MALAYSIA: Murum Dam – Public Funds for Corporate Profit?

By Anil Netto*

By end-2007, Sarawak Hidro, the Bakun Dam developer, had outstanding borrowings of 1 billion dollars from a state-managed workers’ pension fund and pension trust fund.

PENANG, Malaysia, Sep 27 (IPS) – Who will foot the bill for the Murum resettlement? ”Is it Sarawak Energy or will it be passed on directly to the state government and hence the tax payer,” asked one Sarawak-based activist, who declined to be identified.

In the case of Bakun, a dam in central Sarawak which is still under construction, compensation to indigenous people and resettlement cost the Sarawak and federal governments over 876 million ringgit (256 million dollars). ”But there are still Bakun residents who have not received compensation even though they left the Bakun area 10 years ago,” noted the Auditor General in his 2007 Annual Report.

Sarawak Energy Berhad (SEB), which is 65 percent owned by the Sarawak state government, will fund the dam. It was reported in June that SEB would issue bonds to finance the project.

SEB has been in negotiations with infrastructure firm Cahaya Mata Sarawak (CMS) and the multi-national Rio Tinto Alcan to supply 900-1,200MW of electricity to power a huge smelter. A power purchase agreement was supposed to have been signed by Aug 31, and there has been no news since.

Both CMS and Rio Tinto are in a consortium, the Sarawak Aluminium Company (Salco), to build the 2 billion dollar aluminium smelter with an initial annual capacity of 550,000 tonnes, which could later be expanded to 1.5 million tonnes. The smelter is located in the Similajau area of Sarawak, not far from the proposed Murum and Bakun dams.

CMS, a listed infrastructure firm controlled by Sarawak Chief Minister Taib Mahmud’s family, is a major producer and supplier of steel, cement and other construction materials in the state. Taib has been chief minister of Sarawak for more than 20 years.

According to the firm’s 2007 Annual Report, the substantial shareholders of CMS are the chief minister’s daughters Jamilah Hamidah and Hanifah Hajar, son-in-law Syed Ahmad Alwee Alsree, and family concern Majaharta Sdn Bhd, each with a 14 percent stake. Taib’s wife Lejla has an 11 percent stake while sons Sulaiman Abdul Rahman and Mahmud Abu Bekir own 9 percent each.

Taib’s brother-in-law, Aziz Husain, on the other hand, happens to be managing director of SEB. Rio Tinto Alcan, which has a 60 percent stake in Salco, owns bauxite mines, alumina refineries and aluminium smelters around the world.

Sarawak plans to lure such energy-hungry industries by providing an abundant supply of cheap electricity within the 320-km long Sarawak Corridor of Renewable Energy (Score), an economic development region, managed by the state, where abundant power would be supplied to energy-intensive private industries. Score, launched by Malaysian Prime Minister Abdullah Badawi in
February 2008, aims to tap into the state’s 20,000 Mw hydropower potential by building even more dams in the longer term.

Sarawak’s current installed capacity is just 980 Mw, adequate for its current needs of about 750 Mw, but it aims to expand its hydro capacity to 7,000 Mw or more over the longer term by building a string of dams along the various rivers in the state.

While smelters could create jobs and contribute to GDP, the funding for the dams required to supply cheap electricity will have to be raised by the state or borrowed from public pension funds (as in the case of Bakun). And while indigenous communities are displaced, many foreign workers will have to be brought in for the construction of the dams. And then there are the
environmental costs.

”Will that justify building Murum at a probable estimated cost of 3 billion ringgit, with likely cost overruns to 5 billion ringgits (1.5 billion dollars)?” asked a Sarawak-based academic, who declined to be identified. In the case of Bakun, ”cost over-runs of 708 million ringgit (207 million dollars) were approved by the Finance Ministry even though the contract was
for a fixed lump sum with all risks to be borne by the main contractor (a consortium of private Malaysian companies and China interests),’ ‘ chided the Auditor General in his report.

Sarawak Hidro, the Bakun Dam developer, has outstanding borrowings (as at end-2007) of 3.4 billion ringgit (1 billion dollars). It had received 3 billion ringgit (0.9 billion dollars) from a state-managed workers’ pension fund known as the Employees’ Provident Fund (EPF) in 2007 and 0.4 billion ringgit (0.1 billion dollars) from a state-owned pension trust fund in 2002.
The EPF loan is guaranteed by the federal government. The federal government had also allocated 1.8 billion ringgit (0.5 billion dollars) for the project between 1997 and 2004. Sarawak Hidro has already spent 4 billion ringgit (1.2 billion dollars) on the project.

So is Murum really necessary? ”For energy needs in Sarawak, we don’t need the Murum, because Bakun is more than enough to supply the state’s needs,” says Raymond Abin of the Borneo Resource Institute (Brimas). ”Of course, (much of) this will not go to the really rural areas but will supply industry’s needs.”

“The impression among many sceptics is that these are all self-serving projects,” said another senior academic in a Sarawak-based university, carefully weighing his words while requesting anonymity.

All these funds are not helping the most affected communities like the Penan. ”This is not development for the Penan. This is not assisting the Penan,” says Weng, a Penan whose home will be submerged. ”This is killing the Penan. As our old headman said before, better bomb us now than ‘kill’ us slowly!”

(*This is the second of a two-part feature on a dam in power surplus Sarawak that is being built with public funds for private gain.)

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