Three Gorges Probe

Three Gorges dam: investors still suspicious, controversy rages on

Three Gorges Probe
November 20, 1996

Despite China’s optimism in offering a $120 million bond issue for the Three Gorges Project this month, international investors are still hesitant to back the highly controversial dam.

Says senior analyst Simon Billenness, of Franklin Research and Development in Boston, "Until the grave environmental and human rights concerns are adequately addressed, we wouldn’t touch Three Gorges with a barge pole." A project finance analyst, who asked to remain anonymous, maintained, "The Chinese are going to have a very difficult time financing this. I think the Three Gorges [project] is simply going to be crushed under the sheer weight of itself; the project is much too ambitious."

This is the third time China has attempted to raise money for the project, which is riddled with technical, financial, environmental, resettlement, and human rights problems. The last two times the Three Gorges Development Corporation attempted to offer bonds to international investors, it withdrew its $100m and $200m tranches in the face of weak markets and lack of investor confidence.

Last year, when China was testing the waters of the international debt market, Institutional Investor reported that "the difficulty for financing the project overseas runs deeper than current inhospitable market conditions. Fundamental issues of technical feasibility, runaway cost and completion estimates, political risk and social and environmental impact make the Three Gorges Hydroelectric Project the chanciest China play there is." These concerns are still potent today.

"One might look at the sovereign credit rating of China and be encouraged about the pay back ability on these bonds, but the Three Gorges Project has controversy and political risk written all over it," said Michelle Chan-Fishel of Friends of the Earth. Last year Human Rights Watch-Asia called on foreign investors to avoid any involvement with the Three Gorges dam until the Chinese government can provide verifiable guarantees that the rights of 1.3 million people scheduled to be relocated will be protected.

"The resettlement program is in shambles," said John Thibodeau, director of research at Probe International, a Canadian environmental group which closely monitors the project. "If previous Chinese resettlement operations are any indication, those moved for the Three Gorges dam can expect years of poverty and suffering."

Concerns over the technical feasibility of the world’s largest dam likewise remain a major stumbling block to investor confidence. In April 1996, International Rivers Network released a study prepared by eminent U.S. reservoir sedimentology expert Professor Luna Leopold, which warns that because of the dam’s considerable technical uncertainties, "investing in the [Three Gorges] project would be unwise."


Categories: Three Gorges Probe

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