China's overseas dams: development or destruction?

by Richard Welford rwelford@csr-asia.com

China’s dam industry has become the global leader in the dam construction industry, funded by Chinese financial institutions that have taken the place of the traditional funders such as the World Bank. A new guide from International Rivers, an NGO interested in protecting rivers and the communities around them, is critical of many of the Chinese funded developments. It says that there are huge negative impacts on communities and the environment associated with the dam building. The report focuses on overseas dams that have been built and financed by Chinese companies and encouraged by the Chinese government.


The guide says that as of May this year Chinese companies and financiers had 97 large dam projects in 39 different countries. Many of the projects are located in Asia, but they can be found on every other continent as well. The majority of dams are for hydropower generation.


The Chinese government is keen to support investment in dams in South East Asia, in particular, because it aims to secure regional stability and to facilitate cross-border trade. Such dam projects also lead to employment for Chinese workers.


The Chinese government’s official export credit agency funds most of China’s overseas dams. In Asia its main hydropower projects cover Cambodia, Myanmar, Laos, Malaysia and Nepal. But other investors include the Bank of China and the Industrial and Commercial Bank of China in Nepal and the Goldwater Investment Group and CITIC in Myanmar.


China’s dam industry has a poor social and environmental track record, as shown by projects such as the Three Gorges Dam, according to the guide. A key strategy of Chinese investors is to make previously inaccessible resources accessible. This includes remote areas, politically unstable regions, and parks and other protected areas. Few Chinese dam builders and financiers have adopted environmental policies in line with international standards. And Chinese financiers have provided funding for projects previously rejected by other financing institutions due to non-compliance with social and environmental standards. The Chinese government’s promises of “noninterference in domestic affairs” means that it has been willing to support governments with records of corruption and human rights abuses.


The guide argues that the Chinese government wants to be a responsible and respected international actor. It is interested in international experiences implementing environmental and social standards. But it is not always receptive to direct criticisms raised by western institutions. Concerns raised by southern NGOs, on the other hand, may be better received. Thus, it is important for China’s government, industry, and financial leaders to hear from dam-affected communities and civil society organizations about the problems associated with large dams.


The guide by International Rivers lists all the dams being built and funded from China. But is also goes on to outline various policies and regulation surrounding dam building including those relating to environmental impact assessment, displacement of people and disclosure of information.


China’s environmental laws have been significantly strengthened in recent years, it argues. In September 2003, China’s People’s Congress approved a new Environmental Impact Assessment Law. The law requires that enterprises proposing projects within China with significant environmental impacts must conduct an environmental impact assessment (EIA) prior to project construction. The assessment must be approved by the Ministry of Environmental


Protection (MEP). China’s EIA law requires public participation. This requirement was clarified in February 2006 when MEP (then SEPA) issued “Provisional Measures for Public Participation in Environmental Impact Assessment.” The public participation measures provide basic instructions on: Procedures for disclosing EIAs to the public; When to engage the public in the EIA process; Who should be included in public participation; Methods that can be used to facilitate public participation (hearings, soliciting comments, public forums, expert forums).


China also has laws on the displacement of people for dam projects. The most important of these is the 2006 “Rules of land compensation and people resettlement in medium and large hydraulic and hydroelectricity projects.” This law states: Displaced people must be provided with a level of livelihood similar to or greater than that which they enjoyed prior to dam displacement; Resettlement plans must include economic development plans, not just cash payments for land and resources lost; Resettlement plans should create jobs for displaced people; If rural communities are to be displaced, resettlement plans must include a plan for reclaiming new farmland (to avoid over-crowding in resettlement areas).


While the compensation law applies only to people displaced by dam projects in China, it can serve as a model for the standards Chinese companies should use overseas, says the guide. It is important to note, however, that in practice, few communities displaced by dams in China have received new jobs or training. But they usually do receive some kind of payment for their land.


The guide outlines new regulations on the disclosure of government information came into effect in China in 2008. One new regulation requires that Chinese government offices release information on a timely, regular basis. It also creates a mechanism through which Chinese citizens can demand government information. This regulation may make it easier for citizens and NGOs to access information on the initiation, approval and regulation of overseas dam projects. While China’s laws and regulations are promising, they have been difficult to implement in practice. MEP, many Chinese environmental NGOs, and concerned citizens in China are working hard to strengthen China’s legal safeguards. They are doing so through education and awareness campaigns, legal measures, and by working directly with Chinese companies.


Although these regulations and related initiatives now exist, the guide argues that in many cases there is a failure to adhere to these fully overseas and that they are not always well developed. Whilst some Chinese companies are adhering to other international social and environmental guidelines, it is clear that others are not.


The International Rivers guide points out that there are no laws or regulations that specifically address social and environmental impacts of dams Chinese enterprises build overseas. But in response to mounting criticisms of Chinese companies working overseas, the State Council in October 2006 issued nine Principles Governing the Activities of Foreign Investment Firms. These principles include: Mutual respect, equality and mutual benefit, complementarity, and “win-win” cooperation; Ensuring protection of environmental resources; Caring for and supporting local communities and local people’s livelihoods; Complying with local laws and regulations; Cultivating and protecting the interests of local employees; Strengthening project safety; Creating a friendly environment for public opinion.


