AFRICA: Controversy Continues to Dog Major World Bank Projects

"Everybody is talking about development effectiveness, but the question is, how do you measure it? ...So what we are trying to do now is to pull together a meeting in June at which everybody can come in and take a look at how you judge development effectiveness." -- James Wolfensohn, President of the World Bank, at his Spring Meetings press conference, April 19.

The World Bank president's June meeting could do worse than to consider Uganda's Bujagali Dam project and Tanzania's Bulyanhulu Gold Mine.

The two large-scale projects are being supported by the World Bank's International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (Miga), as part of a broad strategy to increase economic growth and alleviate poverty.

But the two projects have generated considerable controversy as a result of complaints that they will do little for the poor, will damage the economy and the environment and are not transparent.

As the World Bank and its affiliates search for better ways to promote development in Africa, both Bujagali and Bulyanhulu may offer valuable lessons for the future.

Key investment

In Uganda, the World Bank insists that the $500 million Bujagali hydro-electric Dam project is a "key investment" that will help reduce poverty in a country where less than three percent of the population has access to the national power grid.

Environmentalists in Uganda and internationally, have criticized the project as economically unsound, environmentally unsafe and perhaps a vehicle for corruption. The Bank has investigated these claims but in December said the project should go ahead. Construction began in late January 2002.

But the controversy is not over. AES, the giant construction company expected to build the dam, announced in February that a shortfall in cash could result in new delays on the project.

In addition, has learned that an internal World Bank report to be published in May will again raise questions about the promised benefits of the project.

In Tanzania, Miga's decision to provide $115m in political risk insurance to a syndicate of banks that made loans to support the Bulyanhulu gold mining project, and an additional $56 million in risk insurance for the Canadian company developing it, has been applauded by the government.

The mining project will create jobs, generate revenue for the government and improve access to water, electricity and other services for communities surrounding the mine, according to Miga.

"The insurance will cover the investment against the risks of transfer restriction, expropriation, and war and civil disturbance," said Miga in a statement describing the project.

'Dozens killed'

But critics charge that in preparing the land for mining, previous owners killed dozens of people and displaced tens of thousands of others, violated Tanzanian laws and constructed the mine in a manner that will cause extensive damage to the environment.

Tundu Lissu of the Lawyers Environmental Action Team told that his group has filed a legal complaint with the office of the ombudsman at Miga, charging that the $56m credit to the Canadian Barricks Mining Company for development of this mine violates several mandatory World Bank requirements for such projects.

The violations include forced relocation of Tanzanians without compensation or other assistance, the lack of any serious attempt to assess potential damage to the environment and a failure to approve the project with full transparency.

Miga has rejected these criticisms, but a World Bank official confirmed to this week that a complaint has been filed with the office of the independent ombudsman and accepted for investigation.

While cautioning that accepting a complaint for investigation does not constitute acceptance of the accuracy of the charges, this same official, who asked not to be named, said that the investigation of these charges has been largely completed and a final report on the accusations should be issued in May.

Financing for both the Bujagali and Bulyanhulu projects is going ahead. But Mr Wolfensohn may be about to get some answers to his questions about development effectiveness from within his own organisation.

AMP Section Name:World Financial Institutions
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