When the Rivers Run Dry

Friday, October 5, 2007

The World Bank, Dams and the Quest for Reparations

The World Bank has been the largest single source of funds for large dam construction worldwide. Under its stated aim of alleviating poverty, it has promoted and funded dams that have displaced more than 10 million people from their homes and land, caused severe environmental damage, and pushed borrowers further into debt. Never hesitant to exact loan repayment in perpetuity for projects it has funded (even failed projects), the World Bank has never been forced to pay for the destruction it has caused to millions of people’s lives and the environment.

A growing movement of dam–affected communities from all over the world is demanding reparations, or retroactive compensation, for the continuing damage to their lives because of dams which have already been completed. From the Maya Achi indigenous people in Guatemala to the people affected by Pak Mun Dam in Thailand, people are demanding justice from the World Bank. It’s time for the Bank to pay its own debts.

The Dam–Builder’s Bank

Large dams, whether built for hydropower, flood control, or irrigation, epitomize the huge infrastructure development projects which have been the staple of World Bank lending throughout its history. The Bank has provided more than $60 billion (in 1993 dollars) for 538 large dams in 92 countries, including many of the world’s largest and most controversial projects.

The Bank’s portfolio of large dams reads like a primer on the folly of damming rivers. In case after case the benefits have been far smaller than promised, and the costs ­ in terms of money spent, debts incurred, communities uprooted, fisheries and forests destroyed, and opportunities lost ­ have been far greater than imagined. While the Bank claims that its operations have improved in recent years, projects such as the Lesotho Highlands Water Project, the Ertan Dam in China and the proposed Nam Theun 2 dam in Laos reveal ongoing social, environmental and economic problems with its large dam portfolio.

The Business of Poverty Creation

Bank–funded large dams have turned more than ten million men, women and children into refugees in their own land, including 180,000 people displaced by the Xiaolangdi dam in China, 24,000 Indonesian villagers, some of whom clung to their rooftops as the waters rose behind Kedung Ombo Dam, and the 80,000 farmers of the Volta River valley in Ghana, forced from their homes by the Akosombo Dam. These legions of dam oustees have, in the great majority of cases, been economically, culturally and emotionally devastated. In many cases once self–sufficient farming families have been reduced to eking out a living as migrant laborers or slum dwellers.

Despite a policy requiring that those displaced are enabled to at least regain their former living standards, World Bank reviews cite few instances where this has occurred to even a small proportion of oustees. A 1994 Bankwide Resettlement Review found only one dam ­ Khao Laem in Thailand ­ out of the many hundreds the Bank has funded, where incomes for all households rose after resettlement. Yet when interviewed, four–fifths of the households considered themselves to be worse off than before resettlement.

For the vast majority of dams it has funded, the Bank simply has no data on the incomes or living standards of displaced people, before or after resettlement, due to inadequate or non–existent resettlement plans. Official estimates of the number of oustees have been notoriously low. Even when a realistic estimate is made of the people displaced by a reservoir, those evicted to make way for dam–related irrigation canals, transmission lines and other infrastructure, as well as people without land title, are often excluded from the total. The 1985 appraisal of the Sardar Sarovar Dam in India, for example, totally overlooked 140,000 farmers who are estimated to lose at least some of their land to the project’s massive network of canals.

Indian author Arundhati Roy, writing about resettlement in India, states "The millions of displaced people don’t exist anymore. When history is written they won’t be in it. Not even as statistics. Some of them have subsequently been displaced three and four times... Once they start rolling, there’s no resting place. The great majority is eventually absorbed into slums on the periphery of our great cities, where it coalesces into an immense pool of cheap construction labour..."

In addition, people who live downstream of the dam are often forced to abandon their homes because of loss of fisheries, changes to hydrology which eliminate seasonal floodplain agriculture, or of other benefits previously provided by the undammed river. For example, 11,000 people were flooded out by the Manantali Dam in Mali, but half a million farmers downstream are suffering the consequences of the changed flow regime of the Senegal River.

