China: New Dam Builder for the World

Friday, December 28, 2007

The Wall Street Journal
December 28 2007
By Shai Oster

December 28, 2007 — Home to almost half of the world’s 45,000 biggest dams, China has embarked on a push to export its hydropower know-how to developing countries — even as it contends with environmental damage and social upheaval at home from the massive Three Gorges Dam.

Many other countries and international organizations have begun to shy away from dam building. But Chinese companies and banks are now involved in billions of dollars worth of deals to construct at least 47 major dams in 27 countries, including Sudan and Myanmar, nations criticized for human-rights abuses and poor environmental track records.

Just this week, Gezhouba Co., one of China’s biggest engineering firms, said it won a $1.5 billion contract to build a hydroelectric dam in Pakistan. Earlier this year, the company announced it would build a $1.5 billion dam in Nigeria. China’s leading dam builder, Sinohydro Corp. Ltd. last month won a bid to build a dam in Laos whose cost is estimated at $2 billion.

For China, the projects are a highly visible and permanent part of its effort to increase aid to Africa and Asia, helping to build infrastructure in exchange for access to resources such as oil and copper. In many of the countries where China is building dams, local governments and parts of the population welcome hydropower as a clean, renewable source of otherwise-scarce energy.

African and Asian delegations visiting China are taken each year to see the Three Gorges Dam as a model project even though it has been dogged by problems ranging from spiraling costs and unrest caused by forced relocation of more than a million citizens to rapid land erosion and increased pollution. Criticism of the dam — which is the largest in the world by many measures — has become so persistent that the Chinese government has recently begun to acknowledge the issues. But environmentalists and human-rights activists fret that China will repeat many of the same mistakes it has made with dams at home as it leads a dam revival abroad.

"China is promoting dams around the world based on an analysis which doesn’t recognize the true cost of these projects," said Peter Bosshard, policy director at International Rivers, an environmental advocacy group based in Berkeley, California.

Within China, the government has started to rethink big dams, paying more attention to the environment and marshaling popular support by enforcing requirements like impact assessments and public hearings.

And even hydropower advocates outside China are anxious, worrying that any problems in China’s high-profile foreign building campaign could cast a shadow over the entire industry. "I am personally concerned because I believe each project is the best ambassador for the industry," says Alessandro Palmieri, the chief dam expert at the World Bank. "These projects can go seriously bad," he warns. He worries about the risks of projects running into environmental problems or sparking social unrest.

In some cases, they already have. At the $2 billion Merowe Dam along the Nile Valley in Sudan, financed in part by the Export-Import Bank of China, several villagers protesting forced resettlement were killed by local police in April last year. The United Nations has complained about other human-rights abuses and suppression of anti-dam activism there. Other proposed dams in Africa could threaten national parks in Ghana and Zambia, putting parts of them underwater and altering the ecosystem, environmentalists say. The China Three Gorges Project Corp., the quasi-state company that managed the construction of the immense Chinese dam, is considering forming a partnership with Western power companies that are weighing plans for a dam in the politically unstable Democratic Republic of Congo that would yield twice as much power as the Three Gorges Dam.

China is equally active in neighboring Southeast Asia, where some 21 Chinese companies are involved in 52 hydropower projects, according to research issued this year at the China-ASEAN Power Cooperation & Development Forum.

Environmentalists say dams have already damaged the Mekong River’s headwaters within China’s borders. They want to stop China building any more downstream. Activists are targeting China’s building of dams in Myanmar, which they say is hurting local communities through forced relocations while supporting an authoritarian regime. In Laos, one of the poorest countries in the world, Sinohydro, which built the Three Gorges Dam, is constructing two dams to export electricity to neighboring China and Thailand.

A broader backlash against China’s growing dominance in Southeast Asian and African business and trade has grown along with opposition to its dam-building spree. "China is using its political power to convince lower Mekong countries to accept projects and investment," says Premrudee Daoroung, a Thai activist with Towards Ecological Recovery & Regional Alliance, which is campaigning against dams along the Mekong River. "In many cases the local people are starting to talk against the Chinese."

China and other hydropower advocates such as the International Commission on Large Dams, a trade group, say building big dams can raise living standards in the poorest parts of the world. Africa has only developed about 8% of its hydropower potential, according to the commission.

"We don’t want to be misunderstood," Li Ruogu, head of the Export-Import Bank of China, said in an interview. "We want people to understand we are not hurting the environment. We are helping nations to develop."

China’s push comes as large dams have largely fallen out of favor in the West in recent years — but only after western countries ended a decades-long dam-building binge. Dams were a big part of nation building, industrialization and poverty-alleviation plans, from the U.S.’s Hoover Dam, built during the Great Depression, to Europe’s biggest dam, the Alqueva in Portugal, proposed in 1957 and finished in 2002. Europe and North America, two of the world’s richest regions, have already exploited around 70% of their hydropower potential, according to the International Commission on Large Dams.

Dams fell out of favor as their environmental consequences became clearer. One case is China’s Three Gorges Dam. Construction of the dam was approved in 1992 despite strong opposition, eventually creating a 400-mile-long reservoir and forcing some 1.4 million people to resettle. Supporters claimed the dam’s benefits — preventing devastating floods downstream and generating clean power — outweighed any negatives. Critics said several smaller dams could have prevented floods better and left a smaller footprint. In the end, the mammoth dam had an oversized impact on world opinion. Reports of corruption and mismanagement and worsening environmental fallout there helped galvanize the international movement against hydropower.

During the 1990s, under pressure from environmentalists, the number of new dams under construction world-wide fell to just over 2,000, from a peak of 5,400 in the 1970s. The World Bank, which spearheaded dams as cornerstones of raising nations out of poverty, stopped nearly all its funding for big dams. In 2000, an influential group called the World Commission on Dams issued a scathing report calling into question the benefits of hydropower. That report marked the nadir for the industry.

But other factors have brought hydropower back into vogue, such as rising oil prices and concern about the impact on global warming from burning fossil fuels like coal. In 2005, the Asian Development Bank and the World Bank started to lend again to develop dams when they funded the Nam Theun 2 dam in Laos as part of plan to raise income by exporting electricity. In some cases, hydropower is growing as a backup power supply for wind and solar power.

Meanwhile, China, largely through its state-run Export-Import Bank of China, has moved even more aggressively, experts say. "In the last four or five years, China has become the most important financier of large dams around the world," says Mr. Bosshard of International Rivers, the environmental group.

His agency and other groups are targeting the Export-Import Bank because they believe it shoulders the greatest responsibility because it lends to Chinese construction companies building dams. They want China to adopt international standards for social responsibility and transparency, which is part of a broader debate about China’s aid to the developing world. China has been attacked for its no-strings approach to aid, which some say allows human-rights abuses and corruption to flourish.

Chinese officials say their aid policy is evolving along with the country’s deepening involvement abroad. Recently, Mr. Li, of the Export-Import Bank, invited Mr. Bosshard for a meeting after reading his group’s criticism of his bank online. The bank has publicized its lending guidelines, and is considering joining with the World Bank in projects in Africa.

"It’s not right to say we don’t care about the environment and social responsibility," said Mr. Li, a Princeton-trained economist who has worked at China’s central bank, the Asian Development Bank, and the International Monetary Fund. But, he says, "you can’t stop a country’s development because of some corruption. That doesn’t help. You cannot refuse to eat because you might choke."

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