In future the dam construction industry could do very well out of the water power and irrigation sector — provided it changes its ways in line with the World Commission on Dams. World Bank president James Wolfensohn says the Bank will be tougher on flawed work, overruns and bribery and corruption, adding that the report’s guidelines could also be set to work on loans for oil and gas, mining and forestry exploitation.

‘You could say that it should be done for everything — it’s not just water. It is a milestone not just for dams but a reassertion of the way you should go about development generally,’ he said. Wolfensohn believes the report is of fundamental importance and has implications for operations by the bank’s commercial wing, the International Finance Corporation (IFC), as well as Bank’s core, soft loan operations.


Blacklisting of companies from work under Bank loans, Wolfensohn said, would expand. ‘For the last several years we have been far more active than ever in our history, on the issue of blacklisting and following up suggestions of default or misappropriation of monies. I now personally meet at least monthly with the team which is dealing with this. We have put around 45 companies on in the last 18 months and that probably exceeds the total we have ever put on the blacklist. We are tightening up, we have tightened up and it is a vigorous part of our activity,’ he added.

With reference to the corruption allegations associated with the Lesotho Highlands water development scheme, he said the Bank has been very open with the authorities. He could not comment for judicial reasons but added that ‘we are monitoring very carefully what is coming out’.

Wolfensohn made it clear that the Commission’s report did not, in Wolfensohn’s view, merit a moratorium on large dams. ‘I very much doubt we will have a moratorium. Just to put it in perspective we are now doing about one per cent of the dams that are being built. And my belief is that the practices that we’re engaged in, in terms of consultation and the way we are going about it, are reasonably co-extensive with the recommendations of the report.’ But he did not close the door on the NGO demand completely, saying the Bank would not call for a moratorium in the intervening period before February when the Bank’s Board would publish its opinion on the report. ‘I know that it [a moratorium] was called for by some institutions but it was not called for in the report itself and I think it’s more likely that we will follow the report,’ he added.

Future prospects It is the throw-forward aspect of the 26 guidelines in the report which will be the main focus for the hydro industry, as the Bank clearly intends to use them widely when looking at all loans for projects. But Wolfensohn has to be careful: if the Bank is too tough it will lose control, not just of hydro projects, but other sectors.

The Bank is not in a position ‘to beat governments over the head’, Wolfensohn said. ‘We don’t have the force of the police to go in and straighten something out.’ Withholding loans to other sectors does not necessarily work. ‘If we introduce conditionality beyond the particular projects we’re engaged in, it is regarded as inappropriate intervention. And we are widely criticised by some segments of the civil society for even dreaming of it.’ In the dam sector the Bank just will not go in now if there is poor relocation of people or reparations are not paid. The Bank is now known to impose conditions which are difficult and socially responsible, and companies are free to go elsewhere. ‘That is removing from us a lot of the ability to mould the way in which governments do things,’ Wolfensohn said. ‘They simply say ”If you are going to insist on these conditions then we are going to do it with someone else”. That’s happening a lot today — the more conditions we are applying, in a curious way, the less strength you have. And I must tell you it is becoming a serious issue for us in terms of projects.’ Wolfensohn deflected a question on Ilisu in Turkey— the Bank had no role in it, he said — by passing the ball to Dr Maritta von Bieberstein Kock-Weser, director general of the Swiss-based World Conservation Union (IUCN) (The IUCN and World Bank co-conceived the WCD idea in April 1997.) Her remarks were blunt and a sign of the new yardstick guidelines to come. ‘If you held it [Ilisu] up to the principles which you will read in the Commission’s report and recommendations, there would be a very long gap between where this project and its history is right now, and what is being challenged in the report. So I would certainly not favour it.’ Koch-Weser floated a proposal which will also toughen up post-construction monitoring. An institutionalised mechanism was needed to ensure contractual long term commitments were not dropped after a project had been signed off. Wolfensohn did not dismiss the idea but said reparations would be a matter for government to take up and were not the responsibility of the Bank.

New opportunities

While the large dam and irrigation schemes may be dropping off the agenda, the expansion of work in the small hydro and dam sector could see a boost. Wolfensohn, just back from eight days in India, said the Bank would increase investment in the lower end of the hydro and water market, particularly when it is absolutely clear that bringing local people in to manage their water is the central element in it. ‘I would guess that will be more widely used than ever before,’ he said. Rehabilitation and maximising power generation are also becoming increasingly important. The Bank has put US $825.9M into new dams worth US$14B over the last seven years but it has also put US$341.8M into rehabilitation and safety projects worth a total of US$6.9B over same period.
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