ON June 12, in his speech at the 6th Asia Oil and Gas Conference in Kuala Lumpur, the Prime Minister claimed that the opposition against hydropower by non-governmental organisations from rich countries is actually perpetuating the poverty of the people in poor countries by denying the latter greater economic development and a cheap supply of electricity. He also asserted that the alternative to hydropower would be fossil fuel, which is highly detrimental to global climate. In addition, the Premier also insinuated that local groups opposed to the Bakun Hydroelectric Project are instigated by their foreign counterparts, effectively reducing them to mere rebels without a clue. So here, we would like to set the record straight.

Let us get down to the basics as to why a project such as Bakun Hydroelectric Dam is opposed.

Myth 1: Malaysia is one of those poor, energy-starved countries.

Fact : the contrary

Table 11.6 from the Eighth Malaysian Plan 2001-2005 adequately details our energy needs and capacity from 1995 to 2005, without input from Bakun.

In 2005, Sabah will have an accumulated installed capacity of 880MW, while its *peak demand will only be 615MW. This means that by 2005 the state will have a **reserve margin of 43.1 percent. Sarawak in 2005 will have an accumulated installed capacity of 1046MW with a peak demand of 839MW. This means that the state by 2005 will have a reserve margin of 24.7 percent. Altogether, both states will be having an installed capacity of 1926MW with a peak demand of 1454MW, creating a reserve margin of 33 percent in 2005. This is a comfortable reserve margin.
Thus if Bakun is commissioned in 2006 and if we assume that the dam will be generating only 1,800 MW of electricity and not 2,400 MW as projected because hydroelectric dams do not usually succeed in producing electricity up to their target capacities and assuming that there are no plans for any other Independent Power Producers in both Sabah and Sarawak, the total accumulated capacity in East Malaysia by 2006 will be 3,726 MW.
If we allow for an 8 percent annual growth in peak demand between 2005 and 2006, the total peak demand for both Sarawak and Sabah in 2006 will only be around 1,570 MW, resulting in a reserve margin of 137 percent. If Bakun were to produce up to 2,400 MW, the reserve margin will actually be 175 percent.

Electricity once produced must be consumed immediately. If a nation spends RM8 billion to develop a product only to find that it is not able to sell the creation, enormous losses that could potentially jeopardise its economy are inevitable.

The only way we can fully utilise the excess power in East Malaysia as a result of Bakun is through a mindless form of industrial growth that will also give the industries the upperhand in determining the price of the energy sold.
Sending the excess power to Peninsula as originally planned in the 1990s will be pointless, as by 2005, Peninsular Malaysia will also be having a comfortable reserve margin of 35.4 percent. Furthermore, installing the 650 km-submarine cables will only increase the cost of the project by more than 100 percent and the construction of such lengthy undersea links will be burdened by issues of their security, maintenance, high levels of transmission loss and other complex and unpredictable engineering problems.

If there is ever such an urgent need for a huge increase in energy supply by 2006, whether in Peninsular or East Malaysia, which is doubtful anyway, it is certainly cheaper, faster and safer to build a new gas-fired plant, a tried and tested technology.

*Peak demand is the maximum power demand registered by the system in a stated period of time.

**Reserve margin equals accumulated capacity minus peak demand, divided by peak demand and multiplied by 100.

Myth 2 : Opposition to hydropower is actually perpetuating poverty

Fact : Bakun has already created new poverty among the relocated communities

To look at poverty we must first understand the mechanism of the distribution of wealth and ownership of the means of production. In societies where resources are equally shared and there is no monopoly on the means of production, people are not poor.

Mindless and monopolised development does not eliminate poverty. To eliminate poverty, a community must be empowered and be given access to natural resources and the means of economic production. Land is one such resource. In addition, the poor must also be left to make decisions on the development paths that they wish to take.
80 percent of the land where the Bakun Hydroelectric Project stands on belongs to 10,000 indigenous persons who had access to electricity, water, schools and clinics. Their farms, rivers and forests gave them food and a decent source of income.

However, Federal planners who assume they know better and who choose to deny the participation of communities in the decision-making process of their development plans are bound to doom the concerned people. This was what that happened to the Bakun-affected families.

