Fundamental questions on Bakun construction

By Sahabat Alam Malaysia

Utusan Konsumer September 2002

2002-10-05 | THE awarding of the contract to build the main dam for the Bakun Hydroelectric Project to a Sime-led consortium which also comprises a Chinese counterpart in mid August is a clear message that the Federal Government and the Sarawak State Government are bent on pursuing the project although East Malaysia is not facing any power short-age in the future and building the dam will only put a strain on the nation's finances.

Before we go any further, we would like to state that we are not an organisation opposed to development and our critical stand against the dam is not a reflection of our desire to stunt growth for Sarawak. On the contrary, we are deeply concerned on how the project has produced and will continue to produce a chain of adverse impacts, all at the expense of local peoples and local economies, the nation's finances and our natural resources.

We believe that for development to be meaningful it has to be sustainable and people-centred and it must also reflect consumption realities. Bakun's commissioning in 2006 may shoot East Malaysia's energy reserve margin to anywhere between 137 and 175 percent when a comfortable margin should only be around 30 percent.

First and foremost, we are concerned if the contract may indirectly aggra-vate the encroachment of land where Native Customary Rights (NCR) are exercised in Sarawak.

Last year it was reported that Beijing was offering Kuala Lumpur a barter agreement to buy more palm oil at a fixed price if mainland companies are given an active role in Bakun's construction. China, the second largest buyer of Malaysian palm oil, bought around 1.4 million tonnes of our palm oil last year. After it joins the World Trade Organisation, it is expected to increase its palm oil quota to 2 million tonnes a year and Malaysia is said to want a lion's share from this chunk. On August 29, it was revealed that part of the payment for the contract work on the RM1.8 billion main dam is expected to be in the form of palm oil.

Will such a deal accelerate the opening up of new plantations in Sarawak where NCR are exercised? The development of plantation projects on such land has already caused much discontent among several affected communities in recent years.

Secondly, how will money be raised for further works on the project? In the mid-1990s, foreign investors literally turned their back away from the dam as it was viewed to be lacking in financial viability and technical feasibility. It is highly unlikely that this view has changed.

Sarawak Hidro Sdn. Bhd., a subsidiary of the Ministry of Finance Inc. has proposed that the cash for the project be raised through the issuing of Government's bonds.

Thus we plead for the government to consider the issues below:

• Won't the attempt to entirely raise RM 9 billion worth of money from the domestic market, which constitutes 22 percent of our RM 40 billion reserve as of May 2002, cause a strain on our economy?

• If growth in power demand in the near future in East Malaysia fails to produce a consumption pat-tern that is able to utilise electricity from the dam at a maximum level, Bakun will still suffer huge losses.

• If Bakun again faces financial trouble during its construction period or is saddled with huge techni-cal problems upon completion, the dam will also suf-fer huge losses. Energy output of hydropower is often lower than initially estimated and huge dams are almost always besieged with technical and engi-neering problems during their lifetime, especially in the tropics where erosion and siltation are especially severe.

• With so much power in need to be sold, it is most likely that the industries will have the advantage to determine the price of the energy. If the price of power from Bakun dips, the dam will again suffer losses.

• If we are able to find enough industries to con-sume electricity from the dam, they are most likely to be massive in capacity and are huge energy users, which may produce various adverse environmental and social impacts. The interest shown by a Dubai-based aluminium smelting plant to take advantage of Bakun is already indicative of the environmental hazards that the dam may expose Sarawak to. In the end, such impacts may cost us even more.

Thus in view of all the facts above, there is a high probability that Bakun will incur huge losses that may not be able to offset its oft-touted future benefits. Who will then bear these losses?

SAM would like to call both the Federal Government and the Sarawak State Government to seriously review their decision in proceeding with the construction of Bakun Hydroelectric Project.

Although RM 1 billion has already been spent, it is better that the project is called off at this point rather than further exposing ourselves to unnecessary financial risks. — SAM

Source: Utusan Konsumer, September 2002