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Graft fights back
World Bank staff are determined to oust Paul Wolfowitz, because his campaign against corruption threatens their overpaid jobs.
by Patricia Adams, National Post, May 9, 2007
A majority on the World Bank's board, many of whom are directors from Third World countries opposed to president Paul Wolfowitz's anti-corruption campaign, understandably want him out. But why is the World Bank Group Staff Association so intent on getting rid of Wolfowitz?
It's all about jobs. Wolfowitz's actions threaten to lead to a dramatically scaled back workforce, possibly even the bank's collapse.
In a world now awash in private capital, the World Bank is not as competitive as it once was. To stay in the game, it has been "lowering its fees to the point of losing money," stated Adam Lerrick, an economist with Carnegie Mellon University. In a 2005 study for the American Enterprise Institute, Lerrick had found that the interest subsidy embedded in bank loans, "a compelling 12% per annum in 1999, has now shrunk to less than 2% on average as emerging nations have gained increasingly greater access to private capital."
But the bank has had one competitive advantage that no private-sector Western lender can match – a willingness to lend large sums to corrupt Third World administrations with few governance strings attached. Wolfowitz's arrival in 2005, and the anti-corruption measures he has brought in, have jeopardized that advantage big time, as seen in a chilling memo the bank received on March 12 of this year.
The e-mail memo, entitled "Sanctions Reform Roll-Out in EAP [East Asia and Pacific Region] – Your Feedback Needed," was from the manager of the bank's operation in China, Hsiao-Yun Elaine Sun, to James Adams, vice-president for East Asia and Pacific Region. It warned that the bank could lose its second-largest customer, the Chinese government, if it insisted on carrying through with its intention to hold borrowing countries to account for World Bank monies that were used inappropriately.
China's Ministry of Finance (MOF) "is very concerned about the implementation. They foresee potential disagreements as to the scope, level, and approach of the bank's involvement on specific cases. Our MOF counterpart is so worried and is considering to suspend the lending program discussions next year – in order to avoid getting into a confrontational situation with the bank."
Losing a large borrower like China, which has some US$21-billion in outstanding loans and credits with the bank, and accounts for close to 10% of the bank's total portfolio, would lead to significant staff layoffs. Moreover, at least three other countries – India, Mexico and Indonesia – have also expressed alarm at the bank's anti-corruption program, which would make their officials subject to investigation and exposure. These four countries alone, ranked first, second, third and fifth in size among bank customers, account for 30% of all World Bank business.
World Bank staffers can be forgiven for feeling that they are standing at the edge of an abyss.
Without corruption-related lending, the bank's prospects are grim indeed; the bank's continued existence would be called into question. Moreover, Wolfowitz seemed determined to press ahead with his reforms, despite the upsets he was creating.
Prior to Wolfowitz's arrival, the bank had never acted against a borrowing country or its officials over allegations of corruption – it limited its sanctions to contractors, and even then sanctions were a rarity, despite an estimated 20% to 30% of all World Bank lending that went missing. Wolfowitz promptly suspended or cancelled loans to Kenya, Chad, India, Bangladesh and Argentina, among others.
The bank's board of directors, which includes representatives of the Third World countries that benefited from the bank's largesse, erupted when he cut off funding. Wolfowitz did not back down, as seen in his plan to roll out the sanction reforms broadly to borrowing governments.
The leak over Wolfowitz's handling of his girlfriend's compensation occurred two weeks after the e-mail from China began reverberating through the World Bank's corridors.
Some World Bank employees are, in all likelihood, themselves on the take (dozens have been either disciplined or are under investigation), and oppose Wolfowitz for fear that they could be exposed. These are a minority. The majority are complicit in that they knew what was going on, and chose to turn a blind eye. Their financial incentive to do so is clear: The World Bank's remuneration for its professional staff is exceedingly high. In 1995, a U.S. Government Accountability Office study pegged it at US$125,000 per year tax free, excluding the highest level of management. While the bank does not reveal its average salary today, it would top US$175,000 tax free, assuming an escalator of 3% per annum.
This financial incentive sheds light on the staff's determination to rid the bank of Wolfowitz – staffers have been far more vocal in their desire to oust Wolfowitz than the board, where Canada, the United States, Japan and several reform-minded African countries are thought to be supporting Wolfowitz and his desire to rid the world of corruption. The members of the board – some represent lenders, some borrowers, some countries that are clean, some that are corrupt – have diverse interests. Not so with the more uniform reaction of World Bank staff: It overwhelmingly depends on the continuation of corruption for its own continuation. Wolfowitz be damned.
Patricia Adams, an economist, is executive director of Toronto-based Probe International. She is the author of Odious Debts: Loose Lending, Corruption and the Third World's Environmental Legacy.
Carbon boondoggles
Aid bureaucracies are the only winners when they repackage outdated development projects into supposed carbon savers.
by Grainne Ryder, National Post, April 26, 2007
To reduce greenhouse-gas emissions, Canada's federal government plans to push Canadian corporations into buying carbon credits under the so-called "Clean Development Mechanism" (CDM), a system established under the Kyoto Protocol by which companies in rich countries buy "rights to pollute" from companies in poor countries. The poor-country companies, in exchange, promise to give up their own greenhouse-gas producing activities.
The scheme, if implemented on the large scale sought by its backers at the World Bank and other Western development agencies, may or may not lead to reductions in greenhouse-gas emissions in rich countries. It will certainly succeed in harming the environment and the livelihoods of millions of farmers, fishermen and indigenous peoples in the Third World.
Over the last four decades, Western development agencies such as the World Bank, the UN's Food and Agriculture Organization, and national aid agencies such as the Canadian International Development Agency, have financed massive hydro dams, the removal of Amazon forests, and industrial projects in the Third World, leading to the forced relocations of hundreds of millions of people from rural lands and the wanton pollution of urban communities. The development agencies were forced to back off only after opposition from local peoples became fierce through riots and hunger strikes, and public opinion in the West turned away from these ruinous megaprojects. Hundreds of hydro dams, rainforest highways, industrial tree plantations and other boondoggles have been cancelled as a result since the late 1980s.
Today, with the Kyoto treaty and Clean Development Mechanism strengthening their hand, the very same development agencies are now repackaging the boondoggles as carbon-saving projects qualifying for carbon credits that can be sold on the global carbon market.
To qualify as a CDM project, projects must be large – the UN typically favours projects expected to save millions of tons of greenhouse gases per year. As a result, smallholders are being expropriated by large private or public corporations, or otherwise coerced into selling out. In the case of a CDM forestry project, for example, a land mass of about 1,000 hectares would need to be assembled. In countries where land holdings are small, the landholdings of hundreds of families would need to be assembled into plantations. Even in relatively prosperous countries such as tiny Costa Rica, where the average landholding of family plots is about 50 hectares, 20 farms would need to be assembled to create a single CDM project. To exacerbate the problem, the needed land assemblies will need to grow incessantly to meet UN targets. Costa Rica, total area five million hectares, needs to assemble at least 15,000 hectares per year to meet FAO targets, leading local community organizers and environmentalists to prepare for expropriation battles.
Most of the CDM projects to date are slated for India, which has about 350 CDM projects in the works, including large hydro dams and nuclear plants. India's record to date is not promising. For example, Jindal Steel and Power, which runs the world's largest spongeiron plant, is developing four CDM projects, courtesy of the sale of carbon credits and amid claims of forged documents that allowed the controversial projects to go through. These projects are being fought by 32 communities that have suffered air and water pollution in the surrounding area for years.
Likewise, villagers are protesting Nalwa Sponge Iron, MSP Steel, Salasar Industries, Shivshakti Factory and Anjani Steels -- all Indian CDM beneficiaries – for polluting their croplands. In 2005, villagers resorted to blocking a national highway in protest against Monnet Steel Industries' plans to seize 120 hectares of their land. Protests also broke out in India against another land grab – this one by Ind Agro Synergy, another firm with a UN-validated CDM project. Protests against CDM projects, in fact, are o ften the order of the day. They have occurred in Thailand, where protests have stalled a biomass power plant, and in West Bengal, where villagers oppose a textile factory's pollution, among numerous other examples.
Against the backdrop of CDM-created confrontation in developing countries that are presumably benefiting from the carbon credits, large questions arise as to whether CDMs even accomplish their goal of economically reducing greenhouse gases.
In the case of Costa Rica, studies by the FAO and the Forest and Climate Change Project in Central America concluded that they don't have the data to account for increased or decreased carbon storage since plantations began in the 1990s.
In Ecuador's Andes, an 8,000-hectare plantation set up by a group of Dutch power companies is absorbing far less carbon than expected. Because it is also prone to fires that release unanticipated carbon into the atmosphere, some now estimate that the net carbon balance is negative. As with other CDM projects, the local communities are aggrieved, claiming that their environment has been damaged and that the promised benefits – well-paying jobs – never materialized.
In some cases, CDM projects fail because local opposition wins the day. In Uganda, where the indigenous Benet people were left homeless and hungry after their forest lands were expropriated to make way for a plantation, the courts have set back a CDM project after the Benet took the government to court. The Benet have won the right to return to their traditional land, with the right to farm, but the conflict is carrying on.
The only clear beneficiaries of CDM projects are the aid bureaucracies that oversee growing fiefdoms, and the corporations that have learned to game the system. A striking example of how Third World corporations cash in on CDMs came earlier this week, with revelations from India of SRF, a company that produces refrigeration gases. After spending a mere $3-million to reduce its emissions, SRF then used its CDM earnings to expand production of another greenhouse gas, one that is 100 times more damaging than CO2. SRF now stands to make a profit of $670-million from its expansion, paid for by British companies Shell and Barclays. In the last year, more egregious examples still have emerged. There can be no doubt that billions of dollars that could be well spent in legitimate development are being squandered on CDM schemes that are unwelcome in the Third World, where they do harm to the environment and the economy alike.
Grainne Ryder is policy director at Probe International, a Toronto-based environmental group.
World Bank faces setback to war on corruption
The actions of World Bank president Paul Wolfowitz have led to allegations of impropriety just when his campaign against corruption had gathered momentum.
by Mark Trumbull, The Christian Science Monitor, April 23, 2007
A month ago, it seemed as if the World Bank was ready to press forward with renewed zeal to battle corruption – a bane of economic development worldwide.
That effort has been cast into doubt, for now, by allegations of impropriety within the institution itself. At issue: whether bank president Paul Wolfowitz acted improperly in arranging for the employment and compensation of his close companion, Shaha Riza. The matter is a complex tangle, with accusations mounting against Mr. Wolfowitz even as his defenders characterize the storm as more about politics than ethics.
What's clear is this: It is a setback for Wolfowitz's attempt to make a crackdown on corruption a hallmark of his tenure at the World Bank. And such an effort is sorely needed, say experts in economic development.
"We should be extremely concerned about the prevalence of corruption in our world," says Frank Vogl, cofounder of the watchdog group Transparency International in Washington. The problem has stark consequences, he says: more hunger and disease, and less education and clean water "in many of the most fragile and poorest countries of the world."
The problem is far broader, and older, than the World Bank. Yet the Washington-based institution has a central role on this issue for two reasons.
First, experts say, it has helped to make corruption endemic in the developing nations it serves. Since its founding in 1944, the World Bank has doled out billions of dollars annually for building roads and other infrastructure in poor nations, and until the mid-1990s, it rejected the notion that guarding against bribes and theft was part of its mandate.
Second, arguably no institution offers a better platform from which to combat financial impropriety on a global basis. It is the leading agency of global development assistance, so its policies can ripple outward to affect governments and other financial institutions.
Now the bank's image is on the line in a very public way. The question goes beyond alleged wrongdoing by Wolfowitz to whether the bank can fairly and openly address a matter that is fraught with internal politics.
This week, a panel appointed by the bank's board is undertaking an urgent review of whether Wolfowitz acted improperly in arranging for the transfer of Ms. Riza, a bank employee, to a new job at the US State Department, after disclosing his relationship with her to the bank's ethics committee. According to news reports, the investigation will also consider other complaints against Wolfowitz.
"Your credibility as a leader in the fight against corruption . . . is certainly harmed if there's a perception" of actions inconsistent with good governance, says Mr. Vogl, a former World Bank spokesman. "The situation is very serious. It needs to be resolved in a clear, transparent manner."
The uproar comes barely a month after the bank issued a comprehensive report on its strategy for fighting corruption and promoting good governance – matters of heated debate within the bank during Wolfowitz's two years at the helm.
Most of the world's nations have serious levels of corruption, according to survey-based research by Transparency International. Of the surveyed countries, 71 – or nearly half – showed "rampant" corruption.
The problem spans from the public sector to the private, and across the ideological spectrum. Consider some news reports from the past month:
• In Taiwan, the leading candidate for president is standing trial, accused of graft in diverting more than $300,000 of public money into a private account.
• In Afghanistan, citizens say today's leaders there are more corrupt than were their Taliban or Soviet-backed predecessors, according to a poll by Integrity Watch Afghanistan.
• In the US, major universities are scrambling to clean up a scandal involving financial-aid officers who allegedly accepted financial perks from lenders while steering students toward their loans.
Raymond Baker, a scholar at the Center for International Policy in Washington, says the problem is so big that the very survival of global capitalism in this century is at stake. The reason: Too many of the world's peoples are held in poverty by the illicit transfer of wealth.
Over the past decade, the World Bank has begun to acknowledge the importance of the problem. Bank president James Wolfensohn put it squarely on the agenda in 1996.
Now some observers say that his successor, Wolfowitz, has pushed the issue even further into the forefront.
"He has certainly attacked the corruption issue in a much tougher way than anyone has before him," says Patricia Adams, executive director of Probe International in Toronto, which follows trade and aid issues. "The biggest thing that he did, that no one else has done, is just stop the flow of money" to certain countries.
In the process, Wolfowitz has become embroiled in a longstanding debate, inside and outside the bank, over how to reconcile two priorities – clamping down on corruption and continuing to assist nations that in many cases are desperately poor.
Wolfowitz has been controversial from the start of his tenure. Fairly or unfairly, he has been criticized within the bank for bringing in a handful of advisers from the Bush administration, in which he had served immediately prior to his current post.
And he made what seemed to critics to be arbitrary moves – suspending all aid to some nations, such as Chad, as part of the anticorruption effort. Faced with criticism from Europeans and aid organizations, he has backed off such hard-line tactics.
Regarding Riza, he disclosed their relationship to the bank in 2005, asking to be recused from personnel decisions related to her. But, according to news reports based on documents that the board recently released, the ethics committee asked Wolfowitz to arrange for Riza to leave the bank, with a pay raise or promotion to reflect any unintended cost to her career from this step.
After earning $133,000 as a communications adviser in the bank's Middle East department, Riza got a $180,000 job at the State Department.
Wolfowitz has said he has no plans to step down. At the same time, calls for him to exit have mounted this month.
Vogl says it is hard to judge the matter until all facts are made public.
"There's an awful lot of partial information out there," he says. "We feel in Transparency International that there may have been fault not only on the part of Mr. Wolfowitz, but also on the part of the ethics committee."
In the end, some analysts say this could become one more cautionary tale on the need for clear ethical lines – whether on personnel matters or bank projects.
Mr. Baker says the flow of dirty money is often enabled by the view that "the end justifies the means" – that a little unfairness or bending of rules is acceptable so long as some greater good is being served. The consequences can involve national security as well as poverty.
"We probably wouldn't be in Iraq today if it wasn't for the money that passed through the oil-for-food" program, he says.
Wolfowitz, as a advocate for the Iraq war, knew all about that.
What he might not have guessed is that today, with Saddam Hussein's regime gone, Iraq would remain a hotbed of financial abuse, at the bottom of Transparency International's ranking.
There and elsewhere, there's plenty of anticorruption cleanup work to do.
Internal attack
The only wonder is that it took so long for World Bank staff, faced with his campaign against corruption, to try to oust.
by Patricia Adams, National Post, April 17, 2007
Since its creation in 1944, the World Bank has become the world's leading architect of Third World corruption. In the Third World countries themselves, the World Bank has created hundreds of state-owned enterprises and then lavished them with money, requiring their officials to subject themselves neither to public oversight nor the bank's own scrutiny. Among the Western suppliers to these corrupt state corporations, the bank awarded billions of dollars in contracts, again without public oversight or bank scrutiny, let alone market discipline. The result, understandably, has been corruption – and cover-ups – on an unprecedented scale, over the course of six decades.
How odd, then, that the World Bank's president of less than two years, Paul Wolfowitz, should now face a chorus of outrage from the World Bank's staff organization, which has seen – and overseen – this corruption during the tenure of his predecessors with hardly a peep. Why did the staff not go public over earlier ethical lapses? And why is this staff now so hell-bent on seeing to Mr. Wolfowitz's ouster?
In truth, many would consider Mr. Wolfowitz's behaviour to have been exemplary. Before he became president in 2005, he disclosed that he was romantically involved with a bank employee, Shaha Riza, who held the post of acting manager for external affairs in its Middle East department. Although she worked four levels down the World Bank hierarchy, and although she did not want to leave her post, the World Bank's ethics committee decided she must, to avoid a potential conflict of interest. It instructed Mr. Wolfowitz to see to her employment elsewhere, which he did, albeit with some discomfort. Now he is being accused of breaching ethical standards because he landed her a well-paying job in the U.S. State Department.
The real wonder is that it took so long for the World Bank staff to attack Mr. Wolfowitz. He is altogether unlike any of his predecessors, in that he takes corruption seriously. Last year, he cut off funds to Chad because the government had breached its agreement with the World Bank by changing a law that diverted oil profits away from social programs designed for the poor. He delayed loans to projects in Kenya out of concern that the government was not serious about tackling corruption, and is conducting a "forensic exercise" on the delayed projects before releasing the funds. He stopped funding to the Congo, despite an IMF decision that the country deserved debt relief, because of its financial irregularities. In India, in Bangladesh, in Uzbekistan, in Yemen and in Argentina, Mr. Wolfowitz is sending an undeniable message: Clean up your act or forfeit development assistance.
Mr. Wolfowitz's administration is the first to ever staunch the flow of corrupt dollars, an amount of almost unimaginable proportions. According to testimony before the U.S. Senate committee on foreign relations in 2004 from Jeffrey A. Winters, Associate Professor of Political Economy at Northwestern University, roughly US$100-billion in World Bank development funds has been stolen. In Indonesia, for example, an estimated 20% to 30% of World Bank lending was stolen, and that's according to leaked memos from the World Bank's staff. According to Julian Schweitzer, a senior World Bank official, Indonesia's experience is "a lot better than some places with only 10 cents on the dollar" appropriately used, he said, referring to certain African countries where nearly all of the loan funds are misallocated, diverted, unaccounted for, or simply stolen.
With this much World Bank money disappearing in the Third World, questions have arisen about why World Bank staff would have been so complacent in the money's disappearance. Steve Berkman, a former World Bank investigator and author of an internal paper on fraud and corruption in World Bank projects, told the same Senate committee hearings that the World Bank has not "even the slightest clue" as to the full extent of money that has disappeared.
"It seems strangely odd," he explained, "that an institution noted for its leadership in the field of economics would not consider the theft of its funds important enough to quantify the problem as accurately as it could. The bank spends millions of dollars of its operating budget to produce a plethora of arcane economic data. It can tell you exactly how much annual household earnings are in the middle of the African bush, but it cannot tell you how much may have been stolen from annual disbursements amounting to billions of dollars . . . One has to ask, if Wal-Mart can give an accounting of its losses to theft each year, why can't the World Bank?"
Was the bank staff complacent all these years – or was it sometimes complicit? Mr. Wolfowitz has encouraged his investigators to fight corruption by World Bank staff more effectively than it has in the past, with some results: Last year saw disciplinary actions taken against World Bank staff and in his message from the president in his Annual Integrity Report, 2005-06, he noted the need to "ensure that bank staff continue to maintain high standards of conduct. The overwhelming majority of people working in the Bank Group are exceptionally dedicated professionals, but recent corporate scandals around the world have shown that the actions of even a very small number of individuals can tarnish the reputation of an entire organization."
The World Bank has never had anyone with Mr. Wolfowitz's corruption-fighting determination at the helm. While he is rightly criticized for going too slow and doing too little in fighting corruption, he has also accomplished more as a corruption fighter than any of his predecessors, and has, for the first time, given the institution he heads some ethical mettle. His critics are right to want him to do better. They are wrong to want him out.
Patricia Adams is an economist and executive director of Toronto-based Probe International and the author of Odious Debts: Loose Lending, Corruption, and the Third World's Environmental Legacy.
Wolfowitz deflects questions about role in scandal
"Has he damaged the Bank's reputation as the Bank staff representative association suggested? Get real, I'd say," said Pat Adams of the Canadian anti-corruption watchdog Probe International.
by Emad Mekay, Inter Press Service News Agency, April 15, 2007
As the World Bank handed out a communiqué that talked about "transparency" and "equity," beleaguered Bank President Paul Wolfowitz deflected a barrage of questions from journalists seeking more information about allegations of nepotism involving a Bank employee who is personally involved with him.
But despite his diminishing credibility at the helm of the Bank, Wolfowitz, who started his tenure in June 2005, said he wants to keep his job.
"This is important work and I intend to continue it. I have many expressions of support," Wolfowitz told reporters at the close of the annual Spring Meetings of the World Bank and the International Monetary Fund, which were largely overshadowed by the scandal.
"I believe in the mission of this organisation and I can carry it out. We need to work our way through this," he added.
During a 30-minute press conference, Wolfowitz kept referring reporters to the 24-member Board of Directors of the Bank, which is dominated by countries from the Group of Seven most industrialised nations and which is investigating the case.
"The Board is looking into the matter. We'll let them complete their work," he said.
His words failed to appease a roomful of reporters thirsty for details over why he paid his girlfriend and co-worker at the Bank, Shaha Riza, an unusually high salary above and beyond Bank rules, and seemingly tried to cover it up later.
In a near chaotic scene, the moderator of the panel on which Wolfowitz spoke tried to cut short a Swiss reporter who told Wolfowitz that he had "lost the trust" of his staff and some of the shareholders at the Bank. A Bank employee even tried to seize the microphone from the reporter.
Another reporter asked whether it was "hypocritical" on Wolfowitz's part to continue at the Bank, preaching anti-corruption and transparency – especially to African nations – when he is embroiled in allegations of cronyism.
A third sounded awkward as he searched for a word to describe the 52-year-old woman at the heart of the scandal. "Your girlfriend," he finally told Wolfowitz, president of an institution that lent 23 billion dollars to developing nations last year.
Of the nine questions allowed during the session, six were about the Riza affair.
The issue also dominated the two-day meetings.
Finance and development ministers from around the world who gathered under tight security in Washington for the Spring Meetings of the World Bank and the IMF appended their statement with a call for openness and good governance at the World Bank.
"The current situation is of great concern to all of us," the communiqué said. "We expect the Bank to adhere to a high standard of internal governance."
The governors, however, said they would endorse the Board's actions in looking into the matter.
"We have to ensure that the Bank can effectively carry out its mandate and maintain its credibility and reputation as well as the motivation of its staff," they said.
Meanwhile, calls for Wolfowitz's resignation – which started on Thursday with the 10,000-member World Bank Staff Association – continued to trickle in.
"He has become a distraction, not a leader, at a moment when leadership is sorely needed," said Nancy Birdsall, president of the Washington-based Centre for Global Development, in a statement earlier in the meetings.
"There are other reasons, too: With shareholders and staff questioning his judgment on the conflict of interest issue, he cannot lead by influence and inspiration, as the World Bank's global mission so obviously requires," she said.
Birdsall said that the scandal is a major diversion from other pressing global issues such as poverty, climate change, cross-national money laundering, drug and sex trafficking and avian flu, among others.
"We are in a new and dangerous global century. We need a strong World Bank to wield its financial and technical weight in a concerted collective attack on these global challenges," she said. "By resigning now, Mr. Wolfowitz can rescue for himself a lasting legacy. He can do so by linking his own resignation to a clarion call for a transparent and openly competitive process in the selection of his successor, in which it is merit not politics and power that matter."
These sentiments were echoed by several development groups.
"With Wolfowitz, the World Bank is losing face. If it wants its policies on corruption to be taken seriously, it must first look within," said Amy Gray of ActionAid.
However, others fear that if Wolfowitz leaves, the anti-corruption campaign at the Bank that he started may be derailed.
"Has he damaged the Bank's reputation as the Bank staff representative association suggested? Get real, I'd say," said Pat Adams of the Canadian anti-corruption watchdog Probe International. "The Bank's role as architect and sponsor of Third World corruption and bad governance was firmly established by the Bank and its previous presidents, Boards of Governors, ED's (executive directors), and staff long before Wolfowitz came on the scene."
But she added that despite criticisms of Wolfowitz's signature crusade in the Bank, it had the seeds of seriousness.
"I do think Wolfowitz took tougher measures to rein in the Bank as an accomplice to the crime of corruption. I don't think he went far enough, but I think he went further than his predecessors," she said.
Canadian report: Sida project contradicts Swedish dams guidelines, says Probe International
March 6, 2007
An environmental study carried out in Cambodia by the Norwegian engineering consultancy SWECO Grøner for a Vietnamese client does not pass the test of Sweden's own guidelines for building dams, claims Probe International in a report to the Swedish Foreign Ministry.
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The report claims that SWECO Grøner's assessment, financed by the Swedish International Development Co-operation Agency (Sida), and its failure to comply with Swedish standards results in negative effects on 11,000 people of ethnic minority cultures in Cambodia, who are "at risk of increased poverty without compensation" as a result of dams built upstream in Vietnam.
The Nordic donor agencies, Sida and Norad, have since 1999 provided more than US$10 million in aid financing to Vietnam for the planning of hydropower dams.
A controversial aspect of this project has been the trans-boundary impacts of projects built on rivers that flow from Vietnam into Cambodia. During Phase I of the project, the Nordic consultants did not address the trans-boundary issues. Sida insisted on an environmental study of impacts in Cambodia of dams built along the Srepok River, as a condition for the funding of Phase 2.
Probe's Compliance Review gives SWECO Grøner poor marks because its impact study was completed after construction of four of six planned dams had already begun. According to Probe, the study does not include an analysis of economic losses due to impacts on fisheries, agriculture, hunting, increased safety risk and so on. And though SWECO Grøner predicts serious damage to food security and livelihoods of affected people in Cambodia, it contains no specific proposals on compensation.
"This omission suggests that SWECO is either unfamiliar with compensation experience in the region or uninterested in increasing project costs for its client," Probe states.
SWECO Grøner agrees that its environmental study is not complete. Tore Hagen at SWECO Grøner had said earlier that limited time and resources did not allow for a full EIA to be done:
"Normally you would have completed a full EIA before construction begins. We agree upon that. However, we thought it was better to do something than nothing at all."
The SEK 500,000 provided by Sida in 2003 to conduct the study was not sufficient to cover a full EIA. Norad, meanwhile, refused to provide any funding.
Gráinne Ryder, the main author of the Probe report, says the consultant had been "professionally negligent" for failing to give the Vietnamese client information they need to be in compliance with the law.
"The fact is SWECO got sloppy and produced a sub-standard EIA knowing the rule of law does not apply in Vietnam, and presuming it would not be held to account by affected people in Vietnam or Cambodia . . . I think the companies are well aware that they would be liable in a Swedish or Norwegian court."
Report by Development Today, a journal on aid and aid-related politics and business issues concerning Nordic and multilateral development assistance.
Full text available from Development Today (subscribers only):
www.development-today.com
Zambia: Let the looters pay the vultures
by Odious Debts Online, February 28, 2007
A recent British high court ruling that permits a so-called "vulture fund" to pursue an enormous profit on its purchase of Third World debt from Zambia has provoked a backlash from global debt campaigners. However, U.S. law professor Larry Cata Backer argues that, within an odious debts context, the fund ought to be able to seek repayment but not from the people of Zambia.
The case and the moral outrage
Debt campaigners have denounced a London high court ruling that permits Donegal International, a so-called "vulture fund," to enforce its claim to payment from Zambia for sovereign debt Donegal had bought more than a decade ago on the secondary debt market.
Vulture funds are companies that buy up the debt of poor countries cheaply, often at a time when they are negotiating unpayable debts, and then later try to reclaim the debt for its full value plus interest, sometimes by suing the country.
The claim against the government of Zambia arises from a $30 million debt it incurred with the Romanian government in 1979 for the supply of argricultural machinery. Zambia reneged on the repayments and eventually the outstanding debt was renegotiated to some $3 million. That's when Donegal International stepped in and purchased the bad debt for under $4 million from Romania. Donegal then persuaded Zambia to agree to repay $15 million, an amount Donegal says has since been inflated by legal costs and interest to a whopping $55 million.
In the wake of the Zambian decision, debt activists have mounted campaigns to stop vulture funds like Donegal, which they say "swoop in on the worlds' poorest countries in order to make a cynical buck out of their debts." Campaigners argue that the high court ruling will also undermine Zambia's poverty reduction efforts – the country received $4 billion of debt relief from the Group of Eight rich nations in 2005 under an international debt relief scheme. That relief was supposed to enable Zambia – one of the world's poorest countries – to use funds that would have gone to debt servicing to boost the country's health and education infrastructure.
"Profiteering doesn't get any more cynical than this," said Caroline Pearce of the Jubilee Debt campaign, who added that vulture funds make a mockery of the work done by governments to write off the debts of the world's poorest.
Martin Kalunga-Banda, a Zambian presidential adviser and consultant to the international development charity Oxfam International, said the amount of money Donegal could extract from Zambia was equal to all the debt relief the country had received last year.
"It means 30,000 children who would have benefited from going to school free will not be able to do so," he said. "It also means the treatment, the Medicare, the medicines that would have been available to in excess of 100,000 people in the country will not be available."
High Court Justice Andrew Smith, who ruled on the case, conceded that although the proceedings aroused "strong feelings" because "Zambia is a poor country and sees itself as being vulnerable to vulture funds," his concern was bound to "the legal questions . . . raised by the applications before me and not with questions of morality or humanity."
It has also been alleged that the debt bought by Donegal has been "tainted by corruption" and was purchased by Donegal from "behind the back of the [Zambian] government."
Justice Smith found that international witnesses called by Donegal had been dishonest and unreliable. Mr. Smith described Michael Sheehan, the American financier who owns Donegal, as "not merely careless but cavalier" in the presentation of his evidence and said that delays to the trial were to "put at its kindest" a result of some of Donegal's witnesses being "less than candid."
A BBC "Newsnight" investigative report claimed Mr. Sheehan offered to make a $2 million payment to Zambia's then president Frederick Chiluba's favourite charity at the time of the debt purchase, a payment Mr. Sheehan described as a "charitable initiative," which Zambia's lawyers have characterized as a "bribe." White House officials have taken a particular interest in this aspect of the case.
After viewing the BBC "Newsnight" report, Washington's powerful congressional judiciary committee chairman, Congressman John Conyers, brought the matter to the attention of President Bush. Although Mr. Sheehan, a U.S. resident, denies the payment was a bribe, it could still mean that Donegal falls foul of the U.S. Foreign Corrupt Practices Act.
"It's our position that the Foreign Corrupt Practices Act and the comity doctrine brought from our constitution allows the president to require the courts defer in individual suits against foreign nations. And so, we're conducting a couple of things," said Mr. Conyers. "First of all, we want to know where these practices are going on at the present time, and, two, how we can get this information to President Bush so that he can, as he indicated to us, stop it immediately."
Mr. Bush has the power to block the collection of debts by vulture funds, either individual ones or all of them, if he considers it to be at odds with U.S. foreign policy, in this case debt relief for poor countries.
U.S. law professor Larry Cata Backer, meanwhile, has brought an interesting legal perspective to the issue: the Zambian case, he says, highlights the clash when multiple systems of law and legal norms – one private and economic (to protect the integrity of capital markets for secondary debt) and the other public and political (to forgive certain debts in order to free up funds for development) – function simultaneously on different aspects of a complicated transaction.
The political community – debt campaigners, NGO activists, as well as Gordon Brown (the likely successor to British Prime Minister Tony Blair as leader of the Labour Party) – have characterized public debt speculators in secondary capital markets as "perverse and immoral" and suggest that such entities ought to have some sort of obligation to act in the interests of the state.
"We particularly condemn the perversity where vulture funds purchase debt at a reduced price and make a profit from suing the debtor country to recover the full amount owed – a morally outrageous outcome," said Mr. Brown, in a 2002 address to the United Nations.
But, says Professor Backer, "this makes little sense." The U.K., he says, "would hardly argue that Donegal International ought to act in the interests of stakeholders other than those with an interest in the entity. Donegal International is not a state actor." Rather than browbeat Donegal for seeking a return on behalf of its investors, Backer suggests that if the debt is odious, "let the great insights of modern odious debt doctrine" take their course.
Let the doctrine do its job
In "Odious Debts and Vulture Funds: Making a Case for Repudiation of Sovereign Debt," Backer argues that Donegal ought to be able to seek repayment for its purchase of Zambian debt from the public officials who incurred the debt on behalf of the citizens of Zambia, but not for their benefit.
Backer says he has written how the doctrine "would distinguish between legitimate and illegitimate state debt on the basis of the purpose for which it was incurred. Debt incurred for the benefit of the nation, whether or not well used, would remain the obligation of the state. Debt incurred for the benefit of the agents of a state, whether as a consequence of corruption or for some other illegitimate purpose, would be deemed to be the personal debt of the agent, against whom the creditors could proceed. Creditors making loans to a state would have the obligation of satisfying themselves of the legitimacy of the loan before it is incurred.
"As a consequence," continues Backer, "the application of the odious debt doctrine in this way can continue to support the integrity of the secondary capital markets – the Zambian debt can still be collected. But it also furthers international public economic policy – the Zambian state is relieved of the obligation for the debt, repayment falls to the party actually responsible for its incurrence, that is the officials who acting for their own interests purported to incur a debt for Zambia. Donegal International ought to be able to seek repayment of the debt – but only from the agents of the state for whose benefit the loans were made, and not against the Zambian state itself. In the future, Donegal International will assess the value of secondary market transactions with this in mind."
In other words, Donegal International, and other vulture funds, would learn to beware: if the loans were to crooks, it is the crooks they must chase payment from.
