Report shows Executive Board approved project on basis of distorted economic analysis
In early June, the World Bank is expected to vote on a political risk guarantee for the Bujagali dam in Uganda. The Bank approved a package of loans and guarantees for the dam in December 2001, but this has proved insufficient to secure support from other funders. Analysis of internal documents by International Rivers shows that World Bank management manipulated data to gain Board approval for the project, which is sponsored by US–based AES Corporation. Contrary to Bank management claims, official documents show that the dam is not the cheapest option for generating electricity in Uganda. International Rivers calls on the Bank to reconsider the economics of the project, to allow the World Bank Inspection Panel to submit its near–complete report on Bujagali, and to assess Uganda’s promising geothermal potential before taking any further decision on the project.
The World Bank’s appraisal of Bujagali’s economic viability contains major discrepancies with other relevant Bank reports. When presenting the project to the Executive Board, World Bank management neglected, withheld or misrepresented critical information from other Bank documents. Essential assumptions affecting Bujagali have already proven over–optimistic by developments since the respective documents were published. These are some of the conclusions of a new report on the Bujagali project published today by the environment and human rights group, International Rivers.
“Bank management willfully exaggerated the viability of the dam and downplayed the attractiveness of alternative power sources when presenting the project for Board approval. There is a serious risk that the Bujagali project will prove an economic white elephant and will add to Uganda’s debt burden – at a time when the IMF and IDA have just expressed concern about Uganda’s very high debt indicators’, comments Patrick McCully, International Rivers Campaigns Director.
The International Rivers report recommends that before taking any decision on Bujagali, the World Bank’s Executive Board should insist that the following conditions are met: the potential of geothermal power, which Bank documents indicate is the cheapest power option for Uganda, should be analyzed in an unbiased way; the economic viability of Bujagali should be reconsidered in a more realistic manner, taking into account the recent economic downturn in Uganda; the project’s Power Purchase Agreement should be disclosed to the public; and Uganda’s civil society should be allowed to have an informed debate about all available options for the country’s power sector. Finally, the World Bank’s Board should not take any further decisions on Bujagali until the Bank’s Inspection Panel, which has been investigating the project since September 2001, has released its report.
International Rivers’s analysis concludes that the Bujagali project confirmed many findings of the World Commission on Dams (WCD). Published in November 2000, the WCD report noted “that many dams were built not based on an objective assessment and evaluation of the technical, financial and economic criteria”, but based on “vested interests’. The Bujagali project further documents that the “pervasive appraisal optimism” which the World Bank had identified as the fundamental source of its portfolio problems in 1992 still persists today.
The new International Rivers report was prepared by Peter Bosshard, a researcher on the economics of power projects and advisor to International Rivers.
Background: Bujagali is a hydropower project on the Victoria Nile in Uganda. Sponsored by the AES Corporation, the 200 MW venture is the largest private power project in Sub–Saharan Africa. The World Bank approved credits and guarantees to the tune of $225 million for Bujagali in December 2001. A series of other financial institutions, including from the US, Great Britain, Germany and Sweden, have declined support for the project. The World Bank is now planning to extend a further guarantee of $215 million in order to pull some export credit agencies back into the funders’ consortium, and so to rescue the dam project. Affected Ugandan citizens filed a complaint against Bujagali with the World Bank’s Inspection Panel in July 2001. A report by the Bank’s investigative body is pending.
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