SASAC, which supervises China’s state-owned enterprises (SOEs) has taken steps to ensure SOEs set the standard for corporate social responsibility. In January 2008, SASAC issued Corporate Social Responsibility Guidelines for State-owned Enterprises. These standards can be applied to SOEs such as Sinohydro and China Southern Power Grid. The guidelines state that SOEs should “set an example of honesty and trustworthiness, resource conservation, environmental protection, and people centeredness.”


In addition, China Exim Bank and China Development Bank have their own environmental and social responsibility policies. China Development Bank has a brief summary of its environmental policy publicly available on its web site. The policy states, “In recent years, environmental compliance has become an aspect of our loan evaluation process. We will not consider a loan application complete until the applicant has obtained approval from the relevant environmental agencies and we are otherwise satisfied with its environmental compliance.”


The guide also examines some of the campaigns by communities affected by the construction of dams. In particular it looks at the international campaign to save the Salween River in Mynamar and China where a series of 17 dams have forced the resettlement of numerous ethnic minority communities. The dams are also accused of harming downstream fisheries and biodiversity, in general.


The guide encourages campaigns to stop dams or to decrease the human and environmental impacts of dams by using a number of different tactics. These tactics include research, media work, legal approaches, corporate campaigns, legislative tools and peaceful protest. It lays out, in some considerable detail, the types of approaches to take and places considerable emphasis on engagement with funders.


In the past, the World Bank has said that “dams are essential for growth and poverty reduction”. The promotion of poverty-reduction benefits in what it now calls a “high risk, high reward hydraulic infrastructure” has become one of the key drivers of dam construction in developing countries.


Critics, on the other hand, have argued that dam builders have provided little evidence to support the poverty reduction hypothesis and that the 24 countries in the world dependent on hydropower for more than 90% of their electricity are still to be found amongst the world’s least developed nations.


Not surprisingly, it is the large dams that come in for most criticism. Some 40,000 large dams have been built in the last 50 years with reservoirs that cover 400,000 square kilometres. The environmental effects of dams have been the target of many groups that have opposed dam construction. Dams reduce the flow of water downstream and this changes the landscape that the river flows through and, in turn, the flora and fauna along the river. They also impact on seasonal water variations changing the growing pattern of local crops dependent on the river.


A dam also holds back sediments and a river deprived of its sediment load will tend to increase erosion of the downstream channel and banks. Riverbeds are typically eroded by several metres within the first decade following dam construction. This can lower the groundwater table, threatening vegetation, local wells and the floodplain, often requiring irrigation where none was needed in the past.


A river’s estuary, where fresh water meets the sea, is a particularly important ecosystem. It is at the point where 80% of the world’s fish catch comes from and the health of the ecosystem is very much tied up with the volume and timing of the nutrients found in the fresh water.


In addition, the storage of water in dams delays and reduces floods downstream and this affects those ecosystems linked to the river’s flooding cycle. Plants and animals depend on this cycle for reproduction, hatching and migration. The floods also deposit nutrients on the land, flush out stagnant channels and replenish wetlands. Again, the IRN argues that dams currently threaten 20% of the world’s recognised freshwater species with extinction.


The fact is that most rivers in the world are no longer controlled by nature, but by humans. However, those making the decisions about the fate of rivers often have a narrow agenda linked to short run financial considerations rather than one linked to long term costs and benefits. This whole picture of river manipulation is further complicated by the impact that climate change will have on our efforts to create a water-secure future.


But people, as well as local ecosystems, are affected by dam building. Large dams have forced as many as 80 million people from their lands. Indigenous, tribal and peasant communities have been particularly badly hit and in many cases have been economically, culturally and psychologically devastated. Local cultures linked to land rights, burial grounds and local knowledge have often disappeared.


Those people displaced by the building of dams are perhaps the most visible. But other people are affected downstream because of lost land, lost canals and damaged irrigation opportunities. They have also been impacted by roads, power lines and other infrastructure associated with servicing the dam and power generation.


We are now seeing, therefore, a growth of protests against dams. The human rights problems and potential environmental devastation caused by dam projects have encouraged affected people’s groups, environmental and social activists and even some development agencies to campaign against ongoing and proposed projects. Any investment surrounded in controversy and with prospects of protests and media attention looks much more risky and this has got the investment community thinking hard.


So, what of corporate social responsibility? Critics of large dams have often called for water and energy planning to be made transparent, comprehensive, participatory and accountable. There is no suggestion, here at least, that there should necessarily be a blanket ban on dam building but that assessments relating to the construction of dams should be much more thorough and consultative. Even the much criticised World Bank says that “concepts of stakeholder involvement and options assessment imply a change in investment patterns for water and energy development. More resources and time will be spent at the upstream end of planning. Benefits such as the early elimination of unacceptable projects, improved project portfolios, greater public acceptance, improved access to external funding, and lower overall costs outweigh the incremental time and costs spent prior to decision-making”.


Clearly, there needs to be a better consideration of other options before building a dam. Those affected by a dam should be involved in considering those options and encouraged to participate in the decision-making. A number of smaller dams along a river may do less damage then one large dam for example. Others, however, point to decentralised alternatives to damming such as the promotion of geothermal power, biogas development, solar systems for local energy provision and even smaller scale water projects such as water wheels and water driven turbines.

Corporate social responsibility has always been about active engagement, two-way dialogue and a full assessment of all options involved in an investment project. Sadly, to date that has often been lacking in the building of dams, especially Chinese overseas dams. ■

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