Economic Aspects of the Project

1) Financial returns on, and economic viability of the project.

2) "The Bakun Dam within the development of the Malaysian economy"

3) Close ties between project proponents, contractors, and government officials

4) The effort devoted to finding private or domestic sources of funding, and to portray this project as an example of privatization.

5) The international economic links implied by this project.

6) Doubts as to the need for power from Bakun

Impacts of the Project

Environmental Impacts

Social Impacts: Resettlement

Technical issues

Economic Aspects of the Project     (top of page)

1) Financial returns on, and economic viability of the project.
Since the project was first proposed, its proponents have projected favourable economic returns. In 1983 the SAMA Consortium projected rates of return of about 16%. They also noted that only if there was a "practically inconceivable combination" of low demand for electricity, low fuel prices, and "extreme deviations from expected costs (+20%) and benefits (-20%) would the project become marginal. This study concluded that "Bakun is an economically outstanding project."

However, the experience with most large water projects has been that costs have been underestimated, and benefits have been over-estimated. This appears to also be the case with the Bakun project. Power from the project is likely to be more expensive than that available from other sources. Ekran has signed a contract to sell electricity to the national utility at a rate higher than that offered to independent power producers, and about double the cost of power from the utility's own stations. Even at this rate, much doubt has been expressed that the project will be economically viable. Ultimately, according to many critics, the cost of the project will be borne by the national electric utility, and by the Malaysian public, through higher electricity rates, direct subsidies, or both.

Sources:
o SESC 1983.
o Insan, Power Play, pp. 19-52. [Detailed discussion of economic aspects of the Bakun Project.]
o Delphi International, "Bakun: High Dam: High Risk?" 8th July 1996. [Assessment of the economic viability of the project, from the perspective of London-based investment consultants. Highly influential.]

2) "The Bakun Dam within the development of the Malaysian economy"     (top of page)
Beyond the economic viability of the project itself, the Bakun Dam has been justified in terms of the overall economic development Malaysia. In 1991 Malaysia established "Vision 2020", a plan that envisages Malaysia becoming a fully developed, industrialized nation by 2020. Key aspects of the plan include:

• a central role in the development process to be played by manufacturing, as the nation shifts from its former reliance on primary resources and agriculture;
• access by Malaysia to the most advanced technology, through both domestic innovation and links with foreign technology-based companies;
• a partnership between the government and the private
  sector, with shared goals, and close working
  relationships.

Within this context, the Bakun Dam could contribute in several ways to Vision 2020:

• through the supply of electricity, needed by manufacturing. In recent years, demand for power has increased by up to 13 per cent / year. The 2400 megawatts produced by the dam was expected to be required by soon after the year 2000;
• through gaining access to advanced power technology, such as turbines and transmission lines, provided by foreign engineering firms;
• the project would be a model of close partnership between the state and federal governments, and the private sector.

3) Close ties between project proponents, contractors, and government officials     (top of page)
As is often the case in Sarawak natural resources development, there are close ties between government officials and proponents of resource development. (For example, the Sarawak environment minister also holds major timber concessions.) In the case of the Bakun project, two of the Sarawak Chief Ministers' children are shareholders of the company participating in harvesting timber from the forest reservoir area. The Sarawak Chief Minister is also chair of the Sarawak Natural Resources Board, established by the Sarawak government to regulate the project, and over-ride the national environmental impact assessment provisions. Tight links between business and government officials often means that these officials are in a position to benefit when companies with which they are associated receive benefits.An extensive array of often closely-associated businesses are potentially or actually involved in the Bakun project. In many cases, these businesses have associations of
various kinds with Ekran Berhad. Ekran has sought to provide lucrative contracts for components of the project (harvesting timber, or selling products to the project, etc.) to associated companies. (In mid-May 1997, however, ABB overturned many of these contracts, opening them up to other companies through a more competitive bidding process.)

Sources:
o "Jupiter's list of potential players," The Edge, Oct. 14, 1996
o "The Bakun Connection: The Business Connections and Environmental Effects," Aliran Monthly, Vol. 15(7), 1995. [On the complex business relationships of Ekran Berhad.