"To the extent that issues of legitimacy and corruption play a greater role in the validity of debt contracts and to the extent that courts take seriously the separability of a state from its officials (and thus apply more vigorously an ultra vires rule) courts will begin to apply some of the great insights of modern odious debt doctrine. And that is a step in the right direction," Backer added.
A further court hearing on the Zambian case is scheduled for March 9 to ascertain legal liability and cost. It is thought that the court will not allow Donegal to claim full repayment from Zambia and will likely set the amount closer to the agreed upon price at the time of purchase.
The case is being heard in the English courts because the purported settlement agreement stated that in the event of a dispute, the parties should submit to the English jurisdiction.
For the High Court judgment in full, please see:
http://news.bbc.co.uk/nol/shared/bsp/hi/pdfs/16_02_07_zambiajudge.pdf
Rich nations prodded on 'illegitimate' lending
A new study by international anti-debt campaigners argues that some debts owed by developing countries should not be paid at all. Probe International, one of the groups behind the report, contributed a case study on Canada's involvement in the construction of the Yacyretá dam in Argentina and Paraguay.
by Emad Mekay, Inter Press News Service, February 12, 2007
Industrialised countries that knowingly lent billions of dollars in "irresponsible" debts to corrupt and dictatorial regimes in poor nations should cancel the debts and reconsider their harmful policies, a new study says.
The study by international anti-debt campaigners argues that some debts owed by developing countries should not be paid at all.
"This is because creditors bear a large part of the responsibility for having extended loans irresponsibly and negligently," says the study, "Skeletons in the Cupboard – Illegitimate Debt Claims of the G7".
The report says that the Group of Seven (G7) most industrialised nations – Canada, France, Germany, Japan, Italy, Britain and the United States – lent money to regimes they knew to be corrupt or repressive in order to buy political allegiance.
The non-governmental organisations behind the report contend that the G7's newfound emphasis on corruption, good governance and transparency lacks seriousness since those nations still refuse to apply the same principles to their previous economic practices.
"Creditors need to be held accountable for the bad decisions they have made and share responsibility for mistakes," said Gail Hurley, of the international debt think tank EURODAD.
"It is not acceptable for the G7 to preach good governance to developing nations while at the same time collecting debts that were corruptly made," Hurley said.
She was referring to politicians in industrialised nations who have recently put fighting graft high on their agendas, saying they want to make sure that taxpayers' money is well-spent and not wasted by corrupt elites.
Other groups behind the report include the Italian group CRBM, Erlassjahr in Germany, PARC from Japan, Plate-forme Dette et Développement from France, the Jubilee Debt Campaign in Britain, Jubilee USA and Probe International in Canada.
Some of these loans, the report says, were designed to help rich country companies do business abroad and in many of these cases loans were provided at excessive interest rates.
"Development was never their original purpose," says the report.
The study highlighted cases of unnecessary goods or services being sold, blatant overcharging, the sale of military hardware or weapons to authoritarian regimes which were widely known to be corrupt or to abuse human rights, extortionate interest rates and projects with huge negative social and environmental impacts.
For example, the report cites the case of Germany selling warships to Indonesia during the Suharto regime despite concerns over how the vessels would be misused in internal conflicts.
Japan also supported the development of an aluminum project in Indonesia designed to serve the interests of Japan's aluminum exporters and which did not benefit Indonesians, the report says.
The Bataan Nuclear Power Plant built by former dictator Ferdinand Marcos, who ruled the Philippines between 1965 and 1986, was financed by The Export-Import Bank (EXIM), the U.S, government's export credit agency, which provided loans and guarantees totaling 900 million dollars for the project.
The Filipino people continue to pay this debt and are projected to continue to do so until 2018, even though they have never received even a single watt of energy from the project, which ended up costing more than 2.3 billion dollars.
Italy sold three hydroelectric turbines to Ecuador when only two were needed, and despite evidence that the hydropower plant was unviable and had destroyed the local environment and communities.
The calls by the campaigners to deal with such debts are not without precedence.
In October, Norway decided to cancel 80 million dollars in debt owed by Ecuador, Egypt, Jamaica, Peru and Sierra Leone after it determined that the loans were not granted in a good faith effort to promote development.
Anti-debt campaigners want Norway's decision to serve as a model for other wealthy creditors to follow in order to ease the global debt crisis that has squeezed many developing nations.
The report recommended that G7 countries open official and impartial audits of illegitimate debt and that the enquiry's recommendations be public, involve debtor nations fully and "lead to the cancellation of debts found to be odious or illegitimate."
The International Monetary Fund estimates that total public external debt for the 54 lowest-income countries, which Gross National Income per capita of less than 860 dollars a year, stands at some 460 billion dollars.
These countries include Afghanistan, Bangladesh, Kenya, Senegal, Ethiopia, Myanmar, Uzbekistan, Gambia, Nepal, Vietnam, Ghana, Niger, Yemen, Nigeria and Zambia.
"Debts which are found to be corrupt, fraudulent and illegitimate must be cancelled and responsibility shared between the two parties," Hurley said.
Rich nations, especially in the powerful group of bilateral creditors known as the Paris Club, and through multilateral lenders like the World Bank and the IMF, have long denied promoting illegitimate debt to corrupt governments or failed policies in developing countries.
Bank's graft crusade exaggerated, critics say
Watchdog groups cite conflicts of interest in the Bank's core mission, and the Washington-based lender's keenness to brush up its image. "The sad truth is that, when you compare the Bank to others – such as Canada, which is doing nothing – it is taking a leadership role. But that isn't much to rejoice over," said Patricia Adams of Probe International.
by Emad Mekay, Inter Press News Service Agency, February 7, 2007
Publicising a self-styled crusade against corruption, the World Bank says it is successfully stepping up its campaign against graft, probing more than 400 cases over the last two years alone and barring dozens of companies and individuals from future World Bank contracts. But critics doubt the scope of the claims.
Watchdog groups cite conflicts of interest in the Bank's core mission, and the Washington-based lender's keenness to brush up its image.
They say the Bank has a contradictory agenda – the Washington-based lender needs to push more loans for projects in developing nations whose economies are open for investment, but its newfound role as a campaigner against corruption could deter companies from joining Bank projects and slow down lending.
"The sad truth is that, when you compare the Bank to others – such as Canada, which is doing nothing – it is taking a leadership role. But that isn't much to rejoice over," said Patricia Adams of Probe International, a Canadian watchdog group.
Adams, who has followed corruption cases for years, says the Bank's efforts are still sorely lacking.
"If the Bank were to conduct forensic audits of all its outstanding projects – and the closed and completed projects too – to determine when the funds were 'wrongly diverted from their intended purpose of benefiting the poor,' recovered and repaid, then I will have greater confidence that the Bank is serious about stopping corruption on its projects and is determined to send a strong message to its contract winners that it won't tolerate corruption," she told IPS.
Another group says that the Bank has so far resisted calls to pass greater protections for a crucial player in the fight against corruption – its own internal whistleblowers.
"We continue to be concerned about the sincerity of management's efforts," said Beatrice Edwards of the Government Accountability Project, a Washington-based whistleblower support organisation.
"Because whistleblowers are a key element in fighting corruption, an institution that refuses to protect them, as the World Bank refuses, demonstrates clearly that it wishes to turn a blind eye to the theft and misuse of public funds," she said in an interview.
In its latest report released Tuesday, the World Bank Group's Institutional Integrity Department (INT) says it has cracked down on corrupt business practices like never before.
It says over the last two years alone, the INT investigated and closed 441 external investigations into fraud and corruption in Bank-financed projects -- more than the total cases probed from 1999 to 2004, during which time the Bank sanctioned 338 firms and individuals.
The more recent investigation resulted in the debarment of 58 firms and 54 individuals due to fraud and corruption over the period covered in the report. The companies and individuals will no longer be eligible to work in Bank-financed projects.
With a budget of 10 million dollars a year, the INT says it examined problems like influence peddling, procurement fraud, collusion, kickbacks and bribes, the misuse of project assets, and misrepresentation of qualifications in bid submissions, among other misdeeds.
"The World Bank is the only multilateral development bank that has published the names of the firms it has sanctioned for corrupt practices – a major deterrent to wrongdoing," the report says.
These achievements, however, failed to impress many independent groups monitoring the Bank.
GAP, for example, says the Bank exaggerates the effectiveness of the steps that it has taken to fight corruption.
"For example, the firms debarred for corruption are typically small-scale," Edwards of GAP told IPS. "For the most part, they have been involved in petty fraud having to do with minor kickbacks."
She said that GAP analysts are working with World Bank staff members who made credible, documented disclosures involving major corporations and corruption in Bank operations.
"When these Bank whistleblowers made their disclosures to INT, they were (alternatively) harassed, demoted and dismissed and blacklisted. In short, silence. One of our clients said that where corruption and the World Bank are concerned, INT is 'part of the problem,'" she added.
The Bank insists it is doing the best it can, not only externally, but internally as well.
It reports that it completed 227 internal investigation involving staff misconduct over the past two fiscal years. Of these, INT substantiated allegations in 77 of the cases involving 78 staff members.
"The Bank will continue down the path of zero tolerance toward fraud and corruption and commit itself to a 'gold standard,'" said Suzanne Rich Folsom, who directs the INT, which was established in 2001 as the independent investigative arm of the Bank.
The Bank says it terminated or barred from rehire 22 staff members and disciplined 11 others for fraud and corruption, while also barring five staff members for sexual harassment; disciplined five for failure to comply with personal obligations; terminated from rehire seven others for conflict of interest or other violations; and punished four others for conflicts of interest.
Ever since he came to office in 2005, World Bank President Paul Wolfowitz, widely criticised for his role as a key architect of the U.S. invasion of Iraq, has been trying to make the anti-corruption crusade a signature of his tenure.
Wolfowitz announced a "long-term strategy" for using the Bank's funds and expertise to help developing countries rid their governments of bribe-taking and other dishonest practices.
A key component has been the deployment of anti-corruption teams in many World Bank country offices.
Wolfowitz says he is restructuring the Bank's INT to make its authority clearer and its operations more effective. Last year, he led efforts to gather heads of other multilateral lenders like the Inter-American Bank and the African Development Bank to commit verbally to further fighting corruption.
Among other measures, the Bank has also kick-started the "Voluntary Disclosure Programme," which encourages companies to admit wrongdoing in exchange for diluted or no penalties.
Critics say that the VDP programme allows "confessors" confidentiality, in turn allowing the Bank to cover up its own negligence or complicity, which undermines the administration of justice in countries where it is a criminal offence to bribe a foreign official.
"[The] Voluntary Disclosure Programme doesn't accomplish this goal and indicates to me that the Bank is still suffering from the same conflict of interest with the companies it awards contracts to," Adams said. "I don't have confidence that the INT is catching the big fish."
Dam project brings Laos cash and controversy
Monitoring bodies have been assigned to assess Nam Theun 2 progress and make recommendations to the Laos government but such experts have no legal powers and recommendations will not be binding on the power company that runs the dam.
by Ioannis Gatsiounis, International Herald Tribune, January 4, 2007
Sop Hia, Laos Near this dusty village of 51 houses, amid remote hills in the center of landlocked Laos, a country where electricity and running water are scarce and 80 percent of people still live on subsistence farming, a giant project is taking shape that has multinational companies and lenders buzzing.
Nam Theun 2, a hydropower project on a tributary of the Mekong River, involves building a dam and a power plant with a generating capacity of 1,070 megawatts, at a cost of $1.25 billion. The largest single foreign investment in Laos, the dam will also be the largest in Southeast Asia when it goes online – scheduled for 2009.
Electricity from the complex will mainly supply neighboring Thailand, which has agreed to buy 93 percent of the power. It is expected to contribute $2 billion to Laos's cash-starved economy over its first 25 years of operation, when it will be owned and operated by a construction and financing consortium, the Nam Theun 2 Power Company, and $240 million a year, at present electricity prices, after reverting to national ownership in 2034.
Nam Theun's 450-square-kilometer, or 175-square-mile, reservoir will drown Sop Hia and neighboring hamlets along with 40 percent of the Nakai Plateau, where the dam is being built, displacing 6,000 indigenous villagers and affecting the livelihoods of 100,000 other people.
The power company – a consortium led by the French state-controlled Electricite de France and including two Thai companies and the Laotian government – says the plateau mainly consists of poor farmland and degraded forest that was bombed heavily during the Vietnam War. Conservationists say it is home to endangered species, including tigers, Asian elephants and clouded leopards.
Officials say that exhaustive attention is being paid to mitigating the project's social and environmental impact.
The concession agreement calls for the dam's catchment area, 4,000 square kilometers of upland rain forest, to be set aside for a national biodiversity conservation area, with the consortium paying $1 million a year for its upkeep. The consortium has also agreed to double the annual income of affected villagers to $800 per year, in a country where the average per capita income, at $340, is among the lowest in the world.
Monitoring bodies have been assigned to assess progress and to make recommendations to the country's Communist government and the consortium. An independent panel of experts, for instance, will check whether livelihood opportunities and housing relocation are in place before the dam is closed. In theory, electricity may not be generated or exported if they are not.
The panel, however, has no legal powers, and its recommendations will not be binding on the power company.
"Only the Laos government has the authority to enforce the concession agreement. And as a part-owner, the Laos government has no incentive to minimize revenue by accurately accounting for compensation and environmental mitigation needs," said Grainne Ryder, a corporate accountability expert and the policy director at Probe International, an independent environmentalist organization. "Its main priority is to keep NT2 financially afloat and maximize profit."
The World Bank, which is providing $270 million in loans and risk guarantees, and which plays a critical role in attracting international investment to the project, could promote corporate accountability by freezing funding. But Bank officials are loath to say at what point it would do so.
"If there is a pattern that emerges of noncompliance and the government remains unresponsive, then obviously the Bank would shift to a higher gear," said Patchamuthu Illangovan, the World Bank's country manager for Laos, in Vientiane.
Critics say the World Bank's role as a lender prevents it from flexing effective regulatory muscle. "The World Bank's overriding interest as regulator is that the Laos government doesn't default on its loans from commercial lenders," said Sebastien Godinot of Les Amis de la Terre, a French environmentalist association linked to Friends of the Earth. "It doesn't have any incentive to manage environmental and social impact."
In the mid-1990s, amid widespread criticism of its role, the Bank stopped funding large infrastructure projects. Nam Theun marks its return to the field, and Bank officials say they cannot afford to get it wrong.
"We need to demonstrate that we have the capacity to do these projects right," said Mohinder Gulati, a senior energy specialist at the Bank. "If there are shortcomings in this project our ability to help not only Laos but also other developing countries would be affected."
EDF, too, as majority shareholder with a 35 percent stake, "is on the front line, so we have an added incentive to take all measures to properly implement the project," said Olivier Salignat, an environmental advisor on sustainable development issues at EDF.
Last year a complaint by nongovernmental organizations against EDF's environmental and social impact assessments at Nam Theun was officially rejected.
The complaint, alleging a breach of internationally agreed guidelines for multinational enterprises was examined by a mediating body, which declared it to be unfounded. "In fact, socially, they found we were going a step further" than necessary, Salignat said.
Critics however are unimpressed, noting that the mediator was part of the French Finance Ministry – a government body judging the actions of a government-controlled company.
Officials for the project concede that in Laos, where there is little transparency, legal recourse or free speech, people are vulnerable to abuse. "The nature of the government is well known here," Illangovan said. "But on the NT2 project, very early on in the process we communicated to the government that there has to be a very strong credible contribution from them."
The government says that it has held over 200 public workshops to tell villagers about the project and their resettlement options. They say that most villagers welcome the changes.
In Sop Hai, a 49-year-old woman, who gave her name as Fong, said she hoped to be able send her six children to school after resettlement, and to grow vegetables on a plot promised by the government. Still, a government representative monitored and helped to translate all interviews, which yielded no statements of dissent.
Best wishes for 2007
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Probe International
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China's reporters face a backlash over investigations
by Geoffrey A. Fowler and Jason Dean, The Wall Street Journal, December 21, 2006
As journalists push the limits, Beijing is waging a crackdown on muckraking stories, according to a front-page article in yesterday's Wall Street Journal. 'There are people who don't want things to come out,' investigative reporter Liu Jianqiang was quoted as saying. 'But there are always other people who do.' Probe International applauds the work of crusading reporters like Liu Jianqiang, who are helping to bring to light important stories related to China's environment. To further such efforts, Probe International is currently sponsoring an "environmental english" language class – which has included Mr. Liu in its ranks – to help Chinese journalists improve their english communication skills.
www.threegorgesprobe.org/tgp/index.cfm?DSP=content&ContentID=16799
Kenyan corruption case sets important odious debt precedent in bribery cases
A failed case against the government of Kenya over a reneged contract procured through bribery marks a significant decision for the global odious debts campaign, say legal experts: "It dissolves the fiction that a head of state is capable of binding the state to any sort of contract."
by Odious Debts Online, December 12, 2006
An International Centre for the Settlement of Investment Disputes tribunal has struck out a lawsuit against the Kenyan government over a contract dispute after it discovered the contract had been secured illegally through a US$2 million bribe paid to former President Daniel arap Moi.
Although the complainant, Nasir Ibrahim Ali, a Dubai-based Canadian businessman, alleges that the payment was a "personal donation" made to Mr. Moi for public purposes, the ICSID tribunal found that the "donation" was indeed a bribe and that bribery constituted a breach of international public policy, as well as of English and Kenyan public policy. Mr Ali could not turn to a legal body as a means to enforce his rights secured through a breach of international public policy or, in the tribunal's words, he could not "found a cause of action on an immoral or illegal act." The tribunal thus ruled that, "claims based on contracts of corruption or on contracts obtained by corruption cannot be upheld by this Arbitral Tribunal."
Legal experts, Ashfaq Khalfan and Jeff King, of the Canadian based Centre for International Sustainable Development Law (CISDL), and co-authors of the 2003 landmark analysis of the legal doctrine of odious debts, say the tribunal's ruling is an important one for the global campaign.
"This case," says Mr. King, "adds to precedent such as the Tinoco Arbitration (1924) and numerous international conventions in clarifying that contracts for personal enrichment, or those procured by bribery, are against international public policy and are thus unenforceable."
In addition, says Mr. Khalfan, by distinguishing between the acts of the Kenyan President and those of the Republic of Kenya, the ruling contributes an important precedent to the odious debts jurisprudence. The decision by the World Bank-established tribunal upheld the principle that the president of Kenya was acting as an agent of the State of Kenya and as such, it was not assumed that his acts were automatically to be deemed the acts of Kenya. "This decision dissolves the fiction," says Jeff King, "that a head of state is capable of binding the state to any sort of contract."
The case
In his witness statement, Mr. Ali claimed that in 1989 he approached Mombasa tycoon Rashid Sajjad to express interest in investing in Kenya. Mr. Ali wanted to win government approval to establish duty free shops at Kenya's international airports in Nairobi and Mombasa.
Mr. Ali said he was advised by Mr. Sajjad that protocol in Kenya required him to make a donation to the President, Daniel arap Moi.
Mr. Ali agreed to pay US$2 million to Mr. Moi on the understanding that the money was considered a personal donation made to the president within the framework of the Kenyan system of Harambee (voluntary contributions).
"I was given to believe that this was payment for doing business with the Government of Kenya," said Mr. Ali. "I was advised that the donation should be in cash."
According to Mr. Ali, he transferred the $2 million to Mr. Sajjad's account before his meeting with Mr. Moi. A large portion of the money was then changed into Kenyan shillings, placed in a briefcase and carried by Mr. Sajjad to the meeting.
After the meeting, Mr. Ali said that when he went to collect the briefcase he found the money replaced with fresh corn: a sign, Mr. Sajjad assured him, that "the president likes your proposal."
In response, the tribunal said it was "aware of the fact that, on the occasion of visits to heads of State, gifts are often exchanged as a matter of protocol," and then quoted a 2003 report by the Task Force on Public Collections (or Harambees), which had found that "over the years, the spirit of Harambee [had] undergone a metamorphosis which [had] resulted in gross absues . . . linked to the emergence of oppressive and extortionist practices and entrenchment of corruption and abuse of office."
The tribunal rejected Mr. Ali's argument that Mr. Moi had been "one of the remaining Big Men of Africa who, under the one party state Constitution, was entitled to say, like Louis XIV, that he was the State," as unfounded since under Kenyan and English law, which Mr. Ali was relying on, the president was regarded as being bound by the law and the constitution.
In dismissing Mr. Ali's claim for restitution, the tribunal said it declined to recognise "any local custom in Kenya purporting to validate bribery committed by [Mr. Ali] in violation of international public policy" and ruled that the bribe could not be considered a separate agreement and was "an intrinsic part of the overall transaction, without which no contract would have been concluded between the parties." According to Jeff King, this means "that where some obligation undertaken by the debtor can be shown to have been procured by a bribe, the entire obligation will become voidable at the behest of the debtor."
Inter-American Development Bank debt relief a smoke screen
IDB write-off of Latin American debt diverts attention away from the Bank's failed odious loans.
by Odious Debts Online, December 12, 2006
A move last month by the Inter-American Development Bank (IADB) to write off US$2.1-billion in debt owed to it by five Latin American countries helps the Bank bail itself out and bury its mistakes under a cloak of magnanimity, says odious debts expert, Patricia Adams.
Bank President Luis Alberto Morena announced in November that the IDB intends to write off the debts Bolivia, Guyana, Haiti, Honduras, and Nicaragua owe to the soft loan window of the Bank and called it "great news for the more than 30 million people in these five countries." The soft loan window (or Fund for Special Operations) provides loans on concessional terms and is funded by regular cash contributions from the bank’s rich member countries.
Patricia Adams of debt watchdog Probe International and author of Odious Debts: Loose Lending, Corruption and the Third World's Environmental Legacy, points out that debt write-offs, such as these, will also help the five debtor countries continue to service their loans to the hard loan window of the Bank (or Ordinary Capital). Borrower defaults on the hard loan window of the IDB – which raises its capital on international bond markets – would threaten the triple-A credit rating of the institution and possibly force the rich countries to pony up billions to pay back bondholders. The multilateral development banks (MDBs), of which the IDB is but one, want to avoid this scenario at all costs.
Bailouts of the soft loan windows of the MDBs help stave off this worst case scenario, says Ms. Adams and, in effect, help bail out the Banks themselves.
Debt forgiveness also rids the banks of embarrassingly unsuccessful and corruption-plagued loans from their portfolios and helps them avoid demands for independent audits. With mounting evidence before the US Senate Foreign Relations Committee, for example, suggesting that as much as $200 billion of MDB loans over the past 60 years has been used corruptly, the MDBs want to quell the threat of more and more debtor governments challenging the enforceability of claims in arbitral proceedings on the grounds they were contracted corruptly. Viewed from that vantage point, debt forgiveness starts to look very attractive to the MDBs, says Ms. Adams.
Ms. Adams' organization, Probe International, argues for a moratorium on Third World debt payment until public audits of all claims can be evaluated. Legitimate debts spent in the interests of the people should be forgiven if countries are too poor to repay them. Illegitimate debts, contracted corruptly or negligently, and without the consent of the people, would be deemed unenforceable.
German firm barred by World Bank for bribery in Lesotho project; ban should have come sooner, says analyst
by Odious Debts Online, November 7, 2006
The World Bank has suspended contracts to the German engineering firm, Lahmeyer International, after finding the company guilty of paying bribes in the multi-billion dollar Lesotho Highlands Water Project (LHWP).
The World Bank's sanctions committee found that Lahmeyer had engaged in corrupt activities by bribing the Lesotho Highlands Development Authority's chief executive, Mr Masupha Sole, the government official responsible for contract award and implementation under the LHWP, in violation of the Bank's procurement guidelines.
But the decision to debar Lahmeyer for bribery – a crime for which it was indicted in 1999, and convicted and affirmed on appeal in 2004 – has been too long in coming, said Patricia Adams of the Canadian-based foreign aid watchdog, Probe International.
"It sends the wrong signal to other corporate bribers," said Ms Adams. "In those seven years since the original indictment, Lahmeyer was able to carry on business as usual. Rather, the Bank should have taken swift action and suspended the company's right to do business with the Bank when they were originally indicted – as is allowed for under the U.S. Foreign Corrupt Practices Act – pending a decision by the Lesotho courts."
Declaring the Bank's support for Lesotho's lead in holding corporate bribers to account, World Bank President Paul Wolfowitz said:
"The Government of Lesotho has shown courage and leadership in successfully prosecuting its own officials and several large foreign companies for corruption. Institutions like the World Bank, and the governments of rich countries, should support the bold stance of poor countries like Lesotho which are working to make sure that precious public resources go to help the poor, for whom they are intended."
In its statement announcing the debarment, however, the World Bank said the period of Lahmeyer's ineligibility to bid on Bank-financed contracts could be reduced by four years if the company introduced a "satisfactory corporate compliance and ethics program" and disclosed any other past misconduct, presumably under the Bank's new Voluntary Disclosure Program (or VDP).
Despite the Bank's outward appearance of support for Lesotho's actions, the protection offered by Bank programs like the VDP are ultimately "bad for developing country citizens and taxpayers, and the rule of law," said Ms Adams.
"The VDP program allows 'confessors' confidentiality and thus allows the Bank to cover-up its own negligence or complicity, which undermines the administration of justice in countries where it is a criminal offense to bribe a foreign official," she said – the same stance the Bank is publicly congratulating Lesotho for.
In addition to debarment from World Bank contracts, Lahmeyer was fined $10 million rand ($1.63 million) in 2003 after being found guilty of bribing Masupha Sole in relation to the Lesotho project, touted as southern Africa's largest water scheme undertaking to date.
Three other companies previously charged by the Lesotho courts for paying bribes to win contracts for the Lesotho Highlands Water Project are Impregilo, an Italian construction company, and engineering firms Acres International, based in Canada, and the French company, Spie Batignolles.
The official World Bank statement regarding Lahmeyer's debarment:
www.odiousdebts.org/odiousdebts/index.cfm?DSP=content&ContentID=16564
VN hydro dams threaten Cambodian food security
A new study predicts hydro dams on the upper Srepok River in Vietnam will reduce fish stocks and make riverside agriculture impossible, with major negative impact on people's diets and livelihoods.
by Gráinne Ryder, Bangkok Post, October 7, 2006
A report by Nordic hydro consultants warns that a comprehensive change in food production culture may be needed in Cambodian villages negatively affected by hydro operations upstream in Vietnam.
The study funded by the Swedish International Development Agency (Sida) predicts that hydro dams on the upper Srepok River in Vietnam will reduce fish stocks and make riverside agriculture impossible, with major negative impact on people's diets and livelihoods, especially the poorest households.
A draft final version of the study, "Environmental Impact Assessment on the Cambodian part of Srepok River due to Hydropower Development in Vietnam", was obtained by NGO Forum on Cambodia from the Swedish International Development Agency, which provided funding.
An estimated 11,000 people, mostly ethnic minorities, live along the Cambodian stretch of the Srepok River, and depend upon the river for fishing, drinking, household use, irrigation, livestock and transportation.
All these uses will be seriously disrupted by a series of dams Electricity of Vietnam plans to build on the Srepok within five years, according to the study by SWECO Groner of Sweden.
The largest dam, 280-MW Buon Kuop, has been under construction since 2003 and is expected online in 2008.
The study notes that food security is good for most of the riverside population. No children are undernourished due to the abundant fish in the river, providing the main protein sources. In most villages, households have enough cultivation land and even produce a rice surplus, which together with fish and animals can regenerate cash.
But protein deficiency especially in growing children can be anticipated since there seems to be no available alternative to replace fish as a major protein source, as wildlife hunting is regulated and domestic animals are raised mainly for selling and not for family food.
The study concludes that a comprehensive change may be required in the riverside villages.
Unless mitigated, the expected fish decline in the river will have a major negative effect on the economy of fishing households, especially the poorest.
The solution, according to SWECO Groner, is: Changes both in the food habits (eating meat more often) and in economic resources (other sources of cash, or more efficient animal raising, demanding more pasture land, extension and training input and introduction of new fast-growing species, e.g. rabbits), to guarantee the future nutrition status of the riverside people.
Alternatively, Electricity of Vietnam could change the way its hydro dams are operated. The study notes that "daily peaking" is the most environmentally damaging mode of operation.
"A major reconsideration of dam operating schedules might be needed," writes SWECO Groner, "in order to avoid destructive effects on downstream areas."
The only way of trying to save as many [fish] species as possible is to try to keep [the river] as close as possible to the natural conditions, it says.
SWECO Groner also recommends building a specially-designed re-regulating dam near the Cambodian border that could even out flows to downstream Cambodia.
Sida has agreed to a public review of SWECO's recommendations in Phnom Penh later this year.
SWECO Groner is a subsidiary of SWECO, Sweden's leading engineering consulting firm and longtime hydro adviser to Electricity of Vietnam.
The writer is policy director for the Toronto-based Probe International, a citizens' group monitoring the environmental and economic effects of foreign aid.
Norway takes historic step
Unilaterally cancels its illegitimate Third World debt. Debt campaigners say it is the "tip of the iceberg" – audits of all export credit and multilateral bank loans needed.
by Odious Debts Online, October 6, 2006
In a stunning move, the Norwegian government has become the first creditor country to implicitly acknowledge that some of its Third World debt claims are illegitimate and says it will cancel such debts outright and unilaterally. The Norwegian Parliament must now approve the government's debt cancellation plan, details of which are contained in the government's budget being submitted to Parliament today. If the plan is accepted, five countries – Ecuador, Egypt, Jamaica, Peru and Sierra Leone – will be relieved of some $80 million they owe Norway.
The debts date back to 1976, when Norway exported 156 ships to a number of countries as part of a Shipping Export Credit Campaign to boost Norway's shipping exports during a time of crisis for the country's shipbuilding industry. The exports were financed through the Norwegian export credit agency, known as the Guarantee Institute for Export Credits (GIEK).
In a press release last week, the Royal Norwegian Ministry of Foreign Affairs explained that "a great many of these projects proved to be economically unsustainable, so that government guarantees were triggered and the Norwegian Government became the creditor." Between 1988 and 1989, the Brundtland government conducted an evaluation of the Ship Export Campaign, and criticized it for "inadequate needs analysis and risk assessments."
"The main conclusions," said the Ministry of Foreign Affairs' statement, was that "this kind of campaign should not be repeated."
"It is now generally agreed that the Ship Export Campaign was a development policy failure," said the Ministry statement forthrightly. "As creditor, Norway shares part of the responsibility for the resulting debts. By cancelling these claims, Norway takes responsibility for allowing Ecuador, Egypt, Jamaica, Peru and Sierra Leone no longer to be obliged to service the remainder of these debts."
By wiping the slate clean Norway may also be avoiding further bad press. A joint investigation into the ship deal by Ecuadorian human rights and economic researchers (the Centro de Derechos Económicos y Sociales, CDES) and a constitutionally-mandated anti-corruption watchdog (the Commission for the Civil Control of Corruption, CCCC) revealed that the original private debt of US$13.6 million had ballooned into a $50 million public debt against the government of Ecuador, though no direct benefits to the population of Ecuador could be identified. Furthermore, said CDES in a 2002 report, the whereabouts of the object of the loan – the four ships an Ecuadorian firm purchased from Norway – "is unknown." "The use to which the ships have been put to date and who derived benefits from this use," is also unknown. This loan, CDES argued, "fits clearly into the category of an illegitimate debt." Ecuador's anti-corruption Commission subsequently demanded that the Ecuadorian government require the government of Norway to terminate the debt.
Norway's announcement this week that it will, indeed, terminate the ship export debt has been applauded by debt campaigners.
Kjetil G. Abildsnes of Jubilee Norway said that by taking co-responsibility in this way, "Norway has now become the first country which by action confirms lender responsibility by cancelling illegitimate debt."
Gail Hurley of the European NGO Eurodad highlighted the unfairness of "corrupt, negligent and politically motivated lending" and hailed the Norwegian decision as breaking a 'silence' that she urged other creditor countries to emulate by following Norway's 'bold lead.'
Patricia Adams of the Canadian-based NGO Probe International and author of Odious Debts: Loose Lending, Corruption and the Third World's Environmental Legacy, said that the decision "most significantly represents the first time a First World creditor has acknowledged responsibility, indeed negligence, as a lender," adding that it is also the 'tip of the iceberg.'
"This underscores the desperate need for forensic audits of all export credit and multilateral development bank debt claims against Third World countries to determine their legitimacy," she said.
Related Articles
Cancellation of debts resulting from the Norwegian Ship Export Campaign (1976-80)
Press Release by the Ministry of Foreign Affairs (Norway), October 2, 2006
www.odin.dep.no/ud/english/news/news/032171-070886/dok-bn.html
Norway debt write-off a $190m saving for Jamaica
by Camilo Thame, Jamaica Gleaner, October 4, 2006
www.jamaica-gleaner.com/gleaner/20061004/business/business3.html
Norway makes groundbreaking decision to cancel illegitimate debt
Eurodad, October 3, 2006
www.eurodad.org/articles/default.aspx?id=737
A historic step
Norwegian Church Aid, October 4, 2006
http://english.nca.no/article/view/6402/1/449
Upheaval in the back yard: illegitimate debts and human rights – the case of Ecuador-Norway
Centro de Derechos Económicos y Sociales, November 2002
www.odiousdebts.org/odiousdebts/publications/cdes_ecuador_norway.pdf
Tune in
The Discovery Channel's Daily Planet is currently re-showing an interactive feature called, "Daily Planet Goes to China," which in part focuses on China's massive Three Gorges dam. The feature runs until October 6 every night at ET 7 p.m.
Look out for appearances by Probe International experts, Patricia Adams and Gráinne Ryder, who were interviewed for the feature, which has been updated since its original release in 1999.
To view, please see: http://discoverychannel.ca/dailyplanet/
World Bank management takes over Wolfowitz's anti-corruption proposal
The "Third World's poor have been hurt more often than helped by World Bank loans": Patricia Adams.
by Odious Debts Online, September 21, 2006
The World Bank's shareholder governments struck Bank president Paul Wolfowitz a blow this week after they opted to take control of his flagship anti-corruption strategy rather than allow him the free hand he had hoped for to advance his campaign against graft.
Although Mr Wolfowitz's paper on Strengthening Bank Group Engagement on Governance and Anti-corruption was approved by the Bank's Development Committee at this week's annual meeting of the Bank and International Monetary Fund in Singapore, the Committee has decided to take back management of the plan's development and will review its progress at spring meetings in Washington, DC.
