World Bank Pulls Out of Nepal Hydroelectric Project; Project Assailed by Environmentalists as Damaging to Forests on Tibetan Border

WASHINGTON - Aug 4, (AP) -- The World Bank pulled out of Nepal's biggest hydroelectric project Friday, saying it posed too many risks for the impoverished Himalayan kingdom's government. The bank canceled an offer of $175 million to go toward the $770 million Arun III project. It said the dam project, which it had hoped would meet Nepal's long-term energy needs, faced escalating costs and delays because of "increasingly rigorous" standards imposed by the bank. In recent years, the bank has imposed new conditions on its loans in response to criticism that it fosters development at the expense of local residents and the environment.

Environmentalists contend the Nepal project would destroy forests on the Tibetan border, displace villages and disrupt the lives of thousands of people. They argue the huge dam on the Arun River could be replaced by a series of many smaller structures that would cause less environmental damage. The World Bank's decision to quit the 201-megawatt project came after an inspection panel's reassessment earlier this year resulted in several measures to address environmental and social concerns. A statement released in Katmandu and at the World Bank's Washington headquarters reaffirmed that the bank still feels the large hydroelectric project would be environmentally and socially sound. But the bank considers its increasing cost and complexity would lay too heavy a burden on Nepal's government, the statement said.