EIB prepared to dig deeper into troubled Ethiopian dam project warns new report

Serious question marks over the ongoing involvement of the European Investment Bank (EIB) in a hugely controversial Ethiopian dam complex have been raised by a report released today by Counter Balance. [1]

While the World Bank has publicly pulled out of funding for the USD 1.7 billion Gilgel Gibe III dam – currently Ethiopia’s largest planned infrastructure project – because of criminal proceedings in Italy hanging over the related Gilgel Gibe II dam [2], the EIB is eyeing a further multi-million euro loan for Gilgel Gibe III. The EIB previously loaned EUR 50 million for Gilgel Gibe II, being constructed by the Italian construction major Salini. Salini is also promoting Gilgel Gibe III alongside the Ethiopian government.

Caterina Amicucci, from the Campaign for the Reform of the World Bank and author of the report, said: “The dodgy tendering practices that have dogged the Gilgel Gibe complex from the beginning now finally seem to be having an effect within EIB corridors as there has been recent talk about the EIB only financing subcontracted activities related to the project. But this kind of chicanery doesn’t wash, especially for an EU body mandated to adhere to the EU’s policies.

“We look forward to further discussions with the EIB on how they reconcile any investment in this project, which numerous other international lenders including the World Bank have refused to back and which is currently under criminal investigation, with their obligations under the Cotonou Agreement.”

The Counter Balance report, focusing on the Gilgel Gibe I, II and III large hydro projects along the Omo river basin in southwestern Ethiopia and based on recent fieldwork in the area, also shows how goals to eradicate poverty and support local communities are most often compromised when major corporations and political elites are intent on maximising profits.

Anders Lustgarten, from the Bretton Woods Project, said: “The Cotonou Agreement may sound like an arcane piece of EU-speak, but with the potential human suffering that this new research details, it’s about time the EIB cottoned on to it. It’s a treaty that lays down the legal basis for the EU’s relationship with Africa, and under it the EIB is obliged to ensure that any work it supports in Africa helps to reduce poverty. Gibe III’s power will be fully exported to Kenya, and yet only 12 percent of Ethiopians are currently connected to the national grid. The EIB needs to stop being driven by European Industrial Benefit, and start adhering to EU-backed treaties like Cotonou. The word is getting out, and the EIB risks becoming a laughing stock.”

A range of other project controversies – including the impoverishment of Gibe I displaced communities, the projects’ non-compliance with national environmental regulations and the repression of any form of opposition to the Ethiopian government’s plans – are detailed in the new study, the first major report launched by ‘Counter Balance: Challenging the European Investment Bank.’

Notes for editors:

[1] The new report, “The Gilbel Gibe Affair: An analysis of the Gilbel Gibe hydroelectric projects in Ethiopia”, is available at the Bankwatch website.

[2] In March 2006, the Prosecutors’ Office in Rome instigated criminal proceedings concerning the biggest aid credit ever granted since the creation of the Italian development revolving fund: EUR 220 million for the Gilgel Gibe II dam project. The circumstances that lead to the approval of the loan by the Development Cooperation Directorate at the Italian Ministry of Foreign Affairs are unclear: both its own Technical Evaluation Unit and the Ministry of Finance expressed a negative opinion about the project. There is no technical evidence able to justify the approval of the loan. Further, SACE, the Italian export credit agency, refused a guarantee to the project pointing out the same criticisms.