Controversy has shadowed some of the large dam projects which have borne the hallmark of the World Bank. Yacyreta on the Argentina/Paraguay borders and Sardar Sarovar in India are just two examples where NGOs and local residents have condemned the Bank for its involvement and financial support. As stated by the Bank’s independent Operations Evaluation Department (OED), dam opponents’ main criticism has been that project sponsors and financiers systematically downplay the detrimental effect dams can have on project-affected people and the environment.

With such past experiences in mind, one could be forgiven for thinking that the World Bank may view all dams warily, seeing them as increasingly controversial undertakings which should be treated with caution. But as Alessandro Palmieri, a dam specialist at the World Bank says, there is not a policy which states that the Bank will or will not finance large dams. Each case is treated individually and is now steered by the Bank’s own safeguard policies — a portfolio of ten guidelines which should ensure that all World Bank-supported projects meet present day environmental and social standards (see panel).

‘With particular respect to hydroelectric dams, we believe that any hydro power scheme which now comes forward for financing, and which complies with our safeguard policies, is environmentally and socially acceptable,’ says World Bank energy specialist, Richard Spencer. ‘There has been some debate about whether or not this statement presupposes the World Commission on Dams’ final report. But to unilaterally decide that we will not finance dams until the outcome of the Commission is announced also presupposes it.’ The general presumption is that if safeguard policies are in place for dams, then there is no reason why the Bank should not finance projects which meet normal prudent investment criteria.

Tor Ziegler, who acts as a co-ordinator between WCD and the World Bank, says that today it is not possible to build a dam without living by and observing safeguard policies. ‘There is one thing which we are very concerned about,’ he said, ‘and that’s compliance. It’s compliance, compliance, compliance. This is true both in the Bank during preparation of a project and in the field. The latter is the litmus test.’ Spencer commented that things have changed with regards to how large dam projects are carried out. The stumbling block has always been resettlement. ‘I’ve heard stories about how they did resettlement at Kariba dam on the Zambezi river. They simply drove through the day before and said the place was going to be flooded and people had better get out quick,’ he says. ‘Quite rightly, you just can’t do that any more.’ ‘At the Bank we’re learning how to deal with the problems regarding the environment and resettlement,’ said Barry Trembath, energy specialist at the World Bank. ‘And we’re learning fast.’ A learning curve Experience has influenced the World Bank’s decisions in recent years. Palmieri explained how the inclusion of dam safety in the safeguard policies was directly related to experience with the Tarbela dam in Pakistan. ‘We were involved with Tarbela which, at the time, was beyond state-of-the-art during construction,’ he says. ‘But it had so many technical problems, which have all now been rectified, that we had to evaluate our involvement. After this we suggested that the Bank needed to have a dam safety policy. So from a real case study this is a lesson which we have learnt.’ Ziegler spoke about the OED review of large dams which was completed in 1996, a year before any discussion about the World Commission on Dams took place. The review took an objective look at 50 large dams (60-90m high) which the World Bank had supported, completed and evaluated between 1956 and 1987. The review was based on World Bank and NGO reports and it was found that only 26% of assessed dams were considered to be fully acceptable, and 48% potentially acceptable, under the Bank’s current safeguard policies. However, 90% were acceptable under the Bank’s older policies. The report concluded that the Bank had made sufficient changes in its consideration of project-affected people and the environmental impacts of dams. It said the Bank should continue to support large dam projects provided they comply with its policies and ‘fully incorporate the lessons of experience’.

Zielger believes that the Bank has learnt from the past, which may explain its early involvement in establishing the WCD. Along with the World Conservation Union (IUCN) the Bank agreed to host a workshop on the future of large dams in April 1997, and it was on the recommendations of this workshop that the two-year independent Commission was established. Zielger said that after their initial involvement the Bank and IUCN have stepped back. ‘The Commission is totally independent from us,’ he said. ‘We are just the midwives.’ Until the Commission presents its final report in June 2000 there will be great speculation about its recommendations and their effectiveness, bearing in mind that the commissioners have had to complete such a large task in a short period of time. But Palmieri said this was the only way to do the report. The industry needs some guidelines now: it cannot wait ten years for a report to reach a reasonable conclusion.

Confident that WCD will produce a valuable document, Ziegler agreed that such a report is urgently needed. ‘I think that this will be a very powerful report, which will hopefully bring us out of this stalemate,’ he said, referring to the conflict between opponents and proponents of dams. ‘Once the Commission has put its results on the table the world community will look at them and ascertain whether they make sense or not. This is where we have to count on WCD to be good enough to come up with guidelines which will work on the strength of their moral authority.

‘Indeed when the World Bank gets the guidelines it will need to take a stance on where it stands in relation to the Commission’s recommendations.’ But can anyone ensure that the guidelines are followed? ‘I will be surprised if after the involvement of so many people from different communities, this is a document which just gathers dust on bookshelves,’ Palmieri says. ‘There have been so many reviews in various countries, along with constant rumours about what the final report will contain, that it can’t be forgotten.’ Ziegler agrees: ‘Those involved with the Commission, along with the World Bank and IUCN, will have to sit down and decide what they are going to do with this report. The question is how can we carry this into the future? With industry organisations such as icold and on-going hydro conferences, I believe there are a lot of vehicles to carry this on for many years.’


