NGOs Urge IFC to Consider WCD

Wednesday, December 13, 2000

A sign–on letter urging the head of the IFC to evaluate the Bujagali Dam against WCD guidelines.

Peter Woicke
Executive Vice President
International Finance Corporation
2121 Pennsylvania Avenue, NW
Washington, DC 20433

Rome, December 13, 2000

Re: Bujagali Dam project – Uganda

Dear Mr. Woicke:

We are writing to you to express our concern about the Bujagali dam project in Uganda, which is currently being considered for funding by the IFC.

We have been very closely following developments related to this project and have carefully evaluated its pros and cons as well as the concerns already conveyed by Ugandan and international NGOs. It is our opinion that the project is too flawed to go forward as planned, as it neither helps the majority of Ugandans, nor meets the guidelines and recommendations of the newly released report of the World Commission on Dams.

Ugandan NGOs and citizens have asked that the project be reviewed against WCD guidelines. We join our voices to theirs in urging the IFC to stop forward momentum on this project until it has been independently reviewed against the WCD’s guidelines, and the key concerns related to its cumulative impacts of the project be addressed in a satisfactory manner.

First, the Bujagali dam project is not likely to produce the positive developmental impacts for the poor that are expected to be at the core of all IFC projects. The dam will not help meet the basic energy needs of the rural poor, as its exclusive focus on a conventional grid–extension approach will leave the majority of the Ugandan population out.

This aspect was made clear by the 1996 Energy Sector Management Assistance Programme (ESMAP) report, "Uganda Energy Assessment", which states: "The prospects for Uganda Electricity Board to significantly strengthen its national coverage to non–grid areas in the next 20 years are remote. Even if all of Uganda’s urban consumers were connected to the grid, it would still leave 75% of Ugandans without UEB grid electricity". Moreover, ESMAP goes on to affirm that "It is, however, unrealistic to think that more than a fraction of the rural population could be reached by the conventional, extend–the–grid approach. A more promising course is to rely, instead, on ’alternative’, ’non–conventional’ or ’complementary’ approaches to electrification."

The 1999 ESMAP report also pointed out that: "the basic financial and economic analysis of Uganda’s grid operations clearly suggest that there should be a major rethink of the country’s off–grid and rural electrification strategy".

Numerous recommendations from the new World Commission on Dams report also call for a complete understanding of needs and the best way to meet those needs before considering specific energy projects. The report notes: "In countries where a large proportion on the population does not have access to basic services a key parameter should be the extent to which human needs will be met." The WCD also recommends that studies be made to assess the scope for "demand side management (DSM), and for decentralized supply options and community–level initiatives" and that "a priority should be to improve existing systems before building new supply, and DSM options should be given the same significance as supply options".

We should also reiterate here that a decentralized approach to development in order to meet basic human needs of the Ugandan poor was advocated in the World Bank Country Assistance Strategy for 1997. (The PEAP is designed to ensure that growth is sustained and that its benefits are spread more widely"). Participants in CAS consultations also expressed the view that public investment should be "redirected towards the poorer and remoter districts and to redouble efforts to ensure that the poor people benefit from government programs".

The analysis done for the Bujagali project to date does not appear to meet the criteria described above. A comprehensive needs assessment, decentralized approaches to energy supply, a full feasibility study for renewables such as solar, and the potential for demand–side management have all gotten short shrift in virtually all project documents that we have seen. In addition, Bujagali is likely to set off a wave of dam–building on the Nile which will take Uganda down a path of hydro–development that is inflexible, uneconomic and damages communities and the environment.

Bujagali would be the third large dam project on this stretch of the Nile, after the Owen Falls Dam and Owen Falls Extension Project. The cumulative impacts of these dams will have a detrimental effect on the Nile riverine ecosystems and local livelihoods. Bujagali could be followed by up to 6 more dams that would multiply these social and environmental impacts.

It is our understanding that no Environmental Impact Assessment has been carried out for either Owen Falls or Owen Falls Extension. Without knowing the impacts of these two upstream dams, it is unlikely that the AES’ EIA will adequately address the cumulative impacts of all three dams. This is in clear contradiction with the WCD recommendation according to which "cumulative impacts of projects should be analyzed and environmental impacts from past projects should be evaluated and incorporated into the needs assessment".

As far as project–related risks are concerned, the World Commission on Dams calls for a fair analysis and public discussion of these: "[Risks] must be identified, articulated and addressed explicitly. Most important, involuntary risk bearers must be provided with the legal rights to engage with risks takers in a transparent process to ensure that risks and benefits are negotiated in a more equitable basis". It also specifies that: "Determining what is an acceptable level of risk should be undertaken through collective political process".

The planning process for Bujagali is troubling in its handling of risk. On the one hand, the Power Purchase Agreement was neither subject to public debate, nor made public It has been reported in the Ugandan media that the Ugandan government would be forced to buy all the projected output even in case of an energy glut or of a drought–induced interruption of energy production. The costs of this unfair deal would be paid by the people of Uganda, should the national utility be unable to meet its obligations. By potentially increasing the public debt of the country, this project would undermine actions undertaken by the World Bank to reduce the country’s foreign debt through the HIPC Initiative.

Another kind of risk is that directly experienced by the Project Affected People who might not receive the benefits allegedly promised by AES. No grievance mechanism is in place to allow local villagers to hold the private project sponsor accountable in case it does not deliver its promises for jobs, hospitals, schools and land.

The issue of land is directly linked to resettlement and compensation. According to the Ugandan Parliamentary Research Center, "the developer has handled the issue of resettlement and compensation very lightly in the case of the Bujagali hydropower project... the resettlement plan was not available and there was no program for it".

There are many other concerns which we share with Ugandan NGOs, such as the lack of competitive bidding for the project and the resulting potential for corruption; the serious unmitigable cultural loss caused by destroying Bujagali falls; the lack of assessment of potential revenue generated by river–based tourism, which the project developers seem to be seriously underestimating; the water quality issues associated with damming the Nile just below Lake Victoria; the increased potential for water–borne diseases, and the impacts of the dams on local fisheries.

In consideration of the above, we ask that no financial support be given to the Bujagali dam project unless the following conditions are satisfied:

a. the project is re–evaluated according to the criteria set up by the WCD;

b. the release and public discussion on the Power Purchase Agreement;

c. a thorough needs assessment, and a full and fair consideration of alternative energy approaches to meet those needs;

d. a comprehensive management plan for the Nile done by independent experts;

e. a comprehensive EIA for the Owen Falls Dam and the Owen Falls Extension and an assessment of the cumulative impact of related projects;

f. the release and public discussion on the resettlement action plan.

We look forward to your prompt reply to our concerns.

Yours sincerely:

Francesco Martone
Reform the World Bank Campaign

Frank Muramuzi
National Association of Professional Environmentalists (NAPE)

Andrea Durbin
Friends of the Earth US

Peter Bosshard
Berne Declaration

Nick Hildyard

Monique De Lede
The Netherland

Goran Ek
Swedish Society for Nature Conservation

Tonje Folkestad
Association for International Forest and Water Studies (FIVAS)

Heffa Schuecking

Doug Norlen

Lori Pottinger
International Rivers

Bruce Rich
Environmental Defense