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World Bank Board Approves Panel Recommendation to Investigate in Uganda Kalagala Offset Case

The World Bank Board of Executive Directors on September 19, 2018, approved the Inspection Panel’s recommendation to investigate two projects related to the Kalagala Offset Area (KOA) in Uganda.

The Panel received two Requests for Inspection of the Private Power Generation (Bujagali) Project, the Water Management and Development Project (WMDP) and the Energy for Rural Transformation Phase III Project (ERT-III) in 2016. The complainants raise concerns about potential social and environmental harm caused by the construction of the Isimba Dam reservoir and the consequent flooding of the KOA. Although the World Bank is not financing construction of the dam, the Requesters claimed the flooding would undermine the management of protected natural resources in the KOA, a requirement of an Indemnity Agreement signed between the International Development Association and the government of Uganda as part of the Bujagali project.

Management has argued the Requests are ineligible on several grounds. It has stated the potential harm alleged by the Requesters does not stem from a Bank-supported project, but is related to the development of the Isimba project, which is not financed by the Bank and, as a result, cannot be subject to Panel review. Management also has contended that the Bujagali project is completed and, as such, not eligible for Panel review. It further has stated that the two other projects do not relate to the harm alleged in the Requests. Finally, management has stated the issues raised in these Requests were addressed in the Panel’s recommendation relating to prior requests in 2001 and 2007. 

The Panel on December 16, 2016, recommended to defer by up to one year its decision on whether an investigation of the three projects was warranted. The Panel stated deferring its decision would allow it to wait for the completion of the Environmental and Social Impact Assessment (ESIA) addendum that Bank management was preparing and follow-up actions by the Bank. On April 4, 2017, the Board approved the Panel’s recommendation to defer its decision regarding the WMDP and the ERT-III, but found that the Bujagali project was not eligible to be investigated because the project was closed.

In the intervening period, the Panel kept in contact with the Requesters and Bank management, and a Panel team visited Uganda on February 7-11, 2018. On May 3, 2018, the Panel submitted to the Board its Second Report and Recommendation that recommended an investigation of the alleged issues of harm and related potential non-compliance plausibly linked to the two projects. In making that recommendation, the Panel noted the importance of investigating the timing and adequacy of management’s actions in response to the government of Uganda’s decision to build the Isimba Dam, which threatens the integrity of the KOA in potential non-compliance with the Kalagala Offset Sustainable Management Plan under the WMDP. The Panel also noted that the timing, sequencing and adequacy of the ESIA addendum – financed under ERT-III with analysis of alternatives limited to Isimba Dam’s differing heights, reservoir levels and water level regimes – could constitute potential non-compliance with Bank Policies on Environmental Assessment and Natural Habitats, among others.

Following the Board’s approval, the Panel began working on its Investigation Plan.