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4) The effort devoted to finding private or domestic sources of funding, and to portray this project as an example of privatization.
In the project's first incarnation in the 1980s, funding was not discussed in any detail publicly. The widespread assumption apparently was that Malaysia would seek loans from international sources, particularly multilateral development banks such as the World Bank. However, in the 1990s, there is clearly a strong intention to avoid funding from multilateral sources. This is likely an effort to avoid the controversies and close
examination that have arisen from World Bank funding of dam projects elsewhere, such as the Narmada project in India. A statement by Prime Minister Mahathir on September 24, 1991 perhaps helps explain his government's effort to avoid involvement of the World Bank: "We in the poor countries would like to have some cheap hydroelectric power. But
all manner of campaigns are mounted against our proposals the World Bank will be used to deprive poor countries of cheap hydroelectric power. And all this after the rich have developed most of their hydro potentials." Instead, funding is being sought through domestic private and government sources, as well as international private investors.

The extent to which the Bakun Dam represents "privatization" of power generation is ambiguous: while Ekran Berhad currently holds the largest stake in the project and is actively seeking private investment, the Sarawak state government and Sesco are also major shareholders. Ekran has also agreed to sell much of the power to the national public utility,
at rates that may involve considerable subsidy of the project by Malaysian electricity consumers. Indirect government support of the Bakun project, through the involvement of the Employees Provident Fund [state-run pension fund] in underwriting it, has aroused controversy, because of the potential risk to workers' savings being invested in this project, with uncertain returns.

While domestic sources are envisaged as the dominant sources of funding, funding from foreign private sources is also clearly a priority for project proponents, perhaps because of the credibility such funding would provide. However, the effort devoted to obtaining private funding illustrates the obstacles encountered in financing such a project without subsidies. It has often been argued by dam opponents that such projects could not survive without large subsidies from governments or multilateral development banks. Difficulties that Ekran has encountered in soliciting interest from foreign private investors suggests that this is also the case in this project.

Sources:
o Delphi International, "Bakun: High Dam: High Risk?" 8th July 1996.

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5) The international economic links implied by this project.
The Bakun project has attracted the attention of numerous international engineering and construction companies, with experience building dams elsewhere. A consortium led by ABB Asea Brown Boveri and Brazil's CBPO had won the bidding to build the dam. Other major participants in the consortium include Hyundai Engineering and Construction and Mexico's Ingenieros Civiles Asciados S.A. de C.V. Other companies will also be involved. Both ABB and CBPO have been involved in building many other dams, including some that have aroused substantial controversy. These and a few other major firms together dominate the $20 billion/year international dam building business, engaging in active lobbying to support dam projects.

6) Doubts as to the need for power from Bakun     (top of page)
Since 1993 Malaysia's generating capacity has expanded greatly, with new plants being constructed by the national utility and by independent producers encouraged by policies promoting privatization of power generation. The margin of supply over demand has increased to about 50 percent, with several additional plants expected to be completed within the next few years. As a result, the need for power from Bakun has become much less evident.

Impacts of the Project     (top of page)

As it had in the 1980s, the Bakun project has elicited a variety of concerns, relating both to its impacts, and the process by which decisions are being made. These concerns have led to formation of a popular movement, the "Coalition of Concerned NGOs Against the Bakun Dam". Since late 1993 their concerns have coalesced around environmental
impacts, social impacts (resettlement), and economic and technical problems.

Environmental Impacts     (top of page)
In the 1983 feasibility study of the project, the environmental impacts of the project were described as manageable, and, on balance, as positive:

"The project will have positive effects with respect to the use of local resources, employment, transfer of technical know-how, promotion of regional development and industrialization, savings of fossil fuel, river regulation, tourism and fishery. Also, air pollution would be reduced due to the replacement of thermal energy. Other ecological effects will be negative, such as the deterioration of the water quality (although temporary) and the danger of the appearance of water-borne diseases. With proper planning of precautionary measures those negative effects can be kept under control and should not lead to long-term detrimental effects."

