China’s Biggest Bank to Support Africa’s Most Destructive Dam

Peter Bosshard
Wednesday, June 9, 2010

Ethiopia's Gibe 3 Dam is one of the most destructive hydropower projects being built today. If completed, it would destroy fragile ecosystems on which 500,000 poor indigenous people depend for their survival. A worldwide civil society campaign has held international financial institutions at bay for several years.

Lake Turkana is threatened by reduced flows from Gibe 3 Dam upstream
Lake Turkana is threatened by reduced flows from Gibe 3 Dam upstream
Friends of Lake Turkana
In mid-May, however, the Industrial and Commercial Bank of China (ICBC) offered to step in with a US$500 million loan. If the loan goes through, China's biggest bank will become responsible for a massive social and environmental disaster.

The overall project is expected to cost $1.75 billion. Ethiopia has applied for support from the African Development Bank (AfDB), World Bank and European Investment Bank. The project is being built by Italian firm Salini Costruttori.

The dam, now under construction on the Omo River, threatens the livelihoods of 500,000 indigenous people in Southern Ethiopia and Northern Kenya. By ending the river's natural flood cycle, it would destroy harvests and grazing lands along the river banks, and fisheries in Lake Turkana, the world's largest desert lake. The dam will devastate the unique culture and ecosystems of the Lower Omo Valley and Lake Turkana, both recognized as UNESCO World Heritage Sites.

The Ethiopian authorities have indicated that they will expand irrigation in the Lower Omo Valley to compensate for the end of the natural floods. This would increase water withdrawals from the Omo River, and the negative impacts on the Lake Turkana region. The lake is dependent on the Omo for 80% of its inflow.

The region is already wracked by a drought-fueled ecological crisis that is causing violent resource conflicts between the peoples of the Lower Omo Valley and the Lake Turkana region. The Gibe 3 Dam would worsen these resource conflicts. Climate change brings yet another added pressure.

Ikal Angelei, the chair of Friends of Lake Turkana in Kenya, says: "The Gibe 3 Project will destroy the lifeline of the Lower Omo Valley and the Lake Turkana region. It will condemn half a million of the region's most vulnerable people to hunger and conflict. We ask Chinese banks and companies to stay away from this disaster."

According to Ethiopia's electric power utility, ICBC has agreed to extend the loan for a contract under which Dongfang Electric Machinery Corp., a Chinese state-owned company, will provide equipment for the Gibe 3 project. The loan is for slightly more than the cost of the equipment.

A letter from NGOs involved in the Gibe 3 campaign to the ICBC states: "Friends of Lake Turkana and a coalition of international civil society organizations have filed complaints with the AfDB regarding a series of violations of the Bank's safeguard policies. The international financial institutions have commissioned further studies on the project, and have so far not committed any funding. Approving a large loan while the international financiers are still investigating the problems of the Gibe 3 Project would reflect badly on the environmental, social and financial due diligence of ICBC."

Johan Frijns, the coordinator of the global BankTrack network, says: "China has made impressive progress in reforming its banking sector through its green credit policy. Funding an environmental disaster like the Gibe 3 Dam would make a mockery of the environmental reform efforts in China's banking sector."