China Triggers New Global Dam Boom

by Peter Bosshard
Thursday, October 11, 2007

Country's Economic Expansion Adds to Pressure on World's Rivers

On August 27, Miloon Kothari, the UN Special Rapporteur on Housing Rights, sounded an alarm on human rights abuses over Sudan's Merowe and Kajbar dam projects. "I have received numerous reports of violations of civil and political rights," Kothari warned. The violations included "the shooting of unarmed demonstrators, arbitrary arrests of activists, and repressive measures against the press."

The UN Reporter called on all actors involved in Merowe and Kajbar to suspend project activities until the human rights situation had been assessed. More than 50,000 people are currently being displaced from the Nile Valley to the Nubian Desert by the Merowe Dam. In the late 1990s, a Sudanese delegation visited Europe and Canada in search of funding for the dam - in vain. Traditional financiers shied away from the disastrous project. The Merowe Dam went ahead when Chinese and Arab institutions agreed to fi nance it. With loans of US$520 million, China Exim Bank is its main funder. As Miloon Kothari pointed out, the project's "forced evictions violate a wide range of human rights."

The Kajbar Dam will submerge approximately 90 villages in Sudan's Nubian North - a region that was badly affected by the Aswan High Dam. When villagers protested against the project, the security forces shot and killed four people. The Sudanese government has also detained several journalists and academics and evicted foreign diplomats because of their interest in the project.

New era of global dam building

The ruthlessness with which the Merowe and Kajbar dams are being built is exceptional. Yet China's involvement in large foreign dams is not. The map on page 8 presents 47 recent dam projects around the world that have Chinese involvement; more are being planned.

When the Merowe Dam was being planned 10 years ago, the global dam industry was in crisis. The rate of new dams slumped from more than 5,400 in the 1970s to just over 2,000 in the 1990s. The World Bank had mostly withdrawn from financing such structures. And China was not yet able to build large dams on its own.

When China built the massive Three Gorges Dam, it forced the project's Western exporters to manufacture some of their equipment in China, and transfer their technology to local partners. Once Chinese companies had acquired this know-how, they wasted no time in taking up projects in other countries. They conquered the global dam building market, and China Exim Bank has now become the world's primary financier of such projects. Unlike many Western funders, the Chinese export credit agency does not require borrowers to liberalize their economies to qualify for its loans.

Building dams in Africa, Southeast Asia and other parts of the world allows Chinese companies to escape the stiff competition at home. The government supports their exports in order to create jobs in China, and to strengthen friendly relations with other governments. Many projects, including the Merowe Dam, also help power Chinese overseas investments, such as mines, oil exploration, and manufacturing plants.

China is building many dams that ignore the lessons of the past and should not go continued on page 15 forward, including in Sudan. The expansion of Chinese dam builders also puts pressure on other companies and financiers to lower their standards in order to stay in business. The OECD Export Credit Group, which brings together the export credit agencies of industrialized countries, weakened its environmental standards in April 1997. Financial institutions thus use the emergence of China and other new financiers as an excuse to engage in an environmental race to the bottom, rather than to help them raise their standards.

Hopeful signs

In spite of many questionable projects, China aspires to be a responsible global actor. Chinese companies have recently been hit by riots, labor unrest and kidnappings in various countries. This backlash has shown Chinese investors that they need to maintain friendly relations with their host communities if they want to establish a long-term presence overseas.

In 2006, China's Ministry of Commerce issued recommendations for improving the safety of workers in Chinese foreign investments. It urged Chinese companies to hire local workers, respect local customs and adhere to international safety standards in their projects. China Exim Bank adopted an environmental policy in November 2004, and invited International Rivers to discuss its approach to the environment in December 2006.

The Chinese government is spending billions on the 2008 Olympics, and is sensitive to how public criticism may affect its image. In response to International Rivers criticism of the Merowe Dam, the Foreign Ministry stressed that "China attaches great importance to the local people's livelihood, takes the possible environment effect seriously and applies strict environment evaluation and standards." In March 2007, the Chinese government dropped Sudan from the list of countries which benefit from subsidized China Exim Bank loans. And according to international observers in Khartoum, China has so far not followed up on its earlier promise to fund the Kajbar Dam.

China's global economic expansion offers many benefi ts to poor countries. Yet in the standards of the dams it builds at home and abroad, China still has a long way to go. International public opinion will expect China to comply with human rights standards just like any other dam-building nation. International Rivers will continue to support local groups around the world to hold Chinese dam builders to account for such standards in their projects.