Giant dam postponed indefinitely.

• Author: Roodman, David Malin
• Position: Malaysia's proposed Bakun dam

Amid deepening chaos in Malaysia's financial markets, Prime Minister Mahathir Mohamad announced in September that he had indefinitely postponed several megaprojects, most prominently the Bakun dam, which he had once strongly supported. The dam, planned for the state of Sarawak on Borneo, was to have been completed in 2003. But last summer, Malaysia's stock market fell 40 percent, extinguishing already-weak investor appetite for the dam, while the nation's currency sank 20 percent against the U.S. dollar, prohibitively raising the project's cost. The "indefinite postponement" effectively cancels the dam in its current incarnation as a business project.

As with similar projects elsewhere, Bakun has provoked an outcry from environmental and human-rights groups, both domestic and foreign (see Environmental Intelligence, July/August 1996). If it were to be built, it would soar 204 meters, higher than any other dam in Southeast Asia, and flood an area as big as Singapore that is currently inhabited by 9,400 indigenous people and dozens of endangered species.

The Prime Minister apparently sees Bakun as a victim of an anti-Malaysia conspiracy among environmental and human rights groups and Western currency speculators. "Well, the people who don't want it to be completed by year 2003, I congratulate them because they have managed to achieve the goal by making us poorer now by 20 percent," Mahathir said.

Independent financial analysts, however, see problems closer to home behind the cancelation. Mahathir had awarded the contract to build the dam, without public or competitive bidding, to Ekran, a company controlled by his friend, tycoon Tan Sri Ting Pek Khiing. But ironically, the project also contained a feature that gave it a degree of accountability nearly unique among big dams: 25 percent of the capital was to come from private investors. Bakun therefore had to make business sense, unlike many government megaprojects, in order to attract investors.

In June 1996, the national electric utility contracted to buy Bakun power for a price higher than it pays any other power producer - despite Malaysia's 50 percent generating capacity surplus. Ekran claimed the contract would have given investors the equivalent of an 11.5 percent return. (Most Asian infrastructure projects yield at least 16 percent.) The next month, British consulting company Delphi International grabbed business headlines outside Malaysia by calling even Ekran's projection optimistic...