One debate which looks set to last for many years after publication of WCD’s report is that of hydro power as a renewable energy. ‘Small hydro is certainly grouped in our thinking,’ Spencer said. ‘The Bank has a policy on renewable energy and it will encourage environmentally benign solutions to energy problems. But it will only support projects which do not make the problems worse. The Bank can best be described as being technology-neutral. In a sense it will not go out of its way to finance a particular technology. Our policy is about least cost and maximum efficiency.’ The first Bank-supported renewable energy project was a small hydro scheme which was undertaken in India in 1992. Spencer says that the problems with small hydro are different to larger schemes and are more to do with financial and technical intermediation – problems which other renewables face.

Focussing on small hydro, Palmieri spoke about the misconception that small hydro is good and large hydro schemes are bad. Little regard is given to the actual impact of each dam, he says. Bank- supported small hydro schemes are guided by Bank safeguard policies just like larger projects. ‘We have to give it the same consideration. Small hydro can be damaging to the environment as well,’ Ziegler said. ‘It obviously depends on the individual project, but small peaking facilities can be quite controversial. If they are not dealt with properly they can cause significant stranding problems for fish in peaking affected stretches of the river.’ Ziegler says that this emphasises the need for a properly designed hydro project, whether it is on a large or small scale. ‘Hydro power is really to do with the art of tailoring,’ he said. ‘But this also gives us the opportunity to do something about environmental problems as designs, project lay-outs and rules of operation are tailor-made to each individual scheme.’ Trembath believes that in the future there will be an increasing emphasis on hydro projects which take full account of environmental and social problems. Such schemes may pave the way for hydro in the renewable energy mix. If such large hydro projects were presented to World Bank managers then they would seriously consider financing them. ‘With the renewable discussion there is always the view that we can do wind,’ Ziegler said, ‘but it always needs a back-up system and, of course, hydro is there. In a power system context hydro power has many advantages.’


Hydro, however, still faces challenges. Trembath says that environmental concerns and resettlement are just two of them. ‘One of the main problems is the shift of public financing away from power generation projects. Hydro is having great difficulty in competing with thermal power plants for private developers’ attention,’ he says. ‘This is mainly because hydro’s risk profile is not to the developer’s liking. These are projects which take seven or more years to construct and involve all sorts of difficulties related to the environment, resettlement and geology. These are things which many project developers know little about.’ He added that the tenure of loans available for private developers is too short and the initial tariffs are too high. Problems with tariff management create many difficulties, and all of this makes it a great task for private developers to establish large hydro projects.

Reflecting on the challenges facing the hydro industry and the imminent WCD report, Ziegler said that there are still more lessons to be learnt. ‘The large dam review points to the fact that if there is a future for dams, particularly in developing countries,’ he says, ‘then there is a lot to be observed in creating that future. And this requires developing countries to build the necessary institutional capacity to deal with complex projects like dams.’

The World Bank’s ten safeguard policies

Environmental assessment (1991 and 1999)
Natural habitats (1986 and 1995)
Forestry (1993)
Pest management (1996)
Cultural property (1986)
Safety of dams (1977 and 1996)
Indigenous people (1990)
Involuntary resettlement (1980 and 1990)
International waterways (1994)
Disputed areas (1994)

The secret of success

What projects does the World Bank consider to have been its most successful? El-Cajon dam in Honduras. This 234m high arch dam impounds a 7085M m3 reservoir. During Hurricane Mitch in August 1998 it was able to control flood waters, saving the lives of tens of thousands of people who lived downstream. ‘Flood protection in multi-purpose dams is one of the most over-looked benefits of dams,’ Alessandro Palmieri said.
Hurricane Mitch passed over the catchment of the El-Cajon reservoir, and there was substantial damage upstream of the dam. The incoming flood to the reservoir has been estimated at 9800m3/sec (70% of the PMF). The reservoir level before the hurricane was 13m below the full supply and within 70 hours this had risen by 16m – over 1500M m3 of water had been retained.
As a result of such flood control the maximum discharge experienced downstream of the dam was only 1200m3/sec. According to dam safety officers, the sudden increase in the reservoir level did not cause serious damage to the dam. Seepage from the 600,000m2 grout curtain sealing the reservoir did not increase significantly.
Downstream of the dam a 10km long, narrow gorge exists. At the end of this there are two highly populated alluvial plains which are separated from one another by a 5km long stretch of the river Umuhia. If a water discharge of 9800m3/sec had been permitted to flow in such a morphological setting, Palmieri says ‘an inconceivable disaster’ would have occurred.
Shuikou project in Fujian Province, China. This scheme has been called a ‘best case’ resettlement project and has been praised by the Bank’s independent Operations Evaluation Department. The 1400MW project, with its 101m high concrete gravity dam across the Min river, required the resettlement of some 84,000 people. The project was carried out in parallel with an urban renewal scheme at the head of the reservoir.
Notable successes include the increased income of resettlees. Before resettlement the Shuikou villages had incomes which were 38% lower than the average Fujian rural income. After resettlement in 1997 they were only 2.2% behind and still gaining.
The project is reported to have made an enormous difference to development in the area and as yet no significant negative impacts have come to light. Other positive impacts include an increase in river navigation.
From a financial perspective the project did well. The last unit was commissioned in 1997, by which time the power plant had already generated revenues approaching the overall cost of the project. Barry Trembath said that he considers the project to be extremely successful.
Snowy Mountains hydroelectric project in Australia. The World Bank was involved in providing a US$500M loan for construction of the Snowy Mountains dam. Trembath says that this scheme is regarded by most Australians as being a great success. (See IWP&DC October 1999, pp16-20).
Tarbela dam in Pakistan. This is considered as the backbone of energy and irrigation in Pakistan. Palmieri says that although the dam has been controversial Pakistan could not exist without it.