AP: China Is Top Dam Builder, Going Where Others Won't

Denis D. Gray and Elaine Kurtenbach
Wednesday, December 19, 2012

Originally published by the Associated Press

Up a sweeping jungle valley in a remote corner of Cambodia, Chinese engineers and workers are raising a 100-meter- (330-foot-) high dam over the protests of villagers and activists. Only Chinese companies are willing to tame the Tatay and other rivers of Koh Kong province, one of Southeast Asia's last great wilderness areas.

It's a scenario that is hardly unique. China's giant state enterprises and banks have completed, are working on or are proposing some 300 dams from Algeria to Myanmar.

Poor countries contend the dams are crucial to bringing electricity to tens of millions who live without it and boosting living standards. Environmental activists and other opponents counter that China, the world's No. 1 dam builder, is willing and able to go where most Western companies, the World Bank and others won't tread anymore because of environmental, social, political or financing concerns.

"China is the one financier able to provide money for projects that don't meet international standards," said Ian Baird, an assistant professor of geography at the University of Wisconsin who has worked in Southeast Asia for decades. "You go to China if you want to have them financed."

The consequence, critics say, is a rollback to an era of ill-conceived, destructive mega-dams that many thought had passed. The most recent trend is to dam entire rivers with a cascade of barriers, as China's state-owned Sinohydro has proposed on Colombia's Magdalene River and the Nam Ou in Laos, where contracts for seven dams have been signed.

Viewed by some in the developing world as essential icons of progress, dams in countries as far apart as Ecuador, Myanmar and Zambia have spearheaded or reinforced China's rising economic might around the world. They are tied to or put up in tandem with other infrastructure projects and businesses, and power generation equipment ranks as China's second-largest export earner after electrical machinery and equipment.

In energy-starved Cambodia, trade with China has risen to 19 percent of GDP from 10 percent five years ago, according to an Associated Press analysis of International Monetary Fund data.

The year-old $280 million Kamchay Dam in Cambodia's Kampot province was the largest ever foreign investment when approved as well as a political flag-carrier for Beijing. It has been hailed by both governments as a "symbol of close Chinese-Cambodian ties."

Cambodia's electricity demand grew more than 16 percent a year from 2002 to 2011, with shortfalls largely met through costly oil imports, said Bun Narith, a deputy director general in the Ministry of Industry, Mines and Energy. Only 14 percent of rural homes have electricity, one of the lowest levels in Southeast Asia.

"We have no choice," Bun Narith said. "Hydropower is the priority, and the Chinese have the initiative and capability, both financial and technical."

The 20 hydro dams built, being constructed or under study in Cambodia, the bulk of them by the Chinese, would lift Cambodia out of literal darkness and make it energy self-sufficient, he said. "We should have a win-win policy, a balance between environment and energy. After all, electricity is also a basic human need."

Electric rates have fallen in Kampot town since the opening of the nearby Kamchay Dam, but they remain high.

"Everybody believed that after the dam is completed, there will be extra power to use in Kampot and the price will be much cheaper, but in fact there is not much change," taxi driver Prum Virak said.

He said his house is without power three to four hours every day. The price of electricity has dropped to 920 riel (23 cents) per kilowatt-hour from 1,100 riel six months earlier when power was being imported from Vietnam.

In Myanmar, where China may build as many as 50 dams, one re-ignited an ethnic insurgency in 2011 and fanned a wider, smoldering anti-Chinese backlash. Mega-dams in Africa and Latin America have also sparked sometimes violent protests.

The Myitsone dam in Myanmar would have displaced thousands and flooded the spiritual heartland of the Kachin ethnic minority, which cited the project as one reason for again taking up arms.

The government abruptly cancelled it earlier this year, a warning shot that China must clean up its image, if not its act, to avoid both political and economic fallout, analysts say.

The rise of China as a dam-building power began in the early 2000s as its companies beat out then dominant Western competitors and just as anti-dam lobbyists were celebrating victories over the World Bank, until then the leading international dam financier. In the United States, where the golden era of dams peaked in the 1960s, scores are being decommissioned.

The industry, shepherded by the World Commission on Dams, was moving toward setting higher, mandatory standards to mitigate the negative impacts of large dams — environmental degradation, uprooting of communities, depletion of aquatic life — and maximize their positives: flood prevention, irrigation of farmlands, relatively clean energy for homes and industry.

"The Chinese are now definitely diluting the standards debate. We're back to talking about basics," said Grace Mang, who monitors China's dam industry for the U.S. -based environmental group International Rivers. "There is a pattern of projects that would have been delayed, maybe for decades, or dropped, coming back on line with the assistance of Chinese companies and banks."

Among such projects:

— Nepal's West Seti dam, which would force some 10,000 poor villagers from their homes in a biodiversity-rich area. It hung in limbo after Australia's Snowy Mountain Engineering Corp. failed to attract international funders, and the Asian Development Bank pulled out because the dam didn't meet its standards. Six months after the cancellation, the Chinese took over the project.

— A number of dams being built inside or adjacent to nature reserves, including Ghana's Bui Dam and two proposed on the Patuca River in Honduras, where a U.S. developer earlier pulled out for environmental reasons.

— The 1,500-megawatt Coca Codo Sinclair Dam, Ecuador's largest ever infrastructure project, which would encroach on a vast rainforest between the Andes and the Amazon and possibly dry up the country's highest waterfall, located in a UNESCO reserve.