Environmental Destruction

World Bank–funded dams are responsible for the submergence of tens of thousands of square kilometers of forests, the decimation of countless fisheries, the opening of remote areas for resource extraction, and the loss of floodplain, wetland and estuarine habitat. Tucurui and Balbina Dams together drowned 6,400 square kilometers of rainforest in the Brazilian Amazon. Akosombo flooded more land than any other dam in the world, 8,500 square kilometers, around four percent of the area of Ghana. Bank–funded dams and irrigation schemes have also led to explosions in the incidence of waterborne diseases, especially schistosomiasis and malaria.

Because of its location at the mouth of the Mun River, the 136 MW Pak Mun Dam, funded by the World Bank in 1991, blocks fish migration for the entire Mun–Chi river system, the most important in Thailand’s northeast. The project also led to the submergence of rapids important for fish breeding. As a result, 169 fish species are no longer found upstream of the dam, and fish catches have decreased by 60 to 80% from pre–dam levels, affecting many thousands of people who depended on fisheries for their livelihood.

World Bank support for a project may cause environmental destruction even before the project is funded or built. In the case of the proposed Nam Theun 2 Dam in Laos, for which the World Bank is considering a political risk guarantee and other assistance, more than one million cubic meters of timber on the biologically significant Nakai Plateau has been logged to clear the reservoir area even though the dam may never be built. The World Bank now justifies its support for the project on the basis of purported social and environmental benefits, claiming that the Nakai Plateau is so degraded that it is not worth saving, and that the dam should be built to provide revenue to protect the watershed area.

Economic Nightmares

World Bank dam projects have also performed poorly in economic and technical terms. A 1996 World Bank investigation found that construction cost overruns averaged 30 percent on 70 hydropower dams funded by the Bank since the 1960s. Another World Bank study reveals that, of 80 hydro projects completed in the 1970s and 1980s, three–quarters had costs in excess of budget. On almost one–third of the projects studied, costs exceeded estimates by 50 per cent or more.

The collapse of poorly designed tunnels during the construction of Guatemala’s Chixoy Dam contributed to a nine–year delay and cost overruns of 250 percent. In 1990 the country suffered a series of blackouts because of a lack of water at the dam. Two years later, another power shortage because of low rainfall resulted in electricity rationing for more than a month, costing the country $2 million a day in lost industrial production. The final cost of Chixoy ­ $1.2 billion, more than five times the original estimate ­ represented nearly 40 per cent of Guatemala’s total external debt in 1988.

World Bank power demand estimates are invariably exaggerated, resulting in excess generating capacity when the project comes on line. The $3.4 billion Ertan Dam in China garnered the World Bank’s largest–ever project financing package of $1.2 billion. Recent reports have revealed that project has been losing more than $2.4 million a day since it first started producing power in August 1998 due to lack of demand. Due to the project’s high costs and changes in China’s power industry, Ertan’s electricity is significantly more expensive than that produced by smaller power stations which have sprung up since ground was first broken for Ertan in 1991, making its power unattractive for consumers.

Corruption has been a stalwart of World Bank–funded dams. Between $350 and $500 million dollars were lost to corruption during the implementation of the Chixoy project. The Yacyretá dam on the Paraná River, between Argentina and Paraguay, became known as a "monument to corruption" as the cost of the project ballooned from an original estimate of $1.6 billion to more than $8 billion. The recent corruption scandal involving the Chief Executive of the Lesotho Highlands Water Project and 12 of the biggest dam–building companies in the world is not unusual in a World Bank–funded dam project. What is unusual is that they were caught. (See sidebar for further details).

"We Shall Not Be Moved"

World Bank lending for dams peaked in the late 1970s and early 1980s at a level of more than $2 billion a year (1993 dollars). Since the mid–1990s the World Bank’s lending for large dams has declined significantly. From 1995–1999, the World Bank and its private sector International Finance Corporation made 14 dam–related loans amounting to $2.3 billion. In the pipeline are five more: two projects involving large dams in China, an energy sector loan promoting hydropower development in Nepal, and political risk guarantees and IFC loans for Bujugali Falls Dam in Uganda and Nam Theun 2 Dam in Laos. (See sidebar for further details). It is no accident that three of these projects are in China and Laos, countries where opposition movements are not tolerated by the government.