According to the EIA, the dam would provide a range of benefits, including improved conditions for those affected, flood control, and better river navigation. While a range of impacts were identified in he"preliminary ecological impact assessment", it was concluded that these could be minimized. For example, sedimentation could be reduced to an "acceptable level" that would not affect the project. Sediment inflow was estimated "for the present rate of erosion" as 9 million tons/year. This was considered to have a "negligible" impact on reservoir storage capacity. it was also argued that "the risk of long lasting detrimental effects on men and environment caused by the creation of the Bakun reservoir can be reduced to an acceptable level if appropriate preventive measures are
undertaken". With proper management, the river system could adjust to the changed conditions (for example, the diversity of indigenous fish could ensure that there would be sufficient species to fill all niches within the new reservoir.) It was also argued that "[a]dequate measures will help to prevent long lasting ecological damages as a result of the creation of the Bakun Reservoir thus contributing to a successful implementation of the
project."

Other impacts were less than feared, because of damage that had already occurred. For example, since the reservoir area had already been disturbed by shifting cultivation, impacts would be less severe than if the area were virgin forest. Remarkably, the EIA even claimed that the dam would reduce loss of forests, even though site preparation for the reservoir involved clearing the entire area. Further impact studies were also recommended.

Many of the claims made in this feasibility study could be questioned. For
example, it was specified that during reservoir filling a "mandatory release of 150 m3/s will be maintained to satisfy the needs of the downstream ecosystem". This figure could be compared with the observed unregulated flow, varying from 960 m3/s in July, to 1975 m3/s in November. (It was not explained how 150 m3/s would be sufficient to "satisfy the needs", given these pre-existing flows.) Similarly, while benefits of the project identified in 1983 included regulation of downstream flows, "improving navigation conditions and reducing flood damages", there was no apparent discussion of the inevitable trade-off between flood control and power generation.

Shortly after the release of the 1995 EIA report, it was evaluated by the
International Rivers Network (IRN). The IRN identified numerous shortcomings. While the EIA had identified a range of impacts, including deterioration of reservoir and downstream water quality, impacts on downstream water levels and salt water intrusion, risk of waterborne diseases, loss of fish habitat, and inundation of terrestrial habitat, most
of these impacts were not reflected in the EIA's optimistic conclusions.

The evaluation also concluded that the EIA's "usefulness is severely limited by basic methodological flaws". It had failed to explain why the dam was needed, or to consider adequately the no-project alternative, or other sources of energy. Nor did it evaluate long-term impacts, or interactions between different impacts, such as the effect of water quality on fisheries. It did not even estimate adequately the life-span of the project. Numerous key issues were not addressed at all, and the report relied too much on inadequate data or uncertain predictions. In sum, the IRN said, the EIA "would not meet internationally accepted standards for environmental assessments", and gave no evidence of having benefited from past experience with large reservoirs in tropical areas.

For more information on the environmental impacts of the Bakun project.

Sources:
o Democratic Action Party, "A Preliminary study on the proposed Bakun hydroelectric project," October 1985. [brief overview of environmental impacts, in the context of ethical principles of reverence and respect for the environment.]
o Ekran Berhad, "Privatisation of the Bakun Hydroelectric Project; Detailed Environmental Impact Assessment for Reservoir Preparation," February 1995.
o Philip B. Williams et al., "A Review of the Environmental Impact Assessment [Interim Report] of the Bakun Hydroelectric Project Prepared for Ekran Berhad," Prepared for the International Rivers Network, June 1995.

Social Impacts: Resettlement     (top of page)

"We are happy you came among us.
For soon, we worry, we may drown
Because of Bakun.
We are mourning, due to our problems.
Share your ideas with us, so we can have courage.
Please help us, please tell your
friends, and others in the world outside,
that we have our problems
so that you and they can help us
one way or other.
Please remember us and our plight
whereever you go, wherever you may be."