Concerns that the Bank's proposals would tie development aid to anti-corruption reforms incited conflict.
South African finance minister Trevor Manuel said that while no one underestimated the importance of corruption, it could not be conflated with a campaign for better governance, adding that had Wolfowitz's proposals been passed unchecked, loans that had already been approved could be dropped because "somebody in the bank said there was corruption."
Rather than penalize the citizens of indebted countries, one area where redress is being sought is in the prosecutions of bribery cases, "with a strong push for businessmen who offer bribes to be punished just as those who take the bribes are," reports Quentin Wray for The Mercury.
Polycarpe Abah Abah, the minister of economy and finance in Cameroon, said: "Those who pay and those who take bribes must be condemned."
Hilary Benn, the UK's Development Secretary, said the new policy could have led to the Bank "walking away" from poor people which, in effect, would punish the poor for the abuses of their leaders.
However, Patricia Adams, author of Odious Debts: Loose Lending, Corruption and the Third World's Environmental Legacy, challenges the claim that World Bank loans have actually helped the poor.
She says the Third World's poor have been hurt more often than helped by World Bank loans and cites the flooding of rich agricultural areas, the razing of forests for pulp mills and resettlement schemes as some of the ways in which Third World citizens have been harmed by Bank-funded projects.
"Cutting loans off, especially when between 10-25 percent of Bank funds are likely to end up in Swiss bank accounts is not going to hurt the Third World's poor, it will help them," Adams argues. "Mr Wolfowitz is absolutely correct to tie loans to a recipient country's progress on fighting corruption," she adds, calling arguments that say cutting off loans will hurt the poor "mischievious and self-serving."
Adams also argues that the World Bank should launch independent audits of all existing Bank claims in order to determine which funds have been used corruptly so the guilty parties can be punished and held accountable for the return of ill-gotten gains.
Meanwhile, the New York Times cites an anonymous World Bank board member as saying that the Bank should not try to position itself as a world policeman or condition its funding on whether or not a country is believed to be corrupt, nor should the Bank overstep its mandate to reduce poverty.
The Times also notes that World Bank officials reported Mr Wolfowitz's proposal, which had been redrafted five times before it was unveiled to the World Bank's Development Committee this week, had caused quite a stir internally.
Several longtime Bank officials said they could not remember board members wrangling over the wording of a policy paper with a Bank president and that at recent meetings, directors had demanded that Mr Wolfowitz agree to a greater role for the board in any future decisions regarding cutting off aid.
Earlier this year, Mr Wolfowitz suspended Bank-funded projects in India and Kenya over corruption concerns and pushed for more transparency in the Republic of Congo's oil sector when the country applied for debt relief.
Bank members also forced the deletion of language that suggested the Bank's campaign to curb corruption should take precedence over the United Nations' goal to reduce world poverty 50 percent by 2015, the New York Times reports.
Addressing the Bank and the IMF at the meeting this week, Indonesia's finance minister, Sri Mulyani Indrawati, called on the lenders to "act more like partners, not preachers," and called on them to be share evidence of corruption in Bank-financed projects.
"Let us use this . . . to target the system that gives rise to that corruption, but to do this we need to work together on joint investigations and on joint solutions," she said.
"We also need to work together on asset tracing and asset recovery and we need to send a message to investors that bribery will bring you . . . serious risks," she added.
Sinohydro 'downgraded' over accident record
The Chinese company set to build a billion-dollar dam on the Salween River in Burma in partnership with Thailand has been criticized in a performance review of state-owned enterprises for unspecified 'safety or environmental pollution accidents.'by Kelly Haggart, Three Gorges Probe, August 31, 2006This article was republished by The Bangkok Post and China Digital Times (CDT). CDT is a collaborative news website covering China's social and political transition and its emerging role in the world and aims to use the new generation of participatory media technology to create a fully interactive network that can track and report news, facilitate conversations and debate, and share resources and knowledge in a virtual China community. CDT's stated goal is to "harness the distributive power of the Internet to advance the world's understanding of China. In a time of profound transformation, CDT takes an innovative approach to one of the greatest challenges of the 21st century: China's democratic transition, sustainable development and peaceful emergence in the global community."
Run by the Berkeley China Internet Project out of the Graduate School of Journalism at the University of California, Berkeley, China Digital Times collects China-related news from a range of sources, including Three Gorges Probe (TGP). See below for recent TGP stories highlighted on the CDT website and news service.
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to dam Southeast Asia's last major free-flowing river. |
Sinohydro, the Chinese company set to build a billion-dollar dam on the Salween River in Burma in partnership with the Thai utility EGAT, has been criticized in an annual performance review of state-owned enterprises for unspecified "safety or environmental pollution accidents."
It is the second high-level public rebuke in recent years for China's largest dam-building company. Sinohydro was fined along with several other firms in 2004 for shoddy construction work on Yangtze River flood-control structures, a scandal that was exposed in a scathing report by the National Audit Office.
A supervisory body operating under the State Council, China's cabinet, delivered the latest reprimand after assessing the performance in 2005 of 166 state-owned enterprises (SOEs) affiliated to the central government. (The number of such companies, known as central SOEs, fell to 165 last week with the merger of two of the firms.)
"Four enterprises were downgraded because of safety or environmental pollution accidents, including China National Petroleum Corp. and Sinohydro Corp.," China Daily reported. "Six others, including China Guodian Corp. and China Datang Corp., were downgraded as a result of irregular financial practices or negligence in supervision."
China Guodian and China Datang are two of the country's "big five" state-owned power-generating companies. China Guodian has been involved in preparatory work for a string of dams planned for the Nu River, as the upper Salween is called in China.
The newspaper gave no further details of the companies' accidents or financial irregularities, nor any indication of the exact grade any of the firms had received.
The State-owned Assets Supervision and Administration Commission, set up in 2003 to assess the management and financial performance of China's central SOEs, grades the companies from A to E. In its latest review, 28 companies earned an A and 84 received a B, entitling their chiefs to bonuses worth 1.5 to three times their salary, along with other incentives, China Daily reported.
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Fan Jixiang |
Whether Sinohydro's poor report card will have any impact on its access to capital for projects outside China, such as the recently announced dam-building joint venture on the Salween in Burma, is also not clear.
In June, Sinohydro signed an agreement with Burma's military regime and the Electricity Generating Authority of Thailand to build a US$1 billion dam at Hat Gyi in Karen state. The first in a series of five planned hydropower projects, Hat Gyi would be the first dam to block the 2,800-kilometre-long Nu/Salween, the last major free-flowing river in Southeast Asia. The project has been widely condemned by human-rights and environmental activists.
Sinohydro (formerly China National Water Resources and Hydropower Engineering Corporation) is no stranger to controversy, and has worked on some of the world's most contentious dams. These include Merowe, being built on the Nile in northern Sudan, Bakun in the Malaysian state of Sarawak, and the Chalillo dam, built by the Canadian company Fortis in Belize.
Back home, Sinohydro, which employs 35,000 people, has been involved in the construction of an estimated 80 per cent of China's existing large and medium-sized dams, as well as many of those now under construction.
It has been a major contractor on the Three Gorges dam on the Yangtze River in Hubei province, as well as Ertan on the Yalong River in Sichuan, Xiaolangdi on the Yellow River in Henan, and the Manwan, Dachaoshan and Xiaowan dams on the Lancang (Mekong) River in Yunnan. The company is also involved in the Xiluodu dam being built by the Three Gorges Project Corp. on the Jinsha (upper Yangtze) River, which will be China's second-largest dam after Three Gorges when it is completed in 2015.
According to the New York-based construction industry magazine Engineering News-Record, Sinohydro ranked 49th among the world's top 225 construction contractors in 2004, up from 136th spot in 2000. (The rankings are based on annual construction revenue generated outside of the companies' home countries.) In 2004, Sinohydro secured 27 projects in 15 countries, with a total value of US$903.8 million, up from US$113 million in 2000.
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Recent Three Gorges Probe stories highlighted on the CDT website and news service:
Dai Qing: Boosting support to dam migrants is just a start
by Kelly Haggart and Mu Lan, Three Gorges Probe, August 27, 2006
Beijing's decision to give 22 million farmers who have been displaced by dams a 600-yuan (US$75) annual subsidy for 20 years is seen by journalist Dai Qing as an official acknowledgement of the high social cost of such projects.
www.threegorgesprobe.org/tgp/index.cfm?DSP=content&ContentID=16071
Three Gorges navigation woes set to worsen
by Kelly Haggart and Mu Lan, Three Gorges Probe, August 14, 2006
The delays that have plagued boats trying to get around the Three Gorges dam are set to worsen soon when one-half of the two-way shiplock is taken out of service for more than nine months.
www.threegorgesprobe.org/tgp/index.cfm?DSP=content&ContentID=16016
On the road to forgiveness, justice is forgotten
Under the current system, justice is forgotten on the road to debt forgiveness and forgiveness tends to reward everyone except the citizen taxpayers who are forced to repay odious debts generation after generation.
by Lisa Peryman, Odious Debts Online, July 7, 2006
The World Bank's high-profile focus on curbing corruption looks set to continue but to what effect can the Bank implement its anti-graft agenda when the Bank itself has been "the cause of corruption, and odious and illegitimate debts, in the past?" asks Gail Hurley of the Brussels-based NGO network Eurodad.
In her analysis of the Bank's current position on the issue, Hurley notes that although Bank President Paul Wolfowitz has acknowledged publicly that "for every bribe-taker, there is a bribe-giver, and often, that comes from a developed country," the Bank's focus in practice has been on the "corruption of today."
Hurley points out that a "critical examination of the Bank's lending practices to poor countries in the past" has been "remarkably absent from the anti-corruption strategy presented by officials so far," even though, she says, "the World Bank has over the years been involved with and lent to some of the world's most notorious and despised regimes such as Mobutu Seke Seso of Democratic Republic of Congo and Ferdinand Marcos of the Philippines." Writes Hurley:
"Bank documentation at the time of these transactions, or published shortly afterwards, confirms that many Bank officials - at both country-level and in Washington DC - were perfectly aware of the nature of the regimes in place and that many loans were simply transferred into the bank accounts of the dictators and their generals. It was plain therefore that they did not reach the poor or foster economic development. Despite their odious and illegitimate nature most of these debts continue to be serviced today, at the expense of essential investments in poverty reduction and economic development."
Hurley recommends that the Bank accept co-responsibility for its mistakes and agree to cancel Bank debts resulting from loans where Bank officials knew much of the money would be diverted by corrupt elites. "Accountability," she says, "must begin at home, by addressing the mistakes - and in some cases downright negligence - of the past."
However, cancelling odious debts does not guarantee that governments in power now will manage future state loans or public monies freed up from debt repayment any better than past regimes.
As moral philosopher Samuel Gregg writes in an editorial published by The Washington Times this week:
"Does anyone seriously imagine debt-forgiveness that does not hold accountable developing world political elites who corruptly diverted the billions loaned to their countries is likely to discourage future such diversions? Surely such actions will only undermine ongoing efforts to discourage corruption among these elites by effectively rewarding with debt forgiveness countries whose leaders have been irresponsible borrowers."
As an example, Gregg cites President Denis Sassou-Nguesso of the Republic of the Congo, who pressed his case for an immediate and extensive debt-forgiveness for the Congo in Washington, D.C., recently.
"To say that President Sassou-Nguesso has a checkered past is an understatement," writes Gregg. "In a previous incarnation as a Marxist, President Sassou-Nguesso first came to power in the early 1980s before rising to power again after a civil war that ended in 1997. On several occasions, his supporters have been accused of numerous atrocities, including torture and rape, by Amnesty International and other international observers. . . . What is especially reprehensible about this particular African leader is the manner in which his government continues to fudge the facts of what happens to the considerable revenues derived from the Congo's oil industry - revenues that could be used to pay off considerable foreign debt. . . .
"None of this might have come to public attention, save for the flagrant manner in which President Sassou-Nguesso spends money on himself and his entourage when traveling abroad. While the Congo's citizens continue to be mired in living standards that lead to disease and death rates consigned to history in the West centuries ago, their leader reportedly spent $295,000 on an eight-night stay for himself and 50-strong entourage (including his wife's hairdresser) earlier this year in New York. This is just one of a number of similar documented instances of extravagant spending by the president of a country where the average citizen lives on approximately $2 a day."
Accordingly, Gregg advises creditors to refuse the Sassou-Nguesso's of the developing world debt forgiveness as a signal to other political elites "that the days of toying with their people's futures are over."
In their call for lender and borrower accountability, an examination of past practices and a refusal to cancel debt outright in certain cases, Gregg and Hurley are right on the money. Indeed, indebted countries could parallel such moves by carrying out audits of public debt, flag loans that are suspicious, and refuse to make payments on debts pending further investigation as a signal to western political elites and financial institutions that the days of irresponsible lending to despots and dictators are similarly at an end.
By invoking the doctrine of odious debt, indebted countries could selectively repudiate liability for portions of external debt lost to corruption. The establishment of an international tribunal charged with arbitrating cases mounted by countries repudiating odious debts would be able to address the mistakes of the past without letting wrongdoers off the hook. Creditors can still chase payment from the dictator or regime they loaned to but the amount will no longer appear as a national debt, which means citizens will no longer have to pay for the crimes of their leaders, as they do now.
Last month, it was reported that the Norwegian government had asked the World Bank to undertake a study of odious and illegitimate debt and had set aside $US20,000 to support such research. Perhaps part or all of this fund could go towards drafting a proposal for an international odious debts tribunal post-haste, especially when one considers that under the current system of debt forgiveness, cancellation not only absolves lenders and borrowers: crimes of the past are absolved along with them. Under the current system, justice is forgotten on the road to forgiveness and forgiveness tends to reward everyone except the citizen taxpayers who are forced to repay odious debts generation after generation; an odious debts tribunal provides the mechanism that would allow countries burdened by illegitimate debt to throw down the gauntlet without being further ripped off by their leaders and leaders' lenders in the process.
China's new dam builders and the emerging regulatory framework for competitive power markets
The operation and regulation of China's new dam builders as commercial power generating companies will set the pace for how rivers will be regulated in the six-country Mekong region for years to come. The following paper was delivered by Grainne Ryder of Probe International to the Mekong Region Waters Dialogue, which took place in Vientiane, Lao PDR, on July 6-7.
Paper available in a PDF format:
www.probeinternational.org/pi/documents/GRMekongpaper2006.pdf
China suspicious of nonprofit organizations
by Jehangir S. Pocha, San Francisco Chronicle, June 25, 2006
China fears that money from the West may be backing democracy: political and environmental activist Dai Qing, for example, organized training camps for NGOs sponsored by Probe International and the Open Society Institute.
Beijing: In the United States it might seem odd for the government to crack down on Habitat for Humanity or Goodwill, yet here authorities have been conducting intrusive audits of China's fledgling nongovernmental organizations.
NGOs – mostly nonprofit organizations involved in a wide range of social, medical and environmental work – have only recently been allowed to operate in China, and some have been focusing attention on the country's human rights and environmental policies.
[Some say state audits of NGOs] are an understandable reaction to concerns in Beijing that the United States, Europe and some wealthy individuals have been using NGOs as fronts to push for greater democracy, and even regime change, in authoritarian states around the world.
In April, the Chinese media, including Hong Kong-based Open magazine, have reported that President Hu Jintao issued a report entitled "Fighting the People's War Without Gunsmoke," which exhorts officials to contain a potential "counter-revolution" by increasing Internet censorship, removing controversial books from libraries and closing down potentially subversive organizations.
Thousands of Chinese NGOs actively working in areas such as environmentalism, human rights, AIDS, labor rights and religious freedom that have received funds from overseas have been investigated by the government over the last year, say activists.
"They've gone around asking: 'What is your real purpose? Are you trying to overthrow the government?'" said Nick Young, editor of China Development Brief, a Beijing-based journal focused on China's aid and nonprofit community. "This may make no sense to you or me, but it makes perfect sense to the folks doing it because they are trained to find conspiracies and temperamentally inclined to suspect there is more than meets the eye."
Last year, more than 87,000 public protests swept China. While there is no official tally of NGO involvement, many protests were jointly organized by several NGOs openly working together.
Dai Qing, a political and environmental activist who was jailed for a year after the Tiananmen Square massacre of 1989, organized training camps for NGOs that were sponsored by Probe International, which tracks Canadian aid, and the Open Society Institute, which advocates democratic governance.
But while China's once-disparate, underfunded, untrained and badly equipped NGOs are learning to organize and empower themselves, there's little evidence to show they are anti-state.
Yu Xiaogang, director of Green Watershed, an environmental NGO in southern Yunnan province, said the recent wave of audits might end up convincing the government that most Chinese NGOs do not have sinister motives.
"Things improved after a conference of NGOs the government organized in Beijing in November," he said. "Most of the investigations have already recognized the role of NGOs in China, and their basic finding is that China needs to develop more NGOs."
To read the full story.
Export Credit Debt Prevention
Three steps to protecting future generations from export credit agencies.
by Patricia Adams, Executive Director, Probe International,
An address to the European Commission Conference on "Export Credit Agencies and Sustainable Development: Challenges and Opportunities" on June 20, 2006, in Brussels, Belgium
Full speech appears below:
PATRICIA ADAMS: Thank you very much to FERN and to the European Commission. It is an honour for me to be here to discuss this very important subject – how to prevent more unpayable Third World debts being created by the world's export credit agencies.
In 1991, I published a book called Odious Debts: Loose Lending, Corruption, and the Third World's Environmental Legacy in which I resurrected a century old legal doctrine called the Doctrine Of Odious Debts to argue that most of the loans made to the Third World in the past half century have been odious. The doctrine says that debts not incurred for the needs or in the interest of the State, but to strengthen a despotic regime, to repress the population, or for interests that are "manifestly personal" would be deemed odious. In such a case, the creditors would have committed a hostile act against the people in extending those loans and would lose their claim to repayment.
I suspect the vast majority of ECA loans, credits, and guarantees to the Third World – which have doubled and now account for 34% of all Third World official debts – could be deemed "odious."
Why? The evidence of boondoggles made possible by ECA support – the Three Gorges dam in China, the Norwegian shipping deal to Ecuador, the Manantali dam in the Senegal River basin, the Bataan nuclear power station in the Philippines, pulp and paper mills in Indonesia, the Ok Tedi Mine in Papua New Guinea, military exports to Iraq – is extensive and well documented. ECAs back projects that are too risky and in markets that are too "dodgy" for the private sector. Their feasibility studies are prepared by equipment suppliers, their products marked up by as much as 100%. They operate in secret, without effective public oversight. Their business environment – state to state deals in the absence of sunshine laws – makes their operations a hothouse for corruption. Because they insist on sovereign guarantees, and counterguarantees from Third World governments, should purely private deals sour, they convert private corporate risk into public risk.
As such, ECAs are moral hazard machines. Most damning is that their mandates are political, not economic: the mandate of all ECAs is to win contracts for their country's exporters away from the next country's, at any cost, without attracting the discipline of the OECD "Arrangement" or the WTO's "Agreement." The economic viability of the projects ECAs finance is irrelevant to, and thus not a factor in their support. It is inevitable that the deals ECAs subsidize in Third World nations do not generate the wealth needed to repay the loans.
Now, in perhaps the most stunning acknowledgment of what I would call the greatest financial scandal of the past half century – in which Third World taxpayers have been forced to subsidize northern multinationals by repaying them for boondoggles – the OECD Working Party on Export Credits and Credit Guarantees has issued a Statement of Principles that ECAs should no longer extend credits to "unproductive expenditures" in the poorest and most indebted Third World nations.
I agree.
And to ensure that these "unproductive expenditures" don't occur again in future, I would recommend the following steps.
The first step is to call for an immediate moratorium on the repayment of current ECA claims against Third World nations and then, under an odious debt arbitration procedure, conduct public audits of all claims to determine their legitimacy. Many ECA claims for odious debts would fail and be written-off. The legitimate debts that remain – those that can be proven to have been spent in the interests of the people – could then be forgiven if countries are too poor to repay them. Third World nations have been threatened for the past 60 years into honouring illegitimate contracts. This must end and the burden of proof must now be placed on lenders to establish the legitimacy of those contracts.
Holding them to account will embarrass the ECAs, it will certainly inform Northern taxpayers of the waste laid by their ECAs to the Third World's environment and economies, and it will lead to write-offs of most Third World ECA debts. But it won't stop new ECA debt from being created in future. As a former American National Security Council member and debt consultant commented when the US Ex-Im Bank went into technical insolvency in 1990 after it set up a special reserve to cover losses on delinquent Third World loans, "not that anybody gives a damn."
And therein lies the key to the problem of the ECAs – their governments don't "give a damn" if they lose money. Their purpose isn't to make money. Their purpose is to push exports, usually for favoured firms in politically important constituencies. They are in the business of patronage, porkbarrel, and cronyism.
Can ECAs be reformed to "do no harm"? Not likely. As long as they are charged with the mandate of subsidizing exports, all other goals – environmental, economic, social, anti-corruption – will remain secondary, unenforceable, and outside of their legal mandate. Oh sure, the OEDC may try to harmonize this standard or that standard upward, but the fact remains, in the absence of tough national laws to stop ECAs from causing environmental harm, corruption, human rights abuses and the like, civil society will be helpless to stop these ill-effects from happening.
For example, Canada's enabling legislation for our ECA, Export Development Canada, or EDC, was carefully rewritten a few years ago to give it, in the words of a Parliamentary advisory body, "complete, unlimited freedom to make any decision," that "would be virtually immune from Judicial review" on its environmental decisions. Meanwhile, Canada's anti-corruption legislation is full of holes and EDC saw no reason to bar Acres International, the first company to be convicted in the landmark Lesotho trials, after it had been debarred by the World Bank, and even though loss of business is about the only effective deterrent to corruption. As for disclosure, one of Canada's top forensic accounting firms who we asked to review EDC's financial statements concluded that there was no way for taxpayers to tell which of EDC's sovereign financing deals was politically motivated. Moreover, to silence critics, EDC now has the extraordinary power to jail and fine anyone who uses the letters EDC in any circumstance that could be characterized as a "business purpose" or an "advertisement" without EDC's written consent! Under Canadian law, I could be fined $10,000 and jailed for the presentation I am making before you today.
Can ECAs be reformed to "do good"? I would ask, why would we want to? Why would we want to turn ECAs into agents of the Millennium Development Goals, in effect turning them into aid agencies, when we can't even get the existing aid agencies – the MDBs and bilateral agencies – to stop supporting environmentally damaging and odious projects. What on earth would make us think that we could turn this sow's ear into a silk purse. It makes me think that perhaps reform of international financial institutions has become a business in itself.
Here is what we know about ECAs. We know that ECAs are modern mercantilist organizations that distort markets, give life-support to smokestack industries, destroy environments, finance dictators against their people, turn private sector risk into public sector debt, and promote cronyism. We know they have no legitimate public policy purpose or economic function. As Eugene Lawson, a former acting chairman and president of the U.S. Export-Import Bank, explained, export aid is a "lousy and costly way to do business." Robert Richardson, former president of EDC, agreed that concessionary financing is not economical. "If other countries didn't do it, we wouldn't either, he said. "Our approach is merely to match others." Jeffrey Garten, former dean of Yale's School of Management and Undersecretary of Commerce for International Trade, said "In the best of worlds, governments ought to get out of this business altogether."
In the absence of any legitimate public policy benefit, and in the presence of overwhelming evidence of harm done by ECAs, here are three steps to protecting future generations: first, force the ECAs to account for their past operations with disclosure and audits of all claims; second, write-off the odious debts they created, and; third, begin the orderly shut down of their operations post-haste.
Thank you.
Probe International calls on foreign funders to protest attacks on Three Gorges petitioners
PRESS RELEASE
by Probe International
Toronto: A savage attack on Three Gorges migrant representative Fu Xiancai, reported by Human Rights in China on June 12, has left him with a fractured neck and possible permanent paralysis.
The beating occurred on June 8 as Mr. Fu was walking home from a meeting with a Public Security Bureau official in Zigui county (Hubei province) who criticized him for talking to a German television journalist.
Patricia Adams, executive director of Probe International, said that all foreign funders of the Three Gorges project have a moral responsibility to become involved in Fu Xiancai's case.
"Every government that poured money into the Three Gorges project, including Germany and Canada, needs to step forward and make strong diplomatic representations to the Chinese government about this horrific assault," Ms. Adams said.
"Foreign financiers of the dam should let the Chinese government know that the brutal beating of Fu Xiancai, and the jailing and harassment of other Three Gorges petitioners, are violations of international human-rights norms, are completely unacceptable and must stop."
Probe International, a Toronto-based energy and environmental think tank, has worked for two decades with Chinese environmentalists and scholars to monitor the Three Gorges project, and led the international campaign against Canadian financing for the multibillion-dollar scheme.
Canada, Brazil, France, Germany, Japan, Sweden and Switzerland provided at least US$1.5 billion in export credit to finance the sale of turbines and other equipment for the Three Gorges project.
Mr. Fu had appeared in a program that aired May 20 on the German television station ARD, saying he had been harassed for complaining about official corruption in the Three Gorges resettlement operation.
On the morning of June 8, as he was returning home from his police interview, Mr. Fu was struck from behind by an unknown assailant wielding a heavy object.
He was left unconscious by the side of the road, and is now in No. 1 People's Hospital in Yichang city, under police surveillance. He is currently paralyzed from the neck down, but is able to speak, Human Rights in China said.
Germany's international broadcaster Deutsche Welle reported today [June 13] that the German Foreign Ministry, through its embassy in Beijing, has demanded an explanation about the attack from the Chinese government.
Jobst Plog, director of TV station Norddeutscher Rundfunk (NDR), part of Germany's ARD public television network, also sent a letter of protest to the Chinese ambassador in Berlin, Ma Canrong. Mr. Plog said it was tragic "that a Chinese citizen was severely injured just because he made reasonable comments in an ARD program."
"This overshadows our intention to intensify our coverage of the Olympic Games 2008," he wrote, and called on the embassy to use its influence "to ensure that Chinese citizens do not in future need to fear for their life or health just because they speak factually on German television."
Human Rights in China reported that "an additional threat to Fu's recovery is a lack of financial resources, as his family has only been able to scrape together 7,000 yuan out of the estimated 80,000 yuan [US$10,000] needed for surgery."
Hospital officials have apparently stated that all medical treatment for Mr. Fu will be stopped if his family cannot come up with the money.
"As a matter of urgency, Fu Xiancai needs to receive the best medical treatment possible, as well as protection from any further assaults and harassment," said Probe International's Patricia Adams.
"In addition, all those people who have been imprisoned for voicing legitimate complaints about being swindled and mistreated in the Three Gorges resettlement operation should be released from jail immediately.
"This list includes Wang Xidong, a mother of three who was arrested in 2004 and jailed for five years simply for asking for the full compensation her family had been promised before resettlement."
See also:
- Human Rights in China press release on Fu Xiancai:
Three Gorges activist faces paralysis after brutal assault
- Three Gorges Probe story on Wang Xidong:
Five years in Wuhan Women's Prison for requesting fair treatment
- Fact box on Three Gorges dam funding:
How the Three Gorges project was funded
For more information: CONTACT:
Patricia Adams, Executive Director,
Probe International, Toronto, Canada
Tel. 416-964-9223, ext. 227
PatriciaAdams@nextcity.com
China Three Gorges activist beaten - rights group
Reuters, June 13, 2006
China Three Gorges activist beaten - rights group Beijing: A Chinese activist who has spent years petitioning over resettlement terms for those displaced by the giant Three Gorges Dam was beaten up just after being called in by police, a rights group said on Tuesday.
Human Rights in China said it was the latest in a string of attacks against Fu Xiancai, who has been petitioning since the 1990s for better compensation for the more than 1 million flooded out of their homes by the dam. ...
Activists also say dams in the southern province of Fujian exacerbated flooding there when operators opened the floodgates of 10 reservoirs without adequate warning. ...
Dam operators opened the floodgates on June 6 when reservoir levels rose too high, sending torrents of water into the Hetongxi valley in Fujian's Pingnan county, said environmental think-tank Probe International. ...
Read the full story.
Nigeria: beyond debt
by Lisa Peryman, Odious Debts Online, June 4, 2006
The rush to pay off foreign loans has derailed Nigeria's chance to challenge its odious debts, claims Lagos-based lawyer and commentator Remi Ogunmefun in "Nigeria after debt relief."
Specifically, Nigeria became the first African nation to pay off its debt to the Paris Club cartel of western creditor nations in April when it made a final payment of $4.5 billion of the $30 billion it owed. In reward for fast repayment and for carrying out certain economic reforms, the Paris Club had earlier agreed to drop $18 billion of the total debt, leaving an outstanding amount of $12 billion to be paid, which Nigeria has now cleared.
Although, Mr Ogunmefun concedes that the resolution of Nigeria's foreign debt issue has been "one of the landmark achievements" of the country's government and "probably saved millions of lives that could further have been driven into poverty," the battle has also "been lost in some regard because we could not get total cancellation of the debt." In June 2005, Mr Ogunmefun had called for the repudiation of Nigeria's foreign debt on the grounds that the debts were odious and had largely been incurred by a series of military regimes which had used borrowed public funds for their own gain.
On the other hand, it could also be argued that the Paris Club was eager to help Nigeria precisely because it had lobbied for debt relief on the basis of an odious debts challenge. The country in its efforts to obtain relief had argued that most of the money it had received had been loaned to corrupt military dictators, a fact Nigeria alleged was widely known by foreign banks and governments.
"Presumably, these arguments were not considered," said Mr Ogunmefun. "Apparently those in government considered it better to resolve the debt issue on moral and business grounds, but at what cost?"
Although, an odious debts argument might not have been acknowledged publicly, it is likely that the underlying threat of such a challenge by Nigeria was taken into very serious consideration by the country’s creditors. Rather than face opening the can of worms that would spill forth from such a challenge, negotiating write-offs is a far more preferable option that also allows creditors to appear magnaminous when the truth is they have much to hide and much to gain from quelling allegations of odious debts with the promise of debt relief.
Mr Ogunmefun is right to be concerned that when odious debts go unchallenged legally, respect for people's rights, the rule of law and due diligence are set aside as well.
To avoid a repeat of the uncontrolled and unaccountable borrowing and lending that resulted in Nigeria’s massive debt, Mr Ogunmefun is calling for the establishment of oversight bodies and the strengthening of laws to help protect Nigerian citizens from being looted by their leaders in future.
Although debt is not necessarily the problem. Mr Ogunmefun points out that “virtually all western countries” have considerable foreign debt loads, in particular the United States, which ranks as the most indebted country in the world.
“Yet no person in that country complains,” writes Mr Ogunmefun because “in the United States and most western countries, foreign debts are incurred with everyone’s knowledge,” supported by “structures and legislations regulating this process.”
In the Third World, he says, there “is a complete departure from the western standards” where “foreign debts are incurred without the clear mandate of the people and nobody knows about them.”
To promote transparency and put an end to public theft and dubious loans, Mr Ogunmefun recommends the following for Nigeria:
Mr Ogunmefun also calls for the creation of a new international financial institution mandated with the power to review and approve loan applications from Third World countries, and charged with the responsibility of determining loans that might prove 'odious' to the borrower nation.
But, points out Probe International's Patricia Adams, author of Odious Debts: Loose Lending, Corruption and the Third World's Environmental Legacy, there is no institution better able to evaluate whether a loan is odious in its origin or not, and to ensure that it isn't odiously used during its dispersal, than the lending institution that stands to lose its claim to repayment if the money is not used in the interest of the people.
The best way to keep lenders on their due diligence toes, is to ensure that the threat of non-repayment keeps them vigilant. Furthermore, she adds, the danger in appointing a third party institution to screen for odious loans is that it would rob citizens of a borrowing nation of the future right to challenge a loan that looked legitimate in the beginning, but was used in odious ways.
China's Three Gorges dam to begin flood control with a bang
'To sort economic fact from fiction, China needs a comprehensive independent audit of the real costs of the Three Gorges project,' Probe International executive director Patricia Adams is quoted as saying.
by Environment News Service, May 31, 2006
Beijing: The moment of truth for the world's largest dam will arrive on June 6. The main concrete wall of the Three Gorges dam on the Yangtze River must begin to hold water after a temporary cofferdam is demolished in a series of planned explosions.
The last of three cofferdams used in building the massive dam, the 140 meter (460 feet) high and 580 meter (.3 mile) long cofferdam generated power for construction crews building the main dam's right bank and served as a temporary barrier, excluding water from an area of the main dam that will soon be submerged.
The final concrete was poured for the dam's main wall on May 20, so the cofferdam is no longer needed, and preparations for the June 6 blasting operation have been completed, said a source with the China Three Gorges Project Corporation.
About 200,000 cubic meters of concrete will be removed during demolition. Explosives have been placed 35 meters (115 feet) underwater, making the blast "extremely difficult," said the company.
The cofferdam removal means the main dam is expected to begin its flood control function in time for the 2006 flood season. China's main flood season usually lasts from June to August.
The dam is planned to protect 1.5 million hectares of farmland and towns in the Jianghan Plain and Dongting Lake area from flood damage. The region is inhabited by some 15 million people.
Officials with the China Three Gorges Project Corporation say the dam was engineered to prevent 10 year floods, control 100 year floods and "even in case of a rare occurrence of 1,000 year flood, mass damages or injuries can still be prevented."
Deadly floods are a frequent occurrance along the Yangtze, China's longest and the world's third longest river, after the Nile and the Amazon. Floods have claimed more than one million lives in the past 100 years. The latest flood in 1998 claimed about 1,000 lives and caused approximately 100 billion yuan (US$12.5 billion) in economic losses.
The Three Gorges - the Qutang, Wuxia and Xiling Gorges - extend for about 200 kilometers on the upper and middle reaches of the Yangtze River.
The 185 meter (607 foot) high and 2,309 meter (1.4 mile) long dam across the middle reach of the Three Gorges is the world's largest dam of reinforced concrete, with a total of 28 million cubic meters of concrete poured.
Located in the central province of Hubei, near the town of Sandouping, the massive dam is said to have cost US$25 billion over the 17 years it has been in planning and construction.