A major reason for decline in Bank funding has been the struggle by anti–dam movements across the world. A milestone was reached when the World Bank was forced to pull out of the Narmada Dam project in India in 1993. The Sardar Sarovar project became the catalyst for a huge movement of affected villagers, Indian grassroots activists and international groups questioning the World Bank’s involvement in large dam projects. Another watershed came in 1995, when the World Bank was forced by citizen action to withdraw from the Arun III Dam in Nepal. Since this time, the Bank has funded less dams than ever before.

The Bank’s decline in lending for large dams is a partial victory for the anti–dam movement. But the communities who have been affected by Bank–funded dams have nothing to celebrate. Neither do those whose lives will be destroyed by future Bank projects. In 1994, 2154 organizations in 44 countries signed the Manibeli Declaration, calling for a moratorium on Bank lending for large dams and for the Bank to pay reparations to dam–affected peoples. This call was renewed at the first international meeting of dam–affected people in Curitiba, Brazil, in 1997.

A Debt to the Dammed

The World Bank owes a debt to the many millions of people whose lives it has destroyed through the financing and construction of large dams. The 1994 Manibeli Declaration calls on the World Bank to establish a fund to provide reparations to the people forcibly evicted from their homes and lands by Bank–funded large dams. The fund would be administered by a transparent and accountable institution completely independent of the Bank and should include assistance for communities to prepare reparations claims.

The need for reparations for those who have suffered past harm is a well–founded legal principle accepted by the international community. Precedents include reparations for damages from wars, for victims of torture, and for Japanese–American internments during WWII. These reparations imply that those responsible for damages or suffering have an ongoing responsibility to right the wrongs they committed, and that the victims of these actions have a permanent right to achieve redress.

Calls for dam reparations include monetary as well as non–monetary measures, such as dam decommissioning, official recognition of injustices committed and restoration of ecosystems. Communities affected by Chixoy Dam in Guatemala and Pak Mun Dam in Thailand are engaged in active campaigns to demand reparations from the World Bank.

Chixoy Dam, Guatemala

In the late 1970s, the World Bank teamed up with a brutal dictatorship in Guatemala known to be waging a war of annihilation against Maya communities. The village of Rio Negro stood in the way of the Bank’s plans to construct the Chixoy Dam. After villages refused to relocate from their ancestral lands in 1982, the Bank averted its eyes when the army and paramilitary massacred some 400 Maya, mostly women and children.

Despite sending numerous missions to oversee the project during construction, the Bank kept silent about the massacre until 1996, when human rights groups revealed this horror story to the world. The Bank’s own internal investigation subsequently absolved it of responsibility. Further, Bank officials in Guatemala now consider the issue to have been dealt with because "almost all relocated communities have reached the level they had in 1976 [when relocation began] or are about to reach it." In other words, although the massacre survivors have suffered 20 years of extreme deprivation, terror and murder of their loved ones, the World Bank believes that their responsibility is over because they believe they have "helped" the survivors claw themselves back to the standard of living they had 20 years ago. The demands of the survivors of the massacres include replacement land of the same quality and quantity that they had before, the construction of a monument to commemorate the 400 people massacred, and bringing to justice those responsible.

Pak Mun Dam, Thailand

Communities affected by Pak Mun Dam in Thailand have been engaged in a struggle for reparations since the World Bank–funded dam was completed in 1994. As a direct result of the dam, more than 25,000 people have been affected by drastic reductions in fish populations upstream of the dam site, and other changes to their livelihoods. Six thousand families have received some compensation for loss of fisheries during the three–year construction period, but it is not enough.

For more than a year, 5,000 villagers have been occupying the Pak Mun Dam site and intend to stay until their demands are met. Villagers are demanding that the World Bank and the Thai government remove the dam and restore the river, thereby allowing the fisheries to recover. There is evidence to suggest that removing the dam would be cheaper than adequately compensating the villagers for their losses.

Odious Debts

There is also a case to be made for cancellation of World Bank debts owed for large dam projects in which the economic, environmental and social costs are found to outweigh the realized benefits. Two examples where the case for debt cancellation is especially strong are Chixoy Dam and Yacyretá, where the Bank lent to notoriously corrupt and despotic military regimes, all the while making it clear that it was prepared to extend further loans to cover the huge cost overruns.