The Bakun project would compel relocation of more than 9,000 people, who would lose their land, homes, and every other aspect of 18 communities. Most are now subsistence farmers, with some supplementing their income through cash crops or jobs in timber companies. They value their autonomy: as one stated: "We are poor only insofar as we have little money. In fact, we are rich, because we have all we need to feed ourselves and house ourselves. Rice is free, fish and meat are free, vegetables are free, water is free, lumber is free". After relocation they would likely no longer have their own land, but might have to seek work instead on large plantations.

The need to resettle inhabitants was noted in the project's initial feasibility study of the project. This was seen as a relatively straightforward and inexpensive aspect of the total project: 5200 persons (note population growth in the region to about 9000 since the 1980s) would be resettled into areas having "suitable living accomodation, basic infrastructure, such as schools, medical centres and electricity and water supply, and lands
for planting crops", at a cost of M$65 million. The resettlement program, it was noted, "must cater for the needs and interests of each ethnic group," and accordingly, detailed socioeconomic studies would be needed of these communities.

A few hundred kilometers from the Bakun site sits the smaller Batang Ai dam, completed in 1985. For that project, 3000 people were relocated to an area lacking adequate farmland or jobs, even before their new homes were ready. Many have not yet received fair compensation, and almost half have returned to near their original homeland. Relocation plans at the Bakun site appear not to have benefited from this experience: the time frame for completing the resettlement (by 1998) is unrealistically short, and, as Jérôme Rousseau of McGill University has documented, plans make little provision for the preferences of those to be relocated. While many would prefer to move to higher ground within the catchment area, plans call instead for a move to an area with poorer land and fewer prospects.

Resettlement plans have been marked by a general failure to consult those affected. As Nyaban Kulleh, a resident of one of the communities to be flooded told a journalist in 1994: "no one has come forward to tell us what is happening. We don't want to go against the Government. But if the Government wants the Bakun project, why don't they think of us? They say this is development but we don't think that flooding our homes is development."

Sources:
o Sarawak Museum, "Batang Ai Hydro-Electric Project: Survey on the attitudes of the affected people towards the project and resettlement" Batang Ai Report No. 1, July 1979. [A survey of those to be displaced by the Batang Ai project, before resettlement occurred.]
o "We don't want to leave our land," Utusan Konsumer, Feb. 1986. [interviews with those to be displaced by the Bakun project.]
o Democratic Action Party, "A Preliminary study on the proposed Bakun hydroelectric project," October 1985. [overview of issues relating to resettlement.]
o Insan, Power Play, pp. 74-86. [Critical discussion of resettlement plans for the Bakun project, from the perspective of Malaysian activists.]
o Rousseau, Jérôme, "The Bakun Project: Review of Socio-Economic Studies and Preliminary Recommendations for the Resettlement of the Kayan and Lahanan of the Upper Balui," A report submitted to the State Planning Unit, Jabatan Ketua Menteri, Sarawak, 27 Sept. 1994. [Extensive analysis of Bakun resettlement plans.]
o Rousseau, Jérôme, "The Bakun Hydro-electric Project and resettlement: a failure of planning," Conference on the Bakun Hydro-electric Project, Kuala Lumpur, December 2-3, 1995. [Critical discussion of resettlement plans, from the perspective of a McGill
University anthropologist.]

Technical issues     (top of page)
There are many uncertainties concerning technical details of the Bakun project. These include variations in rainfall and streamflow at the dam site, and questions concerning the design and stability of the dam itself. One of the most significant technical worries relates to the cables that will deliver power to the Malaysian mainland. They are, in effect, an unprecedented experiment. At 650 km, they are far longer than the longest existing undersea power cables, beneath the calmer waters between Denmark and Sweden. No reliable estimates of how much these cables will cost, how long they will last, or how much power will be lost as it travels through the cable, are yet available.

Sources:
o Insan, Power Play.
o Malaysia Ministry of Finance, Economic Report 1994/95.
o Aliran Monthly, Vol. 16(5), 1996.
o Wang, WeiLou, "Bakun Hydro-Electricity-Project (HEP) Firm Capacity: Dangerous Tendency" Conference on the Bakun Hydro-electric Project, Kuala Lumpur, December 2-3, 1995. [Argues that predictions of power production are inflated, as estimates of river flow and efficiency of power generation are over-estimated.]