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China re-evaluates role in construction of dams overseas

BEIJING: When African and Western banks stalled on a deal to fund the building of a controversial dam in Ethiopia, the project's backers found an unlikely source of support.

The Industrial and Commercial Bank of China (ICBC), China's biggest bank, stepped in with a $400-million loan, allowing the project, which is located near Ethiopia's sensitive borders with Kenya and Sudan, to go ahead.

The Gibe hydropower project in Ethiopia, say analysts, underscores China's widening involvement in dam projects overseas, often in inaccessible and unstable regions where other countries are reluctant to go. However, amid a backlash from local communities, in countries from Myanmar to Ethiopia, China is beginning to re-evaluate the nature of its involvement, and considering introducing standards its companies will have to follow. Chinese financiers are now involved in 250 projects in 68 countries, according to International Rivers, a non-governmental organisation.

While China's “going out strategy”, to encourage banks and infrastructure companies to cast their net wider, has helped bring development in difficult areas, it has also triggered debate among civil society groups, who are calling on the Chinese government to follow stricter environmental standards in taking up projects such as Gibe. “We think the going out of Chinese financiers brings a lot of benefits for host countries,” said Peter Bosshard, policy director of International Rivers, in Beijing this week. He did, however, add that China needed to do more to fulfil “environmental responsibilities” in taking up projects.

This week, civil society groups called on the ICBC to withdraw its support to the Gibe dam. Built near the Ethiopian border with Sudan and Kenya, groups say the project, which is still mired in political uncertainty, will have catastrophic effects on communities downstream.

With doubts about the project's fate, the African Development Bank and World Bank both withdrew their support.

“We are calling ICBC to reconsider its support while there is such uncertainty about the project,” said Ikal Angelei of the Kenya-based Friends of Lake Turkana, which represents downstream communities.

Beijing, too, needed to reconsider its policy of “non-interference” and take a stand. “Leading global actors,” she said, “need environment policies which reflect global standards.”

Since 2000, when China's Exim Bank stepped in to support the controversial 1250 MW Merowe project in unrest-hit Sudan, which displaced more than 50,000 people, Chinese companies have widened their presence in Africa. Over the past decade, the Exim Bank had “become bigger than the World Bank” in financing such projects, said Mr. Bosshard.

But amid a backlash from local communities in several cases, he noted, the Chinese government appeared to be reconsidering its approach of involving itself even in sensitive situations.

For instance, in 2009, the Exim Bank suspended support for the Belinga dam in Gabon, slated to be built in a national park. Last year too, it baulked at supporting the Illusu dam in Turkey, after Western financiers pulled out. China's Ministry of Finance last year put in place guidelines to be followed by companies internationally, though these have not yet been enforced.

“The Merowe dam has not become the new model,” said Mr. Bosshard, with China realising that engagement was often “more complicated than non-interference”, and needed good relations with local communities and trade unions, besides governments.

“China is realising this is important for a long-term future,” he said. “The Jasmine Revolution [in West Asia] has brought home the point that its risky to rely on good relations with governments, which may be out of power before you know it.”

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