New York - The World Bank’s executive directors approved the Bujagali Falls dam project Tuesday, with no votes against the project and two abstentions. The vote is a key step toward the completion of the dam project, but impediments remain.

AES Corp., the U.S. firm which plans to build the dam, is still short of funding after a number of development agencies pulled out of the project. Meanwhile, the Bank’s Inspection Panel is currently evaluating the project for environmental impact. Its findings are due in late January.

Development banks in Germany (DEG), France (Proparco) and England (ECGD) all pulled out of the Bujagali project in the past year. In October, the US agency OPIC pulled out; it was to lend $100 million. And in November, Swedish SIDA said it would not fund the project.

One rumored explanation for the pull-out by the French and British banks was corruption.

At least one opponent of the AES contract was not surprised by the Bank’s vote. Both Ugandan president Yoweri Museveni and a leading officer of the International Finance Corporation -- the private lending arm of the Bank which was approved by the Board Tuesday -- are personal friends of AES CEO Dennis Bakke, according to Lori Pottinger, director of the Southern Africa Program for the International Rivers Network (IRN), a United States NGO. Pottinger said AES has been the largest recipient of IFC funds among any single company.

"It seems AES is getting a sweetheart deal," she said. "The company has long enjoyed a favorable relationship with the IFC."

In broader terms, Pottinger had harsh words for the Bank’s executive directors. "There doesn’t seem to be too much independence among them," she said. "Too many of the executive directors don’t make up their own minds. They have their governments tell them how to make up their minds. And too many of them don’t take outside information seriously."

Hogwash, says Uganda’s ambassador to the U.S. Edith Ssempala. She has been a major supporter of the project, and she has lobbied Bank directors to approve the project. "They listen, they debate, and they of course do their homework, as well," she said of the directors. She believed the directors came to their decision for the good of Ugandan development.

To Pottinger, however, ulterior motives were at work. She pointed out that the United States is by far the largest shareholder in the IFC, and its 24 percent share gives the U.S. 24 percent of the voting power in the Board of Directors. "Some Northern executive directors have been pressured to vote specifically for projects based on how much money they will bring back to countries," Pottinger said.

The implication contained in that statement, that the American company AES stands to benefit the most from the project in Uganda, is quite intentional. Almost since day one of the project, IRN has argued that Uganda’s contract with AES mainly benefits the Virginia-based power company and not the people of Uganda.

"This project is too economically risky for Uganda," Pottinger said. According to an analysis of the confidential contract obtained by IRN, Uganda guarantees AES payments of US$100 million per annum for the first 10 years of project operation, with the payments decreasing somewhat for the subsequent 20 years. This arrangement places all the risk at Uganda’s feet, Pottinger said.

Ssempala argued that AES could not possibly have negotiated a contract which jeopardizes the Ugandan government’s financial standing. "AES cannot be interested in putting us in a situation where we are not going to be able to pay them," she said. "If we can’t pay them, then they lose as well."

However, Pottinger pointed to the banks that have withdrawn from the project, and the statement made by some of their representatives that the project is too risky. "It’s not common for so many banks to have pulled out," she said.

To Pottinger, this loss of funds is a major impediment to AES’s continuation of the project, now seven years old. But Ssempala believes the project will move forward. She spoke to Bakke after the Banks announced its decision. "He was extremely excited," she said. "They are now talking about starting construction."