Odious Debts

Chinese leader will aid Chretien award contracts to supporters of the controversial Three Gorges dam

Three Gorges Probe
October 12, 1995

Chinese Premier Li Peng is expected to lend a helping hand to Prime Minister Jean Chretien tomorrow in his bid to secure business for Canadian firms in the construction of China’s Three Gorges dam.

Premier Li is attending the annual general meeting of the Canada China Business Council tomorrow in Montreal and is expected to announce the award of contracts to help build the massive and controversial Three Gorges dam.

According to Chretien, Li’s visit “builds on the momentum of last November’s successful Team Canada trade mission to China.” But for critics of the massive Three Gorges dam, which will forcibly relocate more than one million people, Chretien’s position is reprehensible.

“When the Liberals were in opposition, they demanded that no federal funds or loan guarantees be earmarked for the project,” says Patricia Adams, executive director of Probe International. “For Chretien to support the dam now, when Canadians have opposed it for years, is outrageous. Canada remains the only country in the world still holding out its hand for contracts,” she added.

While Canada rushes for a part in the world’s largest construction project, many other foreign financiers are backing away from the project. In 1993, the U.S. Bureau of Reclamation, which had been involved in the preparations for Three Gorges since 1944, pulled out of the project saying it was neither economically nor environmentally feasible. The World Bank, notorious for its involvement in large dam schemes, has stated that the current design of the Three Gorges dam is “not economically viable.” According to a recent report in Institutional Investor, issues like technical feasibility, skyrocketing costs, political risk and social and environmental impacts make the Three Gorges dam “about the chanciest China play there is.”

Beijing hopes to raise $2 billion to $3 billion of the project’s cost through international stock and bond offerings. According to a Wall Street Journal article, however, China’s plans for such offerings were postponed after consulting with several banks, including Merrill Lynch & Co. and J.P. Morgan & Co. The same report calls the Three Gorges project “so politically risky that few bankers are willing to be associated with it.”

Even foreign companies are wary of vying for Three Gorges contracts. The giant American engineering firm, Bechtel Enterprises, has rejected involvement in the project, saying it was “not at all likely” to pursue contracts for Three Gorges because it feels the project is “extremely controversial from an environmental perspective.” One of the authors of a Canadian feasibility study of the dam, Hydro Quebec’s Pierre Senecal, has said the study’s conclusion that China’s resettlement plan was viable “is not valid anymore.”

Canada, however, appears determined to remain involved in the project. The Canadian International Development Association (CIDA), along with several Canadian engineering firms, produced a glowing feasibility study of the dam in 1988, which recommended the dam be built at the earliest possible date. Now, a Canadian engineering firm, Monenco-AGRA, hopes to secure a contract with the Chinese to provide a $35 million computer system needed to coordinate the resettlement of 1.3 million people. The Export Development Corporation, which supplies insurance and financing to help Canadian companies win contracts abroad, is expected to finance the contract. The EDC has already supplied $23.5 million to China to build a cement plant. That contract went to a Montreal-based engineering company.

Supporters of the 185-metre dam on China’s Yangtze River claim it will provide flood control, ease navigation on the Yangtze, and generate over 17,000 megawatts of electricity. But critics contend that sedimentation of the reservoir will actually disrupt navigation, cause flooding, and destroy the dam’s turbines in less than 10 years.

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