Designed for power generation as well as flood control, when operating at full capacity, now scheduled for 2008, the project's 26 hydropower turbines are expected to produce 18.2 million kilowatts, up to one-ninth of China's output.
Compared to the coal-fired power stations with equivalent generating capacity, the Three Gorges Power Plant will decrease emission of 100 million tons of the greenhouse gas carbon dioxide, according to the China Three Gorges Project Corporation. The emission of two million tons of sulfur dioxide and 0.37 million tons of nitrogen oxides, which both contribute to acid rain, will also be prevented, company officials said.
The project includes the largest system of locks ever built, engineered to bring cargo ships 1,500 miles inland to Chongqing, the capital of the municipality carved from Sichuan province in 1997 to govern the project.
Pu Haiqing, deputy director of the State Council Three Gorges Project Construction Committee, told the official state news agency Xinhua that the completion of the dam completes just one phase of the project, and a great deal of work remains, including resettlement and environmental protection.
Now that construction of the Three Gorges dam is almost completed, an independent and transparent financial and environmental audit is needed, says Probe International, a nongovernmental organization based in Toronto that has been a persistent critic of the dam.
"To sort economic fact from fiction, China needs a comprehensive independent audit of the real costs of the Three Gorges project," says Probe International Executive Director Patricia Adams.
The energy and environmental think tank has worked for two decades with Chinese environmentalists and scholars to monitor the Three Gorges project, and led the international campaign against Canadian financing for the multibillion-dollar scheme.
"The audit should document all the revenue raised and spent building the dam," Adams says. "The project's environmental consequences and the dam-related disaster risks must also be quantified and taken fully into account."
Claims by the government and dam authorities that the Three Gorges project will cost about 200 billion yuan (US$25 billion) have never been independently verified, says Adams.
"No one knows for sure how much money has been poured into the project since construction began over a decade ago, or what costs will be paid out of the dam's electricity revenues. Nor is it clear whether the official cost estimate includes an additional six turbines in an underground powerhouse that was not part of the original project design," she says.
The same financial uncertainty applies to the Three Gorges Corporation's profits, says Adams. She points out that The Three Gorges' listed subsidiary, Yangtze Power Company, reported profits of US$417.5 million last year but those profits have not been verified by China's new power-industry regulator, the State Electricity Regulatory Commission.
Once the dam's environmental costs and liabilities are factored into the price, Probe International estimates the true cost of Three Gorges power would be at least several times the government fixed price of US$0.03 per kilowatt-hour.
Adams says that any full audit of the Three Gorges project must review, "Corruption and abuses in the resettlement of more than one million people."
The audit must include "dangerous" buildup of silt in the Three Gorges Reservoir behind the dam that will flood 632 square kilometers (395 square miles) of land to create a reservoir about 644 kilometers (400 miles) long by 112 kilometers (70 miles) wide.
Adams is concerned about the impact of silt buildup on the entire project's performance and revenues.
Auditors should also consider the increased risk of earthquakes and landslides due to the presence of the reservoir, she says, as well as damage to fish stocks due to changes in river conditions and the blocking of fish migration routes.
The China Three Gorges Project Corporation says the dam will relieve the invasion of saline tide in the Yangtze River's estuary where it empties into the East China Sea near Shanghai.
Probe International says salt-water intrusion and land erosion problems in the Yangtze estuary will be increased, not relieved, by the upstream dam project.
Earlier this month, Chongqing Municipality's Kai County announced a tree planting drive to create greenbelts in the peripheral area of the reservoir, formed by the periodic variation of the shoreline. This "fluctuation" area is expected to cover 45.2 square kilometers (11,169 acres).
Last year, the county says it planted 2,533 hectares (6,260 acres) of forests around the reservoir..
For a diagram of the role of cofferdams in Three Gorges construction, visit the website of the British Dam Society
This story on the ENS site.
What cost as China tames mother river?
by Mary-Anne Toy, The Age, May 20, 2006
Article excerpt:
... The dam's most outspoken opponent is Dai Qing, a journalist turned activist whose book Yangtze! Yangtze!, which argued that the dam is a waste of money and an environment disaster, brought her 10 months in a maximum security jail. ...
"Deng Xiaoping made two mistakes: one is June 4th [Tiananmen Square], the other is Three Gorges Dam," Ms Dai said. "China's rivers are being ruined by these greedy and corrupt officials." ...
Patricia Adams, of Canadian environmental advocacy organisation Probe International, said governments continue to be attracted by huge infrastructure projects over smaller, more efficient, projects or reining in energy use. Probe International has campaigned intensively against the Three Gorges Dam.
"Projects like this can only go ahead as long as it's governed by propaganda, as long as the proponents don't have to be accountable, for example, to taxpayers, independent regulators or the stockmarket," she said.
"Meanwhile, what people really need is power, the ability to move back and forth on the river, and flood control."
But even Ms Dai concedes that the Three Gorges Dam has had one benefit. It has nurtured environmental awareness in a country that has traditionally valued development at any cost. Environmental reporting is becoming mainstream and government agencies are working with green groups. ...
Read the full story.
China's Three Gorges Dam nears completion
by Steve Chao, CTV News, May 20, 2006
Article excerpt:
At a time when many countries are questioning the benefits of damming their rivers to harness electricity, China's government has announced it is almost finished building the World's largest dam.
At the time of conception in the 80s, the Three Gorges [dam] was hailed as a way to provide electricity cheaply, and with minimal amounts of pollution. Along the way, proponents championed the fact that the dam would also help regulate the spring flooding that have wreaked havoc on communities along the Yangtze.
[But] a chorus of critics have questioned all these points.
"What's the result? First, it's the huge cost from resources and environment, and who will take the cost? It's the ordinary people," environmental activist Dai Qing told CTV News.
While they acknowledge hydroelectric dams in theory run cleaner than coal, which China relies heavily on, there are other polluting concerns. Scientists point out the reservoir created behind the dam has become a cesspool of human and toxic waste.
Environmentalists like Dai believe it is threatening the drinking water of major cities like Chongqing.
"The Yangtze used to be so clear, I could drop a pen and see it float to the bottom, but now it's a dirty muddy river, and the water is no longer good for drinking," says Dai.
The towns that were flooded over during the building of the dam were never cleaned of toxic waste, she says.
"There was never a budget for clean-up. On the bottom of the reservoir, there is now hospital, factory, pig and animal waste. It will all be stirred up."
...
Because leaders view the Three Gorges project as an important symbol of China's new status as a world economic power, Dai believes the government is quick to silence any dissent on the matter.
Several Chinese journalists have been jailed for writing articles criticizing its building.
"The dam for the government shows the world that the Chinese are mighty, we have the world's largest dam," says Dai.
In reality, the dam will now only provide about 2 percent of China's electricity by 2010. And the significance of using dams for energy is being debated by the United States along with several European nations. The argument always goes back to the environmental harm such projects create.
When it comes to the Three Gorges, Canadians have been on both sides of the debate. Canadian engineers have offered studies supporting the dam. Canadian branches of companies such as GE and Siemens have provided turbine generators for the project. On the other side, groups such as Probe International have led the fight against the hydroelectric project, helping to train Chinese environmentalists on how to take up the cause.
But the Three Gorges debate is now purely academic. The dam is already built, and will be fully operational by 2008. The government steadfastly argues that all environmental concerns have been addressed. Still, it will be another twenty years before the full impact will be known.
But for Dai Qing, who's been jailed, and subjected to years of police monitoring and harassment, it's been worth it. "We have learned from this fight, and it's taught us how to do it better for future dams."
Read the full story.
China builds Three Gorges dam wall, prompts concern
by Lee Spears and Ying Lou, Bloomberg.com, May 19, 2006
China tomorrow marks a milestone in building the world's largest hydropower project, a venture that's easing electricity shortages and prompting concern about the effect on the environment.
Workers at the Three Gorges Dam will celebrate completion of the 2.31 kilometer-long (1.44 mile-long), 185 meter-high wall across the Yangtze River, Asia's longest. The facility in the central province of Hubei will take another three years to finish, as the last of 26 turbines are added.
The dam proposed by China's first President Sun Yat-sen more than eight decades ago is intended to reduce flooding and cut pollution. Coal-burning now fires two-thirds of the power output in the world's fastest-growing major economy. Detractors are opposed to the 600 kilometer-long reservoir that is filling up behind the wall and submerging towns and villages.
"When you define 'clean' as inclusive of the potential ecological impact that's caused by the Three Gorges Dam, then I guess that's questionable," Victor Shum, of Singapore-based energy consultants Purvin & Gertz, said in a May 15 interview.
Fourteen generators producing 9,800 megawatts are complete and in operation by Shanghai-listed China Yangtze Power Co. Its parent, China Three Gorges Corp., builder of the project, has tasked Yangtze Power with running the 84.7 billion kilowatt-hours of power the site is scheduled to produce by 2009, an amount equal to 10 nuclear reactors.
The 2009 power-production target is equivalent to 3.4 percent of China's 2005 electricity output, said Judith Chen, an analyst at KGI Consulting Co. in the southern city of Shenzhen.
Yangtze Silt
Meanwhile, more than half of the silt that the Yangtze once carried downriver is now settling in the reservoir, which may result in a harmful buildup, said Edmond Lee, a Hong Kong-based analyst at JPMorgan Chase & Co.
Environmental questions haven't halted work on the dam, since former Premier Li Peng revived the project and construction started in 1993. Completion of the wall is about nine months earlier than officials originally estimated, according to state media reports.
By the end of April, 126 billion yuan ($15.7 billion) had been spent on the project, a figure that may be capped at 180 billion yuan in 2009, the official Xinhua news agency said this week.
About 45 percent of the budget has been earmarked for relocating and compensating people that live in the area the dam is submerging, JPMorgan's Lee said. So far, 1.25 million people have been moved at a cost of almost 45 billion yuan, according to state media reports.
Adequate Compensation?
"The problem is whether these people are adequately compensated," Lee said. "You never know."
Some of the money intended for those forced to abandon their homes was stolen. Huang Faxiang, a former construction bureau chief in Fengdu county, was executed in December 2003 for embezzling 12 million yuan in relocation funds.
The case for building the dam is strengthened by the power shortages that have caused blackouts in Chinese homes and factories during the last three years. China had 25,000 megawatts less electricity than it needed when demand peaked last summer, a shortfall that may narrow to 10,000 megawatts this year, the National Development and Reform Commission, the state planning body, said in March.
Sales of that power will enable the project to pay for itself less than a decade after starting full operations, according to Yang Ya, chief accountant at China Three Gorges. By 2020, the dam will have generated 1 trillion kilowatt-hours of electricity, earning an estimated 250 billion yuan, Xinhua quoted Ya as saying on May 17.
Project's Advantage
The project has the advantage of being located in the Yichang section of the Yangtze, "where natural conditions are quite favorable for hydroelectricity generation," Morgan Stanley analysts including Hong Kong-based Michael Tong wrote in a Jan. 23 report.
Hydropower offers lower operating costs than coal-fired plants that are quicker to build, especially at a time of high coal prices, Tong wrote. Prices of thermal coal, used to generate electricity, reached records last year. Spot export prices for thermal coal shipped from Newcastle, the world's biggest export harbor for the fuel, have gained 44 percent since mid-November.
Critics of the Three Gorges project cite safety risks including the dam's location near six active geological fault lines, according to the Web site of Probe International, a Canada-based environmental group.
China may build 100 hydro-electric plants on the Yangtze and its tributaries during the next two decades, Xinhua reported on May 13. Still, the engineering risks associated with plants the scale of Three Gorges may discourage similar dams, said Goerild Heggelund, a China energy specialist at the Fridtjof Nansen Institute, a Norwegian environmental, energy and resource research foundation.
"It's a project that was planned many, many years ago," Heggelund said in a telephone interview this week. "If it were up for a vote in the National People's Congress today, some people think it might not have been approved."
Ertan's market failure and the World Bank's outlook for China's power sector
by Grainne Ryder, Policy Director, Probe International
The World Bank has given China's second-largest hydropower project a satisfactory rating on its financial performance, despite its failure to meet the Bank's financial targets and its near-bankruptcy in the first five years of operation.
Unable to service its debts, the US$2.2-billion Ertan project, which received more than US$1 billion from the World Bank, was bailed out by the Bank of China in 2003. With a US$396-million loan from the central bank, Ertan Hydropower Development Corporation repaid its commercial financiers and a portion of its World Bank debts.
Since then, EHDC's finances have improved somewhat due to increased electricity sales and lower interest charges on its outstanding debts, according to last year's performance assessment by the World Bank's operations evaluation department.
However, the company's earnings are still nowhere near the Bank's target of 15-per-cent return on assets.
Read the full story.
China's Three Gorges dam developer switches to coal
by Grainne Ryder, Policy Director, Probe International
Earlier this year, China Yangtze Power Company, the listed arm of state-owned Three Gorges Project Development Corporation, announced plans to buy a string of coal-fired plants to reduce the company's exposure to hydro risk.
According to Bi Yaxiong, Yangtze Power's general manager, the decision to diversify was due to concerns about relying on hydro development, which depends on seasonal and highly variable river flows. Quoted in the Beijing-based Economic Observer (Jingji guancha bao), he also said that reliance on long-distance transmission lines to deliver power from inland hydro dams to the coastal provinces poses additional safety and economic risks for the company.
Read the full story.
Big hydro in the red: the drive for DE-friendly reform in China
by Grainne Ryder, COSPP (Cogeneration and On-Site Power Production), May 10, 2006
Large, centrally planned hydroelectric energy projects in China have tended to be a serious mismatch to the power problems they were meant to solve. Consumer-oriented markets ought to guide future investment decisions. [Full text: PDF file]
www.probeinternational.org/probeint/images/Cospp_06-3_Ryder.pdf
Three Gorges project raises dam questions
by Reuters, ABC News Online, May 14, 2006
Construction on China's Three Gorges dam is set to finish next week but its critics warn the lessons about the environmental consequences of the world's largest hydropower project have yet to be learned.
"If we look at the four purposes, only the first has been realised, it can produce power," Dai Qing, China's most outspoken opponent of the Three Gorges, said.
"But compared to other methods of generating power, that electricity is much more expensive."
With China's total generating capacity about 508 gigawatts by the end of 2005 and another 75 gigawatts to be added this year, the dam's 18 gigawatts will not have the same impact it would have had when the project was approved in 1992.
"When it was approved, nobody in their right mind would have thought that China would be adding the equivalent of the capacity of the whole of the United Kingdom in one year," Joseph Jacobelli, an analyst at Merrill Lynch in Hong Kong, said.
"Any additional capacity helps, but in the global scheme of things the Three Gorges is quite small."
Critics say opposition to the Three Gorges project is still relevant because of the effect on future dam-building.
"I think the Government can really only proceed with more dams if they can maintain a fiction that Three Gorges makes sense," Patricia Adams, executive-director of Probe International, a Canadian environmental think-tank, said.
Read the full story.
Probe International calls for independent financial audit of China's Three Gorges dam
PRESS RELEASE
May 16, 2006
Toronto: Now that construction of the mammoth Three Gorges dam spanning China's Yangtze River is nearing completion, an independent and transparent financial and environmental audit is needed, says Probe International.
"To sort economic fact from fiction, China needs a comprehensive independent audit of the real costs of the Three Gorges project," says Patricia Adams, executive director of Probe International. The Toronto-based energy and environmental think tank has worked for two decades with Chinese environmentalists and scholars to monitor the Three Gorges project, and led the international campaign against Canadian financing for the multibillion-dollar scheme.
"The audit should document all the revenue raised and spent building the dam," Ms. Adams says. "The project's environmental consequences and the dam-related disaster risks must also be quantified and taken fully into account."
Canada, Brazil, France, Germany, Japan, Sweden and Switzerland have provided at least US$1.5 billion in export credit to finance the sale of turbines and other equipment for the project. (See "How the Three Gorges project was funded," on the Three Gorges Probe website, which is published by Probe International.)
Export credit agencies, the global dam-building industry, and taxpayers who involuntarily helped finance Three Gorges should demand such an audit, Ms. Adams says.
"As long as dam proponents don't have to face voters at the ballot box, victims in court, industry regulators or bond-holders in stock exchanges, their promises are cheap and nothing more than propaganda."
Power at what cost?
Claims by the government and dam authorities that the Three Gorges project will cost about US$25 billion (200 billion yuan) have never been independently verified.
No one knows for sure how much money has been poured into the project since construction began over a decade ago, or what costs will be paid out of the dam's electricity revenues. Nor is it clear whether the official cost estimate includes an additional six turbines in an underground powerhouse that was not part of the original project design.
The same financial murkiness applies to the Three Gorges Corporation's profits. The Three Gorges' listed subsidiary, Yangtze Power Company, reported profits of US$417.5 million last year but those profits have not been verified by China's new power-industry regulator, the State Electricity Regulatory Commission.
Once the dam's environmental costs and liabilities are factored into the price, Probe International estimates the true cost of Three Gorges power would be at least several times the government-fixed price of 3 US cents per kilowatt-hour.
Just a few of the project costs and liabilities Three Gorges auditors must review:
For more information: CONTACT:
Patricia Adams, Executive Director,
Probe International, Toronto, Canada
Tel. 416-964-9223, ext. 228
PatriciaAdams@nextcity.com
Three Gorges Dam nears completion, critics fear catastrophe
by David Stanway, Interfax, May 12, 2006
The Chinese government has ignored the real costs of the Three Gorges project in order to justify a bad decision, Probe International's Patricia Adams tells Interfax.
www.threegorgesprobe.org/tgp/index.cfm?DSP=content&ContentID=15340
China's Three Gorges raises questions for future dams
by Lindsay Beck, Reuters May 13, 2006
'There are better methods of electricity production being locked out in order to protect a bigger project like the Three Gorges,' says Probe International's Patricia Adams.
www.threegorgesprobe.org/tgp/index.cfm?DSP=content&ContentID=15373
PRESS RELEASE
Fortis monopoly fails to deliver low-cost power, environmental compliance.
At today's annual meeting in St. John's, Newfoundland, Canadian power giant, Fortis, will inform shareholders of its record earnings in 2005 from its operations in Belize, Central America.
Belizean environmentalists and community leaders, meanwhile, gathered yesterday to protest the company's rate hikes – two since last summer – and its failure to comply with an environmental agreement signed with the government of Belize in 2002.
According to Candy Gonzalez, Vice President of the Belize Institute of Environmental Law and Policy, "Fortis/BECOL has not met its legal obligations in constructing the Chalillo dam and providing for the health and safety of the people, the river, and the environment."
Fortis completed the widely opposed Chalillo dam on the Macal River last November, after a protracted legal battle with environmental groups.
In its report card released today, the Belize Institute of Environmental Law and Policy gives Fortis a failing grade on:
"We believe Fortis has inflated its profitability by evading its environmental responsibilities and overcharging customers," says Gonzalez, an organizer of yesterday's riverside rally and one of 12,000 people living downstream of the 12-storey high Chalillo dam. "We want an honest review of the company's costs and profits, and the safety of its hydro operations."
Belizeans pay Fortis a staggering 22 US cents per kilowatt-hour of electricity, which is nearly double, even triple, the cost most Canadians pay for their electricity service.
in Belize against Fortis' rate hikes and plans
for a third dam on the Macal River. Her T-shirt
reads (English on the back, Creole on the front):
Bills go up
River go bad
BEL/Fortis – Stop the Lies
No to Vaca Dam
Damn the Dams
Fortis blames its high costs on rising fuel prices even though half the country's power supply now comes from two hydro dams, owned by BECOL, a subsidiary of Fortis.
"Fortis shareholders should insist upon an open and impartial review to ensure that Belizean ratepayers are not being gouged," says Grainne Ryder, Policy Director of Probe International. "Fortis' failure to procure competitively priced power and the less-than-transparent relationship between its two subsidiaries warrants regulatory scrutiny."
Fortis is the majority owner of Belize Electricity, the country's monopoly buyer and distributor of electricity to nearly 70,000 customers. Fortis also owns the Belize Electric Company (BECOL) which operates the country's two hydro facilities: Mollejon and now Chalillo, which is expected to double power output from the Macal River.
Prior to flooding by the Chalillo dam, the Macal River Valley was internationally renowned for its Maya ruins and abundance of rare birds and wildlife, including the jaguar, tapir, and scarlet macaw.
For more information and photos, CONTACT:
Grainne Ryder, Policy Director, Probe International, Toronto, Canada
Tel: 416-964-9223, ext. 228
E-mail: GrainneRyder@nextcity.com.
The dammed
Environmentalists watch and wait for the opening of the world's largest dam.
by Clifford Coonan, The Independent, March 17, 2006
Environmentalists view the Three Gorges dam in China, the world's biggest, as a monstrous natural catastrophe waiting to unleash itself on the hundreds of millions of people who live near the Yangtze river.
The Chinese government is fiercely proud of the dam, which is due to open in a few weeks, saying it will stop the river flooding all the time, provide much-needed clean hydroelectric power and give ships from booming coastal cities such as Shanghai better access to central China. ...
The most famous opponent of the dam in China is the energetic environmental activist and journalist Dai Qing. She opposes the dam because of the lack of public debate about such an enormous project, the fact that the warnings of independent analysts have been ignored and also because she sees it as a huge waste of money.
Her book criticising the project, Yangtze! Yangtze! earned her 10 months in a maximum security prison, during which she was threatened with the death sentence. "Our efforts may look weak and limited in comparison with the government's strong and thunderous media campaign. Whether history proves the project to be a success or a failure, the fact remains that we were simply a group of journalists who took our profession very seriously. We tried to do what we felt was right at a time when we were needed," Dai said. ...
Read the full story.
Dam project brings Laos cash and controversy
Only the Laos government has the power to enforce a concession agreement calling for part of the Nam Theun 2 dam's catchment area to be set aside for a national biodiversity conservation area. But as a dam co-owner, the government lacks incentive, says Probe International's Gráinne Ryder.
by Ioannis Gatsiounis, International Herald Tribune, March 15, 2006
Near this dusty village of 51 houses, amid remote hills in the center of landlocked Laos, a country where electricity and running water are scarce and 80 percent of people still live on subsistence farming, a giant project is taking shape that has multinational companies and lenders buzzing.
Nam Theun 2, a hydropower project on a tributary of the Mekong River, involves building a dam and a power plant with a generating capacity of 1,070 megawatts, at a cost of $1.25 billion. The largest single foreign investment in Laos, the dam will also be the largest in Southeast Asia when it goes online – scheduled for 2009.
Electricity from the complex will mainly supply neighboring Thailand, which has agreed to buy 93 percent of the power. It is expected to contribute $2 billion to Laos's cash-starved economy over its first 25 years of operation, when it will be owned and operated by a construction and financing consortium, the Nam Theun 2 Power Company, and $240 million a year, at present electricity prices, after reverting to national ownership in 2034.
Nam Theun's 450-square-kilometer, or 175-square-mile, reservoir will drown Sop Hia and neighboring hamlets along with 40 percent of the Nakai Plateau, where the dam is being built, displacing 6,000 indigenous villagers and affecting the livelihoods of 100,000 other people.
The power company – a consortium led by the French state-controlled Électricité de France and including two Thai companies and the Laotian government – says the plateau mainly consists of poor farmland and degraded forest that was bombed heavily during the Vietnam War. Conservationists say it is home to endangered species, including tigers, Asian elephants and clouded leopards.
Officials say that exhaustive attention is being paid to mitigating the project's social and environmental impact.
The concession agreement calls for the dam's catchment area, 4,000 square kilometers of upland rain forest, to be set aside for a national biodiversity conservation area, with the consortium paying $1 million a year for its upkeep. The consortium has also agreed to double the annual income of affected villagers to $800 per year, in a country where the average per capita income, at $340, is among the lowest in the world.
Monitoring bodies have been assigned to assess progress and to make recommendations to the country's Communist government and the consortium. An independent panel of experts, for instance, will check whether livelihood opportunities and housing relocation are in place before the dam is closed. In theory, electricity may not be generated or exported if they are not.
The panel, however, has no legal powers, and its recommendations will not be binding on the power company.
"Only the Laos government has the authority to enforce the concession agreement. And as a part-owner, the Laos government has no incentive to minimize revenue by accurately accounting for compensation and environmental mitigation needs," said Gráinne Ryder, a corporate accountability expert and the policy director at Probe International, an independent environmentalist organization. "Its main priority is to keep NT2 financially afloat and maximize profit."
The World Bank, which is providing $270 million in loans and risk guarantees, and which plays a critical role in attracting international investment to the project, could promote corporate accountability by freezing funding. But Bank officials are loath to say at what point it would do so.
"If there is a pattern that emerges of noncompliance and the government remains unresponsive, then obviously the Bank would shift to a higher gear," said Patchamuthu Illangovan, the World Bank's country manager for Laos, in Vientiane.
Critics say the World Bank's role as a lender prevents it from flexing effective regulatory muscle. "The World Bank's overriding interest as regulator is that the Laos government doesn't default on its loans from commercial lenders," said Sébastien Godinot of Les Amis de la Terre, a French environmentalist association linked to Friends of the Earth. "It doesn't have any incentive to manage environmental and social impact."
In the mid-1990s, amid widespread criticism of its role, the Bank stopped funding large infrastructure projects. Nam Theun marks its return to the field, and Bank officials say they cannot afford to get it wrong.
"We need to demonstrate that we have the capacity to do these projects right," said Mohinder Gulati, a senior energy specialist at the Bank. "If there are shortcomings in this project our ability to help not only Laos but also other developing countries would be affected."
EDF, too, as majority shareholder with a 35 percent stake, "is on the front line, so we have an added incentive to take all measures to properly implement the project," said Olivier Salignat, an environmental advisor on sustainable development issues at EDF.
Last year a complaint by nongovernmental organizations against EDF's environmental and social impact assessments at Nam Theun was officially rejected.
The complaint, alleging a breach of internationally agreed guidelines for multinational enterprises was examined by a mediating body, which declared it to be unfounded. "In fact, socially, they found we were going a step further" than necessary, Salignat said.
Critics however are unimpressed, noting that the mediator was part of the French Finance Ministry – a government body judging the actions of a government-controlled company.
Officials for the project concede that in Laos, where there is little transparency, legal recourse or free speech, people are vulnerable to abuse. "The nature of the government is well known here," Illangovan said. "But on the NT2 project, very early on in the process we communicated to the government that there has to be a very strong credible contribution from them."
The government says that it has held over 200 public workshops to tell villagers about the project and their resettlement options. They say that most villagers welcome the changes.
In Sop Hai, a 49-year-old woman, who gave her name as Fong, said she hoped to be able send her six children to school after resettlement, and to grow vegetables on a plot promised by the government. Still, a government representative monitored and helped to translate all interviews, which yielded no statements of dissent.
Germany and Japan block new anti-bribery guidelines for export credit agencies
Anti-bribery watchdog calls OECD guidelines "paper tiger" anyway
by Odious Debts Online, February 24, 2006
Germany and Japan are challenging efforts to tighten anti-corruption guidelines covering companies supported by official export credit agencies.
The bribery controls contained in the Draft Action 2005 Action Statement on Measures to Deter Bribery, being drawn up by the Organisation for Economic Co-operation and Development (OECD), were expected to be agreed next month after the release of a weaker action statement issued more than five years ago.
However, objections by Germany, Japan and a number of smaller countries have raised fears that a final decision on new anti-bribery rules could be delayed. According to a report by the Financial Times, Germany and Japan are arguing that the OECD's tougher rules are too bureaucratic.
But their stance could prove embarrassing, as both countries supported the decision by the Group of Eight (G-8) industrialised nations at the Gleneagles summit last July to ensure that export guarantees are not used in projects where companies pay bribes, reports the Times.
In a report published by the BBC, Germany said it opposed plans to require agents representing exporting companies in countries to disclose their identity when seeking export credits or guarantees. Agents, who act as consultants for exporting companies, are sometimes suspected of passing on bribes in order to facilitate deals.
But, says the German submission, "it is highly questionable whether their revelation is a proper tool for detecting bribery."
Japanese officials agree and argue that "excessive responsibilities or roles" should not be imposed on export credit agencies.
The global graft watchdog, Transparency International, is also skeptical about the effectiveness of the measure because, it argues, bribers have become ever more imaginative in finding ways to pay bribes and those determined to bribe will not be deterred by the potential threat of having to reveal agents' commissions. They will find other channels.
Patricia Adams,, the executive director of the Canadian-based trade and aid watchdog, Probe International, agrees with TI. Ms. Adams, who followed the 2002 conviction of Canadian engineering giant Acres International in Lesotho for using an agent to bribe one of that country's officials to win a lucrative dam-building contract, said:
"I always ask myself if new anti-corruption measures would have stopped Acres from bribing Mr. Sole through its agent, Mr. Bam, who, as Canada's Honorary Consul in Lesotho, enjoyed the confidence of the Canadian government and its Crown agencies, and who set up a devilishly inscrutable bribe payment route through a Swiss bank account. I have to say that the OECD enhanced action statement would not have raised any red flags whatsoever.
"It seems to me that the bribe givers and bribe takers are several steps ahead of the anti-bribe bureaucrats," said Ms. Adams. "The real test of countries' commitments to slay corruption will not be a 'paper tiger', like the OECD's new action statement, but the enforcement of existing national laws to catch and punish bribers, to make the cost of bribing higher than the benefit", she added.
Meanwhile, ECA-Watch, a coalition of anti-bribery groups, yesterday urged the OECD to disqualify companies convicted of foreign bribery from receiving publicly subsidized export credits. In a briefing paper and letter, they noted that "no OECD Member State reviewed so far has taken the step, proposed under Article 3 of the OECD Anti-bribery Convention, of imposing administrative sanctions in the form of temporary or permanent exclusion from export credit support, on any sort of automatic basis."
Even the OECD's own examiners who have been investigating each member country's implementation of the OECD Convention to combat bribery of foreign officials agree with the NGOs about the importance of raising the cost of bribery, arguing that the "threat of suspension or refusal of coverage, or the risk of seeing their names on a blacklist, would be powerful deterrents for companies dependent on exports."
In fact, says Probe International's Patricia Adams, with the exception of the U.S., few countries have shown much mettle for enforcing their new laws against bribing foreign officials. When they do, she says, "that's when we will see a real drop in the incidence of bribery in international projects."
Yes, Master
by Steve Maich, Macleans, February 20, 2006
The Three Gorges project stands as a black mark on Canada's human rights record abroad, says Probe International's Patricia Adams. 'You have to be willing to walk away from a project if it violates your principles.'
... With so much at stake, few paused to ask what moral compromises would be necessary to turn a poverty-stricken backwater into the world's next great industrial titan, in less than a decade. The massive Three Gorges Dam megaproject on the Yangtze River may stand as the most dramatic example of Western business aiding a quantum leap in China's economic development, without much thought for the human toll. Several Canadian companies, including Montreal engineering giant SNC-Lavalin, Acres International, Hydro-QuŽbec and Dominion Bridge Inc., have been involved in various aspects of the Three Gorges endeavour, many of them backed by taxpayer money through Export Development Canada and the Canadian International Development Agency. But, as the project steamed ahead in the mid-1990s, and "Team Canada" trade missions trudged across the Chinese countryside promoting closer ties, few stopped to consider the forced evacuation of roughly two million people living in low-lying areas to be flooded by the dam.
To this day, public criticism of the Three Gorges development is prohibited in China, and the project stands as a black mark on Canada's human rights record abroad, says Patricia Adams, executive director of Probe International, an environmental group based in Toronto. "Three Gorges Dam is a spectacular case because it's so big and has been so notorious. But it's just one of many, many projects, and I think it shows the difficulty of dealing with a dictatorship," she says. "The principle should be, 'do no harm.' You have to be willing to walk away from a project if it violates your principles. China will change and it is changing, but when you're dealing with a government that mistreats its citizens, it's just as likely to mistreat companies as well." ...
Read the full story.
China grasps for green
For once, activists and the Party seem to have the same goal: to tackle China's appalling environmental record. But can they get along enough to do some good?
The Ottawa Citizen, January 22, 2006
Is China going green? The idea seems laughable, coming after an 80-kilometre-long slick of benzene on the Songhua River poisoned the water supply for about 12 million people in northeastern China last fall.
But a growing number of observers say a green revolution is sweeping the country, with grassroots groups dragging polluters to court, consumers opting for organic produce, and activists staging defiant, even violent, protests.
In April, hundreds of villagers battled riot police outside Dongyang in Zhejiang province, demanding that officials close nearby chemical plants that had poisoned their water and crops. The factories were closed indefinitely.
Three months later, as many as 15,000 protesters faced off against riot police in the city of Xinchang in a successful bid to shut down a polluting pharmaceutical plant, according to the New York Times.
"People are taking a stand," says internationally renowned Chinese dissident and environmentalist Dai Qing, who was jailed after the Tiananmen Square massacre of 1989, and who led the charge against the mammoth Three Gorges Dam hydroelectric project upon her release.
Chinese people are "shocked by . . . how bad the situation is in China," she explains in an e-mail from Beijing.
Ms. Dai has won an array of international awards for her work, including the prestigious U.S.-based Goldman Prize, considered the "Oscar" of environmentalism.
She says green activism has been gaining momentum in the past 10 years as increased contact with the West through avenues such as the Internet shows Chinese citizens "how well the environment has been protected in other countries."
That awareness has become more widespread as the appalling environmental toll of China's boom economy becomes apparent. Already three-quarters of the rivers running through Chinese cities are toxic; seven of the world's 10 most polluted cities are in China. Smog kills an estimated 400,000 people a year, according to the International Energy Association.
"China is facing the most severe environmental degradation in history," says Zhao Ang, an activist with Green Earth Volunteers, a Beijing-based environmental group, in an e-mail interview.
"The public is beginning to realize the importance of environmental protection," adds Mr. Zhao, who comes from Shanxi province, the biggest coal-mining region in the country.
The country's first green nongovernmental organization, Friends of Nature, was registered in 1994; since then, more than 2,000 officially recognized activist groups have sprung up across the country, according to the Boston Globe. That doesn't include an untold number of other groups operating without official government sanction.
And many of these groups are not pulling their punches: They are launching lawsuits against factories, fighting officials over the building of large dams and other megaprojects, and harassing bureaucrats who refuse to press charges against polluters.
