By Michael Richardson, FOR THE STRAITS TIMES
Nov 1, 2010
FOR most of the 20th century, Western companies played a key role in building hydropower dams in China to generate electricity and improve flood control, irrigation and river navigation.
Leading European and US hydropower companies agreed to technology transfer terms set by Beijing in the 1990s. Today, they may regret giving China a helping hand.
China is the the world's biggest producer of hydropower, with over half the large dams. Its companies are now building nearly 220 dams in about 50 countries, including 19 of 24 largest projects in Asia, Africa and South America.
In fact, just a handful of Chinese firms, all state-owned, now dominate the global hydropower market. One company alone, Sinohydro, has a 50 per cent share of the business.
These firms use low-cost loans from Chinese banks and capital raised from partial listings on the stock exchanges of China and Hong Kong to fund expansion abroad and underbid their former Western collaborators. Chinese nuclear power, high-speed rail and aerospace companies aim to replicate this expansion model.
The dam builders are at the forefront of another significant trend: the rapid rise of Chinese construction, engineering and design firms in building infrastructure in the developing world. Construction contributes over 10 per cent of world GDP and China now accounts for one-sixth of all activity.
In 1989, the international revenues of China-based contractors were less than US$3 billion. Twenty years later, contracted project revenue had reached nearly US$60 billion (S$78 billion) in Asia alone.
Just last week, China Development Bank said it would lend more than US$11 billion over the next five years to the Three Gorges dam developer for power projects in China and abroad.
Another leading Chinese energy company, China Huadian Corp, officially opened a 180 megawatt hydropower plant in August at Asahan, in Indonesia's North Sumatra province. In Cambodia, Chinese hydropower firms are heavily involved in the Cambodian government's plan to increase power generation tenfold in the next decade.
China's dam-building is widely welcomed by governments of developing countries that want renewable energy at affordable cost instead of power from fossil fuels that cause pollution and global warming emissions.
But China sometimes undertakes projects that Western firms and international development banks will not support because of social and environmental concerns. Big hydro projects can displace large numbers of people and disrupt the livelihoods of many others.
In September, a group of NGOs said that more than 20 big dams were being built or planned in Myanmar by local, Chinese and Thai investors without consulting local communities, many of them minorities in conflict with the central government. These dams would 'exacerbate conflict, cause forced displacement and threaten biodiversity', the NGOs said.
Meanwhile, China has completed four dams in Yunnan province on the upper reaches of the Mekong, South-east Asia's longest river. It intends to build four more despite concerns among downstream countries that their own development plans for the river will be affected.
Three of the four downstream states - Laos, Cambodia and Thailand - want to construct 12 dams on their section of the Mekong. If all go ahead, they would generate a massive 13,500 megawatts of electricity but disrupt migratory fisheries and have an adverse impact on over one million people, many of them poor farmers. Vietnam, the fourth downstream state, fears it would suffer if the dams higher up the river in South-east Asia are built.
As a result, a recent report for the Mekong River Commission (MRC) recommended a 10-year deferral of any mainstream hydropower development and the World Bank said it would not finance any of the projects.
Chinese companies are involved in many of these ventures. Will they and other promoters heed the expert advice? Although China is not an MRC member, it is 'increasingly recognising the mutual benefits of adopting a more open approach to the trans-boundary management of water resources' in the Mekong River basin, according to MRC chief executive Jeremy Bird.
Mr Peter Bossard, policy director of the International Rivers NGO, says that destructive dams, mining and logging operations have triggered a backlash against Chinese investors in many countries.
However, he is optimistic the tide can be turned because the Chinese government has realised that social and environmental sustainability is in its long-term self-interest and is now urging Chinese firms to follow stricter standards abroad.
The writer is a visiting senior research fellow at the Institute of South East Asian Studies.