Today the once self-sufficient community is facing hardship of unprecedented magnitude in their new homes in Sungai Asap.

The non-transparent resettlement process has created new poverty among the people because it deliberately pushed them into a cash economy with scarce job opportunities, inadequate and sometimes infertile and inaccessible farming land, little access to forest and river resources, no cheap modes of land transport and a debt of RM52,000 for their shoddy and small new houses. In fact, Sungai Asap does not even have a secondary school.

The communities today are pit against each other in their fight for more farming land; women and the elderly are losing their mobility and economic independence; many families are experiencing food shortages; some children have dropped out of school; and alcoholism along with incidences of theft have begun to trouble the communities.
So, where is the poverty-eliminating development?

Myth 3 : Bakun will contribute to economic development through greater industrialisation and export of excess power to neighbouring countries.

Fact : Bakun may literally risk what is left of the nation's financial strength

Bakun is said to cost only RM8 billion this time around and media reports have revealed that the money to finance the project will be raised via Islamic bonds issued by the Ministry of Finance's wholly owned subsidiary and will be guaranteed by the Government.

There are many issues that we need to question here.

Firstly, there is a very high probability that foreign investors are not going to be interested in financing the project given the fact that it is obviously lacking in economic viability. In the 1990s, foreign investors literally turned their back away from the dam resulting in the Sarawak State Government, Tenaga Nasional Berhad, Sarawak Electricity Supply Corporation and the Employees' Provident Fund, among others, having to fill in the equity of the Bakun Hydroelectric Corporation Berhad (BHC) - the company in charge of the operation of the project and in the process risking money which was not at all privately sourced out.

In the end due to the economic downturn, the Ministry of Finance had to take over the project and the Federal Government had to fork out a total of RM950 million to compensate the parties involved for works already done at the dam site.

Bearing this in mind, will the attempt to entirely raise RM8billion worth of money from the domestic market not cause a strain on our economy? Can the project yield a sufficiently large flow of funds within a short period of time? With our falling reserves, will the market take Bakun lightly? (According to Bank Negara, as of Feb 2001, we only have RM39 billion in total reserves.) With liquidity on a declining trend, domestic reserves alone may not be sufficient to absorb the proposed issues of bonds. Most importantly who will have the money to purchase the bonds?

Secondly, the country is certainly going to face adverse economic impacts if the project faces financial obstacles in the midst of its construction again. The fact that the dam has been already been shelved twice shows that Bakun cannot withstand the assault of an economic hiccup. In 1985, the crash in commodity prices smothered it within a year and amid our arrogance of newfound wealth in 1997, the currency depreciation shot it down within months.
Cost performance data in the World Commission on Dams' (WCD) Knowledge Base suggest that the average cost overrun of the 81 large dam projects included in its Cross-Check Survey was 56 percent. Even the medium sized Pak Mun Hydroelectric Dam in Thailand was saddled with a 68 percent cost overrun. Are we strong enough to absorb such unfortunate occurrences?

Thirdly, will the return of the project be good enough to compensate for the cost of raising the required capital? What if Bakun is slapped with huge technical problems after its completion, resulting in the dam generating an amount of power below its projected capacity?

One-fifth of the projects in the WCD sample achieve less than 75 percent of the planned power targets. Energy output of hydropower is often lower than initially estimated. Normal variations in weather, river flows and siltation dictate that virtually all hydroelectric projects will have year-to-year fluctuations in output. Eleven of India's largest reservoirs were filling with sediment 130 to 1,650 percent faster than expected - indeed, erosion can be very severe in the tropics.
Fourthly, as we have already argued above, there is no immediate demand for such an enormous increase in power supply in Malaysia. Thus if Bakun is commissioned, we are indeed going to face a lose-lose situation - if growth in power demand in the near future in East Malaysia fails to produce a consumption pattern that is able to utilise electricity from the dam at a maximum level, Bakun will certainly suffer huge losses. However, if we somehow, miraculously, are able to find enough industrial investors to fully consume electricity from Bakun, such a super rapid growth is unlikely to be sustainable and may create adverse environmental and social impacts that may also cost us dearly in the long run.

