Thailand's Klong Dan Waste-Water Treatment Plant a $750 Million Fiasco by Phairath Khampha 18 May 2002 Certain politicians in Thailand urged the government to scrap the controversial Asian Development Bank-financed Klong Dan waste-water treatment plant because of all the huge social problems it would create and because there was plenty of evidence of corrupt practices associated with the design and construction tender process. It was meant to be a US$750 million environmental project, cleaning up polluted canals in Thailand's industrial heartland. But the waste-water treatment plant in Samut Prakan province turned into a public relations nightmare for the ADB, which came under fire from both its biggest shareholders and the people it said it was supposedly trying to help. It only served to show the hypocrisy surrounding the ADB's supposed poverty alleviation and supposed demands for transparency in the projects it finances. The wastewater facility in Samut Prakan won the dubious honour of becoming one of Thailand's most expensive ``white elephants''. Senator Charoon Youngpraphakorn urged the Thai government cabinet to scrap the Klong Dan waste-water treatment project, claiming it was riddled with corruption. Prime Minister Thaksin Shinawatra should not waste time with another committee examining the project because there was already plenty of evidence of irregularities, the Samut Prakan senator said. Finance ministers from the developed world and Thai villagers on May 12, 2002 spoke with one voice in slamming the ADB-funded water treatment plant, saying it dumps toxins on mussel farms, making the seafood dangerous to eat and near impossible to sell. "The prime minister should have received all information from his inspection tour to the site last Thursday (May 2, 2002). He should make a quick decision and I think he has it in his mind because the Senate environmental committee and his fact-finding committee have already examined the project and sent him their reports," Mr Charoon said. Irregularities started with the land acquisition wherein corrupt senior officials in effect stole the land on which the treament plant was to be built from poor, ignorant land-owners, changes in the treatment system requiring a bigger plot of land, procurement of pipes, substandard construction, and specifications changed to favour the contractor, who had been paying bribes to the officers responsible for the project and procurements. The site in tambon Klong Dan of Bang Bo district, Samut Prakan, was not one of the 13 locations urged by the project's consultant. A former provincial governor had conspired with the Town and Country Planning Department to illegally change the Klong Dan site from an agricultural zone to an industrial one to permit construction, Mr Charoon said. Samut Prakan people had complained to the former Counter Corruption Commission, now the National Counter Corruption Commission, but ministers were more interested in the views of the Pollution Control Department, the project's owner, because they wanted the project to go ahead regardless of the the people's complaints as they, too, had their hand in the till. The construction contract expired on February 26 but was simply illegally extended for another eight months. The Senate environmental committee had studied the project and asked the government to suspend it. The request was ignored, he said. "I will make it clear that the project will damage the nation. It will be a loss-maker from the first day. How could a project be designed to pump more than 500,000 cubic metres of water over 125 kilometres a day? "That will mean a daily power cost of two million to three million baht," Mr Charoon said. "Who was the engineer and why did they behave so unprofessionally in not bringing this fact to light." The ADB, after some soul-searching, said it needed to make itself more responsive--and accountable--to the people who get its aid. "A deplorable experience," Austrian Finance Minister Karl-Heinz Gasser said of the plant in his speech to the ADB's annual meeting in Shanghai. Delegates from Canada, Australia and Britain, key contributors to the bank's funds, all mentioned the waste-water project in speeches to the ADB's annual meeting that typically give a bland economic overview. Activists said the plant removes many pollutants from the mouth of the Chao Phraya river but not dangerous heavy metals, which were dumped on nearby mussel farms. The Manila-based lender changed the location and budget of the plant without asking residents how they would be affected, they say. But the ADB says it funded $230 million of the plant on the belief that it would help improve the lives of 600,000 people nearby. "You'd think we were talking about two different projects," said Rajat Nag, director of the ADB's Mekong Department. Residents of Klong Dan, the most affected village, complained that the project was originally meant to be two treatment plants and the environmental impact study had been made with the two plants in mind. They asked for an internal review--a first for the Manila-based bank--that took two years to complete and found that the ADB had been at fault on several counts despite all its self-important claims its activities aimed at meeting the needs of the little people, poverty alleviation, and demands of transparency in the projects in funds. Klong Dan residents say even the review process in fact was opaque with clear indication that ADB officials would rather satisfy corrupt Thai officials, and with documents in English and obscured with so much foreign aid and development jargon that they did not know what was going on. "The ADB doesn't listen to us," Dawan Chantarahussadee, a resident of Klong Dan, said in Shanghai. "The ADB should visit sites. Talk and listen to people. But nothing happened. Most of their people cannot even speak the local languages, or if they do, they are officials native to those countries and who would rather rub shoulders with the countries' officials and listen to them as if we were poor, ignorant commoners." Although the plant would go ahead in its current location, the ADB's contributors and its staff said the project taught them some painful lessons. "We took too technical a view... We should have taken a broader view of who is affected," Mr Nag said. Even normally reserved ADB president Tadao Chino called Samut Prakan a "learning experience" in a veiled reference to the project in his speech at the meeting's opening ceremony. The bank suggested setting up an ombudsman-type office, allowing outsiders a chance to complain or ask for a review of lending practices. No changes to policy had yet been made. But activists said development projects need to be started with input from villagers, not just economists and experts who at best quickly view the situation on the ground from air-conditioned cars. "Whose reality prevails, the technical expert ignorant of real conditions or the villager who has to live in those conditions?" said Maetet Pascual of the NGO Forum on ADB, a bank watchdog. "The only way the technical expert can learn is to live and chat with the villagers in their village for up to several weeks, perhaps months. It is the only way." There is more waste than just water The Klong Dan wastewater facility in Samut Prakan won the dubious honour of becoming one of Thailand's most expensive ``white elephants''. The multi-billion-baht treatment plant has been