Mr. Zhao's group, for example, is pushing the notoriously secretive central government to allow public hearings as part of its fledgling environmental impact assessment process. Other groups provide legal aid to pollution victims, campaign to protect wetlands and endangered species, or push for better media coverage.
Concern for the environment is now top-of-mind for China's growing middle class, observers agree.
For example, consumers are opting in increasing numbers for certified organic or green produce, says Arlyle Waring, a Montreal-based consultant with 20 years' experience in China.
"You can even go into Shanghai and find a store with 'green' baby products," says Ms. Waring.
"Greenspeak" terms such as biodiversity and GM foods are now common, notes a YaleGlobal Online study, pointing to an increase in environmental reporting from 1994 to 1999.
And that coverage is generally better than in the West, says Ms. Waring: "Newspapers are much more detailed about what is happening in their water and their air than we ever see here," she says.
So does China now have a free-wheeling, western-style environmental movement?
Not by a long shot, says Vaclav Smil, a University of Winnipeg professor who has written extensively on China.
While the number of activist groups has grown exponentially, most focus on specific local causes – rogue factories, or corrupt officials, for example.
The Communist Party would not allow a nationwide movement that could threaten its "fierce control," he says.
But in recent years party officials have tolerated, even encouraged, many local environmental groups.
"Authorities have more tolerance of environmental protection activities . . . than of human rights and religious" protests, explains Ms. Dai.
It serves the government's purpose to give environmental groups some leeway, Mr. Smil says: "The air stinks and everything is polluted. The party bosses see that, too . . . they genuinely do want to improve the environment."
He adds that, while party brass still prizes economic growth, population control and public security over all else, Chinese leaders take their country's environmental crisis seriously.
In fact, he argues, "top Chinese leadership is much better informed about the true state of the environment than (Canada's) leadership."
With its economy growing by a whopping nine per cent a year, China has to act fast to find alternatives to increasingly costly fossil fuels.
Then there's the economic cost of China's environmental nightmare, which slices 10 per cent off the country's Gross Domestic Product every year, the federal State Environmental Protection Administration has said.
Grassroots groups not only help the central government crack down on lax or corrupt local officials who flout federal standards, but they also help it "sell" environmentalism, notes the China Business Review.
The government "understands the need to push through some unpopular measures – realistic energy and water pricing in particular," notes the magazine, which is published by the U.S.-China Business Council. "Green non-governmental organizations make more convincing propagandists than government slogan writers."
The Chinese government is also rushing to go green, or at least to appear to be, after nailing its bid for the 2008 Olympics by promising the most environmentally friendly games ever.
China will spend $14 billion preparing for the games in Beijing, building energy-efficient housing, converting the capital to cleaner fuel such as natural gas rather than coal, and improving water treatment.
Other national programs are equally ambitious: From 2001 to 2005, $97.4 billion was earmarked for environmental projects, the Review notes.
Last February, the government passed a law requiring utility operators to buy some of their electricity from renewable sources, such as wind or solar plants; by 2020 it wants 10 per cent of China's energy to come from renewable sources.
And by 2007, auto-emissions standards will exceed the American norm, according to the New York Times.
"China already has some fantastic legislation that's even stricter than ours," says Ms. Waring. "The problem is enforcement."
For example, in December 2004, the State Environmental Protection Administration took the unprecedented step of closing 32 coal-power plants for breaking its air-emissions standards. Within weeks, most were running again, having paid a $28,000 fine; most took no steps to conform to the rules, the New York Times reported.
Such failures put the government's environmental commitment in question, especially in light of its pursuit of prosperity, critics say.
By 2025, China will be spewing 20 per cent of the world's greenhouse gases, according to the New York Times. Annual car sales, it says, have skyrocketed as much as 37 per cent in recent years, and energy use has grown by about 15 per cent a year.
The central government continues to censor potentially embarrassing environmental news: After the chemical-plant explosion poisoned Harbin's water supply, Beijing suppressed news of the accident for 10 days.
Activists are still punished: In October, police arrested six members of the advocacy group Green Watch after they tried to open a bank account for the as-yet unregistered group, according to the Worldwatch Institute, a Washington-based think-tank.
Ms. Dai's writings, including Yangtze! Yangtze!, a scathing critique of the Three Gorges Dam project, remain banned in China, 17 years after the party ruled that her work contributed to the Tiananmen Square uprising.
Communist Party brass will brook no criticism of any project it endorses, no matter what the cost to the environment, Ms. Dai says.
The Three Gorges Dam, for example, "is a pet project of China's top leaders, and those who voice their opposition to it run the risk of being severely punished," she says.
The dam, to be completed by 2009, will force the relocation of almost two million people, says Canada's environmental group Probe International.
China is planning even more mega-projects to harvest hydroelectric power – projects so vast they will affect tens of millions of people, Ms. Dai says.
But partly thanks to the explosion of Chinese environmental groups, public awareness is higher now than it has ever been, she adds. Nowadays, such megaprojects are "likely to trigger revolutions," Ms. Dai predicts.
Ms. Waring agrees that Chinese people have become far more assertive about such issues.
"It's a new era in China, where people are feeling they have to stand up and make their views known."
Sidebar: Activists now scaling Great Wall of silence
by Kelly Patterson, The Ottawa Citizen, January 22, 2006
For decades, Chinese citizens concerned about the environment have been cut off from the outside world by a Great Wall of silence – not only because of government censorship, but also simply because of language.
"English is the lingua franca of the environmental movement around the world," explains Patricia Adams, executive director of the Toronto-based watchdog group Probe International, which for 20 years has led a high-profile campaign against China's Three Gorges mega-dam and similar projects.
Chinese activists struggle to get the word out about environmental crises, and many can't read about breakthroughs in environmental law or science elsewhere in the world, notes Ms. Adams, whose organization has for many years helped translate and publish Chinese news and books.
Now Probe is trying to break down the linguistic barriers by launching a language-training program especially for Chinese environmentalists.
This fall, 16 participants took the course, co-ordinated in Beijing by renowned Chinese environmentalist Dai Qing, and funded by the U.S.-based Open Society Institute.
In the spring, four of the students – most of them journalists or activists in environmental groups – will come to North America to work with organizations such as the U.S.-based International Rivers Network, doing research, exchanging ideas and practising their English.
Zhao Ang, a member of the Beijing group Green Earth Volunteers, spent five nights a week studying English through the program, and still goes once a week to hone his skills.
In an e-mail from Beijing, he said he considers good English an essential tool in his campaign for "public participation in environmental decision-making."
Programs that address the linguistic divide are critical to Chinese activists, says Ms. Dai, noting that China's burgeoning environmental movement owes much to the support and financial aid of international organizations.
A handful of international environmental organizations, including Probe and the World Wildlife Fund, have been active in China for about 20 years; now even radical groups such as Greenpeace are active in the country.
Ms. Adams notes that Chinese groups aren't the only ones to benefit from efforts to break the language barrier: Much of the environmental research done in China is still not accessible to western scientists.
For example, some of the world's top hydrologists are Chinese, and several have done groundbreaking work on the environmental effects of river diversion and dams, she says.
"There's a great body of scientific knowledge in China that we don't have access to right now," Ms. Adams notes.
Correction
Due to a technical glitch, the Bangkok Post article we ran yesterday contained several errors pertaining to various costs cited in relation to China's Ertan dam project on the Yalong River in Sichuan. A corrected version of this article appears below:
World Bank says benefits of Chinese hydro dam 'impossible to quantify'
by Gráinne Ryder, Bangkok Post, January 18, 2006
The World Bank has given China's second-largest hydro project a satisfactory rating on the resettlement of 46,000 people, despite having no data to assess whether anyone is better or worse off. The US$2.2-billion Ertan dam on the Yalong River in Sichuan, now in its eighth year of operation, received more than US billion in loans and a decade of technical assistance from the WB, the biggest loan package ever extended by the world's leading financier of large dams.
But a performance assessment by the WB's Operations Evaluation Department last year concluded that it is "impossible to quantify the degree of progress [on resettlement at Ertan] or the extent of the income shortfall of those resettled" because no income data was collected from resettled households. Bank policy stipulates that bank-funded dam projects must boost the incomes of resettlers to higher than pre-project levels. Of the 46,000 people moved, about 4,000 people had to be moved a second time because the land allocated to them was either prone to landslide damage or too poor to farm. Another 900 people are still waiting for replacement land more than a decade after the WB approved the project. Despite the lack of data, the bank's assessment team concluded that "resettlement appears to have been successful" based on observations in one resettlement village they visited. The Ertan resettlement programme cost nearly US$300 million or US$6,300 per person, about three times the original budget approved by the WB. This included US$64 million for "independent monitoring and evaluation" led by a panel of international resettlement and environmental experts hired by the WB. The panel "proved its worth", the report says without elaborating.
In addition to the official resettlement budget, Ertan Hydropower Development Corporation has imposed a 10-year surcharge of 0.003 yuan per kilowatt-hour on power consumers, which could amount US$56 million over 10 years.
The funds are supposed to go toward environmental protection around the reservoir, infrastructure maintenance and "income-boosting activities for the resettlement villages".
No accounting of how the resettlement funds were spent or how the 46,000 people resettled would rate the programme is offered.
With an installed capacity of 3300 MW, Ertan was China's largest hydro plant until the Three Gorges Dam came onstream in 2003.
Gráinne Ryder is policy director at Probe International and editor of "Damming the Three Gorges: What Dam Builders Don't Want You to Know," published by Earthscan in 1993.
To read Gráinne Ryder's full review of the World Bank's Project Performance Assessment Report on the People's Republic of China Ertan Hydroelectric Project Loans I & II, World Bank Operations Evaluation Department, please see: www.threegorgesprobe.org/tgp/index.cfm?DSP=content&ContentID=14558.
World Bank says benefits of Chinese hydro dam 'impossible to quantify'
by Gráinne Ryder, Bangkok Post, January 18, 2006
The World Bank has given China's second-largest hydro project a satisfactory rating on the resettlement of 46,000 people, despite having no data to assess whether anyone is better or worse off. The US$2.2-billion Ertan dam on the Yalong River in Sichuan, now in its eighth year of operation, received more than US billion in loans and a decade of technical assistance from the WB, the biggest loan package ever extended by the world's leading financier of large dams.
But a performance assessment by the WB's Operations Evaluation Department last year concluded that it is "impossible to quantify the degree of progress [on resettlement at Ertan] or the extent of the income shortfall of those resettled" because no income data was collected from resettled households. Bank policy stipulates that bank-funded dam projects must boost the incomes of resettlers to higher than pre-project levels. Of the 46,000 people moved, about 4,000 people had to be moved a second time because the land allocated to them was either prone to landslide damage or too poor to farm. Another 900 people are still waiting for replacement land more than a decade after the WB approved the project. Despite the lack of data, the bank's assessment team concluded that "resettlement appears to have been successful" based on observations in one resettlement village they visited. The Ertan resettlement programme cost nearly US0 million or ,300 per person, about three times the original budget approved by the WB. This included million for "independent monitoring and evaluation" led by a panel of international resettlement and environmental experts hired by the WB. The panel "proved its worth", the report says without elaborating.
In addition to the official resettlement budget, Ertan Hydropower Development Corporation has imposed a 10-year surcharge of 0.003 yuan per kilowatt-hour on power consumers, which could amount to US million over 10 years.
The funds are supposed to go toward environmental protection around the reservoir, infrastructure maintenance and "income-boosting activities for the resettlement villages".
No accounting of how the resettlement funds were spent or how the 46,000 people resettled would rate the programme is offered.
With an installed capacity of 3300 MW, Ertan was China's largest hydro plant until the Three Gorges Dam came onstream in 2003.
Gráinne Ryder is policy director at Probe International and editor of "Damming the Three Gorges: What Dam Builders Don't Want You to Know," published by Earthscan in 1993.
To read Gráinne Ryder's full review of the World Bank's Project Performance Assessment Report on the People's Republic of China Ertan Hydroelectric Project Loans I & II, World Bank Operations Evaluation Department, please see: www.threegorgesprobe.org/tgp/index.cfm?DSP=content&ContentID=14558.
Environmental awareness and anger grow in China
A new communications workshop sponsored by Probe International and run by Probe International Fellow Dai Qing, aims to help Chinese activists improve their communication skills.
by Jehangir S. Pocha, Boston Globe, December 4, 2005
Bejing: Much of China watched in horror as work crews struggled to contain the recent benzene spill that polluted the northeastern Songhua River and disrupted drinking water supplies to about 12 million people in the region for more than a week.
But even residents of Beijing watching the event unfold on television weren't entirely safe from the effects of China's increasing environmental decay.
China's capital is one of the most polluted cities in the world and lung cancer is now the number one cause of death here, according to China's State Environmental Protection Administration. A thick cloud of sulfur envelops the city most evenings; a recent picture taken from NASA's Terra satellite shows the entire city covered by a nearly opaque band of gray smog.
With more and more people finding themselves directly affected by China's endemic pollution, public awareness of and anger over China's deteriorating environment is growing. So is their willingness to take risks and do something about it, despite the strictures on organized political activity in this authoritarian state.
"People are taking a stand," said Dai Qing, a political and environmental activist who was jailed during the Tiananmen Square massacre of 1989 and who emerged from prison to champion opposition to the giant Three Gorges Dam on the Yangtze River, which she has called "the most environmentally and socially destructive project in the world."
In the years since China's first environmental nongovernmental organization, Friends of Nature, was allowed to register in 1994, more than 2,000 grass-roots environmental nongovernmental organizations have risen all over the country, according to government reports. Once disparate, under-funded, untrained, and badly equipped, many of these groups are now learning how to organize and empower themselves.
Over the last two months, Dai has been running a communications workshop for local nongovernmental organization workers from a small office within the bowels of a humble-looking residential neighborhood in Beijing.
Zheng Jun Feng, 43, a scientist with Green Remote, a local nongovernmental organization that monitors environmental data from satellite imaging, said he was attending the sessions because he needs to find better ways to get around the controls and constraints the Chinese government places on his work.
"I want to learn how to take my thoughts and ideas to foreign friends," Zheng said, echoing the view of many activists here who say foreign media coverage, money, and expertise is critical for China's budding nongovernmental organizations to grow.
Dai said her sessions are being cosponsored by Probe International, a Canada-based environmental watchdog, and George Soros's Open Society Institute. One reason international nongovernmental groups and leaders are eager to assist the grass-roots ones in China is that while the economic ripple effect of China's booming economy is buoying global markets, the environmental fallout caused by the surge in economic activity also is spreading across the region and beyond.
According to Dr. Tsutomu Toichi, managing director and chief executive economist of the Institute of Energy Economics in Tokyo, ''A lot of sulfur dioxide and other pollutants from China are reaching Japan with the western wind and even the West Coast of the United States."
A concerned Japan has encouraged China, which emits about 25 million tons of acid rain-causing sulfur dioxide a year, to install desulfurization units in its coal-fired power plants. It also is providing China with technical know-how on desulfurization and more than $40 million in ''green aid," which includes money for installing pollution control equipment in industrial plants.
Yet Toichi said that most Chinese power companies prefer to pay the financial penalties levied by the Chinese government against polluters since that's cheaper than installing the equipment.
Julian Fong, the founder of Moving Mountains, a San Francisco-based nongovernmental group helping Dai to organize the training sessions, said the activists in his class "may seem ordinary, but they're all doing groundbreaking work and taking real chances" by trying to change such mentalities.
Initially, Chinese nongovernmental groups and journalists had focused only on politically safe issues, such as tree-planting campaigns. But now many are engaged in fierce battles with authorities over the construction of dams and other mega-public works projects, and filing lawsuits against polluting factories.
So far, they've had some success. A growing section of the Chinese leadership, led by Deputy Environment Minister Pan Yue, has been vocal in calling for China to make its economic policies more environmentally sensitive.
Earlier this year, China's State Environmental Protection Administration took the unprecedented step of suspending work on 30 projects, worth more than $10 billion collectively, after they failed to meet environmental standards.
On Friday, China's chief environmental regulator, Xie Zhenhua, quit and took the blame for last month's chemical spill, which shut off water to millions.
Yet Dai said there had been little change in Beijing's overall economic and environmental policies, which continue to focus on creating the 7 percent annual growth that analysts say the country needs to avert domestic political turmoil.
What also angers Chinese and activists is that the government, despite its rhetoric, continues to hide critical facts and information from the public.
In October, the central government had announced it would stop treating the death toll from natural disasters as a state secret. But any hope that Beijing was moving toward a new transparency was crushed after it became known that the government withheld news for 10 days after a chemical plant explosion on Nov. 13 dumped about 100 tons of benzene into the Songhua River near Harbin. The blast occurred at a company owned by a subsidiary of the China National Petroleum Corporation, a state-owned company.
Yu Lijian, dean of the graduate school of landscape architecture at Peking University and an environmental campaigner, said ''there is also little honesty from the government on environmental issues because they fear the truth might cause turmoil in society."
For now, there is no doubt "China's top priority" remains political stability and economic growth, he added.
The Chinese government's development plans and economic policy remain dedicated to promoting cars instead of public transportation, burning fossil fuels instead of alternate energies, and pampering manufacturers with cheap resources instead of pushing them toward greater efficiencies.
That has made China the world's largest consumer of coal, grain, and steel, and the world's second-largest consumer of gas. As a result, in Beijing alone 70 percent to 80 percent of deadly cancer cases are related to the environment, according to the State Environmental Protection Administration.
Still, Fong said the 20-odd public interest lawyers, journalists and nongovernmental organization managers who attend his three-hour sessions after putting in a full day's work are a determined bunch.
"There's this new sense of 'I can,'" Fong said. "And it's not just with the younger generation. Even older people here have a feeling, a passion to change things. . . . This country's future is at stake."
World Bank anti-corruption: discourse versus practice
A new report from corruption watchdog, Transparency International (TI), indicates that despite improved efforts by the World Bank on corruption ahead of other regional development banks, there is still a striking inconsistency between the Bank's discourse and practice. A new U.S. anti-corruption bill and an oil revenue agreement with Chad are the latest tests.
by Bretton Woods Project, November 21, 2005
The downside of the Bank's continued willingness to fund corrupt governments is exposed by Chadian government manoeuvres to get out of an anti-corruption agreement signed with the Bank.
The World Bank's negligence in allowing corruption to happen in recipient countries was largely overlooked until former president James Wolfensohn introduced the "c-word" into Bank discourse. Anti-corruption efforts are now supposed to be a key focus of the Bank's analysis and lending decisions, and diagnostic work on governance and corruption risks has been expanded. The trend has been picked up by Wolfowitz, who has referred to corruption as "a weed" and supported initiatives to return pilfered money from Switzerland to Nigeria as the basis on which to tackle the corruption which is crippling Africa's development.
In 2004 witnesses testified to the US Senate Foreign Relations Committee under the chairmanship of Richard Lugar, that borrowing-nation bureaucracies and crooked contractors have stolen over $100 billion from the World Bank over the past five decades. Lugar also estimates that between 5-25 percent of the $525 billion lent by the Bank since 1946 may have been misused or lost to corruption, a figure contested by the Bank. Since then a meeting of multi-lateral development bank (MDB) officials took place in London in October to discuss common approaches to transparency and accountability. Most recently, a US anti-corruption bill was signed into law by President Bush. The provisions contained in the bill establish US policy towards the MDBs on several transparency and accountability issues. Patricia Adams of Probe International welcomed the legislation and said that "the reforms in the bill would help reduce the endemic corruption that has plagued MDB projects, but only if implemented fully and effectively by the boards of the MDBs."
Susan Hawley, in TI's Global Corruption Report 2005 summarises the Bank's recent anti-corruption measures, including: the debarment of companies found guilty of fraud and corruption- the World Bank made its system publicly available in 1998; stricter procurement guidelines and improved financial management and oversight. However, Hawley points out that many of the large infrastructure projects round the world that have been plagued by corruption allegations, were backed either by an MDB or an export credit agency, such as the Bank-backed Lesotho Highlands Water, where Canadian company Acres International was debarred by the Bank but only two years after it was found guilty of corruption by Lesotho courts (see Update 41). The Bank's recent re-prioritisation of infrastructure (from $5.4 billion in 2003, to $7 billion by 2005, see Update 48) presents a further challenge to corruption prevention.
Hawley attributes high levels of corruption in Bank-backed projects to: lack of due diligence; legal immunity and the absence of accountability mechanisms; inadequate economic, environmental and social risk assessment; weak internal controls at the Bank in the supervision and auditing of projects; lack of safe channels for whistleblowers; the lack of active oversight by most member countries; and a 'no fail' culture of internal and project evaluations. Many of Hawley's findings are echoed by Bruce Rich, of US NGO Environmental Defense, who outlines how corruption is hampering international efforts to achieve environmentally sustainable development. He attributes much of the negligence by IFIs to the "pressure to lend" and the "culture of loan approval".
Chad: between a rock and a pipeline?
The World Bank may be forced to withdraw from its investment in Chad's high-profile oil pipeline following government threats to change the Bank-backed Petroleum Revenue Management Law, which safeguards oil profits for future generations.
The Bank's decision last year to fund the $3.7 billion 1,000 km pipeline, developed by an Exxon Mobil-led consortium to take crude to market through Cameroon, was strongly criticised by civil society groups who warned that Chad was marred by corruption, political instability and human rights abuses (see Update 43, 47). TI ranks the country as one of the world's most corrupt. At the time of approval, Friends of the Earth forewarned: "Once the money is flowing, the unholy trinity of oil, power and corruption will make corrective action difficult".
This poses a major setback for the Bank's biggest investment in Africa, which it touts as a test case to show that petro-dollars can benefit the poor. In an agreement between the Bank and the government, ten per cent of the oil revenues were being saved for future generations and 80 per cent of the remaining revenues were earmarked for poverty reduction programmes for today's population. Chad now wants to scrap this agreement, claiming that the country is not reaping the rewards from the oil project and is struggling to pay salaries and pensions, and therefore needs access to the funds immediately. It also argues that the increased security costs related to the conflict in neighbouring Sudan's Darfur region have placed heavy demands on the budget, and that it is unable to service its external and internal debt, President Déby's officials assert that it would be better to spend revenue on improved healthcare and education for young people growing up now rather than put it away for the future.
The Bank has urged the government to address "grave weaknesses in public financial management" in order to protect the goals of the oil revenue management scheme. "With allocations already approved in road rehabilitation, health and education, among other areas, the citizens of Chad are beginning to see some benefits, despite the difficulties and weaknesses assessed in the execution of public spending," said the Bank.
As an indication of Chad's financial woes, on 5 September, The Union des Syndicats du Tchad (UST) trade union organisation organised a protest march over salary payments, in particular of former employees of Esso Tchad subsidiary Tchad Cameroun Construction (TCC). However, the unions' demands have little hope of being met, following the government's announcement of a package of austerity measures, which include a public sector pay freeze in order to enable the country to meet conditions to qualify for debt relief under the Heavily Indebted Poor Countries initiative. A loan program approved by the IMF earlier this year is also on hold because of the government's failure to meet budget targets.
Debt cancellation sets looters free
An odious debts challenge would allow Nigerians a public reckoning of accounts and the opportunity to make the looters, both their own political leaders and western creditors, bear the consequences of reckless lending and borrowing.
by Lisa Peryman, Odious Debts Online, October 24, 2005
Debt campaigner Jubilee USA claims a threat by Nigeria's parliament earlier this year to halt foreign debt payments helped pressure rich Western creditors to negotiate a debt write-off deal worth $18 billion.
The Paris Club cartel of creditor nations confirmed this week a proposed debt relief deal that would grant Nigeria a debt write-off of 67 per cent ($18 billion). Under the arrangement, Nigeria would still be required to repay $12 billion of its total $31 billion in sovereign debt and arrears owed to foreign governments, as well as abide by the conditions of an International Monetary Fund (IMF) economic program, which includes cuts in social spending and increased privatization of public services.
Debayani Kar, the communications and advocacy coordinator for Jubilee USA, said the Paris Club write-off "demonstrates the partial success of the Nigerian parliament's threat to cancel its own debt through repudiation, which helped to force the hand of these creditors". But, she said, "we don't think it makes sense to make an impoverished country like Nigeria pay $12 billion when that money should be spent on AIDS, health, and education".
Sony Kapoor of Christian Aid (UK) while welcoming confirmation of the Paris Club deal agreed that "it took the threat of repudiation to get this cancellation".
Nigeria's House of Representatives passed a non-binding resolution in March to halt payments on the country's external debt, the highest of any country in Africa. The resolution stated Nigeria's economy had been "devastated by a series of military regimes from 1984 to 1999, who stole billions of dollars from state coffers" and compared Nigeria’s situation to that of "countries emerging from war." However, the Nigerian Senate later voted to honour debt servicing for this year.
As if "the obvious need of the people and the odious nature of much of the debt were not enough," Sony Kapoor adds, "what is worse is that creditor countries are extracting a pound of flesh in the form of $12 billion worth of payments from Nigeria and have put in place a new IMF program despite Nigeria not owing anything to the Fund."
On a more positive note, he said, "the deal has set the scene for a more assertive negotiating stance by other indebted developing countries."
David Ugolor, president of the African Network for Environment and Economic Justice (ANEEJ), weighed in, saying: "The Paris Club cannot expect Nigeria, freed from over 30 years of military rule, to muster $12 billion to pay off interest and penalties incurred by the military. Since the debt, by [the current president's] own admission, is of dubious origin, the issues of the responsibilities of the creditors must be put on the table at the Paris Club."
Dr. Paul Zeitz, director of the Global AIDS Alliance, took aim at creditors and declared they should be "ashamed of themselves if they simply take this money".
According to Dr. Zeitz: "These creditors often knew that [their loans] would be siphoned off by [African] dictators and deposited in western banks."
Other commentators are skeptical whether monies freed up from debt relief will be spent on real improvement for Nigerians, given the country's long struggle with corruption. In its most recent corruption survey, global graft watchdog Transparency International ranked Nigeria as the sixth most corrupt nation in the world, although sixth-place does mark an improvement over its previous listing as the world's third most corrupt nation.
Asked how to ensure money saved on debt payments would be put to good use David Ugolor of ANEEJ said "it is the responsibility of Nigerians to demand that from the Nigerian government," Business Week Online reports.
However, as reported previously by Odious Debts Online, debt cancellation far from holding looters responsible, sets them free. Although the threat of repudiation might prompt creditors to negotiate write-offs, unless odious debts are challenged legally respect for people's rights, the rule of law and due diligence will be set aside as well.
"An odious debts challenge by Nigeria under international rules of arbitration would serve all citizens around the world who are burdened with odious debts: it would set an important precedent and it would give future creditors – public and private – a clear incentive to lend only for purposes that are transparent and of public benefit. It would also help change the culture of international lending and reduce the moral hazard that has destabilized international finance for the past 60 years," says Patricia Adams, who resurrected the International Doctrine of Odious Debts in her seminal book, Odious Debts: Loose Lending, Corruption, and the Third World's Environmental Legacy (Earthscan, 1991).
But most important, Ms. Adams adds, it would serve Nigerians' best interests by signaling that the current Nigerian administration will be guided by the rule of law rather than the rule of cronies.
"That will do immense good for economic confidence in Nigeria and public confidence in the country's future."
SNC-Lavalin deal Canada under pressure
by Newindpress.com, September 17, 2005
The timing of Power Minister Aryadan Mohammed's letter to the Canadian High Commission on the SNC-Lavalin grant is crucial as a top Canadian delegation comprising ministers, politicians and businessmen is scheduled to land in Delhi soon. Any report on SNC-Lavalin backtracking on the grant would adversely affect the trade plans of both the countries.
A section in the KPCC and the UDF advised the Oommen Chandy government against pressing the Canadian High Commission on the grant commitment made by the SNC-Lavalin to the Malabar Cancer Hospital.
Their apprehension was that any positive response would benefit CPM State secretary Pinarayi Vijayan and the LDF in the coming local body elections.
A section in the CPM had also been using the issue against the official group. And while the Chief Minister's office yielded to pressure and kept silent, Aryadan shot his letter urging a speedy release of the grant amount.
One important point of discussions between India and Canada is the doubling of trade between both the countries by 2012.
The Canadian government is under tremendous pressure as Probe International, an organisation similar to Transparency International, has been exposing the controversy through a media campaign.
The reports on Kerala and SNC-Lavalin appearing in the media here are frequently being posted on its site under Odiousdebts.org.
Probe International exposes the devastating environmental, social, and economic effects of Canada’s aid and trade abroad.
PRESS ADVISORY
Probe International
September 7, 2005
Controversial Laotian Dam Gets Underway
World Bank-Led Hydro Venture Gets Canada's Backing, Fails to Meet US Standards
Global construction industry journal, DesignBuild, reports this month that work has begun on the controversial Nam Theun 2 hydro dam in the Southeast Asian republic of Laos.
The World Bank and Asian Development Bank approved financing for the US$1.2 billion project earlier this year despite opposition from environmental groups, including Probe International.
Like most Bank-donor countries Canada supported the project, while the United States abstained from the vote.
A review by the U.S. Treasury Department found "too many outstanding risks related to environmental and social issues, the Lao PDR’s macroeconomic conditions, and recourse measures if [the] NT2 project is not implemented as planned."
It also noted "defects in the [dam's] environmental assessment process which ran afoul of U.S. legislation regarding [multilateral development bank] projects that have a significant environmental impact."
In accordance with U.S. law, the Treasury then instructed the U.S. executive directors not to vote in favour of Nam Theun 2.
Canada had no such reservations. According to the Canadian International Development Agency, which is responsible for overseeing Canada's contributions to the multilateral development banks, CIDA, Finance, and Foreign Affairs conducted a thorough review and found Nam Theun 2 has "established a high level of compliance with regard to social and environmental safeguards."
DesignBuild, meanwhile, announced that Canadian engineering firm, Klohn Crippen Consultants Ltd., has been awarded the final design contract for the 1070-MW dam, which will flood a vast 450 square kilometres of Laos' Nakai Plateau and divert a large Mekong tributary, generating power for neighbouring Thailand.
Canadian engineering firm, Klohn Crippen Consultants Ltd., has the final design contract for the 1070-MW dam, which will flood 450 square kilometers and divert a large Mekong tributary, generating power for neighbouring Thailand.
The Banks' decision to support Nam Theun 2 followed an unprecedented public relations campaign to persuade skeptical donor governments that Nam Theun 2 was Laos' best hope for poverty alleviation and not another environmental and economic disaster in the making, as citizens' groups have predicted.
Unlike earlier Bank-funded dam fiascos, Nam Theun 2 is supposed to generate up to US$2 billion for the Lao government over 25 years – money the World Bank insists will go toward poverty reduction and biodiversity conservation.
At least six-thousand Laotians will have to be resettled and as many as 100,000 people living downstream will be adversely affected by the dam's operations.
Export Development Canada has been approached by several Canadian firms about providing financing for Nam Theun 2, according to CIDA, but under Canadian law, EDC is not obliged to disclose any details at this stage.
France, Sweden, and Norway are providing $200 million worth of export credit financing. Nine international and seven Thai commercial banks are providing loans.
For more information, CONTACT: Gráinne Ryder
Policy Director, Probe International
Toronto, CANADA
E-mail: grainneryder@nextcity.com
Phone: (416) 964-9223, ext. 228
or visit Probe International's web site at
www.probeinternational.org
Probe International is an independent citizens' group investigating the economic and environmental effects of Canada's aid and companies overseas.
Aiding or abetting? Internal resettlement and international aid agencies in the Lao PDR
by Ian G. Baird and Bruce Shoemaker, Probe International, August 25, 2005
Over the last decade, tens of thousands of ethnic minority people in eastern Asia's Lao PDR (Lao People's Democratic Republic) have been resettled from remote highland areas to the country's lowlands and near major roads. International aid agencies have supported this internal resettlement in the name of poverty alleviation, rural development, and environmental protection. But the outcome for indigenous communities has been devastating and long-term impacts on their livelihoods, food security, and environment have been negative.
Ian G. Baird and Bruce Shoemaker, both veteran development workers in Lao PDR, have produced a report that examines the mixed response of international aid agencies, ranging from ongoing support for internal resettlement to the promotion of alternatives. The authors also discuss what international aid agencies can do to promote a more humane, culturally sensitive, and successful approach to rural development.
This 49-page report is available for downloading in a PDF format.
The dictator debt catch
A US-brokered deal to forgive billions in Iraqi debt is causing other countries to say "me too," even as some Iraqis wish they'd said "no thanks."
by Paul Webster, The Walrus, July/August 2005 issue
Despite the growing attention being paid to the cause of international debt relief, led by celebrities such as Bono, little has actually been done to ease the financial burden on developing countries. But a sign of hope could be seen earlier this year in Iraq, when the Paris Club, an international group that has managed $470 billion (US) in problem loans that the West has made to some of the world's poorest countries since 1983, erased $11.6 billion of debt amassed under Saddam Hussein's regime. And it offered to forgive another $27.4 billion if the country implements sweeping free-market reforms under a plan dictated by the International Monetary Fund (IMF). Since then, the leaders of a number of smaller countries with far fewer resources than oil-rich Iraq have been asking: if Iraq's debts can be so easily erased, why not ours?
The deal to cancel Iraqi debt was supposed to be an important first step, delivering "a major international contribution to Iraq's continued political and economic reconstruction," as President George W. Bush phrased it last year. After the Bush administration waived its $4.1 billion share of the Paris Club's claims against Iraq, American officials asked Baghdad's other creditors to do the same. US Treasury Secretary John Snow framed the issue in moral terms, saying: "The people of Iraq shouldn't be saddled with debts incurred through the regime of the dictator." Richard Perle, former chairman of the government's Defense Policy Board and a strong proponent of the Iraqi invasion, was similarly blunt. "If you loan to a dictatorship," said Perle, shortly after the war began in march 2003, "don't expect to be repaid if a democracy emerges."
Bush entrusted the task of selling Iraqi debt relief to Japan, Germany, France and Russia – each had loaned billions to Saddam's regime – to James A. Baker III, who was secretary of state during the Gulf War in 1990. Some Paris Club nations were quick to follow the United State's lead – including Canada, which was owed $600 million for wheat sent to Iraq before the first Gulf War. But Baker had a tough assignment. Paris Club nations seldom forgive debts, especially for oil-rich countries. "Forgiveness is meant to rescue the world's poorest countries," commented a spokesman for the Japanese government, which initially opposed the American debt-relief plan. "As long as Iraq restores its industrial base, it will be in a position to start paying back."
