Friday, August 27, 2010

Gibe 3: AfDB, EIB out. Who's in?

Gibe 3: AfDB, EIB out. Who's in?
Fri, 08/27/2010 - 12:24pm
By: Terri Hathaway

Ethiopia's Gibe 3 Dam remains the most destructive dam being built
today. According to the official project website, Ethiopia plans to pay
$572 million (448m Euros) from their own pockets. But the rest of the
dam's $2 billion (1.55b Euros) price tag remains unfunded. Which banks
are being chased to fund this highly destructive dam? Here's the rundown:

Development Banks Out.

Earlier this month, the African Development Bank officially withdrew its
funding consideration, as did the European Investment Bank in July. Both
AfDB and EIB had been considering loans for a sub-contract to finance
the dam's turbines and electro-mechanical works. Why a sub-contract?
Because the project's lucrative, no-bid contract with Italian
construction giant, Salini, violates international procurement standards.

The World Bank has told NGOs that, at this time, they are not
considering any support for Gibe 3 Dam. Discussions are indefinitely
halted after a high-ranking Ethiopian official allegedly told the Bank
it could "go to hell" over its indigenous peoples safeguard policy. The
World Bank previously said that Gibe 3's no-bid contract to Salini
violates the Bank's procurement policy, so there's no chance of a
project loan, but the Bank could still give project guarantees. If
tempers calm down, could the Bank jump back in, undermining its
development goals and policies?

China and Italy In?

In May, the Ethiopian government gave the sub-contract to Chinese
company, Dongfang Electric Corporation, and is looking to China's
largest bank, ICBC, for roughly $425 million (85%) of the $500 million
sub-contract. Kenya's Friends of Lake Turkana, BankTrack and
International Rivers immediately called on ICBC to stay out of the
project. "Funding the Gibe 3 Project would seriously damage ICBC's
reputation as a diligent, environmentally responsible bank." No official
word yet whether ICBC has approved the loan, but many eyes are watching
this test case for China's role in Africa. We remain hopeful that ICBC
will follow JP MorganChase, which in 2008, reportedly considered, but
did not approve, a similar size loan.

In July 2009, Ethiopia awarded a sub-contract to Chinese company TBEA,
for the transmission line between the dam and the Wolaita substation.
Roughly $29 million (85%) of the $34 million contract was expected to be
financed by China Exim Bank, although there is no confirmation that
funding has since been approved.

The Government of Italy is still undecided on a project loan of 250
million Euros (roughly $318m). In June, Italian NGOs demonstrated
against Italian involvement in the destructive project. Maybe the
government should follow the lead of its export credit agency, SACE,
which in 2008, refused a request by the no-bid contractor, Salini, to
support the project.

Ethiopia can develop its power sector and meet its development goals
without Gibe 3.

ICBC, Italy and World Bank should focus their investments away from Gibe
3 to power development projects in Ethiopia that won't cause widespread
harm. But, even if these loans are approved, there's still a gap of at
least $600 million, not to mention cost overruns. What other banks is
the Ethiopian government going to chase?

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