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China’s global role inhydropower

developmentOverview and Reflections

London, 8 – 9 November 2012Grace Mang, China Program Director, International Rivers

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International Rivers

About us Our work on China’s global role in dam building

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China’s Global Role in Hydropower Development

Why? Scale & Size, and Key Actors

Chinese dam-building companies now have as much as 50-60% of the world’s dam-building market.

Based on our records, over 306 projects in 70 countries. South-East Asia, South Asia (primarily Pakistan and Nepal), Africa, Latin America and Eastern Europe

Some trends:

- Regional concentration- What types of dams, what size- New markets- What stage?

Chinese companies and banks are global dam

builders

Source: International Rivers, New Great Walls (2012)

Regional Concentration

• Chinese government: Central Government Departments - Ministry of Commerce, National Development and Reform Commission; Ministry of Foreign Affairs

• Chinese financiers: China Export-Import Bank, China Development Bank, commercial banks

• Chinese dam-builders: • Dominated by State-owned enterprises

• Sinohydro Corporation, Gezhouba, China Three Gorges Project Corporation (subsidary China International Water and Electric Corporation).

• Datang, China Power Investment, Guodian, Huaneng

Key Actors

How can we explain the Chinese dam-building industries success?

- Pull: Benefited significantly from “Going out policy,” export led growth

- Push: Saturation in the domestic dam-building market and low profit margins, Part of broader efforts by the Chinese government to improve diplomatic relations.

What is motivating Chinese dam-builders?

- Aspire to be the biggest and best dam-builders in the world- Profits and unlocking new markets- Desire to “help” countries develop

How?

- Bilateral agreements e.g. large infrastructure loans- Tendering and bidding: Chinese dam-builders are becoming more

and more competitive, access to cheap credit lines.- Going out and securing deals themselves- Free surveying and feasibility studies offered countries e.g.

Argentina, Colombia, Ethiopia, Laos

Reflections on China’s Global Role in Overseas Hydropower Development

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Impacts of Chinese Overseas Dams

Reservoir – flooding and indirect impacts

from creation

Downstream: sediment, flow, reduced water availability, ecological impacts

Transmission lines

Upstream

Downstream

Transmission construction

Socioeconomic impacts

Direct costs

Indirect costs – crowding out of alternatives,

balance of payments, structure changes to

economy

Long term costs, long term benefits may not last

Hydropower development as a pathway to grow other resource

intensive industries

Increase dependency on

other countries - borrowing &

finance, buy power

May cause/exacerbate

tensions with other countries

Environmental and social risks particular to the Chinese

overseas dam-building industryMitigating social and environmental risks is challenging for Chinese overseas dam builders. Need to be conscious that different project roles will lead to different responsibilities

• In China, very rarely have responsibility for addressing resettlement and environmental impacts.

• No implementation capacity. Lack of specialists within companies often results in outside consultants do environmental and community relations work.

• Negotiating standards: low host country standards, higher Chinese standards, international standards.

Exacerbating factors:

- Chinese dam builders are late to the game

- Most active in countries where rule of law, environmental law enforcement is weak or non-existent.

- Initially, minimal standards on environment and community relations.

Dismiss widespread opposition to certain dam projects e.g. Myitsone Dam – lacked the social license

Get involved in projects that are destructive, previously deemed by others as “too hard” or fraught with difficulties e.g.• Transboundary rivers: Mekong mainstream dams• Widely opposed and decades delayed projects: West Seti, Nepal• Countries with security issues and poor human-rights: Patuca

dams, Honduras • Corrupt governments and non-sensical projects: Bakun Dam,

Malaysia

Adopt standards but don’t have the means of know-how as to how to implement them. E.g. UN Global Compact, Chinese legal standards, IFC Performance Standards

Ongoing Environmental Reform

• China Exim Bank

• Environmental Policy and Implementation

• Sinohydro’s environmental policy

• Adoption of international standards• Implementation?

• Draft guidelines on environmental impacts of Chinese overseas investment (MOFCOM and MEP)

• Positive examples: Belinga Dam, Gabon; Chemoga Yeda, Ethiopia, Myitsone Dam, Burma

Differentiated responsibility – host country authorities are still by and large the developers, but this is changing …• Khamchay first BOT project. Sinohydro will operate for 25 years.• Nam Ou cascade will the first time Sinohydro will have been responsible for

resettlement

The first wave of dams are only just coming online – Bakun, Khamchay, Bui dams have only just started generating power

Problems are dispersed, treated in isolation and many of the worst are still to be realized.

• Security and workers’ safety concerns in Africa • Indigenous peoples’ protest in Latin America e.g. Colombia, Honduras• Devastating environmental impacts – Gibe 3 on Lake Turkana, Mekong

mainstream dams on the Mekong Delta and fisheries, Virgin protected rainforest from the Nam Ou projects – only on paper.

Why are Chinese dam-builders so dominant

despite their relatively poor social and environmental records?

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Methodology Considerations

Working on China’s global role is hard!

• Contacts are critical and are time intensive to collect. They also move on…

• The topic of overseas investments are still sensitive but not as much as before

• A good organization name opens doors.

• Beijing-based bureaucrats are reluctant to say anything on the record but may be more open when overseas – joint field research can be a helpful and have been successful in the past.

• Project and company managers of overseas projects in the host countries can be quite frank and upfront, particularly when talking to Chinese researchers.

Thank you

Any questions or clarifications?

Contact details: grace@internationalrivers.org