Although Japan and other Paris Club members eventually fell in line with Bush, those seeking wider debt relief found a certain irony in Bush's moral crusade to rid Iraq of debts amassed under Saddam. "What the United States has argued for Iraq could be said about Tanzania, Ethiopia, Argentina, Chile, or the Congo – for any of a number of countries," noted Joseph Stiglitz, former chief economist for the World Bank and an adviser to the Clinton administration. Others argued it was unseemly to put an oil-rich nation ahead of more impoverished countries in Africa and Latin America. Jeffrey Sachs, the high-profile economist who heads the United Nations' anti-poverty Millennium Project, calls the United States push to forgive Iraqi debt self-serving. "What became obvious was how remarkably political debt forgiveness was in Iraq, where the Bush administration has a huge political investment," he says. "Scores of more indebted countries still languish unaided."
Exactly why the nations of the Paris Club changed their views on Iraq's debt in such a hurry remains a mystery. Some analysts say they were persuaded by the prospect of lucrative Iraqi reconstruction and oil concession contracts. But Patricia Adams, whose 1991 book, Odious Debts, helped launch an international debate over Western loans to dictatorships, offers a more complex explanation. "Above all else," says Adams, "the Paris Club creditors were afraid the Iraqis would sue for international debt arbitration."
Arbitration, Adams believes, would have brought unwanted attention to the decision by Paris Club governments to lend billions to Saddam's repressive regime during the 1980s, some of which was spent on the purchase of advanced weapons. International arbitration of this kind is rare, but Adams cites as a precedent the Iran-United States Claims Tribunal, established in 1981 in accordance with UN guidelines, to hear claims stemming from the 1979 Iranian revolution. The legal option grants the Iraqis some leverage, she suggests. "The Paris Club creditors have financed dictators in numerous places like Iraq," she says. "These creditors don't want their odious loans exposed in court. And that's just what the Iraqis threatened to do."
There is a further historical precedent for full debt repudiation after a change in government. Adams cites the case of Cuba after the Spanish-American War of 1898, when the United States assumed control of the island and declared the debt of its former government null and void. Similarly, after World War I, the countries gathered at the peace talks in Versailles decided that Poland would not have to repay some of the debts it incurred under the rule of Kaiser Wilhelm II of Germany.
According to Ottawa-based economic Shakir Issa, most Iraqis want the debt question settled through international arbitration. Issa, who is also the director of Jubilee Iraq, an organization seeking the cancellation of Iraq's debts, travelled to Iraq in October 2003 and interviewed dozens of Iraqi politicians, senior officials, and civilian and religious leaders. He found the majority preferred debt arbitration to Baker's backroom dealmaking, which risked sacrificing Iraqi autonomy to IMF reforms. "Behind the scenes, and before they even had a government," says Ann Pettifor, director of the UK-based Advocacy International, which lobbies on behalf of developing countries, "this poor little country's hands were tied."
The Paris Club debts are only part of Iraq's financial burden. Kuwait still claims some $27 billion in reparations for damage done to their country during the first Gulf War, while Saudi Arabia lent Iraq $30 billion to finance the Iran-Iraq War during the 1980s. Although these obligations are separate from the Paris Club debts, the leaders canvassed by Issa view the whole lot as illegitimate. Soon after the Paris Club deal was struck, Sa'd Salih Jabr, chairman of the Iraqi National Assembly's economic committee, called for his country's debts to be submitted to "a fair and transparent arbitration process in accordance with United Nations rules."
Pettifor vigorously condemns the Paris Club's deal as the product of an arrangement struck between the Iraqi finance ministry and Central Bank officials appointed by the US-backed interim government. At the urging of Pettifor and others who want Iraq to confront its creditors in open and fair arbitration, the country considered reopening the Paris Club deal, but in the end agreed to IMF terms. Still, Issa remains critical. "Far more needs to be done than the Americans did regarding the Paris Club claims," he says.
While the Paris Club deal has been widely debated in Iraq, the reaction around the world has been equally strong. In Africa, nearly half of all international aid goes toward the repayment of debts – many of which were incurred under undemocratic, repressive regimes. In Nigeria, which was ruled until recently by a military dictatorship, the financial picture is especially stark. Abraham Nwankwo, director of the country's Debt Management Office, says it has paid $42 billion to the Paris Club over the past thirty-eight years, to service a debt of $13.5 billion. As a result of compound interest, the country still owes $25 billion, a situation Nwankwo calls an "endless cycle of debt burden." In March, the Nigerian House of Representatives called for debt relief of its own, specifically citing the Iraqi precedent. Sachs thinks they have a point. "James Baker got a deal for Iraq in thirty days," he says. "Yet Nigeria, which is a struggling democracy much poorer than Iraq, with only a fifth of Iraq's oil reserves, is told, ‘Sorry, you're an oil country; you'll have to wait.' The lack of consistency is striking."
The Iraqi case is also generating waves beyond Africa. Last March, Argentina, effectively bankrupt and still wrestling with the bill left by its former military regime, renegotiated its $103-billion debt, forcing international bondholders to accept about thirty cents on the dollar. Even though Argentina has a history of fiscal mismanagement, politicians there suggested that the Iraqi debt rollback meant their debts should be reduced even further. Mario Cafiero, a member of the Argentine parliament, argued that most of that debt was "contracted by a despotic regime, not to satisfy the needs of the nation, but to strengthen itself and repress people who fight against it."
In each of these countries, debts amassed by dictators – whose human rights abuses could hardly have been a secret to Western lenders – are widely seen as illegitimate. According to Adams, politicians and debt managers in many more countries have been emboldened by the case of Iraq. She thinks the Philippines, where politicians have called for debt repudiation of their own, will be next. Filipino Senator Manuel Villar recently suggested that the Argentinian example could apply to his own country, which incurred much of its debt under the dictatorship of Ferdinand Marcos. Villar said that Argentina was able to reduce its debt to 28 percent of $103 billion; a similar dip would no doubt ease the pressure on the Philippines' own $55-billion burden. "Iraq was a watershed," Adams says. "People in many countries are starting to see that the threat of forcing legal arbitration on Western creditors can shame them into dropping these odious debts. It's a very important moment."
Still, it may be some time before the developing world's debt wall comes down. After last December's tsunami devastated a number of deeply indebted South Asian nations, Western leaders offered a one-way freeze on Paris Club debt payments totalling $5 billion. But the gesture was not as generous as it may seem: additional interest will still be charged for the delay period. That doesn't surprise Pettifor. "The United States and the rest of the wealthy nations invoked a moral case for debt reduction in Iraq," she says. "But the rest of the countries with odious debts are expected to keep paying. It's a blatant double standard."
Paul Webster is an award-winning writer living in Toronto. His last article for The Walrus was "Everyday Poisons," in the December/January 2005 issue.
African debt relief package not good enough
Twenty years from now, there will be a whole new generation of debt if the root causes aren't somehow fixed. Applying the Doctrine of Odious Debts will ensure that Third World citizens don't pay for debts that weren't incurred for their benefit.
by Andrea Davis, Guelph Mercury.com, July 27, 2005
African debt relief will be high on the agenda when leaders of the G-8 countries meet next week in Gleneagles, Scotland. Two weeks ago, G-8 finance ministers met and agreed to write off the debts of 18 of the world's poorest countries. Fourteen of those countries are in sub-Saharan Africa.
While relieving the world's poorest countries of their crippling debt is a laudable goal, the G-8 debt plan is more about bailing out the World Bank – to which Canadian taxpayers contribute more than one-third of a billion dollars annually – and other public lending institutions, than it is about bailing out African countries in need.
World views on debt relief have evolved dramatically since the invasion of Iraq in 2003. Saddam Hussein was such a wretched leader that the United States felt justified in using its military might to get rid of him. It would be inconsistent for western creditors to now claim that Saddam's debts were legitimate when his regime clearly was not.
An Iraqi citizens' group, Jubilee Iraq, is working to ensure that the Iraqi people are not unjustly forced to repay the loans of a corrupt, illegitimate regime. Using an international legal doctrine known as the Doctrine of Odious Debts, the group is calling for immediate and unconditional cancellation of all odious debt.
The Doctrine of Odious Debts was created in the 1920s by Alexander Sack, a former minister in Tsarist Russia and, after the Russian Revolution, a professor of law in Paris. He wrote:
"If a despotic power incurs a debt not for the needs or in the interest of the state, but to strengthen its despotic regime, to repress the population that fights against it, etc., this debt is odious for the population of all the state. This debt is not an obligation for the nation; it is a regime's debt, a personal debt of the power that has incurred it, consequently it falls with the fall of this power."
Surely Iraqi debt, as well as that of many African countries, is odious.
Under the Doctrine of Odious Debts, three conditions must be met before a state can repudiate a debt: the debt must have been incurred without the consent of the people of the state; the debt cannot have benefited the public in that state; and, the lender must have been aware of these two conditions.
Sack proposed that a new government be required to prove that the debts it inherited from a previous regime did not serve the public interest and that the creditors were aware of this. Once that was proven, the onus would then fall on the creditors to show that the funds were used for the benefit of the territory. If the creditors could not do so, before an international tribunal, the debt would be unenforceable.
One of the earliest applications of these legal principles followed the Spanish-American War of 1898 when the U.S. argued, successfully, that it could repudiate Cuba's debts because the Spanish loans had not been contracted for the benefit of Cuba and that the burdens connected to those loans had been imposed upon Cuba without its consent.
There is a growing worldwide movement towards applying the legal principles in the Doctrine of Odious Debts.
Legislators in countries such as the Philippines, Nigeria and Argentina are demanding an accounting of how these loans were spent.
Rich western creditors, meanwhile, are growing increasingly nervous about what such investigations may reveal. If they forgive the debt, there's no accountability and no scrutiny of how the money was spent.
"It's a face-saving measure because they can say 'aren't we good guys, we forgive the debt, we care about the poor' and they can write off the debts and never have an investigation and sweep their mistakes under the carpet," says Patricia Adams, executive director of Probe International, a non-governmental organization in Toronto, and author of Odious Debts: Loose Lending, Corruption, and the Third World's Environmental Legacy.
The G-8 debt relief plan for Africa is disingenuous and patronizing at best. Africans – and Canadian taxpayers – deserve an accounting of where these funds came from and how they were spent.
Twenty years from now, there will be a whole new generation of debt if the root causes aren't somehow fixed. Applying the Doctrine of Odious Debts will ensure that Third World citizens don't pay for debts that weren't incurred for their benefit. Moreover, it will hold western creditors accountable for how they lend taxpayers money.
Andrea Davis is a freelance writer living in Guelph and a former employee of Probe International. She is a member of the Mercury's Community Editorial Board.
Odious debts and criminal debts
by The Law Report, The Australian Broadcasting Corporation (ABC), July 5, 2005. Reproduced by Odious Debts Online, July 14, 2005.
In the leadup to the Live 8 rock concerts around the world calling on western governments to forgive loans to developing countries, The Law Report, an Australian-based radio program on lawmakers and lawbreakers, asked: "What if the catch cry wasn't 'forgive poor debtors,' but instead, 'punish bad lenders'? And what if those lenders were held legally accountable for recklessly loaning money to crooked governments and tyrants – and then expecting ordinary citizens to pay the money back?" According to Patricia Adams, the executive director of the Canadian-based foreign-aid watchdog Probe International, the latest G-8 debt write-off was "more about rescuing the lending institutions than it was about rescuing the poor countries."
The full transcript of this program appears below:
Damien Carrick: Today, forgiving debt in the developing world. Is Western generosity contributing to poverty?
Leaders of the world's richest countries are currently jetting towards Scotland for the G8 meeting. Meanwhile in Libya, leaders of the African Union are discussing the pros and cons of having conditions attached to aid. Already the US has agreed to provide more than $40 billion in debt relief to 18 of the world's poorest countries.
But the whole concept of debt forgiveness does assume the debts are, in fact, legitimate. There is a view gaining momentum that a lot of third world debt is in fact illegal.
Anita Barraud reports on a growing movement to cancel debt using legal avenues.
[Excerpts from Live 8 concert]
Anita Barraud: Many would be thankful there were few sights of tight leather pants, mullets or puffed sleeves at this 21st century version of Bob Geldof's rock benefit. But it had all the rest: a lot of noise and the satisfied glow of musicians doing it for the poor in Africa.
But what if the world was really rocked on its axis and the song was not poor debtor, but bad lender? The G8 group of countries are the main stakeholders in the World Bank and International Monetary Fund (or IMF), the institutions responsible for lending to developing countries. The banks are now coming under increasing criticism, even from within their own ranks, about some irresponsible lendings. A group called Probe International, based in Canada, is investigating ways to invoke the Odious Debt Doctrine, a set of legal principles which argues that borrowings to corrupt regimes which are not used for the public benefit are illegal.
Heading the campaign is Probe International director, Patricia Adams.
Patricia Adams: I think the latest debt write-off was more about rescuing the lending institutions than it was about rescuing the poor countries. I think that the creditors are more and more nervous that the nature of the loans that they made over the last 50 years is going to come under more and more scrutiny and that, in fact, the debtors are going to start repudiating those debts. I think a lot of these loans that were made were not properly scrutinised, there wasn't proper public oversight, a lot of the money ended up in private Swiss bank accounts, went to projects that were never viable from the beginning and could never generate the wealth needed to repay the loans, and were given mostly for geopolitical reasons and also for patronage reasons, so that these institutions could award contracts to favourite firms in the northern countries.
Anita Barraud: Already, the Odious Debts Doctrine may have an unwitting promoter. Here's Paul Wolfowitz in April 2003, when he was the US Deputy Secretary of Defence. The US had just stormed into Iraq and overthrown dictator Saddam Hussein.
Paul Wolfowitz: I hope for example they'll think about the very large debts that come from money that was lent to the dictator to buy weapons and to build palaces and build instruments of repression. I think they ought to consider whether it might not be appropriate to forgive some or all of that debt so the new Iraqi government isn't burdened with it.
Anita Barraud: Paul Wolfowitz is now the head of the World Bank. His comment has given momentum to the Odious Debt Campaign, which aims to declare null and void up to US$300 billion owed by the poorest countries.
Patricia Adams: There's no doubt about it. The Odious Debt Principle has gained extraordinary momentum since Iraq. I think it's widely accepted in Iraq. The Iraqi National Assembly just prior to the recent election there rejected the offer from the Paris Club (the Paris Club is a very informal grouping of the rich country creditor nations); they offered 80% debt forgiveness to Iraq – that's unprecedented – and the Iraqi National Assembly rejected it. And they said, 'We don't accept responsibility for even 20% of the debts that Saddam Hussein accumulated.' So I think that Iraq has led the way and other countries are watching very closely and especially African countries, in saying, 'Well wait a minute, you know, we had dictators too, and lenders lent money to our dictators, why should we be held responsible for them?'
Anita Barraud: So what are the precedents for using the Odious Debts Principles?
Patricia Adams: Perhaps the most famous one was at the time of the Spanish American War when the Americans won, they defeated the Spanish, this is 1898, and during the peace negotiations, the Spanish said, 'Well you'll have to assume responsibility for the debts of Cuba. They said that to the Americans, the Americans said, 'No, we're not going to assume responsibility for those, because you borrowed the money in order to oppress the Cuban people, and to stop their legitimate attempts at self-government and self-determination.' And the Americans said, 'Well we're not going to accept responsibility, and as far as we're concerned, the creditors took the risk of their investment.'
And then another one occurred about 20 years later in Costa Rica, where a new government took over and they believed that money that had been lent to a previous dictator – by a Canadian commercial bank in fact – that they should not have to accept responsibility for repaying it, because the money was used by the outgoing dictator for his retirement in a foreign nation. And they asked the Supreme Court Justice from US, Taft, to sit as arbitrator; he did, and his ruling was that, indeed, the dictator had not established his legitimate use of that money, therefore the bank's claim against the new government in Costa Rica must fail. So that's another very important case.
There are probably about a dozen such cases, leading up until about the 1920s or 30s, and then there haven't been as many cases since then that I know of. And I think one of the reasons for that is because the international financial institutions wouldn't allow it to happen. And if there was ever a situation where a government didn't want to repay a debt that they had inherited because they didn't believe it was legitimate, then the international institutions, being the IMF and the World Bank would threaten them, and say 'Well if you do that, then we're going to banish you from the world of international finance and you won't be able to get any credit.'
Anita Barraud: Patricia Adams, from Probe International, based in Canada.
It could be argued that corruption contributes to poverty, but shouldn't stop funds from flowing, even if a portion is siphoned off to support the lifestyle or armoury of a dictator or corrupt regime. There have been some moves to make lending and borrowing more accountable. In more recent years, the UN finance bodies have installed the heavily-indebted poor countries, or HIPC initiative. The scheme ties debt relief to anti-corruption and poverty reduction drives. Almost 30 countries in Africa and Latin America are under the scheme.
Vikram Nehru oversees the HIPC initiative. He's director of the Economic Policy and Debt Relief Program at the World Bank.
Vikram Nehru: Under the HIPC initiative, there has now been a reduction for these 27 countries that are receiving debt relief of the order of $54 billion in lower debt service payments over time. That's a very substantial reduction; in fact, taken together with other various debt reduction programs, their debts have been reduced by about two-thirds.
The other objective is to try and make sure that the resources that are saved from lower debt service payments are in fact used for poverty-reducing expenditures. When we do try and monitor these expenditures, this is much more difficult, but we do try and do it. And now I think there is sufficient evidence, not just put together by us, but also by NGOs and others, to show that poverty-reducing expenditures have increased quite substantially in these countries.
A third side benefit is that countries that have reached the completion point in HIPC are indeed countries that have far better policy performance than other countries. They have reached a certain standard of policy performance which does set them apart from the other HIPCs.
Anita Barraud: Such as independent judiciaries, education programs and the like?
Vikram Nehru: That's been a welcome benefit. But obviously that is what the World Bank works towards. I think we've learned that the sustainable growth in poor countries and a sustainable reduction in poverty rates comes about first of all through the good policies of the countries concerned, which includes the development of institutions and levels of governance that when they improve over time, do show records of improvement of performance in these countries. And finally I think we've also learned that these countries should have access to open markets around the world so that the produce, the exports that they produce can find buyers and that they can use those resources then for development purposes.
Anita Barraud: Vikram Nehru, from the World Bank, who was reluctant to discuss Odious Debts or the details of the recent debt relief package announced in the lead up to tomorrow's G8 meeting.
Patricia Adams welcomes the increased scrutiny, but points out that it's not just the borrower that needs more accountability; some lending institutions, western governments and companies also need to clean up their act.
Patricia Adams: For example, in Lesotho in southern Africa, the government decided to try to put a stop to international corruption on international projects and they charged one of their local officials who had been taking bribes with having taking bribes from international engineering firms and he's now in jail. And then they said, 'Well it takes two to tango, and we're going to start charging the companies that pay the bribes,' and the first company was a Canadian company. And that company was convicted, it appealed, it lost its appeal and it was fined, and now it has lost its right to compete for World Bank contracts. The problem is that that company never accepted its guilt, it never accepted its responsibility and it continued to get support from the Canadian government who argued the same thing. What's most shocking in this particular case is that the agent who moved the money from the Canadian company to the corrupt official in Lesotho was in fact a Canadian government official. And the Canadian government, for example, has not punished that company by saying, 'We're not going to give you public contracts because you were convicted of bribing a foreign official.' They have essentially said, 'Well, we think they've learned their lesson, they're fine.' But I think as long as our governments in the north do not follow through on our rhetoric and say, 'If you bribe a foreign official, there will be serious consequences; jail terms, profound loss of business,' to make the consequences so severe that bribery will not originate from the northern companies, which it often does.
Anita Barraud: OK, so let's get to the practical issues. How could an Odious Debts Principles case be mounted? Who would mount it? There's been discussion about an Odious Debts Tribunal: how would this work?
Patricia Adams: In the case of Iraq there have been a number of lawyers, arbitrators, civil society organisations that have got together to hammer out the details for how one could proceed in Iraq, and it would be done under UN arbitral rules that are well established. There are many precedents for them, and the way it works is that the various parties – this would be the creditors and the borrowers, the Iraqi government and anybody who has a claim against the Iraqi government ... and remember, most of the claims against the Iraqi government come from other governments, ninety per cent of them are from public institutions, so northern governments. Then both sides would appoint an equal number of jurists who would sit on a nine-member panel ... I think actually they each appoint three and then those six then appoint three more. So it's all under very well-established UN rules that are well laid out for the arbitration of disputes like this.
Anita Barraud: So essentially you could envisage a civil court case being held within the sort of UN auspices against its own bodies?
Patricia Adams: Well that's an interesting twist, that's quite right.
Anita Barraud: Patricia Adams, Director of Probe International, based in Canada.
There are some who believe a civil case, using the Odious Debts Principles, doesn't go far enough – lending institutions should be made criminally liable. Professor Jeffrey Winters, from Northwestern University in Chicago, has conducted a 20 year study on the workings of the World Bank, especially in South-East Asia. He says the World Bank is aware that more than $10 billion, lent during the Soeharto regime in Indonesia lined the personal pockets of Soeharto and his cronies.
Jeffrey Winters believes there's enough evidence for Indonesia to mount a criminal debt case against the World Bank.
Jeffrey Winters: Well criminal debts are the portion of the money that countries borrow that is stolen by the country's leadership. After all, built into the institutions like the World Bank, the Asian Development Bank, the various other regional banks ... There are requirements that are built into what are called the Articles of Agreement; this is basically the constitutions of these bodies, and these are international bodies. And, for example, in the case of the World Bank, Article 3 states very specifically that 'the bank shall make arrangements to ensure that the money that it lends will be used for its intended purpose.' This is a legal mandate. It is binding on the institution to do this. If on the other hand, year after year that money is being stolen and it continues to lend, and it takes no action against those parties which are stealing – and by the way these parties that are working hand-in-glove with the World Bank itself, they have dinners together, they meet socially and so on – if no action is taken against those people who are stealing, then I believe the bank is liable.
Anita Barraud: And in fact you say that, in a sense, the World Bank and other such institutions are complicit in the corruption under the repressive regimes by lending money to these people and countries.
Jeffrey Winters: They are at least passively responsible. But over the decades, what happened was this: institutions like the World Bank and other what are called multilateral development agencies, were set up with a developmental purpose, but they also had a political purpose. And during the Cold War in particular, and now during the War on Terrorism, these resources that are pulled together multilaterally get deployed in a political way. So, for example, when the United States and Europe and Australia and other Western countries wanted to make sure that certain governments were going to be friendly to the west and were going to kill communists and so on, what they did is, they would plug an intravenous line through something like the World Bank into the regime to prop it up. Now a lot of that money which was going into the regime, was just called development money, had this political purpose of stabilising a friendly regime which happened also to be a dictatorship, and as the money was stolen, institutions like the World Bank had what I call a global 'don't ask, don't tell' policy; that is, they didn't really look, they didn't really want to know. Now that's fine. One can run one's foreign policy that way, I suppose, but the problem ends up being debt accumulated in this criminal form; that is, there are by now massive sums of money that went to regimes like Soeharto and others across the developing world, the Marcos regime and so on, and this money went into chalets and Swiss bank accounts and so on. The debt for all of that now sits on populations that themselves had no leverage. They were oppressed populations. The leverage was in the hands of the western governments, and in the hands of the World Bank.
Anita Barraud: Jeffrey Winters.
Vikram Nehru was working for the World Bank in Indonesia during the latter part of the Soeharto years. He's now the head of the Debt Relief Program of the World Bank. He acknowledges money did go astray, but the corruption was outweighed by the borrowing program's extraordinary success.
Vikram Nehru: Where the World Bank has given evidence that money has been misused, it has taken immediate action. In fact all this information is on our website. For example, where there has been misuse of resources by contractors for example, those contractors have been blacklisted and indeed some contractors have been blacklisted from all World Bank projects wherever they are financed. In addition, where we found such misuse of resources, we have immediately given the names of the individuals concerned to the authorities in the country for appropriate legal action and where we found the resources had been misused, we have demanded that those resources be immediately refunded to the Bank, because clearly that is not something that the Bank would condone.
Anita Barraud: But it's happened consistently and over many years where money has been linked to people like Soeharto, or Marcos in the Philippines in the past, and there's money missing from there which the people of the Philippines and the people of Indonesia are still paying off; money which they've never seen and has never been used for their own benefit.
Vikram Nehru: No, in the case of Indonesia, from 1968 onwards, has seen a most remarkable economic performance. Between 1968 and 1998 there was a reduction in the poverty rate from over 60% to below 12%. The economy grew at something like 7.8% a year on average for those 30 years. The Bank had announced a large program during that period, and I think the economic performance of Indonesia shows that this was very ... in fact has been one of the most remarkable records of poverty reduction in the world. It is true that towards the end of that period, there was increasing evidence of corruption in that country, and where there was evidence of corruption that was found in World Bank projects, the Bank took immediate action.
Anita Barraud: Vikram Nehru, from the World Bank.
Professor Winters disputes the idea that Indonesia's successful development was due to World Bank loans. He points out that the Asian region was at the time described as a 'Tiger economy'. A lot of Indonesia's success can be attributed to free markets. Part of the recent debt relief package included opening trade to Africa. Most of the leaders of the G8 are not enthusiastic about reducing trade barriers to Africa. As for the new tied aid or tied debt relief programs installed by the World Bank and IMF, despite the rhetoric, Professor Winters says there's little transparency, even today, at the grassroots level where it really counts.
Jeffrey Winters: What has not been done is real oversight and auditing mechanisms put in place at the grassroots level, where projects are actually done. Institutions like the World Bank still defer to local governments and in most instances, what the World Bank receives is a balanced Microsoft Excel spreadsheet where incoming money equals outgoing money and there is not a clear idea of what happens in the middle. And this would involve auditors. And I have proposed in front of the US Senate in testimony last year, I have proposed an international auditing agency be set up, and the sole purpose of that agency... and it should be separate from the World Bank and the multilateral development agencies, but all their lending should fall under the purview of this agency. The idea is that this would be a group of international auditors who have no relationship to the World Bank, also no relationship to the private sector corporations who do the projects, the multinational corporations, and then one's career path in the international auditing agency would be linked to how much you find. Right now, there's no incentive in the system anywhere for anyone to actually find stolen money. And I know people inside the Bank ... by the way, I've been very critical of the World Bank but I should say that one of the reasons I have been able to find out so much in my research about what goes on inside the Bank, is that people in the Bank want change and they have been fighting a losing battle for decades. And with their people called Task Managers, who have upset the World Bank by actually going to projects in Africa and in Asia and going to the ground level and saying for example, 'You told us that you bought 50 air conditions. May I see the air conditioners?' And suddenly there's pandemonium, because the air conditioners were not bought. Asking just simple questions; a road is put in, and then a Task Manager would go and drill a core and see was a standard amount of stand, rock, cement and other kinds of things used? And you can tell, just by drilling a core. And what tends to happen is maybe a $100 million highway is allocated, but a $50 million highway is actually put in. The other $50 million is stolen, then the highway which is supposed to have an endurance of maybe five to ten years, breaks down in two years, and then you have another World Bank follow-on project to repair the highway that was put in. And this is how it goes, year after year.
Anita Barraud: Professor Jeffrey Winters from Northwestern University in the US, who says unlike the Odious Debts Doctrine, there are no precedents for a criminal debt case. He believes Indonesia would find clear evidence to support a criminal debts action, as there's already a well-documented paper trail. However he acknowledges that most countries who could successfully argue such a case don't have the political will to bring an action, fearing sanctions.
Placing public institutions such as the World Bank in the dock, whether civil or criminal, requires expensive investigations, including forensic audits, as well as the political will. There's another more pragmatic approach. Professor Helen Hughes, Senior Fellow at the Centre for Independent Studies in Sydney, worked as an economist in the World Bank for 15 years, mainly in East Asia. She's well-known for her strong views on aid to failing Pacific states. Professor Hughes says public institutions should act in the same way as in the private sector. If money is lent and is not performing, it should be written off. She believes the campaigns for Odious and Criminal Debts are missing the point. Nor is she a fan of the World Bank's attempt at tied aid programs. As far as the debt forgiveness campaign, spearheaded by rock stars, she reckons it's actually contributing to poverty in Africa.
Helen Hughes: I tell you what I call it: 'rock economics'. The whole sort of performance of that rock concert, the last rock concert was in '85, and since then, Africa has got much worse. Conditions for ordinary Africans have got much worse. And I think that's because the economics espoused in '85 were wrong, and I think they're wrong again. It's no good just wishing poverty away and I don't think that the sort of policies that are being promulgated now are going to make any difference. On the contrary, I think that there's a danger there that African dictators will say, 'Well all our debt's been forgiven; that's fine, we can start borrowing again.' That's what they did in the '90s.
Anita Barraud: You're very critical of the HIPC scheme, the Heavily Indebted Poor Countries initiative, why so? I would have thought that aid and lendings tied to better governance and transparency would be a good thing.
Helen Hughes: It is such a scam. And it is being paid for – now there is where I become very critical – it is being paid for by the successful developing countries. A large part of the debt service that has been taken over from African countries under the HIPC scheme comes out of the profits of the World Bank and the International Monetary Fund on loans to countries like Bangladesh, India, China, Malaysia and so on, where people are paying back the loans.
Anita Barraud: So you're saying it's stealing from Peter to pay Paul?
Helen Hughes: Good performers to pay people like Mugabe and the people who reign Uganda, they haven't been able to do anything about the Lord's Army, which is stealing children and turning them into murderers. And a place like Ghana, which is one of their shining HIPC countries, Ghana has 88 Cabinet Ministers. They each have a car, a secretary, a free house, and so on.
Anita Barraud: What then is your opinion on the movement to invoke the Odious Debts set of principles, to recover or wipe out those debts?
Helen Hughes: I think those debts should be wiped out. It's the way you do it. I mean the World Bank consists of individuals, like me. Finding out who was responsible, you know, Bob Macnamara's now in his late 80s; are you going to put him in court? I think it's an absurd idea. But the core of the idea, that the institutions that lent that money in the past, and are continuing to lend it now, should be made responsible for the outcome of their loans.
Anita Barraud: Well I guess this was both Jeffrey Winters and Patricia Adams behind these principles is to reform these public international financial institutions.
Helen Hughes: Well I think economic principle is much simpler than the legal principle. That is, that you have to write off non-performing loans. It's very difficult, because there is a sort of aid industry conspiracy to cover up what your legal colleagues would call the criminality of the lending. It is very difficult to find consultants to examine say lending to Uganda who has not at some stage been involved with the World Bank, the International Monetary Fund, the other development banks or the NGOs. It's all one clique of people.
Anita Barraud: You talk about looking forward, wiping of debts and just moving forward. But how can the World Bank be taken seriously as a credible institution, alleviating poverty and so on, if it's not prepared to be made accountable or scrutinised for its past policies?
Helen Hughes: It can't. If foreign investment came from commercial banks, it would be much more carefully scrutinised. You will never get a public bank to scrutinise its lending. It'll become a bureaucracy of one sort or another, and it will never avoid odious or criminal lending. The sensible thing to do would be rather than cancelling the loans, abolish the banks.
Damien Carrick: And with that radical solution to debt relief from Professor Helen Hughes, we end Anita Barraud's story. That's The Law Report for this week. A big thank you to technical producer Brendan O'Neill.
Guests on this program:
Vikram Nehru,
Director, Economic Policy and Debt Relief Department, World Bank
Jeffrey Winters,
Professor Political Economy, Northwestern University, Chicago; Co-editor, Reinventing the World Bank, published by Cornell University Press
Professor Helen Hughes,
Senior Fellow, Centre for Independent Studies, Sydney, Emeritus Professor, ANU
Patricia Adams,
Executive Director, Probe International, Canada, Author, Loose Lending, Corruption, And the Third World's Environmental Legacy, published by Earthscan
Presenter: Damien Carrick
Producer: Anita Barraud
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Erasing the scar or the evidence?
Erasing debt erases culpability. It does not demonstrate respect for people's rights, the rule of law or due diligence, and it is certainly no arbiter of justice.
by Lisa Peryman, Odious Debts Online, June 17, 2005
Hailed as the biggest debt settlement the world has ever seen, the recent agreement by the Group of Eight (G-8) rich nations to write off the debts of 18 of the world's poorest countries has not managed to quell calls for debt repudiation in Africa.
In the wake of the G-8 announcement over the weekend, high-profile African debt campaigner Rev. David Ugolor urged African civil society organisations (CSOs) to prepare themselves to reject Africa's multilateral debts if the G-8 fails to agree on a 100 per cent debt cancellation for the continent without conditions, at its July summit.
Speaking to the Lagos independent newspaper, This Day, after a two-day conference at Abuja on conflict, security and development, Rev. Ugolor said that while he welcomed the recent G-8 decision to cancel $40 billion in payments on loans owed by 18 of the world's poorest nations (14 of which are African), he warned the "continent would not be able to undergo the painful reforms" that are likely to accompany the move.
If the G-8 does not agree to an unconditional and total debt cancellation for Africa in July, Rev. Ugolor said CSOs will rally "our people and government to repudiate" Africa's "odious debt."
For years, analysts and activists have argued that a substantial fraction of foreign loans to Africa intended for domestic investment or consumption have been diverted by corrupt African political elites. They urge African countries to invoke the international legal Doctrine of Odious Debts to repudiate liability for illegitimate public debts incurred by past regimes.
Some debt campaigners claim gestures by rich nation creditors to forgive the debts of heavily indebted developing countries also affords creditors the opportunity to cleanse their books of embarrassing loans to corrupt, oppressive regimes they had every reason to believe would not use the borrowed funds for their intended purpose.
Responding to the "historic" agreement announced last weekend by finance ministers from the G-8 industrialized nations, the Canadian-based, foreign-aid watchdog Probe International declared lenders were now on the run.
After years of "pushing the Third World around" western creditors have begun to fear exposure for negligent and irresponsible lending to corrupt governments they should never have lent money to, said Patricia Adams, the executive director of Probe International, in a televised interview to discuss the G-8 agreement.
Applauded for having seen the light on debt relief, creditors have done nothing more honorable than to cover their own tracks, she said.
