Malaysia Ponders What to Do with a White Elephant

Cancellation of an aluminum smelter leaves the Bakun Dam with no reason to exist

Asia Sentinel 

The recent decision recently by Rio Tinto Alcan to pull out of a US$2 billion aluminum smelter project next to the Bakun Dam in Sarawak ends a five-year campaign to find something – anything – to do with the 2,400 megawatts of power generated by the mammoth dam, one of the cherished mega-projects of former Prime Minister Mahathir Mohamad.

The cancellation, over how much to charge for the dam’s power, leaves both the Malaysian government and the state government in Sarawak stumbling around with vast amounts of generated power and nothing to use it for.

Negotiations had been underway since 2007 for the construction of the smelter. In a prepared news release, Rio Tinto Alcan chief executive officer Jacynthe Côté said that “while a great deal of progress was made in negotiations with Sarawak Energy Berhad, agreement on a long- term competitive power supply contract could not be reached.”

“We have built solid relationships with the government and our stakeholders in Sarawak and more broadly in Malaysia and we thank them for their support. Looking into the future, we remain interested in development opportunities that may arise within the state and the country,” Côté said.

The decision by the Australia-based mining company to pull out is the latest blow in a saga that has gone on since the early 1980s, over a facility that Transparency International has called a “monument to corruption.” 

The dam, said to be the largest rock-and-gravel filled dam on earth, blocks the upper reaches of the Rajang River, standing as a white elephant on a global scale. The common wisdom is that it was developed so that Chief Minister Taib Mahmud could use it as an excuse to log the 23,000 hectares of virgin rainforest in the dam watershed and deliver the timber into the hands of timber barons. The Sarawak government is said to be planning another half-dozen dams to create even more unusable power. Environmentalists say the only reason for the dams is to provide an excuse to log off the watershed.

As there was no competitive bidding for the RM15 billion contract to build the dam in the first place, there was no competitive bidding over the plan to build the smelter. Cahya Mata Sarawak (CMS), a company connected to the Taib famly and which owns 40 percent of the Sarawak Aluminium Company (SALCO) smelter development, announced the termination in late March in a filing with the Malaysian stock exchange, to the jubilation of environmentalists. 

“There is no market for the power,” Ame Trandem, the regional head of the International Rivers NGO, told Asia Sentinel. “They have resettled 10,000 people, it has had a devastating impact on the area and the people who live there. There is no market for the electricity.” 

Former Prime Minister Ahmad Abdullah Badawi tried to cancel the project when he followed Mahathir into office, but was unable to do so, part of the eternal enmity he earned from Mahathir, who worked tirelessly to drive him from office. When Badawi came to power in 2003 as Malaysia’s prime minister, he told delegates to the 57th United Malays National Organization’s 57th general assembly that he would turn away from Mahathir’s economic strategies. “That era is over,” he told the delegates. It was soon Badawi’s era that was over.

Barry Wain. In his definitive history of Mahathr’s political career, “Malaysian Maverick: Mahathir Mohamad in Turbulent Times (Palgrave McMillan, US$88 from Amazon), estimated that Mahathir may well have wasted or burned up as much as RM100 billion (US$40 billion at earlier exchange rates when the projects were active) on grandiose projects and the corruption that that the projects engendered as he sought to turn Malaysia into an industrialized state. That includes the ill-fated Perwaja Steel project, which is estimated to have lost US$800 million before it was shut down; the Proton national car, which continues to bleed money, and many more.