development Corporation loses US$15 million annually by selling power below cost to several state enterprises in Sichuan province. In total, the company sold US$344 million worth of electricity in 2004.

With an installed capacity of 3300 MW, Ertan was China’s largest hydro plant until the Three Gorges dam came online in 2003.

This is the first of two articles reviewing the World Bank’s Project Performance Assessment Report on the People’s Republic of China Ertan Hydroelectric Project Loans I & II, World Bank Operations Evaluation Department, June 27, 2005. See also: Ertan’s market failure.

Grainne Ryder is policy director at Probe International and editor of Damming the Three Gorges: What Dam Builders Don’t Want You to Know, published by Earthscan in 1993. She can be reached at grainneryder@nextcity.com