According to a recent Wall Street Journal commentary, a proposal by G-8 ministers to partially compensate international financial institutions (IFIs), such as the World Bank and International Monetary Fund (IMF), will spare them the embarrassment of having beautified their balance sheets in the past when they extended additional loans to heavily indebted poor countries (HIPCs) to cover interest that put the HIPCs further and further into debt.
"Presumably, the compensation is new money that will enable the IFIs to go out and make more bad loans. HIPCs are poor, on the whole, not because the world has neglected them, but because they often are run by corrupt governments, afflicted with disease, beset by insurgencies and can't attract private investment," wrote Journal correspondent, George Melloan.
The G-8 agreement erases the debts of 18 nations that have reached the "completion point" under the HIPC initiative, launched by the World Bank and IMF in 1996, and the deal is expected to extend to another 20 nations who do not yet meet these criteria. According to the G-8 finance ministers' statement, to qualify for debt relief, developing countries must "tackle corruption, boost private-sector development" and eliminate "impediments to private investment, both domestic and foreign."
Such conditionalities exclude countries that are not considered sufficiently committed to democracy and accountable government. One such country is Nigeria, Africa's most populous nation with 140 million inhabitants, it is also ranked as the world's third most corrupt country by graft watchdog Transparency International. Although, some 60% of Nigerians live in poverty and the country's economic strife has long been linked to corruption and decades of successive military dictatorships, as the world's eighth-biggest oil exporter, Nigeria does not qualify for a debt write-off under the HIPC initiative.
Describing the G-8's reprieve as selective, Rev. Ugolor suggested it would create division between African countries and that those nations that did not benefit from the G-8 decision would begin to see themselves in different camps, globally. For instance, he said Nigeria deserved debt cancellation but its exclusion from the list was "not a good signal for Africa."
Debt repudiation remains a hot topic in Nigeria; a flame fanned by a non-binding resolution passed by Nigeria's House of Representatives in March to halt payments on the country's $35 billion external debt, the highest of any country in Africa. The resolution stated Nigeria's economy had been "devastated by a series of military regimes from 1984 to 1999, who stole billions of dollars from state coffers" and compared Nigeria's situation to that of "countries emerging from war." However, the Nigerian Senate later voted to honour debt servicing for this year.
Advocates of debt repudiation such as Remi Ogunmefun, a Lagos-based business and financial lawyer, however, continue to rally the public to their cause.
Making a case for a Nigerian odious debts' challenge in This Day, Mr. Ogunmefun asks why should Nigerians be held responsible for debts that "are odious and not truly incurred for the benefit of the Nigerian people?"
"Why are we afraid to repudiate these debts using the applicable international law?" he wrote, referring to the Doctrine of Odious Debts. "A government that rose to power through seizure of the state, using the force of arms and repression of the citizenry, cannot legitimate debt on behalf of its people."
Rather than rely on moral suasion, he said Nigerians should fight the debt crisis based on an odious debts legal argument.
Addressing concerns that a challenge might provoke creditors to seize Nigeria's foreign assets and block its access to international credits, aid and foreign investment, Ogunmefun said creditors would be forced to respect a legal challenge to the enforceability of the debt contracts because it was in their interests to defend international law and order.
"To do otherwise," he said, would "open the door to abuse and disorder in international transactions, which may ultimately hurt their interests worldwide."
Writing off debts, ostensibly to free up money so governments can target more funds to economic development, health, education and social programs, assumes the money will go where it is targeted. Yet, African observers worry the conditions that created the debt crisis are still in place.
Western governments that think the "bad old days" of corrupt African leaders are over are misguided according to Michela Wrong, a former foreign correspondent who witnessed the end of the notorious Mobutu Sese Seko regime in Zaire.
"Whenever I hear talk of a 'new generation of political leaders' in Africa, I have to suppress a laugh," said Wrong, writing for the UK's Observer newspaper. "That's not the Africa I see on my travels, and if plans for an African recovery are built on such naiveté and wishful-thinking, they are doomed to go the same way as every other grandiose project drawn up for the continent," she writes.
Wrong said Africa was "stuck in an uneasy interim" with an old-guard leadership holding on by its fingertips, while too many of the new breed merely mouthed the "new credos" of accountability but continued to "gleefully" exploit the self-enrichment systems set up by their predecessors.
Wrong is one of several analysts to link corrupt spending patterns in Africa to the continent's post-colonial years and the formation of elites who "looked to an expanding state sector, rather than the market, as a source of enrichment." She, along with other commentators, are pinning their hopes on the "emergence of a new breed of young, educated, technologically aware Africans who, less burdened by rigid demands of tribal loyalty and free of the inferiority complexes of the colonial era, will stride confidently towards the future."
Meanwhile, western creditors are doing their best to divert attention away from their complicity in Third World poverty and corruption by appearing to generously forgive debts that ought not to be forgiven but investigated. Instead of "forgiveness," the people of Africa should be free to review and challenge debts accumulated under despots and international law supports their right to do so. An outright debt cancellation deprives the people of the opportunity for a public reckoning while protecting the wrongdoers from being held to account.
Rather than repudiate odious debt if G-8 leaders fail to offer unconditional and total debt cancellation in July, why not repudiate odious debt, regardless?
In an analysis of Africa's debt published in 2002, authors James K. Boyce and Léonce Ndikuman argued that "well-functioning credit markets require that creditors bear the consequences of imprudent lending":
"The notion that creditors should always be repaid, regardless of how and to whom they lend, is indefensible. The logic of sound banking suggests that current and future African governments should accept liability for only those portions of public debts incurred by past regimes that were used to finance bona fide domestic investment or public consumption. By invoking the doctrine of odious debt, they could selectively repudiate liability for those portions of the debt for which no such uses can be demonstrated."
Erasing debt erases culpability. It does not demonstrate respect for people's rights, the rule of law or due diligence, and it is certainly no arbiter of justice. Unless the Doctrine of Odious Debts is enforced, the debt crisis will not end and poverty will not become a blight of the past; there will be other G-8 summits to discuss debt cancellation and more Live Aid concerts, or Live 8's, to raise aid money for Africa. But the looters and loose lenders will be off the hook, their debts cancelled or erased, forgotten and forgiven, history will set them free.
Export Development Canada keeps taxpayers in the dark, says Rosen and Associates Limited
Probe International asks Auditor General Sheila Fraser to investigate
Probe International Press Release
A report by one of Canada's leading forensic accounting firms, Toronto-based Rosen and Associates, criticizes the 2003 annual report of Export Development Canada for not differentiating between commercial and politically-mandated activities. EDC is a crown corporation that in 2003 backstopped $51.9 billion in exports and international investments by Canadian enterprises. The Rosen and Associates study focused on the financial reporting relating to EDC's loan portfolio.
"A fine line exists between promoting economic trade and exercising political action," the accountants say. "Our concern is that a distinction between politically- and economically-motivated sovereign financing is not disclosed in EDC's financial statements," making it difficult for Canadian taxpayers "to determine whether a 'bad' foreign loan was primarily made at the direction of the federal government, or was a business decision of the EDC."
Probe International, the watchdog group that commissioned the study, has also submitted the accountants' report to Auditor General, Sheila Fraser. In a letter to Canada's chief public accounts auditor, Probe International says the Rosen and Associates analysis points to the financial risk of EDC's activities for Canadian taxpayers. In addition, Probe International believes the report would raise concerns for Third World citizens who are expected to repay loans extended for political reasons.
Rosen and Associates also found that:
These figures suggest that EDC may be pricing its loans too low, granting subsidies to exporters, forgoing an adequate margin on lending to cover risk, or taking market share away from private commercial enterprises, say the accountants. EDC may not be maximizing profits for the benefit of Canadian taxpayers, they say.
Other things about EDC's financial statements worry Rosen and Associates:
Being a Crown agency, EDC's liabilities are fully guaranteed by the Government of Canada, and, indirectly, by the Canadian taxpayers. Yet, the implied financial risk of EDC's activities has not been adequately disclosed to taxpayers. "Taxpayers cannot easily assess the risk of loan default by EDC's high-risk borrowers," they warn.
"A few taxpayers could be advantaged while all taxpayers are paying for risks such as bad debts."
Rosen and Associates invited EDC to respond to their concerns about EDC's financial reporting and accounting policies. EDC declined, telling the accountants instead to refer "to the significant amount of financial and other information available on our web site." However, "in our view, complete and clear answers are not found on EDC's website," the accountants said.
Probe International's letter to Sheila Fraser can be viewed at:
www.probeinternational.org/probeint/LettertoSheilaFraser.pdf
The "Financial Analysis of EDC" by Rosen & Associates Limited can be viewed at:
www.probeinternational.org/probeint/RosenFinancialAnalysis.pdf
For more information, CONTACT:
Patricia Adams, Executive Director
Probe International
225 Brunswick Avenue
Toronto, Ontario
Canada, M5S 2M6
Telephone: (416) 964-9223, ext. 227
Fax: (416) 964-8239
Appearance by Patricia Adams on CBC-TV tonight
Patricia Adams, the executive director of Probe International, will join the CBC news and current affairs television program, "The Hour," tonight, June 13, to discuss the pivotal Group of Eight plan to write off the debts of 18 of the world's poorest but well-governed countries. The G8 agreement, announced over the weekend, covers $40 billion of debts of 18 heavily indebted poor countries (HIPC) with the World Bank, the International Monetary Fund and the African Development Bank, and will cost rich countries $1.2 billion a year for the next three years. "The Hour" begins broadcasting at 8 p.m. ET. For more information, please visit the CBC's Web site at: www.cbc.ca/thehour/.
Sweet victory ahead on debt relief?
In the lead-up to the decision by G8 leaders over the weekend to eliminate the massive debts of the world's 18 poorest countries, this article by the Christian Science Monitor surveys the logic behind debt relief .
by David R. Francis, Christian Science Monitor, June 2, 2005
The 10-year battle to wipe out the debt burden of the world's most impoverished nations is reaching a climax.
Hopes are running high that when leaders of the richest countries gather next month in Scotland, they will insist that two key players – The World Bank and the International Monetary Fund (IMF) – forgive billions of dollars of debt.
The logic behind debt relief is twofold: 1) Countries no longer indebted would have more money for education, health programs, sanitation, and services for the poor. 2) Many of these loans are so-called "odious" debts, made by onetime dictators instead of elected representatives. Since the United States has already persuaded other countries to forgive loans made to Iraq under Saddam Hussein, the logic goes, then debts made under other former dictatorships, from Nigeria to the Philippines, deserve similar treatment.
The US stance on Iraqi loans, plus repeated high-profile protests at international meetings of wealthy nations, have moved debt relief from the bottom of the international agenda to near the top.
In addition, thousands of people are expected to protest in Scotland July 2 to help keep President Bush, British Prime Minister Tony Blair, and the other leaders of the G-8 (the G-7 industrial nations plus Russia) on track to forgive billions of dollars of debt, primarily for poor sub-Saharan nations, when they meet four days later in Gleneagles, Scotland.
"Expectations have been raised very high," says Mark Engler, an analyst with Foreign Policy in Focus, a New York think tank.
The momentum has been building slowly. In 1999, President Clinton cancelled 100 percent of the bilateral debts owed the US by 22 nations classified as "Highly Indebted Poor Countries" (HIPC). Britain, Germany, France, and Japan soon followed suit. US bilateral relief was estimated at $330 million.
After the recent tsunami disaster in Asia, the wealthy countries in early February issued a statement agreeing in principle to "as much as 100 percent multilateral debt relief" for 38 HIPC nations.
That was a milestone, though not all will likely get debt relief at the G-8 meeting. These nations owe the World Bank and other regional development banks about two-thirds of their debts – estimated in the hundreds of billions, not the millions forgiven by the US and other individual countries. The large amounts make full forgiveness more difficult.
Back in April, the G-7 finance ministers meeting in Washington appeared to back off from relief of debts owed the IMF. US Treasury Secretary John Snow said, "We are not persuaded by arguments for IMF debt relief."
By forgiving all loans to poor nations, development banks would have less revenue to issue future loans, points out Raghuram Rajan, the IMF's chief economist. In an article last week, he argued that it would be better to deal with the problem of the debt burden on a country-by-country basis.
But according to the Jubilee USA Network, a coalition group working toward total debt cancellation for all impoverished nations, the IMF could afford debt cancellation by selling a portion of its huge gold holdings. That gold is valued on its books at about $40 an ounce, while the market value is about $418 an ounce. American gold producers objected, however. They feared IMF gold sales would clobber gold's price.
Chunks of the IMF's gold could be sold without hurting the supply-demand balance in the market if major central banks reduced their already anticipated annual gold sales by a little each year, says Neil Watkins, national coordinator of Jubilee USA, in Washington, D.C.
By American law, the Bush administration would have to receive approval from Congress for any IMF gold sales, but it apparently doesn't want to raise that issue with legislators. The mining industry has been lobbying Congress against allowing gold sales.
What the administration has done – perhaps unwittingly – to further Jubilee's cause is to bolster the case against odious debts. The US convinced 19 nations last year to cancel 80 percent of the $42 billion Iraq owed them on the grounds that Saddam Hussein used the money primarily to build castles and buy arms.
"That changed public understanding of odious debts profoundly," says Patricia Adams, executive director of Probe International, a nongovernmental group.
In Iraq, the National Assembly within a few days rejected even that unusually generous, US-negotiated debt deal as inadequate, basically on grounds of an odious-debt legal theory dating back to 1927.
Nigerian senators have been raising the same thesis in talking about debts from their former military governments. Citizens' groups and legislators in the Philippines challenge the validity of debts incurred by former dictator Ferdinand Marcos. Debts racked up by an earlier military junta are now under scrutiny in Argentina. In South Africa, apartheid-era debts are being questioned.
The odious-debt thesis makes the IMF nervous because so many of its loans were made to nondemocratic regimes, says Ms. Adams. The IMF has to make such loans when approved by its executive directors. Ironically, the democratic rich nations – soon to meet in Scotland – hold most of the power in the IMF.
Forget forgiveness: make the looters pay
by Lisa Peryman, Odious Debts Online (a project of Probe International), May 24, 2005
Tony Blair's historic win of a third term as prime minister earlier this month was tentatively welcomed as good news by African commentators who would like to see the newly re-elected head of Britain put his money where his mouth was before the election.
Having made Africa's problems the ennobling mission of his second-term as prime minister, Mr. Blair now has the chance to force the issue. As Britain is in the driving seat this year as both leader of the Group of Eight (G8) rich nations and the European Union, Mr. Blair's efforts to make Africa a main focus of discussion and the ambitious recommendations of his Commission for Africa report have raised hopes he can now press ahead and rally the developed world to make good on promises to help Africa turn the tide on decline, disease and destitution, once and for all.
Given that previous international efforts to "Save Africa" have failed to accomplish their goals and acknowledge Western complicity in African corruption – corruption being the greatest obstacle to stable improvement in the region – Mr. Blair's Africa Commission report was refreshing in that it saw graft as a two-way street. Mr. Blair's commitment to ushering in a new era of partnership between Africa and the West also suggested a marked change in tone from the patronizing attitude wealthy nations have taken toward Africa in the past.
In light of this history, news of Blair's return to office received approval from African observers, although enthusiasm appeared somewhat limited.
Chege Mbitiru of the Nairobi daily, The Nation, weighed in on the third-term victory as a "minuscule good for Africa" that "may not amount to much," but did credit Mr. Blair with being the "first Western leader in decades to make Africa a personal agenda."
"Mr Blair's commission has been rubbished as just another 'Save Africa' jig," writes Mbitiru, and "good reasons exist. In 22 years, there have been at least ten such jigs. Yet, other than a small elite that rubs shoulders with the likes of Blair, natives are worse off than 40 years ago."
The real significance of Mr. Blair's efforts, Mbitiru declared, "is that a looter is telling fellow looters: At least let's get civilised; otherwise there'll be nothing left ..."
The results of Mr. Blair's Commission for Africa report, released in March, have since provided a framework for the prime minister's campaign to focus global attention on African issues.
The highly anticipated report proposed 100% cancellation of sub-Saharan Africa's multilateral debt, a doubling of foreign-aid spending by wealthy nations to a total of $US50 billion a year and an end to the subsidies and tariffs that cripple African trade, by 2010. The 17-strong commission of African leaders, experts and development advocates also called on industrialized countries to strengthen their efforts to curb graft and help African governments crack down on corruption and recoup stolen assets stashed by African leaders in Western banks.
The following recommendations formulated by the Commission for Africa are expected to be placed before G8 members at their next summit to be held at Gleneagles, Scotland in July:
"Countries and territories with significant financial centres should take, as a matter of urgency, all necessary legal and administrative measures to repatriate illicitly acquired state funds and assets. [The commission calls] on G8 countries to make specific commitments in 2005 and to report back on progress, including sums repatriated, in 2006.”
All states should ratify and implement the UN Convention Against Corruption during 2005." (The convention can come into force only if 30 nations ratify it. So far, 22 have done so and Britain is the only G8 nation that has pledged to ratify the convention.)
Amending and passing the necessary laws to facilitate the commission's proposals for combating corruption would go some way to legitimizing Mr. Blair's recovery plan for Africa and increase its chances of lasting success.
"However, in order not to let these proposals become another one of those endless communiqués normally issued at the end of every conference or seminar on Africa's problems," warns UK-based African journalist and scholar, Uche Nworah, "it is vital that both the Prime Minister and the Commission for Africa go a step further."
"He should let his actions speak louder than the words contained in the 461-page [commission] report," advises Nworah, in a recent edition of Global Politician. "The common man on the streets of Africa desirous of real change would like to see Mr. Blair convince his fellow Western leaders of the seriousness of the African situation," but "he can only do this if he sets the ball rolling by acting decisively, the same way he did when he led the way in the aftermath of the Tsunami disaster, through his government's record £75M contribution. This time, Africans expect a British government announcement of debt cancellations for poor African nations; such announcements may be the tonic the other creditor nations need to begin to take action themselves towards that direction."
Writing off debts as "a radical but progressive and humanitarian course of action," says Nworah, is a compelling argument in relation to African debt incurred by corrupt governments that used borrowed money to enrich themselves and remain in power.
"Corrupt regimes who ended up recycling the funds back into their private bank accounts scattered all over the western countries" continues Nworah, have left African citizens "to suffer from the repayments, without any real and tangible differences in the social systems and infrastructures" the loan money was secured to improve in the first place.
Writing off such debts, however, might strike Western creditors as a shrewd move for less than noble reasons. After all, what better way to conceal their complicity in the misuse of public funds by despotic rulers than by erasing bad debt at a time when debt cancellation is lauded as the way forward to making poverty history?
According to Mr. Nworah, the "good thing" about the Commission for Africa report is that it "talks about a partnership between Africa and the West," which is a "new approach to dealing with Africa" that "is most welcome" because "it not only shows that Africa as a continent has grown up, it also challenges Africa to rise up and accept its responsibilities as a grown up."
The report, he says, "entrusts Africa's destiny into Africa's hands."
And yet as the upcoming G8 summit in Scotland this summer makes clear, Africa's destiny is not in Africa's hands. So long as African leaders continue to look to the West to bail them out, others will always be able to call the shots.
The most decisive way to signal responsible leadership and authority is to forgo debt forgiveness and declare a moratorium on debt repayments. Debt cancellation doesn't punish the wrongdoers or curb corruption and odious debts left unchallenged will be treated as legitimate and enforceable by lenders. However, challenging odious debts is one way African governments can hold both Western creditors and corrupt African officials to account.
The time of the G8 summit in July poses the perfect opportunity for African leaders and the NEPAD Secretariat (New Partnership for Africa's Development) to launch such a challenge and declare a new era of good governance and prosperity for Africa.
If Tony Blair is serious about a partnership between Africa and the West, he too should drop debt forgiveness in favour of a rigorous accounting of loose lending and corrupt spending.
Nigerians want war on graft, not words
by Lisa Peryman, Odious Debts Online, May 6, 2005
For many Nigerians, President Olusegun Obasanjo's war on corruption has been a long time coming, given his promise six years ago to stamp out vice when he took office in 1999. Nothing much, they have noted, has happened, until now.
An intensified campaign to win debt relief from creditor nations has prompted Nigeria's President Olusegun Obasanjo to wage war on corruption.
Ranked as the third most corrupt country in the world by global graft watchdog Transparency International, Nigeria's reputation for sleaze is such, the TI rating prompted some to joke that a "clever government official must have paid a hefty bribe to keep the group from ranking Nigeria first or second," the Washington Post.
For many Nigerians, the president's war on corruption has been a long time coming, given his promise six years ago to stamp out vice when he took office in 1999. Nothing much, they have noted, has happened, until now.
In the past two months, two senior ministers have been sacked, a former top police officer has appeared in court in handcuffs, and the senate president has been under pressure to resign – all charged with corruption for offenses that would have once been winked at.
Some commentators, however, are worried cynicism will poison the president's current efforts and are calling on Nigerians to rally round, urging citizens to remember "where we were when Obasanjo assumed power." J.O. Muruako, a writer for the Lagos tabloid Daily Champion, asserts that "no Nigerian civil leader has tried to evolve fair-play and equity in the body politic, as Obasanjo has so far tried" and "no Nigerian leader has tried to establish an anti-corruption system as he is trying to do."
"We still remember the free-for-all rot," said Muruako, referring to the Shehu Shagari administration between 1979 and 1983, the military regimes of Murtala Muhammad and Muhammadu Buhari that "wielded brutal and lawless powers indiscriminately, while corruption simmered under them," as well as the Ibrahim Babangida military dictatorship from 1985-1993, whose "rule formalized corrupt practices." According to Muruako:
"President Obasanjo has commenced a tripod revolution, which should eventually establish socioeconomic and political stability and development . . . if we are prepared to bear the necessary pains."
If the 400 eminent Nigerians President Obasango assembled earlier this year for an ongoing national conference on political reform are "not allowed to hammer out a lasting political blueprint" for the country, "then we are doomed," warns Muruako.
Some critics say the president's crusade is already showing signs of faltering and point out that although some top officials have been brought to justice, none have been jailed.
"In fact, even those that were fired from office are still walking the streets as if firing was enough for the egregious offences they committed," writes Alfred Uzokwe for Nigeria World, an online news provider.
"A few days ago, Tafa Balogun, the corrupt former police boss, who should be sitting in jail now for abusing his office, made bail. To add insult to injury, the charges . . . against him have been reduced from 70 to 50," he said.
Uzokwe says "tough action" is needed if Nigerians are to take the president's war against corruption seriously or "the desired effect of deterrence will never be achieved." Instead of talk, he said, Nigerians want wrongdoers held to account and convicted, and the president need look no further than his own government as a place to start clean-up duty.
"There are a lot of corrupt public officials in the senate, in the house and even in the president's cabinet and he must start bringing them to book in full public glare," said Uzokwe, stressing that the president's anti-corruption crusade is his chance to make history and that posterity will "not forgive him" if he succumbs to pressure.
The pressure Uzokwe is referring to concerns the increased scrutiny the president and his son, Gbenga, have borne since the president's graft war began earlier this year.
Some say the president's credibility is undermined by rigged civilian elections in 1999 and 2003, which suggest he is morally ill-equipped to turnaround Nigeria's formidable track record on sleaze. Meanwhile, Gbenga has found himself having to defend allegations that he holds multiple bank accounts in the United States totalling as much as $22 million and has cited his father's campaign as the reason he is being targeted.
"General Obasanjo, including his son, Gbenga, must realize that uneasy lies the head that wears the crown and as long as the anti-corruption war continues, jabs will come their way," continues Uzokwe. "Assuming that Gbenga is innocent of all the allegations against him, he must realize that all these come with the territory. All these years, he has enjoyed the perks of being the son of Nigeria's president and Nigerians did not hear him complain. He must now be ready to take the bad pill along with the good."
President Obasanjo's war has already claimed one son of privilege. The Abuja Court of Appeal in Nigeria has ruled that Abba Sani Abacha, the son of former Nigerian military ruler Sani Abacha, must stand trial for his alleged role in the looting of public funds during his father's reign from 1993 until his death in 1998. Nigerian state lawyers believe Abacha Snr. may have stolen as much as $2.2 billion.
Abba was charged with money laundering and fraud by German authorities late last year on a Swiss warrant and has since been extradited to Switzerland where he will stand trial. Swiss authorities began investigating bank accounts linked to Abba's father after the Nigerian government accused the late dictator of stashing stolen public funds in offshore accounts (following his election in 1999, President Obasanjo vowed to recover billions of dollars stolen from state coffers during decades of military rule, and said he would use some of that money to repay Nigeria's foreign debt). In February of this year, Switzerland announced that it was returning $458 million invested in its banks by Abacha. As well as Switzerland, Nigeria is looking for money in the UK, Liechtenstein, Luxembourg and the US.
Despite being the world's eighth largest oil exporter, some 60% of Nigerians live in poverty and the country's economic strife has long been linked to corruption and decades of successive military dictatorships alleged to have incurred the massive debt burden that currently cripples the nation. Allegations of corruption also dog President Obasanjo's first presidential term in the late 1970s.
Nasir Ahmad el-Rufai, a distinguished crusader against foul play and minister for the federal capital territory, earned the wrath of the Nigerian Senate last year when he accused two senators of asking him for a bribe before his nomination as minister was approved.
According to el-Rufai, at least three out of every four lawmakers are corrupt in Nigeria, as well as half of the nation's governors and many of its civil servants. On a more uplifting note, most of the country's Cabinet ministers and the nation's top judges were clean, he said, although bribery was common in the lower levels of the judiciary.
Things are beginning to change, he said, but only because corrupt government officials have begun to fear that they might get caught.
"We are moving away from a culture of impunity, where people felt they could be corrupt and get away with it, to the point where people are scared of being corrupt. If a few more ministers go to jail, if a few more members of the National Assembly go to jail, believe me, people will line up and do the right thing," he said.
A position Nigeria World's Alfred Uzokwe strongly agrees with.
"The lesson here is that Nigerians abide by the rule of law only when a credible threat, for contravention, hangs over them like the sword of Damocles. . . . If the current anti-graft war [is to] succeed . . . tough talk alone will not cut it. It must be backed with tough punitive measures like prosecution, jail terms and forefeiture of ill-gotten property to the government" he said, quoting the Latin phrase, "Metus improbos compescit, non clementia" – which means, "Fear, not kindness, restrains the wicked."
Perhaps the final word goes to Nigeria World columnist Moshood Ademola Fayemiwo, who writes:
"In Nigeria, once you are 'elected,' you are repeatedly told: 'This is your time' meaning; 'Steal, but make sure you're not caught.' . . . So where should President Obasanjo begin his moral crusade? . . . That first step begins with him both as a citizen and a leader. A leader should lead by examples. That Ota Farm which he owns in the outskirts of Lagos couldn't have been acquired by Obasanjo with his salaries as former head of state or retired general."
A champion of the president's war on corruption, Fayemiwo declares Obasanjo must first "dance naked" and expose the skeletons in his own closet if he is to convince those who have given up on Nigeria that it will no longer be business as usual.
Stop paying nuke plant debt, SC justice urges gov't
by Vincent Cabreza, Philippine Daily Inquirer, April 21, 2005
Filipino Supreme Court Associate Justice Reynato Puno has urged the government to consider stopping payments for loans that the late strongman Ferdinand Marcos borrowed to build the mothballed Bataan Nuclear Power Plant. Speaking at the Integrated Bar of the Philippines' 10th national convention last month, Puno said international experts had taken the position that foreign bankers, who knowingly lent to corrupt governments, were liable for graft. "Nearer home," he said, "the finger points to the Bataan Nuclear Power Plant, which was built in 1976 and which cost us $1.9 billion in loans." [Some reports placed the total cost of the plant at $2.3 billion.] Puno noted that the Philippines was shelling out $170,000 daily (P9.35 million a day or P3.4 billion a year) for the BNPP loans and that the payments would continue until 2018.
In February 2000, Patricia Adams, the executive director of the Canadian based foreign-aid watchdog Probe International, called the BNPP debt "odious," saying it was not an obligation for the nation to repay but the 'personal' debt of the power that incurred it and that, consequently, the debt falls with the fall of this power. The plant has never produced a single watt of electricity and was declared unsafe and inoperable by a team of international inspectors after Marcos' downfall in 1986. Given that large payments allegedly went to Marcos and his cronies, that the Filipino people never benefited from the plant, and that the plant was unsafe, Ms. Adams said the Philippine government should declare the outstanding Bataan plant debt odious and send it to international arbitration.
www.odiousdebts.org/odiousdebts/index.cfm?DSP=content&ContentID=9
News Flash
Patricia Adams, the executive director of Probe International, will speak about odious debts and corrupt governments this weekend, Saturday, May 7, on the Canadian radio program, Warren on Weekend, CKNW 980 AM Radio. Ms. Adams' interview will begin at 4 p.m. EST. To listen in, please go to: www.peterwarren.ca/PAGES/listento.htm
Canadian Government Silent on Nam Theun 2 Decision
Probe International Update, April 2005
The World Bank approved financing for the controversial Nam Theun 2 dam in Lao PDR on March 31 despite warnings from Probe International and more than 150 environmental and social justice groups that the French-led venture will be an economic and environmental disaster for Laotians. When we asked the Canadian government representative at the World Bank, Marcel Masse, to explain Canada's position on Nam Theun 2, his senior advisor, Stephen Free, replied: "As you know, the Board normally operates by consensus and there was no vote on Nam Theun 2 at the World Bank last week. Canada did join in the broad consensus at the Board in support of World Bank involvement in the project, while highlighting various issues that will require careful attention going forward. I will ask that our authorities in Finance and CIDA [Canadian International Development Agency] provide you with a more detailed outline of Canada's approach and considerations that applied to Canada's position both here and at the AsDB [Asian Development Bank]." We have yet to hear from the Finance Department or CIDA.
The Story of the Dahe Dam comes to an end
This is the concluding instalment of the Three Gorges Probe serialization of The Story of the Dahe Dam; sociologist Ying Xing's fascinating, detailed account of the years-long struggle for redress pursued by thousands of people who were plunged deeper into poverty by the construction of the Dahe dam. Many of the farmers uprooted for that dam, built 30 years ago on a Yangtze tributary in what is now Chongqing municipality, are being moved again for the Three Gorges project.
www.threegorgesprobe.org/tgp/index.cfm?DSP=content&ContentID=12763
To view a Table of Contents:
www.threegorgesprobe.org/tgp/index.cfm?DSP=booktitles&SubID=859
"To learn more about what goes on behind the scenes in China, this book about the ruinous consequences of one small dam is an excellent place to start," Probe International fellow Dai Qing writes in her introduction to the translation of this important work.
The original Chinese version of the book, published under the title Dahe yimin shangfangde gushi (A Tale of Migrants Displaced by the Dahe Dam), was banned in China in 2002, but is available on our Chinese site. The online publication and translation of this book have been made possible by the Open Society Institute.
Forgive to forget
by Lisa Peryman, Odious Debts Online, April 8, 2005
Unchallenged, lenders treat all loans as legitimate and enforceable and decide among themselves which loans will be written off and which rescheduled.
On the eve of the first Pan African Forum on accountability and good governance in Kenya this week, an editorial published by the Nairobi-based newspaper, The Nation, called for the relief of Kenya's foreign debt based in part on an odious debts argument.
The editorial follows a debate on debt repudiation for Nigeria sparked by the Nigerian Parliament's passage of a non-binding resolution last month to halt payments on the country's $35 billion external debt.
The Nation editorial, "Why Kenya Deserves Debt Relief," draws inspiration from an opinion piece published by the UK's The Economist, which outlined three reasons Nigeria should be granted debt relief.
Reason No. 1, the Economist argued, "is that much of Nigeria's debt is 'odious'; that is, it was accrued under military dictators. Since Nigerians did not choose these regimes, it seems unfair that they should have to repay the loans that foreigners were foolish enough to make to them."
"Why Kenya Deserves Debt Relief" develops a similar argument and claims Kenya's debt should be waived because it too is odious, or "debt accrued under a dictatorship."
"Should it not matter that [the debt] was incurred under a leadership notorious for corruption and embezzlement – something our lenders were fully aware of when they extended us such credit?" wrote The Nation, adding: "There are as many fingers as there is blame to go around on this one, further stressing that our ongoing debt problems are not of our making alone and that somewhere along the line, these loans have more enhanced than alleviated poverty.
"Just look at us!" the editorial blazed, "Rather than trust accounts, our children inherit debt. Instead of being children, they are saddled with adulthood, fetching firewood instead of doing homework and heading households when they should be schooling.
"We spend millions – multiples of healthcare costs servicing debts while our sick languish at home with bare cupboards, dirty drinking water and no medicine. And yet, we are the norm – an example of others slowly dying under debt incurred by governments, largely squandered by officials and then paid for by the masses – the same individuals not consulted or allowed to benefit from such undertakings."
Corrupt, oppressive regimes acting against public interest and unaccountable lenders who, in numerous cases, knew their funds were not being used for legitimate purposes, are two of the main reasons debt has become the burden it has for many nations in Africa. Despite a heightened global focus on debt reduction and poverty alleviation in Africa, the issue of odious debt is one unlikely to be taken up by donors, although debt cancellation is a strong possibility. Writing off or rescheduling debts provides lending nations with an out for dealing with tainted loans that should never have been granted.
Such was the case last November when the Paris Club cartel of creditors opted to write off 80 percent of the $120-billion debt Iraq owed it. The move deliberately circumvented the threat posed by a potential public review of debts accumulated under dictator Saddam Hussein; it also denied Iraqi citizens the opportunity to assess which loans granted were used for their benefit and which to prop up Saddam's corrupt regime. Conveniently, the cancellation of debt makes that examination appear less compelling, particularly when cloaked in the rhetoric of benign forgiveness.
Patricia Adams, the executive director of the Canadian-based foreign aid watchdog Probe International, at the time suggested Paris Club members had rushed through their debt forgiveness program, prior to the establishment of a democratic Iraqi government, in order to head off an Iraqi investigation of who lent Saddam money and for what purposes. However, she noted, this tactic failed.
