US seeks strict scrutiny of World Bank lending to hydroelectric projects

External evaluation process to ascertain effectiveness of lendings recommended

 
By Soma Basu
Last Updated: Monday 17 August 2015

A fortnight after the United States Congress asked the US government and its agencies to oppose any financial or policy support to large dams, the government has now sought strict scrutiny of World Bank lending to hydroelectric projects by an independent agency.

The move comes after a consensus was reached between the US government and civil society groups that World Bank has failed to address issues related to displacement, forced resettlement and violence due to the projects it funded across the world.

The US congress resolution, Consolidated Appropriations Act, 2014, passed on January 13, reads: “The Secretary of the Treasury shall instruct the United States executive director of each international financial institution that it is the policy of the United States to oppose any loan, grant, strategy or policy of such institution to support the construction of any large hydroelectric dam (as defined in Dams and Development: A New Framework for Decision-Making, by World Commission on Dams (November 2000).”  The World Commission on Dams says that if dams are 5 to 15 metre high and have a reservoir volume of more than 3 million cube metre, they are also classified as large dams. Using this definition, there are over 45,000 large dams around the world.

The resolution also stated that the United States executive directors of the World Bank and the Inter-American Development Bank would now have to take steps to support implementation of the April 19, 2010 Reparations Plan for Damages Suffered by the Communities Affected by the Construction of the Chixoy Hydroelectric Dam in Guatemala in which 3,500 Maya community members were displaced and more than 400 Maya indigenous people were killed in massacres for protesting.

The World Bank has an internal accountability mechanism called Inspection Panel which is supposed to look into complaints brought against projects that are funded by the bank. If the panel in its detailed investigation finds anomaly in such projects, the World Bank could withdraw its funding from the project. It happened in the case of Sardar Sarovar Dam on the Narmada river in India. The World Bank was initially funding SSD, but withdrew in 1994 after widespread agitation.

However, senator Patrick Leahy, chairperson of the Senate appropriations subcommittee on foreign operations, who also authored the new provisions in the Act, sought independent evaluation of the effectiveness of the lendings. He proposed that World Bank should have stricter scrutiny into the large hydro projects and the concerns they raise by an organisation that is not internal but from outside. The resolution also approved bill to the tune of $1.55 billion for the World Bank’s concessional lending arm.

It may be noted that US is the biggest financial contributor to World Bank and other international financial institutions (IFIs) and has the biggest vote share in World Bank and other boards.
 
Peter Bosshard, policy director of International Rivers, says that the World Bank and other international financial institutions are free to ignore the position of the US executive directors. But the Leahy amendments recommend withholding US funding for the bank unless an outside evaluation process is established.
 


National register of large dams 2014

National register of large dams 2013

National register of large dams 2012

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