Ethiopia's Gibe III dam, Africa's largest. Protesters gathered at the Chinese Embassy in neighboring Kenya last year to denounce Chinese companies involved in the project, which they said would endanger the livelihoods of hundreds of thousands of downstream farmers. Ethiopian officials defend it, saying less than 2 percent of the rural population has access to electricity.

The Chinese are taking some steps to improve their image. Sinohydro Corp., which says it controls half the global market for hydropower projects, is expected to release an environmental policy soon and dispatch public relations teams to its offices worldwide. An expert from China's Institute for International Economic Research recently toured Southeast Asia to investigate problems caused by Chinese dams.

The Export-Import Bank of China, the major dam financier, has made some efforts to improve implementation of projects it backs. In a pattern found in other African countries, the Belinga dam planned within Gabon's Ivindo National Park was to power other Chinese enterprises including a mine for iron ore to be shipped to China via a Chinese-built railway and seaport. However, the Exim Bank suspended funding for the dam, citing the national park as one reason.

"The Chinese are seeking a Chinese way of operating at international environmental standards rather than have international standards imposed on them," Mang said.

The Chinese are virtually silent on even such seemingly positive developments, reflecting a persistent lack of transparency on the issue.

The Associated Press sought comment for more than six months from major dam contractors, including Sinohydro, Guodian, China Three Gorges and China Southern Power, calling and submitting written interview requests. The companies provided Internet links to background information or reports about projects in some cases. But most companies didn't respond at all, and those that did rejected requests for answers to specific questions.

Requests for comment on allegations of corruption associated with dam projects were either rejected or failed to draw a response from the Commerce Ministry, Foreign Ministry and the National Development and Reform Commission.

China, the world's largest producer of hydropower, has honed its dam building skills at home, but experts say that its companies build to varying levels of quality abroad depending on what the clients demand.

"My sense is that when the Chinese build a dam overseas, they give you the standards (the local officials) insist on," said Kenneth Pomeranz, an expert on water issues at the University of Chicago. "When governments say, 'We want it done right,' they know how to do that too."

Brian Richter, of the U.S.-based Nature Conservancy, said the Chinese believe it is not their role to set environmental and social regulations, but many countries in which they operate don't have the capacity to enforce proper ones "so you end up with nobody paying attention." And there's corruption.

Cambodia seems an apt example, and in particular Koh Kong province, dubbed the "battery of Cambodia." It is remote, populated mostly by poorly educated ethnic minorities and dominated by the government's business cronies, who resort to brutal tactics with scant scrutiny by activist groups.

"They can basically do what they want down there. It's just the Wild West," said Marcus Hardtke, a German forestry expert with detailed knowledge of the area. He said even international environmental groups have remained largely quiet to avoid clashing with the autocratic government of Prime Minister Hun Sen.

One dam has been built in Koh Kong, three more are under construction and another — the Cheay Areng — was recently approved despite heavy opposition.

The Areng was rejected for funding in a 2007 Japanese government study as having a very low rate of economic return, and a Chinese company, China Southern Power Grid, pulled out of the project on technical and possibly environmental grounds. Company engineers reportedly cited the need to build a sloping, 24-kilometer-long tunnel to the first turbine because the valley below the dam was too flat.

Additionally, the Areng Valley — regarded as a "biodiversity jewel" with great ecotourism potential — would be ravaged not only by the reservoir but by access roads and transmission lines. The area contains perhaps Cambodia's most profuse wildlife including the world's largest population of almost extinct Siamese crocodiles. Some 1,000 villagers are facing eviction.

Opponents believe the seemingly illogical trade-offs can be explained by kickbacks, profit-sharing from highly lucrative illegal logging in the area and a general Chinese push into Koh Kong that includes clearing an area seven times larger than Manhattan for a Chinese-leased seaside pleasure city, having displaced more than 1,000 families from their homes.

Son Chhay, one of the few opposition members in Parliament, said that Chinese-Cambodian dam contracts are simply geared to making profits for the parties involved rather than generating low-cost electricity for the country.

"The Chinese have a funny way of doing deals in Cambodia. Construction costs are inflated by some 300 percent, and the profits shared," Son Chhay said. The Cambodian government declined to comment on his claims.

The government's belief in the necessity of the projects is echoed by Lu Shi Long, the chief engineer at Tatay dam, set for completion in 2014 by the China National Heavy Machinery Corporation.

"The construction of this hydropower station is beneficial for the development of Cambodia's economy and the improvement of Cambodian living standards. It's also a great opportunity for Chinese companies," he said. "As an engineer, I am proud of this project."

As he speaks, some of the 2,000 workers, 800 of them Chinese, swarm over the vast dam wall, smoothing the rocky surface before a concrete facing will be applied. Relays of trucks ferry stones from a quarry gouged out of a hillside. The site is surrounded by a sea of tropical green.

Illegal loggers ring the site, having all but wiped out stands of rosewood, the highly prized hardwood smuggled to China's furniture makers.

Improvements won't come, said the Nature Conservancy's Richter, until sustainable standards can be verified by an independent body.

"The industry as a whole recognizes that there's a need, but the playing field has shifted and the Chinese companies are by far the dominant players," he said. "The future depends on them, for better or worse."

Kurtenbach reported from Shanghai. Associated Press writer Sopheng Cheang in Phnom Penh, Cambodia, and researcher Fu Ting in Shanghai contributed to this report.

EDITOR'S NOTE: This story is part of "China's Reach," a project tracking China's influence on its trading partners over three decades and exploring how that is changing business, politics and daily life. Keep up with AP's reporting on China's Reach, and join the conversation about it, using #APChinaReach on Twitter.