17 November 2000
WCD reports on $40 Billion Industry at UNEP Finance Initiatives Conference, Frankfurt

FRANKFURT, November 17 -- After more than two years spent listening to people who had never before been heard, examining evidence which had never before been documented, and learning from all diverse interests and stakeholders who had never before worked together, the World Commission on Dams has begun to speak.

The WCD was established by all constituents in response to escalating conflicts over the role of dams in development. Its authority came through a diverse Commission at every level, and an inclusive, transparent and participatory work programme in which it conducted an independent comprehensive global review to help turn dam controversies of the past into development consensus for the future through a new framework, criteria and guidelines.

In many countries, dams have often played a pivotal - and controversial - role in public investment programs in industrialised and developing regions. In many countries, very large dams often constitute one of the single largest infrastructure projects. Amongst the WCD Case Study dams were the Tucuruí dam in Brazil (total cost of $5.5 billion in 1998 prices), Tarbela Dam in Pakistan ($8.8 billion) and the Grand Coulee Dam/Columbia Basin Project ($9.2 billion).

The WCD Thematic Review on Trends in the Financing of Water and Energy Resources Projects estimates that current annual global investment in dams is around $40 billion per year and that at least $2 trillion have been spent building 45,000 large dams this century. At present, the donor community appears to be providing only around $2.1 billion a year (on average) for dam related projects (i.e. about 8% of total dam finance). This compares with peak levels of financial assistance that reached over $4 billion (in 1998 prices) during the late 1970s and early 1980s.

During the 1990s, dramatic changes occurred in the manner infrastructure facilities in the developing world are financed, built and operated. Strapped for financial resources and realizing that infrastructure bottlenecks hampered economic growth, governments started to change their roles from service providers to regulators and facilitators of private investments. Thus, there is now a global trend towards liberalization and greater reliance on market forces and competition as a way of improving the quality of infrastructure services while lowering the cost to the consumers. New entrants are being allowed in areas previously reserved for the public sector. The monolithic state owned utilities are being "unbundled" and privatised.

Companies from both industrialised and developing countries have responded rapidly to the new opportunities and have invested heavily in both greenfield projects and in buying and improving privatised utilities. Commercial lenders have adapted the "project finance" model previously reserved for foreign exchange earning mining and hydrocarbon projects to fit projects getting their revenues in local currencies. Private investments in infrastructure projects increased eight-fold from 1990 to reach $120 billion in 1997. For the decade as a whole, private infrastructure investments in developing countries were close to $600 billion.

Estimates are that globally 2 billion people are without electricity, 1 billion people lack access to clean water and 800 million people are undernourished. Developing countries face large needs in the coming years, needs that will require finance - whether the money ultimately goes to build dams or alternatives. However, the changing face of infrastructure finance means that the traditional lenders - the aid agencies and multilateral development banks - are reducing their participation to such projects. Where this finance will come from and what strings will be attached is one of the central issues facing the developing world.

Experience from the 1990s shows that the participation of Export Credit Agencies (ECAs) in dam projects has boomed - though mostly with respect to hydropower projects where imported generating equipment may come to 30% of total investment costs. Based on fragmented data from a few agencies and considering the needs of imported equipment, the WCD Thematic Review paper suggests that the ECAs annually provide almost $1.5 billion for various types of dams in developing countries.

Private sector investments in the energy sector also grew exponentially in the 1990s. Recent evidence suggest that hydropower has indeed participated but proportionately less so than power projects based on fossil fuel. The results of a recent analysis as presented in the WCD Review Paper document that of $69 billion in greenfield (i.e. new sites) power projects reaching financial closure between 1994 and 2000, 9% or some $6.2 billion were hydropower projects. Measured in terms of power capacity the participation of hydropower was 6%. While higher than previous estimates made for earlier time periods in the 1990s this figure demonstrates that hydropower's share in new investment is falling - existing hydropower capacity being 19% of global electric power capacity. This may reflect the view that hydropower is as a risky investment for private capital due to the rise of controversy and conflict caused by such projects' social and environmental impacts - a theme investigated thoroughly in the Commission's Final Report and reflected in the strategic priorities and criteria and guidelines that the report puts forward for consideration and adoption by all stakeholders in this sector.

Upon launching its Final Report in London, WCD Commissioners and Senior staff will embark on a world-wide tour to present what WCD has learned, what it means to each region, group, agency or association, and how to adopt, adapt or implement its recommendations.

"As our journey ends, the real work of translation into action begins," said WCD Chair Kader Asmal. "We have fulfilled our mandate. We have carried out an ambitious work programme to help governments meet the needs of their thirsty constituents without exhausting the waters that sustain us all. We have learned hard lessons from the past, listened to voices hitherto unheard, and offered a new framework for decision making. The rest is up to you."

WHO: WCD Commissioner Deborah Moore & Senior Secretariat Staff
WHAT: Presentation of Final Report "Dams and Development" to UNEP Finance Initiatives Annual Conference entitled "Globalisation and Sustainable Development"
WHEN: 0830 to 1000 as part of plenary session on Friday 17th November 2000
WHERE: Hermann Josef Abs Saal, Junhofstrasse 11, 60311 Frankfurt
HOW: To attend contact organisers at etu@unep.ch or WCD Secretariat at baylward@dams.org