Finally, it is also unlikely that we are able to export excess power from Bakun to our neighbouring countries. Both Kalimantan and Brunei are well-known energy-rich zones.

Thus with all these statistics flying around, it is reasonable to believe that Bakun has a high potential to incur huge losses that may not be able to offset its oft-touted future benefits. Who will then bear these losses? Certainly it is not prudent nor ethical for a government to go ahead with such a risky and huge project that gambles a nation's economic stability.

Myth 4 : Hydroelectric power is green, renewable energy

Fact : Sunshine is free and renewable

Huge hydroelectric dams are not a sustainable source of green energy. Gross emissions of greenhouse gases (GHG) from reservoirs due to rotting vegetation and carbon inflows from the catchment areas may account for between 1 percent and 28 percent of the increase in global warming. All reservoirs emit GHGs and in some circumstances the gross emissions can possibly be even greater than the thermal alternatives.

In addition, dams also affect the river's downstream aquatic ecosystem and biodiversity. It is well-known that all over the world the modified habitats created by a dammed river, often create environments that are more conducive to non-native and exotic plant, fish, snail, insect, and animal species that can outcompete the native species. The ecosystem then may turn unstable, nurture disease vectors, or lose its ability to support the historical environmental and social components of the river.

Dams also reduce the downstream flow of water, sediment and nutrient replenishment to coastal deltas causing them to lose their fertility, affecting the natural productivity of riparian areas, floodplains, mangroves and deltas and can even cause coastal erosion, bank collapse and saline intrusion of the water table. Water quality parameters recover only slowly when water is released from a dam and while oxygen levels may recover within a kilometre or two, temperature changes may still exist 100 km downstream.

In addition, Bakun will also flood 1.5 million ha of land, 75 percent of which is primary forest. More than a hundred protected species, along with various gene pools of native crops will also be lost.

Granted that coal and oil are not at all sources of clean, renewable energy. However, we do actually have a way out.
It is estimated that there are only around 1,000 billion barrels of oil and 800 billion barrels of gas left in the world today. With our present mode of consumption, at an annual growth rate of 1.25 percent globally, the present fossil fuel reserves can only last for another 47 years, roughly the shelf life of Bakun.

While the fossil fuel industry today is more interested to pursue these sources to the last drop rather than begin to heavily invest and mass market renewable energies, governmental actions do make a difference.

In Denmark for instance, as early as 1980, its Government was already concerned enough to lay an energy plan that stipulated that by 2000, the country will generate 1,000MW of electricity from wind. With proper implementation and unflinching commitment, by 2000, the country was already producing some 2,000 MW of wind energy. Today its wind energy industry is a global force to be reckoned with and its energy cost per unit of wind power is the same as for new coal-fired power stations fitted with smoke scrubbers - about 20 sen.

Thus, whether we like it or not, 50 years from now Malaysia will have to switch to solar, wind or biomass for power and even allow rural areas to rely on mini hydro dams. Renewable energy advocates have pointed out that now is the perfect time to begin investing and developing renewable energy efforts. The transitional period must begin today, as even if we burn a quarter of the existing reserves of the world fossil fuel supply, severe climatic impacts will take place.

Thus, instead of investing in such a wasting and risky energy adventure, we should seize this moment to advance solar technology in this country. This is the perfect chance to break away from the monopoly of international energy billionaires whom we often blame every time the price of oil escalates -- by drawing an energy policy that seeks to utilise solar energy through sound planning and implementation of incentives for the offsetting of GHG emissions and low levels of consumption. To argue that Bakun is going to help us when the last drop of oil has been burnt is truly absurd as the dam by then will likely have reached its expiry date.

Contrary to popular belief, solar technology is here today. The reason it has yet to reach the masses is simply because the fossil fuel industry refuses to mass-produce it. It has been estimated that just over RM2.5 billion (RM6 billion cheaper than Bakun) could kick-start a self-sustaining solar energy market in cold, sunshine-deprived Europe. (It requires the installation of 1 million solar roofs or 2,000MW by 2010.) This would create 58,000 jobs and the cost spread across 10 years would equal the European Union's 15-month expenditure on fossil fuels.
The cost of solar photovoltaics has dropped 80 percent in the past two decades and another renewable technology - solar thermal systems, can already almost compete with conventional thermal in settings with high solar insolation levels.