opposed by local people and rejected by many of the industries it was intended to serve almost from its inception as the germ of an idea. Now it seemed, although work was 90% complete and the plant was expected to be ready to open by the end of 2002, that it might never enter operation. The residents of Klong Dan had every right to oppose this project. The owner, the Pollution Control Department, never conducted an environmental impact assessment study. It reasoned that this was unnecessary as the project was not supposed threaten the surrounding environment and, in fact, would bring an end to the discharge of pollutants by factories in the province. The locals said the plant could deprive them of their way of life by killing off the natural resources on which they made a living. And the government officials and politicians certainly wanted the project to go ahead because the would enrich themselves immensely from the contractors' kickbacks. This was another issue that brought about the popular opposition to the plant. Prime Minister Thaksin Shinawatra accepted the villagers' arguments. He was clearly impressed during a visit to the plant site by the pristine nature of the existing community and the richness of the marine life which would be put at risk by the discharge of the treated wastewater. A fact-finding committee appointed by the prime minister also concluded that the project had been burdened by irregularities and corruption at all stages of its development--ranging from the calling of tenders to land acquisition, the drafting of the contracts and payment reimbursement. The committee found serious fault with the Pollution Control Department. Not only did it not conduct the environmental impact assessment, it moved the project to Klong Dan from Bang Pla Kod and Bang Pu, which resulted in a "designed" cost overrun estimated at 5.4 billion baht due to the need for a 30km pipeline. It also changed the treatment system from the Aerated Lagoon type to the Extended Aeration Activated Sludge method without negotiating with the contractor for a reduction in the site needed to 600 rai from 1,900 rai. This added another totally unnecessary 1.3 billion baht to the cost to be borne by the state, the difference which was pocketed by the corrupt officials and politicians connected to the project. The Pollution Control Department was not the only one at fault in this matter however. The management of the Asian Development Bank, the project's biggest creditor, also must share some of the blame for this foul-up, according to the bank's own independent inspection team. It found the management had not observed the bank's good governance and project evaluation and monitoring policies nor its environmental guidelines because many of the Bank's officials also had vested interests in seeing the project go ahead. The Klong Dan wastewater treatment plant can be compared to an unwanted baby. Its presence cannot be ignored; it demands attention, no matter how deeply the concerned parties regret bringing it into this world. The project cannot simply be abandoned, as suggested by Charoon Youngpraphakorn, a senator for Samut Prakan, even though this would have the benefit of reminding everyone of bureaucratic folly, incompetence and greed. Thailand cannot afford another expensive white elephant left to its own decay. The government must come up with a way to make use of this unwanted behemoth so that it does not impinge on the livelihoods of the local people and benefits the country as a whole. The Klong Dan people also should be reminded that Samut Prakan needs an effective wastewater treatment facility. It cannot afford to live any longer with the gross effluence the province produces. More importantly, the corrupt politicians and state officials responsible for this assault on basic decency and common sense must not be allowed to escape punishment. They must be identified and brought to justice. Panel against halting plant construction However, construction of the Klong Dan waste-water treatment plant would continue but the operation of the facility would be put off until it is assured of an income sufficient to cover the operational costs. Kasemsant Suwanarat, a member of the fact-finding team appointed by the prime minister to look into the controversial project, said the government would not scrap the project but would allow construction to be completed because of the political pressures borne on the government by the political and economic elite who have vested interests in the project. The Pollution Control Department, the project developer that has vested interests in the project, was asked to negotiate with a private contractor to put off a test run of the facility for three years, said Mr Kasemsant. The test run was scheduled to commence in 2003. The department had been told to try to bring down the test run cost estimated at 1.7 billion baht. In its report to the prime minister, the panel found the project fraught with corruption and irregularities involving the bidding process as well as the acquisition of land and contract drafting. According to well-informed sources, potential changes to the project needed another 200-300 million baht to lay a pipeline to recycle waste water. But it was certain that the government would not cancel the project because over 21 billion baht had already been paid to the private contractor and because the vested interests had to be allowed to make their dirty money. ``But instead of letting the project operate and suffer cash flow problems, the government is trying to make sure the project would have enough customers,'' said Mr Kasemsant, also an expert on waste-water treatment and general inspector of Bangkok Metropolitan Administration (BMA). The report from the probe team warned that the real danger faced by the project was not only corruption, but also cash flow problems after the operation would start because factories in the province might not use the water treatment service as was exp ected. Factories in Thailand typically avoid having their water treated because the greedy and corrupt owners want to minimise costs in order to increase profits. The project might have to reduce the treatment fee to 3 baht per cubic metre for private use, and 5-7 baht per cubic metre for commercial houses, the report said. The pollution control agency was trying to convince factories to use the system. According to PCD, factory clients could provide major income for the project since the treatment fee is about 10-15 baht per cubic metre. One problem is that most of the 5,000 factories in the province had their own waste-water treatment system. Tannery factories in the province in 2001 said they had already invested 190 million baht for their own treatment plants. Factories in Bang Pu Industrial Estate also had their own facilities, but most were not using them because they did not want to spend any money on waste treatment. It looks as if a marketing research and plan for the plant's services had not even been carried before deciding to go ahead with the project One-third of project cost, or US$230 million, was a loan from the Asian Development Bank with about 6% interest. Debt repayment started in May 2001 and would continue until 2020. Although members of Thailand's economic and political elite enriched themselves immense from the implementation of the project, the loan would have to be paid by Thailand's ordinary taxpayers.