Controversy Flows Around Malaysian Dam Project 
International Herald Tribune
May 16, 1995
Michael Richardson 

Imagine Southeast Asia's largest hydro-electric power project with a concrete retaining wall about twice as high as the Aswan dam in Egypt and a water reservoir, in what is now dense jungle, that will cover an area bigger than the size of Singapore.

For Mahathir Mohamad, Malaysia's prime minister, the Bakun hydropower project in the remote heart of the state of Sarawak is a milestone in an ambitious progam to make his country a fully developed industrial nation by 2020.

"This is a project whose time has come," he declared when announcing the award this year of a contract to Ekran Bhd., a Malaysian company with interests in construction, cables, timber, hotels and property development, to build Bakun at a cost of 15 billion ringgit ($6 billion)

A couple of years ago, industries in peninsular Malaysia were hit by power shortages, temporarily undermining business and investment confidence. The government is determined that won't happen again.

Felling of trees recently began in the Bakun reservoir area, which is several hundred kilometers up the Rajang River. Ekran plans to cut 17,000 hectares (42,000 acres) of rain forest this year, using the timber to pay for development work.

The dam was first proposed in the mid-1980s, but was shelved because of recession.

Malaysia's cabinet approved the dam in September despite environmental protests and doubts about its economic viability.

S. Samy Vellu, the energy minister, said that the project was justified by the country's soaring energy demand. Now at 14,000 Megawatts, national demand is forecast to reach 30,000 MW by 2020.

Bakun will generate 2,400 MW of electricity, enough to supply between 20 percent and 25 percent of Malaysia's projected consumption in 2002.

But only a small part of Bakun's power will go to Sarawak and the neighboring state of Sabah. Most will be sent to major industrial centers in peninsular Malaysia via cables stretching for nearly 650 kilometers beneath the South China Sea.

Ekran estimates that power losses during transmission can be kept to 7.5 percent by using the latest technology. But other energy analysts say wastage will average 10 percent and could be as high as 20 percent.

The government dismisses criticism that Malaysia should rely on its own oil and gas for power generation, arguing instead that these non-renewable resources should be used for other purposes, including exports.

"Harnessing our vast hydro resources will enable our country to switch from depleting to renewable energy resources," Mr. Mahathir said.

"The long-term positive impacts of hydropower projects in reducing global greenhouse gas emissions from burning fossil fuels far outweigh the ecological impacts."

Nonetheless, a number of Malaysian and foreign environmental groups continue to oppose the Bakun plan. They maintain it is an unnecessary and excessively expensive project that will seriously damage the environment of Sarawak and displace nearly 8,000 indigenous jungle dwellers without adequate compensation.

The dam will have "tremendous effects on the lives of natives, plants and animals, and biodiversity of the pristine forests where it is going to be built," said Chee Yoke Lin, secretary of the Friends of the Earth Malaysia group.

Gurmit Singh, president of the Environmental Protection Society of Malaysia, said he doubted whether the venture would provide sustainable development in Sarawak and feared it would be "yet another one of the mega-projects undertaken with little consideration of environmental quality."

Ekran's executive chairman, Ting Pek Khiing, who has impressed Mr. Mahathir by his ability to complete large turnkey construction projects on or ahead of time and within budget, said that natives living in the Bakun development zone would be resettled and given jobs at logging sites and timber factories, which will process logs cleared from the dam site, and that the natural habitat would be preserved as much as possible.

"We will also make sure that in constructing the Bakun project, the natural habitat is preserved as much as possible," he added, without giving details.

Abdul Taib Mahmud, Sarawak's chief minister — whose two sons are major shareholders in Ekran — has also promised that those displaced by the dam will be given help.

The suspicions of Bakun's critics have been intensified by a government decision to accept the environmental impact assessment commissioned by the company in three stages.

Part one, on the tree felling and reservoir construction, has already been approved. Parts two and three, dealing with the dam and the cable that will carry power from Sarawak to peninsular Malaysia, aren't finished.

"What if after the reservoir has been completed, the environmental impact assessment report for the dam is rejected?" asked S.M. Mohamed Idris, president of Friends of the Earth Malaysia. "They are part and parcel of the same project and should be looked at as one."

Financial arrangements for the Bakun project and the price at which its electricity will be sold to the national grid remain to be negotiated.

Although billed as Malaysia's largest private infrastructure project, Bakun could not go ahead without strong government backing. Private banks would not normally lend to such a venture, which has a very high capital cost and a slow payback time.

But Mr. Ting of Ekran insists that a basic understanding is already in place on the financial package to pay for the dam. He said that a large portion of the money will be lent by the state-run Employees Provident Fund, Malaysia's compulsory pension program. The balance would come from banks.

Anwar Ibrahim, the deputy prime minister and finance minister who heads a special cabinet committee on the Bakun dam, said that Ekran and the Sarawak state government together will hold a 51 percent stake in the project.

He said that the remaining equity would be split between the Employees Provident Fund, Tenaga Nasional Bhd., the national electricity company, and Hicom Bhd, a government-controlled industrial investment firm.

MICHAEL RICHARDSON is editor for Asia of the International Herald Tribune.

Copyright © 2006 The International Herald Tribune