Big money for big boys
All in the family - Cahya Mata Sarawak Berhad (CMSB)

THIS is one company that will almost certainly benefit from the Bakun Hydroelectric Project.
The CMSB group was originally a joint venture between the Sarawak State Government's Sarawak Economic Development Corporation (SEDC) and the Sabah State Government. It started as a monopoly of cement producer to feed the building booms in East Malaysia.

In 1989, the Sabah State Government sold its stake and the Sarawak State Government listed the company on the Kuala Lumpur Stock Exchange. At the same time, Sarawak's Chief Minister's brother, Datuk Onn bin Mahmud and the his two sons, Mahmud Abu Bekir Taib and Sulaiman Abdul Rahman Taib bought in.

Today, the Chief Minister's family owns about half the company and SEDC's equity has been diluted to about 8 percent. Datuk Haji Onn Bin Mahmud is the Group Chairman, Sulaiman Abdul Rahman Taib is the Acting Group Chief Executive Officer and Mahmud Abu Bekir Taib is the Group Executive.

The Group today has over 40 subsidiaries and is principally engaged in banking, finance and related activities, unit trust management, asset management and related services, stockbroking and related services, cement and steel manufacturing, construction and quarry operations, property development and property management and trading and transportation.

Its banking and financial services, stockbroking and building material units spearhead the groups in terms of earnings. In the financial year ended December 31, 2000, the Group's banking arm which includes Bank Utama, saw a pre-tax profit of RM96.54 million, just over half of the group's total pre-tax earnings. Its cement and steel manufacturing businesses brought in about RM43 million in pre-tax profits.

Whether or not the group will be part of the consortium that will receive the contract to build the main dam (the company has made known its interest to participate in the bidding process for the main dam via a consortium), its construction and building materials arm is likely to benefit as material supplier to the dam.
In fact, the Multimedia, Telecommunications and Energy Minister, Datuk Amar Leo Moggie has already stated that local companies will be favoured in the dam's construction.

CMSB is virtually Sarawak's sole cement producer - its subsidiary CMS Cement has two plants with 2.5 million tonnes combined annual capacity. One plant is situated in Bintulu, close to the project site. The Edge on May 28 reported that according to the company's officials, the Bintulu plant was built partly in anticipation of the Bakun dam project. The Edge further stated that estimates put cement demand for the project at 100,000 tonnes annually and if all of this is awarded to CMS, it will increase its cement sales volume by 11 percent.

Then there is also CMS Steel, which is involved in the manufacture and sale of steel bars and wire rods. Thus the subsidiary also stands a chance to benefit from the project as the dam will need some RM70 million worth of steel over the four years of if its construction.

Meanwhile, PPES Works, which does civil engineering contracting, along with the group's banking arm, Bank Utama, may also receive a piece of action.

Coffer dam for the coffer
GLOBAL Upline is the private company of Tan Sri Ting Pek Khiing, the Sarawakian tycoon who controls Ekran Berhad, the company that received the turnkey contract to the build the dam in 1994 in a condition of total opaqueness. Today Global is believed to have beaten three other short-listed candidates to build the RM80 million-coffer dam, the structure that will create a dry area at the project site so that the main dam can be built.
If you refresh your memory, you will remember that:

