From The Business Times, Singapore 22nd January 2001

They say full-scale dam is unaffordable and unnecessary; cost may hit RM20b

WITH the economy bouncing back strongly from recession, Prime Minister Mahathir Mohamad's government is about to revive Malaysia's most controversial mega-project.

But it has kept everyone guessing on whether it will resurrect the full-scale version of the Bakun hydroelectric dam, at an estimated cost of RM15 billion (S$6.8 billion), or build a smaller version. Finance Minister Daim Zainuddin said last week the Economic Planning Unit was still studying the issue.

He denied a report it had already called for bids to revive the full-size version in Sarawak state on Borneo island.Mr Daim: denies that govt has already called for bids to revive the full-size version

Environmentalists and some analysts say the original 2,400 megawatt scheme -- involving flooding an area the size of Singapore and laying the world's longest undersea power cables -- is unaffordable and unnecessary. "It is a megalomaniac's dream. It will be the most unjustifiable dam in the world," said veteran anti-dam campaigner Kua Kia Soong.

With the ringgit pegged at 3.80 to the US dollar compared to 2.50 before Asia's economic crisis, opponents say the cost could soar to about RM20 billion.

The dam has been deeply controversial since it was mooted in the early 1980s to tap the hydropower resources of the Rejang River.

After suspending the project during the 1985 recession, the government gave the go-ahead in 1993 to developer Ekran Bhd.

Ekran's plan involved clearing 69,000 hectares of forest, displacing some 10,000 tribal residents and laying cables stretching 670 kilometres to supply power to peninsular Malaysia.

The High Court in June 1996 declared the project illegal for contravening environmental laws following a suit by a group of natives, but the ruling was quashed by the Appeal Court.

In late 1997 Ekran terminated a contract with a consortium led by Swiss-based Asea Brown Boveri after problems emerged.

By then the economic crisis was already biting and the mammoth project was again deferred. In November 1997 the finance ministry took it over from Ekran which received nearly RM1 billion in compensation.

National power firm Tenaga Nasional was made project manager. It later recommended a smaller dam producing 500 megawatts to cater just to Borneo island at a cost of around RM5 billion.

Much preparatory work is already done, including the relocation of the tribal people.

Korea's Dong Ah Construction Industrial is due by April to complete tunnels to divert river water behind a proposed 205-metre-high dam. The Malaysian Business Times last week said the government may go ahead with its original plan and was likely to fund the project via bond markets.

In an editorial, it said the project could lead to spin-offs especially in technology transfer for the manufacture of the cables and future power exports.

But Chan Eu Ky, analyst with Dresdner Kleinwort Benson Research, said it did not make economic sense to build such a large dam. Hydroelectricity may be cheaper but the start-up capital was much more expensive, he said. High transmission loss would occur in transferring power to the peninsula.

"We don't need it. A 500-megawatt dam is justifiable to supply to east Malaysia and even Brunei but at full scale Bakun will be a luxury -- not a necessity," he told AFP.

Pankaj Kumar, senior analyst with OSK Research, said Bakun could help meet long-term power needs but it was more feasible to begin with a 500-megawatt dam that could be upgraded later.

National power demand stood at around 10,000 megawatts last year and is growing by 10 per cent annually, he said. Gurmit Singh, adviser to the Environment Protection Society of Malaysia, said it would be "very foolish and quite irresponsible" to push ahead with the original proposal.

A smaller scheme would flood a smaller area, minimising environmental and social problems. -- AFP