On Jan. 13, Ethiopia's Prime Minister Meles Zenawi inaugurated the Gilgel Gibe 2 scheme, the country's biggest hydropower project. "It is possible to speed up development without polluting the environment," Zenawi proudly declared as he cut the ceremonial ribbon. Yet this was wishful thinking.
Due to shoddy preparation, the project had already been delayed by more than two years. And less than two weeks after the inauguration, the project's core component, a 26 kilometer-long tunnel, collapsed partly. Power generation had to be stopped for several months. Ethiopia's hydro sector demonstrates that there are not shortcuts to sound infrastructure development. Cutting corners does not "speed up development," but produces costly mistakes.
Gilgel Gibe 2 has a price tag of 374 million Euros and a capacity of 420 megawatts. The project works without a reservoir, but channels the water discharged from the Gilgel Gibe 1 Dam through a long tunnel and a steep drop directly to the valley of the Omo River. The undertaking was plagued by shoddy management from the beginning. In violation of Ethiopian law, the government negotiated the project contract with the Italian construction company Salini without competitive bidding. No-bid contracts for public works projects are a big red flag of corruption. The Gilgel Gibe deal was awarded without a feasibility study, and construction started without the legally required environmental permit.
In violation of Italian law and against the recommendation of its own evaluators, Italy's Ministry of Development Cooperation awarded 220 million Euros of aid money for Salini's no-bid contract. Gilgel Gibe 2 was "the biggest development fund released to a single project in the history of the Italian Cooperation," the Ministry says proudly. The European Investment Bank, which is notoriously weak in appraising power projects, contributed another 50 million Euros, and the Ethiopian government funded the remaining 104 million Euros.
Gilgel Gibe 2 was supposed to be completed in Dec. 2007. Yet the poor preparation soon took its toll. Deficient geological studies had overlooked sandy soils and aquifers in the rock. The tunnel boring equipment got stuck in the mud, and the engineers had to redesign the tunnel's path. As we heard, the aqueduct collapsed only 12 days after its inauguration, nine kilometers inside the mountain.
Who pays the price for such development failures? The dubiously negotiated contract for Gilgel Gibe 2 exempts Salini from geological risks, so the Ethiopian electricity consumers and tax payers ended up paying for the cost-overruns. Salini will certainly try to shift the blame for the tunnel collapse to Ethiopia once again. In the meantime, the country's poor remain without electricity, and the environment gets spoilt for nothing.
Italy's Campagna per la Riforma della Banca Mondiale has documented the numerous legal problems and shortcuts of the Gilgel Gibe 2 project in detail. The Campagna's Caterina Amicucci comments that aid projects like Gilgel Gibe 2 "not so much address a country's urgent development needs, but subsidizes a major Italian company." The Campagna and International Rivers have asked that the bill for the latest disaster be paid by Salini and not Ethiopia's taxpayers.
Gilgel Gibe 2's dodgy deal is the rule, not the exception in Ethiopia's hydropower sector. The contract for the slightly smaller Tekeze Dam was awarded in 2002, and power generation was supposed to start in 2007. Yet in this case, the ground on which the dam was being built was too weak -- a fact which a proper feasibility study would have found in advance. Landslides caused further delays, and the project was commissioned two years late in 2009.
The story doesn't end with Gilgel Gibe 2 and Tekeze. In July 2006, the government awarded a $2.1 billion contract for the Gibe 3 Dam -- its biggest infrastructure project ever -- to Salini through direct negotiations. Again there was no competitive bidding. Again project construction started without an Environmental Impact Assessment and an Economic, Financial and Technical Assessment. If built, the Gibe 3 Dam will devastate the fragile ecosystems of the Lower Omo Valley and Lake Turkana, on which 500,000 poor farmers, herders and fisherfolk rely for their livelihoods. Even though the project violates Ethiopian law and their own safeguard policies, the African Development Bank and the World Bank are currently considering support for the project.
Will the collapse of the Gilgel Gibe 2 be a wake-up call for the World Bank and the African Development Bank? Latest news indicates that the financiers, who refused to get involved in Gilgel Gibe 2, may yet shy away from the dodgy Gibe 3 deal. They know that their credibility is on the line.