	In 1994, Ekran commenced their "preparatory works" at the dam site without an Environmental Impact Assessment (EIA) approval amid heavy criticism and this action was defended by the Science, Technology and Environment Minister of that time, of all people. Tan Sri Ting claimed that completion of preliminary works would help save much time and facilitate construction.
	In March 1995, at the Headquarters of the Department of Environment (DOE) in Kuala Lumpur, Tan Sri Ting announced that Part 1 of the EIA on the construction of the reservoir had been approved, in a manner that implied as if the approval was obtained from the DOE. Without public input or feedback, concerned groups maintained that the approval process had contravened the legal requirement for an EIA. The DOE Director General then had to come out and deny that the department had approved the EIA. It turned out that the Federal EIA Guidelines were amended by the Minister of Science, Technology and Environment Datuk Law Hieng Ding earlier in the same month, to transfer the authority for EIA approval for development projects in Sarawak which pertain to land, water, forestry, agriculture and other living and non-living resources from the DOE (at the federal level) to Sarawak Natural Resources and Environment Board (SNREB) at the state level. This amendment was to be backdated to Sept 1, 1994. Back in September 1994, Sarawak also enforced its own environmental law, namely the Sarawak Natural Resources and Environment (Prescribed Activities) Order 1994. According to the Environmental Quality Act 1974 and regulations made under it, the construction of hydroelectric dams is an activity that requires an EIA. The Federal EIA Guidelines in turn stipulate that the EIA process must receive public inputs. However unlike the Federal EIA Guidelines, the Sarawak EIA Guidelines enforced in September 1994 do not allow public participation in the EIA process unless the project proponent so desires. Ekran obviously did not desire for the Bakun EIA to incorporate public feedback and Part 1 of the EIA was not made public until four months after its approval. Even then the complete copies could only be found in Belaga, Kapit and Kuching and concerned groups would have to wait for a long time before copies of their orders arrived. Part 2 also relatively received the same fate and Part 3 cost RM150 a copy.
	Ekran also asked a management fee of a RM1 billion for Bakun and even the Prime Minister then was not happy with the requested amount.
	Four of Tan Sri Ting's listed firms - Wembley Industries Holdings, PWE Industries, Pacific Chemicals and Granite Industries, were appointed lead subcontractors for the project, securing contracts valued at RM4.5 billion, representing 40 percent of the engineering, procurement and construction works. Tan Sri Ting explained this was necessary to avoid Asea Brown Boveri (part of the company that formed the soon-to-be contracted developer consortium) having all "sorts of reasons not to give contracts to local companies".
	Just before the stock market plunged in 1997, Ekran was troubled by a hugely undersubscribed rights issue. The proceeds of the rights issue were to be used for its subscription of a rights issue in associate company Wembley Industries, for investment in Bakun Hydroelectric Corporation Berhad and as working capital. The rights issue was undersubscribed by 66.77 times, leaving Ting and his wife to mop up about 150 million shares that were not taken up with Ting having to fork out RM860 million from his personal coffers. Back then when a question was posed as to how he raised the money, Ting's reply was, "it is a personal matter. The important thing is that the money is in Ekran." But as it turned out later, external auditors Arthur Anderson qualified the company's accounts and raised concerns that the proceeds from the rights issue had been used without the Security Commission's approval. According to its 1998 annual report, the management of Ekran used the proceeds to repay loans, repurchase bonds, as working capital and make part payment to a director in relation to the proposed subscription of assets in two companies. The part payment to the director was a massive RM712.9 million. Back then many have already guessed that the director in question was Tan Sri Ting as the two companies that Ekran proposed to acquire were PWE and Granite. Ekran had in July 1997, among others, proposed to acquire Appleleaf Investments Ltd and Classic Gold Assets Ltd for a total of RM924.45 million. Appleleaf and Classic Gold had earlier entered into an agreement with Tan Sri Ting to acquire his 49 percent stake in PWE and 32 percent interest in Granite. In August 1999, Ekran was reprimanded and fined RM173,000 by the KLSE for failing to announce certain agreements and acquisitions which involved Appleleaf, Classic Gold and Tan Sri Ting; and its 60 per cent acquisition in Langkasuka Marine Development for RM300 million cash and a 100 per cent stake in Skylark Jaya for RM135 million.
	Before that, in April 1999, Ekran was also publicly reprimanded and imposed a fine of RM84,000 for breaching Section 335(4)(b)(iv) of the Kuala Lumpur Stock Exchange (KLSE) Main Board Listing Requirements (MBLR). The company failed to make an immediate announcement to the KLSE for public release in respect of the lapse of a share sale agreement in relation to the proposed disposal of its investments in Wembley Industries Holdings.