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World Bank's Laos decision damning
- for some
By Alan Boyd
SYDNEY - In the end, it was the bean
counters who shouted loudest in the emotive debate
over the World Bank's questionable mandate for
building big, brassy Third World dams - 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 US 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 in loans
and risk guarantees for the $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,
while the Thais can plan for life after their
natural-gas stocks expire. But most important,
from the perspective of the global banking
community, big dams will no longer be on the
blacklist.
Dams offer highly 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 $90 billion over the
next five years to meet electricity demand,
according to the World Bank. This is equivalent to
the region's combined investment in roads,
railways, telecommunications and water services.
Only 17% of Cambodian households were
connected to a power grid in 2003, compared with
41% of Laotians, 55% of Indonesians, 79% of
Filipinos, 81% of Vietnamese and 84% of Thais.
Investors are already heavily committed: Vietnam's
power capacity rose 180% in 1990-2000, while
Thailand achieved 125% growth, followed by
Indonesia, 98%, and Laos, 92%.
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, deepsea 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 swaths of forest swamped by
hydro plants, the social burden of uprooting
entire villages, creating new communities and
rebuilding livelihoods.
The current bank
president, Australian-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 $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, Wolfensohn
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 $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.
Water is one of the few natural
resources available to Laos' semi-subsistence
economy. Foreign Ministry spokesman Yong
Chanthalangsy said after the Bank's announcement
that the dam "has been long regarded by the
government as an essential component of the
long-term development plans" for the country.
What the World Bank hasn't 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. Even the contractors' revenue figures are
questionable; the bank itself does not expect
total income to exceed $250 million at net present
value, while some independent estimates are lower.
The projections assume that Thailand, 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 (NESDB), concluded that the
Laotian power was not cost-effective and probably
should be canceled.
Based on current
values, the price of Nam Theun 2 power will be 14%
higher than the most commercially attractive and
fuel-efficient alternative available in Thailand,
gas-fired combined-cycle plants. Furthermore, most
of the revenues will be deferred, with the result
being that the dam will not contribute to more
than 5% of Laos' central government income until
at least 2020, two-thirds of the way through the
concession period.
In the meantime, 93% 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% 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.
It is difficult to
assess the full scope of the economic fallout
because no comprehensive environmental impact
studies were ever undertaken. However, the bank
need only talk to the villagers who were ordered
to move when the Nam Theun-Hinboun hydropower
project, only 50 kilometers downriver, opened in
1998. Seven years later they are still waiting for
the compensation they were promised for the loss
of their market gardens and fishing traps.
Alan Boyd, now based in Sydney,
has reported on Asia for more than two decades.
(Copyright 2005 Asia Times Online Ltd.
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