The Interim Iraqi National Assembly responded by tabling a recommendation to declare the debts owed were "odious." It further stated:
"This National Assembly has a responsibility to the Iraqi people to protect their current and future interests. . . . These interests are threatened by the Paris Club cartel of creditors which refuses to accept that any of the debts are illegitimate, and is attempting to get Iraq to sign, before the end of the year, an agreement to repay a significant portion of the odious debt. There is a strong basis in international legal principle and precedent to define these debts as being 'odious' and thus not legally enforceable."
A team of Iraqi and international lawyers and arbitrators, in conjunction with Probe International and other debt NGOs, are currently working on the creation of an arbitral model which could be used to determine which of Iraq's state loans under Saddam were used for corrupt purposes.
Currently, debt forgiveness of clearly odious debt, extended as an act of charity, works to conceal the complicity of western donors in the misuse of public funds by despotic rulers. While citizens are expected to be grateful for the writing off of debt they should not be on the hook to repay in the first place, lenders and the corrupt governments their loans financed get off scot free.
Perhaps African countries should raise a hue and cry about odious debt between now and the next meeting of the Group of Eight wealthy nations in Gleneagles, Scotland, this summer, where Africa will be a main focus of discussion.
Given the lending community's strong dislike of the subject, who knows how much debt it may be prepared to "forgive" to contain the threat of an odious debts challenge.
However, the issue of accountability would not be resolved by forgiveness. The beauty of a successful odious debts challenge is that while it absolves citizens of having to pay for the crimes of their leaders, the debt remains outstanding: creditors can still chase payment from the dictator or regime they loaned to but the amount will no longer appear as a national debt.
Unchallenged, lenders treat all loans as legitimate and enforceable and decide among themselves which loans will be written off and which rescheduled. Under this system, the people will always be held to account for unrepresentative governments and their odious debts.
Massive dam project could backfire
by Inter Press Service News Agency, April 5, 2005
"It is projects like Nam Theun 2 that eventually need debt forgiveness because they are not economically viable and they don't generate the wealth needed to repay the loans," said Patricia Adams, executive director of Probe International. Opponents say that large dams financed by the multilateral development banks, including the World Bank, have traditionally proven to be money pits, and that costs have been unrecoverable from ratepayers. "The experience is that big dams lead to bad debt," says Gráinne Ryder, a hydro expert and Probe International's policy director.
Washington: A new dam funded by the World Bank and the Asian Development Bank (ADB) and hailed as a windfall for Laos may end up doing more harm than good to one of the world's poorest nations and its vulnerable farmers, several independent development groups say.
The World Bank, whose approval often signals a green light for other public and commercial banks to get involved, formally approved funding for the 1.25-billion-dollar Nam Theun 2 hydroelectric dam project on Apr. 1 after 12 years of studies and deliberations.
The ADB said Monday that it will give Laos, Asia's poorest nation, a total of 120 million dollars in loans and political risk guarantees. The European Investment Bank (EIB) will make a funding decision shortly.
The involvement of the World Bank, the ADB and the EIB catalyses significant amounts of long-term U.S. dollar debt from commercial lenders to support the power sectors of Thailand and Laos.
The project is run by the Nam Theun 2 Power Company Limited (NTPC), which is owned by a consortium comprising EDF International of France (35 percent), the government of Laos (25 percent), the Electricity Generating Public Company Ltd of Thailand (25 percent), and the Italian-Thai Development Public Company Ltd (15 percent).
Many analysts, however, have assailed the banks' support and say it shows that international financial institutions, spearheaded by the Washington-based World Bank, are ignoring their own policy guidelines and paying little regard to indigenous people, the environment or the long-term welfare of the poor nation.
"I think this project is the poster child of the kind of projects that the Bank should not approve. It is poorly prepared. It's in the wrong place. It's for the wrong reasons," said David F. Hales, a lawyer and sustainable development expert at the Washington-based Worldwatch Institute.
"This is exactly the kind of project proposal that the safeguard procedures of the World Bank and the Asian Development Bank are designed to prevent," he said.
"The risk of further impoverishment of the people, of corruption and mismanagement, and of financial failure of the project is just too high."
Hales, who chaired the World Bank's U.S. public workshop on Nam Theun 2 in September 2004, also warned that now that Nam Theun has been approved, it opens the door for similarly dubious initiatives.
"The World Bank will have written a brand new definition of 'blank cheque'," he said.
The World Bank is providing up to 270 million dollars in loans and risk guarantees for the project, due to be completed in 2009. At 1,070 megawatts, it would divert 93 percent of the Nam Theun River's flow into the adjacent Xe Bang Fai River basin, generating power for Thailand's electrical grid.
It would also submerge nearly 40 percent of the Nakai Plateau beneath a 450-square-kilometre reservoir.
Many say this will drastically alter the character of two important rivers, displace thousands of desperately poor residents, and disrupt the livelihoods of tens of thousands more, among the other transformations typical of such hydropower projects.
The public lenders respond that Nam Theun 2 is the biggest single infrastructure project ever undertaken in Laos, and is expected to earn the country up to 150 million dollars a year in taxes, royalties, and dividends.
The World Bank says those revenues will boost spending on basic health and education by as much as 30 percent in the project's first year of operation, and that part of the money will help fight poverty and protect the environment.
Backers also claim that the project will generate about 4,000 job opportunities in this country of 5.8 million people during the construction period.
But those promises have not eased the concerns of independent development groups, many of which have monitored similar huge water projects in other developing nations.
In March, more than 150 non-governmental organisations from 42 countries sent a letter to World Bank President James Wolfensohn calling on him not to support the dam and detailing a number of their concerns.
Last month, dozens of local villagers protested the new project. The Berkeley-based International Rivers Network warns that the Nam Theun 2 dam would displace more than 6,000 villagers and affect the livelihoods of another 100,000 people living downstream along Xe Bang Fai, another large Mekong tributary.
The group says that feasible plans for compensating affected communities still do not exist.
Among the many other complaints hanging over the project is that it would create an "intractable debt burden" for Laotians in years to come.
"It is projects like Nam Theun 2 that eventually need debt forgiveness because they are not economically viable and they don't generate the wealth needed to repay the loans," said Patricia Adams, executive director of Probe International, a Canadian group.
She pointed to the fact that just last week, on Mar. 28, Japan announced it was canceling debt owed by Laos for construction of the Nam Ngum dam, the country's largest hydro export scheme built in the 1970s.
"The experience is that big dams lead to bad debt," agreed Gráinne Ryder, a hydro expert and Probe International's policy director.
Opponents say that large dams financed by the multilateral development banks, including the World Bank, have traditionally proven to be money pits, and that costs have been unrecoverable from ratepayers.
In Washington, Treasury Department officials have also raised questions about the World Bank's capacity to ensure that the project's revenues are spent on poverty reduction, given the Lao government's record of financial mismanagement.
Another problem with such projects in general is that electricity output is often less than projected and not very reliable because hydro reservoirs are extremely vulnerable to drought. The environmental impacts of large dams have led to major agricultural and fisheries productivity losses.
"By supporting Nam Theun 2, the World Bank has shown it will repeat the same mistakes until it is shut down once and for all," said Ryder.
The financial backers of the project respond that they are aware of all these risks and say they have mechanisms in place to manage them.
These include multi-donor technical assistance to help the government improve its oversight through audits and public expenditure surveys.
"We recognise there are risks involved and we have studied these very carefully with the government and other development partners," said ADB President Haruhiko Kuroda in a statement on Monday.
"This project will improve the living standards of one of the poorest countries in the region. That is why we are involved. We feel that the risks can be managed and that these will be better managed by our involvement," he said.
Massive dam project could backfire
by Emad Mekay, Inter Press Service News Agency, April 5, 2005
Washington: A new dam funded by the World Bank and the Asian Development Bank (ADB) and hailed as a windfall for Laos may end up doing more harm than good to one of the world's poorest nations and its vulnerable farmers, several independent development groups say.
The World Bank, whose approval often signals a green light for other public and commercial banks to get involved, formally approved funding for the 1.25-billion-dollar Nam Theun 2 hydroelectric dam project on Apr. 1 after 12 years of studies and deliberations.
The ADB said Monday that it will give Laos, Asia's poorest nation, a total of 120 million dollars in loans and political risk guarantees. The European Investment Bank (EIB) will make a funding decision shortly.
The involvement of the World Bank, the ADB and the EIB catalyses significant amounts of long-term U.S. dollar debt from commercial lenders to support the power sectors of Thailand and Laos.
The project is run by the Nam Theun 2 Power Company Limited (NTPC), which is owned by a consortium comprising EDF International of France (35 percent), the government of Laos (25 percent), the Electricity Generating Public Company Ltd of Thailand (25 percent), and the Italian-Thai Development Public Company Ltd (15 percent).
Many analysts, however, have assailed the banks' support and say it shows that international financial institutions, spearheaded by the Washington-based World Bank, are ignoring their own policy guidelines and paying little regard to indigenous people, the environment or the long-term welfare of the poor nation.
"I think this project is the poster child of the kind of projects that the Bank should not approve. It is poorly prepared. It's in the wrong place. It's for the wrong reasons," said David F. Hales, a lawyer and sustainable development expert at the Washington-based Worldwatch Institute.
"This is exactly the kind of project proposal that the safeguard procedures of the World Bank and the Asian Development Bank are designed to prevent," he said. "The risk of further impoverishment of the people, of corruption and mismanagement, and of financial failure of the project is just too high."
Hales, who chaired the World Bank's U.S. public workshop on Nam Theun 2 in September 2004, also warned that now that Nam Theun has been approved, it opens the door for similarly dubious initiatives.
"The World Bank will have written a brand new definition of 'blank cheque'," he said.
The World Bank is providing up to 270 million dollars in loans and risk guarantees for the project, due to be completed in 2009. At 1,070 megawatts, it would divert 93 percent of the Nam Theun River's flow into the adjacent Xe Bang Fai River basin, generating power for Thailand's electrical grid.
It would also submerge nearly 40 percent of the Nakai Plateau beneath a 450-square-kilometre reservoir.
Many say this will drastically alter the character of two important rivers, displace thousands of desperately poor residents, and disrupt the livelihoods of tens of thousands more, among the other transformations typical of such hydropower projects.
The public lenders respond that Nam Theun 2 is the biggest single infrastructure project ever undertaken in Laos, and is expected to earn the country up to 150 million dollars a year in taxes, royalties, and dividends.
The World Bank says those revenues will boost spending on basic health and education by as much as 30 percent in the project's first year of operation, and that part of the money will help fight poverty and protect the environment.
Backers also claim that the project will generate about 4,000 job opportunities in this country of 5.8 million people during the construction period.
But those promises have not eased the concerns of independent development groups, many of which have monitored similar huge water projects in other developing nations.
In March, more than 150 non-governmental organisations from 42 countries sent a letter to World Bank President James Wolfensohn calling on him not to support the dam and detailing a number of their concerns.
Last month, dozens of local villagers protested the new project. The Berkeley-based International Rivers Network warns that the Nam Theun 2 dam would displace more than 6,000 villagers and affect the livelihoods of another 100,000 people living downstream along Xe Bang Fai, another large Mekong tributary.
The group says that feasible plans for compensating affected communities still do not exist.
Among the many other complaints hanging over the project is that it would create an "intractable debt burden" for Laotians in years to come.
"It is projects like Nam Theun 2 that eventually need debt forgiveness because they are not economically viable and they don't generate the wealth needed to repay the loans," said Patricia Adams, executive director of Probe International, a Canadian group.
She pointed to the fact that just last week, on Mar. 28, Japan announced it was canceling debt owed by Laos for construction of the Nam Ngum dam, the country's largest hydro export scheme built in the 1970s.
"The experience is that big dams lead to bad debt," agreed Gráinne Ryder, a hydro expert and Probe International's policy director.
Opponents say that large dams financed by the multilateral development banks, including the World Bank, have traditionally proven to be money pits, and that costs have been unrecoverable from ratepayers.
In Washington, Treasury Department officials have also raised questions about the World Bank's capacity to ensure that the project's revenues are spent on poverty reduction, given the Lao government's record of financial mismanagement.
Another problem with such projects in general is that electricity output is often less than projected and not very reliable because hydro reservoirs are extremely vulnerable to drought. The environmental impacts of large dams have led to major agricultural and fisheries productivity losses.
"By supporting Nam Theun 2, the World Bank has shown it will repeat the same mistakes until it is shut down once and for all," said Ryder.
The financial backers of the project respond that they are aware of all these risks and say they have mechanisms in place to manage them.
These include multi-donor technical assistance to help the government improve its oversight through audits and public expenditure surveys.
"We recognise there are risks involved and we have studied these very carefully with the government and other development partners," said ADB President Haruhiko Kuroda in a statement on Monday.
"This project will improve the living standards of one of the poorest countries in the region. That is why we are involved. We feel that the risks can be managed and that these will be better managed by our involvement," he said.
World Bank dam will generate debt burden for Laotians
by Probe International, April 1, 2005
Toronto, Canada: The World Bank's decision to finance the US$1.2 billion Nam Theun 2 hydro project will become an intractable debt burden for Laotians in years to come, warns Probe International, a Canadian-based foreign aid watchdog.
"It is projects like Nam Theun 2 that eventually need debt forgiveness because they are not economically viable and they don't generate the wealth needed to repay the loans," said Patricia Adams, Probe's executive director and an expert on odious Third World debt.
Yesterday the World Bank's directors approved a $20 million grant and loan guarantees worth $250 million for the project, which backers say will generate much needed revenue for poverty reduction.
Earlier in the week, Japan announced it was cancelling debt owed by Laos for construction of the Nam Ngum dam, the country's largest hydro export scheme built in the 1970s.
"The experience is that big dams lead to bad debt," said Gráinne Ryder, a hydro expert and Probe International's policy director. Large dams financed by the multilateral development banks, including the World Bank, have proven to be uneconomic, she said. Costs have been unrecoverable from ratepayers, she added. Meanwhile, electricity output has been less than projected and less reliable because hydro reservoirs are extremely vulnerable to drought. Also, the environmental impacts of large dams have led to major agricultural and fisheries productivity losses.
Nam Theun 2 will prove no exception, said Ryder. The 1070-megawatt dam will flood 450 square-kilometers of land and disrupt the farming and fishing livelihoods of tens of thousands of people who are already poor.
The Nam Theun 2 decision came despite the United States Treasury Department's reservations about the project's environmental risks, and the Lao government's capacity to manage its revenue.
"By supporting Nam Theun 2, the World Bank has shown it will repeat the same mistakes until it is shut down once and for all," said Ryder.
Bankrolling Nam Theun 2: Laotian dam a test of World Bank's credibility
by Odious Debts Online and Probe International, March 31, 2005
Today the World Bank is expected to approve financing for a massive US$1.2 billion dam in Laos despite international concern that the project's revenue will be mismanaged or siphoned off by corrupt officials and contractors.
The World Bank must decide whether it will provide a partial loan guarantee protecting a consortium of investors led by Electricité de France – who together would provide 70 percent of the funding – against the risk of investing in a communist country notorious for corruption and a weak legal system.
The World Bank claims Laos, one of the poorest countries in the world, needs the dam, known as Nam Theun 2 or NT2, to lift the country's five million people out of poverty.
By selling 90 percent of electricity generated by NT2 under a guaranteed contract to Thailand, Laos is expected to earn US$250 million (net present value) over 25 years. The Lao government has pledged to spend its share of the dam's revenue on education, health and rural development under the World Bank's direction.
But critics, including Probe International, doubt NT2 will benefit the poor.
"The Lao government lacks accountability and transparency, and has a track record of squandering foreign aid," said Gráinne Ryder, Probe's policy director.
In Washington, United States Treasury Department officials have raised questions about the World Bank's capacity to ensure that NT2 revenues are spent on poverty reduction, given the Lao government's record of financial mismanagement.
David Hales, a former United States Agency for International Development (USAID) official, and chair of the World Bank's public Nam Theun 2 workshop in Washington last September, writes that no clear mechanisms for effective oversight have been worked out.
Senior Bank staff are aware of the risks. In a November 2004 briefing, they concluded: "The project's ability to have a positive effect . . . cannot be ensured without major reforms in governance, sufficient progress on human development, and natural resources management, and compliance with the Bank's safeguard policies."
Initially, the developers wanted an escrow account set up to manage the project funds but this was rejected by the Lao government as an infringement of its sovereignty.
If approved, NT2 represents a watershed decision for the World Bank which has not financed large dam projects for 10 years. Big-ticket dams have fallen out of favour in developed countries but continue to be built in the developing world, where they are prone to corruption and harshly criticized for their ruinous social and environmental impacts.
Critics also point out that Laotians have been denied other options for development by the alliance forged by the World Bank, the Lao government and the Nam Theun 2 Power Company.
A report by Probe International last year concluded:
"Tying the fate of Laotians to [the] construction of a single hydro export scheme is a political trick, one that would be promptly denounced as such by Laotians if Lao PDR was a free country."
The report argues that if the Lao government opened its doors to private investment, respected the rule of law and recognized its citizens' land and resource rights, investors and sustainable development would follow.
"World Bank financing for NT2 will only encourage corruption and setback reform," said Ryder.
Odious Debts Online is a project of Probe International. Please visit our Odious Debts Web site at www.odiousdebts.org to find out more. Odious Debts Online also produces a weekly electronic newsletter update on odious debt developments from around the world. For a free subscription to Odious Debts Online, please click on: www.odiousdebts.org/odiousdebts/index.cfm?DSP=subscribe_form
Options under water
by Andrew Perrin, Time Asia Magazine, Vol. 165, No. 13, April 4, 2005
Next month, the World Bank's executive board of directors is expected to endorse a controversial $1.25 billion hydroelectric dam for Laos that even developers admit will have major social and environmental impacts. Yet the dam could earn the country $2 billion in revenue over a period of 25 years – money the government has promised it will use to pull its people out of poverty. That makes it a gamble the World Bank thinks is worth taking. "If revenues are channeled in the way we have agreed with the government," says Ian Porter, World Bank country director for Laos, "then we have every confidence they will have an impact [on eradicating poverty]." In a country ruled by aging Marxist revolutionaries, and where promised economic and political reforms have been painfully slow in coming, that could be a big if. Opposition to the project has been fierce from international environmental NGOs, which say the dam will destroy the livelihoods of thousands and do untold damage to rivers and their fish populations, while offering no guarantee that the revenue will improve people's lives. "Laos has a track record of poorly-managed projects that create more poverty than they solve," says Aviva Imhof, campaign director of International Rivers Network, which is based in Berkeley, California. Imhof has tracked the project for a decade and, together with the Canada-based Probe International, led a global campaign to have it halted. "Laos is repeatedly being rewarded for its failure," says Probe's policy director Gráinne Ryder. World Bank officials acknowledge that the project carries considerable risks, but they believe they've made them manageable. Underpinning their faith, says Porter, is a slew of economic reports and social and environmental impact studies they demanded of developers – all of which have been made available for public scrutiny.
www.probeinternational.org/pi/index.cfm?DSP=content&ContentID=12732
The Story of the Dahe Dam: Chapters 10 and 11
 |
The Three Gorges Probe serialization of The Story of the Dahe Dam continues.
Chapter 10: The peasants of Baiyang 16 create two hastily organized disturbances at the Dahe hydropower station, unaware that their protest coincides with a politically sensitive anniversary and that local officials are in no mood to yield an inch.
www.probeinternational.org/pi/index.cfm?DSP=content&ContentID=12657
Chapter 11: Police round up a dozen 'ringleaders' and haul them off to jail. One of those, the former head of Baiyang 16, 'knew it was inevitable that someone would have to be scapegoated after such a long and bitter struggle with the authorities.'
www.probeinternational.org/pi/index.cfm?DSP=content&ContentID=12714
'The Place of Water in the World: Ritual, Beauty, and the Environment'
Probe International Fellow Dai Qing, a journalist who has been outspoken in her opposition to her government's plans for China's massive Three Gorges dam project, will be among the featured guests at a symposium this week organized by Mount Holyoake College in Massachusetts. Beginning on Thursday, March 31, the three-day symposium, "The Place of Water in the World: Ritual, Beauty, and the Environment," will explore the relationship between water and place in shaping human existence and survival and address the following questions: what is the place of water in our physical and metaphysical lives and how do sacred and profane uses of water flow together or diverge in the world? For more information, please see:
http://i-newswire.com/pr10678.html
The 'silver lining' in the Wolfowitz nomination
by Odious Debts Online, March 29, 2005
The nomination of US Deputy Secretary of Defence, Paul Wolfowitz, for the presidency of the World Bank has sparked some positive interest from debt campaigners.
www.odiousdebts.org/odiousdebts/odo_news.cfm?NewsID=2223
Odious Debts Online is a project of Probe International. Please visit our Odious Debts Web site at www.odiousdebts.org to find out more. Odious Debts Online also produces a weekly electronic newsletter update on odious debt developments from around the world. For a free subscription to Odious Debts Online, please click on: www.odiousdebts.org/odiousdebts/index.cfm?DSP=subscribe_form
News Release: Thai villagers rally against Nam Theun 2 dam outside World Bank
the Bangkok headquarters of the World Bank. |
www.probeinternational.org/pi/index.cfm?DSP=content&ContentID=12601
To visit the Probe International campaign to halt the construction of Nam Theun 2, please see: http://www.probeinternational.org/pi/Mekong/index.cfm?DSP=titles&SubID=231
"One New Nation, Two Mighty Rivers, and the Engineer-Hero Huang Wanli"
Last Wednesday, March 9, Probe International fellow Dai Qing, gave a lecture at Loyola Marymount University in Westchester, California on the prominent Chinese water engineer and longtime opponent of China's Three Gorges dam, Huang Wanli. Mr. Wanli, who died in 2001 at the age of 90, opposed the construction of both the Three Gorges and Sanmenxia dams, warning in both cases about the dangers of sedimentation. In the 1950s, after speaking out against the Sanmenxia project, he was denounced and sentenced to hard labour. Almost 40 years later, a letter Mr. Huang wrote U.S. president Bill Clinton about the risk of sedimentation in the Three Gorges reservoir is believed to have helped reverse U.S. support for that project. Because of his opposition to these two large dams, Mr. Huang was punished and sidelined for decades. Mr. Huang, a professor among other things, was not allowed to teach in China until 1998, when at the age of 87 he was finally approved to lecture postgraduates at Qinghua University. It is said, on the day of his first class, he entered the lecture hall wearing an all-white western suit and a red tie – the colour red in China symbolizing joy and festive occasion.
To read the obituary Dai Qing wrote for Mr. Huang at the time of his passing, please see:
www.threegorgesprobe.org/tgp/index.cfm?DSP=content&ContentID=2680
Dai Qing
A biography of Probe International fellow and preeminent Chinese environmental journalist Dai Qing is now available on the Probe International Web site. Dai Qing was trained as a Chinese missile engineer but began her career as a news reporter shortly after. Years later in 1989, while working as an investigative journalist, she published Yangtze, Yangtze to air the views of scientists and engineers who were highly critical of the Three Gorges Dam. Recently, she published The River Dragon Has Come which examines troubling policy issues that the dam creates. She has received the Goldman Environmental Prize, has been a Harvard Niemann Fellow, and was a Woodrow Wilson Scholar. Dai Qing currently works with engineers in assessing the grave environmental concerns in Greater Beijing.
To read a biography of Dai Qing recently posted to the Probe International Web site, please see:
www.probeinternational.org/pi/index.cfm?DSP=content&ContentID=12572
Odious or just malodorous?
by Patricia Adams, Letter to the Editor, International Monetary Fund (IMF), Finance & Development magazine, March 8, 2005
"In his haste to dismiss the international legal Doctrine of Odious Debts and my arguments in favor of it, IMF economic counsellor Raghuram Rajan missed the long legal history in which the doctrine's principles have been used to establish the responsibilities of creditors (or borrowers), and thus their rights to repayment (or repudiation)," writes Patricia Adams, executive director of foreign-aid watchdog Probe International. Ms. Adams was responding to an article by Mr. Rajan published by the International Monetary Fund quarterly, Finance & Development, in which he argues "the odious debt proposal is likely to stay in cold storage." No conspiracy theories are needed, he said, to explain "why the odious debt proposal has not gone anywhere, or why newly legitimate governments like that of postapartheid South Africa have accepted the responsibility of servicing the potentially odious debts they inherited." Mr. Rajan says the concern that debt markets might be disrupted is well-founded. "But there are also potential benefits that deserve further investigation. If researchers had their way, we would pick one petty dictator through a random draw, declare his debt odious, and watch what happened." Mr. Rajan concluded that the odious debt proposal is "unlikely to find many takers" because "the notion of experimenting with countries seems repugnant to most. So in the absence of research that will use existing data cleverly to inform us, or fortuitous natural experiments" the proposal is likely to remain on hold. Ms. Adams, however, refutes Mr. Rajan's claims by pointing to countries that have successfully argued their debts were not legally enforceable, based on the principles of the odious debt doctrine. "Not only is the doctrine well-rooted in international legal custom," Ms. Adams continues, "so too is it grounded in the rich jurispruduence of common and civil law: the principle of 'unjust enrichment' undermines an odious creditor's rights to repayment, and; the law of domestic agency governs the way in which agents can create legally binding obligations for those they represent, thus putting a dictator's creditor at risk." Instead of disparaging the application of the rule of law, the IMF should be championing it, said Ms. Adams: "While an odious debt regime might not stop all dictators 'in their tracks,' it would stop many and it would isolate as pariahs those who survived by selling off their nations assets."
www.odiousdebts.org/odiousdebts/index.cfm?DSP=content&ContentID=12583
Odious Debts Online is a project of Probe International. Please visit our Odious Debts Web site at <www.odiousdebts.org> to find out more. Odious Debts Online also produces a weekly electronic newsletter update on odious debt developments from around the world. To subscribe for free to Odious Debts Online, please see: www.odiousdebts.org/odiousdebts/index.cfm?DSP=subscribe_form
What's old is new
by Lisa Peryman, Odious Debts Online, March 11, 2005
Critics of the final report from British Prime Minister Tony Blair's Commission for Africa say it offers nothing new but are they missing the point?
www.odiousdebts.org/odiousdebts/index.cfm?DSP=content&ContentID=12585
The Story of the Dahe Dam: Chapter 9 (excerpt)
by Ying Xing, published by Three Gorges Probe
Chapter 8: Good guys and bad apples: "The top leaders in Beijing are our benefactors, the provincial leaders are like our family members, there are good officials at the prefecture, there are more bad eggs than good at the county – while all local cadres at the township level are our enemies." — A Yunyang county folk song
www.probeinternational.org/pi/index.cfm?DSP=content&ContentID=12421
Chapter 9: Petition organizers demand ownership of a factory that was built with villagers' compensation money without their consent. But in a surprising twist, the hotly disputed issue suddenly drops off the agenda.
www.probeinternational.org/pi/index.cfm?DSP=content&ContentID=12540
Fiscal crisis takes a 'creative' turn in the Philippines
by Lisa Peryman, Odious Debts Online, a project of Probe International, March 4, 2004
A Filipino senator this week suggested the government look at Argentina's model of debt default as one of a number of ways to ease the country's ballooning national debt of P3.36 trillion ($60 billion).
"I'm not saying we do an Argentina," Sen. Manuel Villar, the chairman of the Philippine Senate committee on finance, told Asia Netcom (ANC). "What I'm saying is [Argentina] was able to redeem their debt from $103 billion to 28 percent of that, as a consequence of what they did."
Emphasizing the need for a more "creative" response to fiscal crisis, Sen. Villar introduced legislation to create a debt relief council to review the country's bilateral and multilateral loan agreements and treaties.
Under the senator's proposed Debt Relief Act, a debt relief council could invoke "the relevant privileges" necessary to facilitate "cancellation of odious debt or restructuring of debts or both to ease debt payments."
"Odious debts," Villar said, are those incurred without the consent of the people, those which cannot have benefited the public, and whereby the lender must have been aware of the two preceding conditions.
The Philippines' staggering debt load is largely attributed to economic policy under the corrupt administration of former president Ferdinand Marcos. According to the Philippine Daily Inquirer, foreign loans were a "rich source of funds" for Marcos and his cronies who used monies generated in loans to line their own pockets. The Inquirer estimates that when Marcos was first elected president in 1966, the Philippines' debt stood at just under $1 billion. When he fled the country in 1986, the total had soared to more than $28 billion.
Meanwhile, Sen. Villar and another member of Congress, Sen. Panfilo Lacson, have also raised the alarm on public sector debt which Sen. Lacson warned would reach P7.1 trillion by 2010, unless the government got serious about reigning in liabilities.
Sen. Villar proposed a debt cap bill to curb the government's "borrowing spree" that would set a ceiling on public sector debt. Under the plan, the total debt stock the government would be allowed to maintain could not exceed 75 percent of the GDP of the previous year.
For his part, Sen. Lacson called for an audit of public-sector debt and a probe of government-owned and controlled corporations. According to the senator, the national debt stood at P3.81 trillion at the end of last year, a 13.6 percent increase over the 2003 level. Of this, foreign debts went up by 9.7 percent to P1.8 trillion in 2004.
"These figures mean that every Filipino regardless of age, gender or economic status is currently indebted to the tune of P64,000 each to our creditors," he said.
Another proposal, this time by former senator Ernesto Macedo, recommends the referral of all future borrowings by the government to the Legislative Executive Development Advisory Council (LEDAC) for review and approval.
The process said Mr. Macedo, would force the government executive to explain "if not to the public at least to its representatives, the House and Senate leadership, why it is borrowing, how much and what are the terms and conditions."
The specter of debt default, however, remains a strong possibility.
An investment consultant writing for Asia Times Online this week, warned that although many analysts and investors were aware of similarities between the Philippines' fiscal position and that of pre-default Argentina, the social and political similarities between the two countries continued to be overlooked.
"One of the key reasons why economic growth slowed in Argentina was the gathering social revolt," claims Jephraim Gundzik, the president of Condor Advisers, an investment consultancy that foresaw Argentina's default and devaluation.
"Increasing social instability in Argentina, driven by increasing unemployment, rising taxes and non-payment of public-sector wages and pensions, created political instability, leading to the eventual collapse of the government and default. Notably, the International Monetary Fund dictated to Argentina the fiscal policies that resulted in social revolt. The same pattern is being replicated in the Philippines," he said.
Argentina's debt default instead of sending a warning to other emerging-market countries may suggest a viable alternative.
According to Philippine congressman Satur Ocampo, quoted in a recent UK Financial Times' report, Argentina has "done rather well" following its loan default and has grown by 8 per cent in each of the past two years. Its currency has stabilised and 2 million net jobs have been created since 2002, when Argentina defaulted on an $805-million debt to the World Bank.
Argentina blamed the default on IMF policy that required the government to tighten its budget and anti-inflation measures before it could strike a deal for emergency funds.
At the time, a report distributed electronically by the Brussels-based anti-debt group Eurodad suggested the World Bank could be seriously harmed by the Argentine move, the biggest sovereign debt default in history.
According to the report, the default posed a threat to the Bank's own creditworthiness and reputation and put its AAA bond-rating with investors at risk.
Eurodad predicted a default trend could spread if "the contagion pushes other countries in the region into making similar defaults or refusals to deal on the IFIs' terms."
Nam Theun 2 studies miss the boat
by Aviva Imhof, World Rivers Review, Vol. 20, No. 1, February 1, 2005
Project documents mask flaws in World Bank project.
Please visit Probe International's Nam Theun 2 dam campaign on the Web.
A series of technical reviews by independent experts for the Nam Theun 2 Hydropower Project in Laos has revealed serious flaws in the project's environmental impact assessment and social development plan – flaws which call into question the project's viability and scale of its impacts. Reviewers note that the project documents lack critical analysis, data and information, and say the project's plans for compensating affected villagers have a high likelihood of failure.
The US$1.3 billion Nam Theun 2 Hydropower Project would forcibly displace 6,200 indigenous people and impact more than 100,000 villagers who depend on the Xe Bang Fai River for fish, agriculture and other aspects of their livelihood. The project is being developed by Electricité de France (a French utility) and two Thai companies in cooperation with the Lao government. One of its big selling points is that it will generate foreign exchange for Laos by selling the power to Thailand. The World Bank, Asian Development Bank and other donors will make a decision on whether to support the project in coming months.
Technical reviews of the EIA and Social Development Plan (SDP) were commissioned by NGOs on five different aspects of the project, including hydrology, water quality, impacts along the Xe Bang Fai River, and the viability of the resettlement plans for villagers living on the Nakai Plateau. Contrary to claims by the World Bank and the Nam Theun 2 Power Company that the project is "world class" and that studies are "comprehensive" and in compliance with World Bank safeguard policies, reviewers found major gaps in the documentation.
"Nam Theun 2 has been under preparation for more than a decade, which makes these gaps quite alarming," said Shannon Lawrence, with the Washington, DC-based group Environmental Defense. "Considering the project's size and scope and the significant resources that have already been poured into its development, it is shocking that more rigorous analysis of potential impacts and clear, feasible plans for compensating affected people still do not exist."
Viability in Question
The review of the project's hydrologic data found that the analysis is so deficient that it is impossible to predict how much water is available for power generation. The reviewers found that the lack of long-term stream flow and rain flow monitoring, coupled with questionable statistical analysis techniques, makes the project "high risk for meeting its power generation predictions and for estimating potential project impacts." In addition, the project developers have undertaken no analysis of how global climate change might affect flows in the Theun River.
"Project planners propose to make irreversible commitments of the hydrologic integrity of these two river basins, the livelihoods of basin residents, and a large capital investment," says Dr. Peter Willing, a hydrogeologist who reviewed the plans. "The EIA's underlying data is inadequate to sustain a conventional hydrologic analysis. The consequences will be vast and difficult to predict: flooding, erosion, disruption of biological and human systems."
The reviewers found that the project developers have also failed to examine how increased water flows will affect the upper and middle reaches of the Xe Bang Fai River, the river to which Nam Theun 2's water will be diverted. This is of concern as more than 7,600 people live along this stretch of the Xe Bang Fai and will be seriously affected by increased flooding and erosion, as well as by depleted fisheries and other impacts.
Fisheries Impacts Underestimated
David Blake, a fisheries specialist based in Thailand, looked at the project's potential impacts on fisheries in the Xe Bang Fai and other downstream rivers. According to Blake, Nam Theun 2 "is likely to have multiple serious, negative impacts on the aquatic resources of the Xe Bang Fai, Nam Phit and other downstream river basins. The likely result will be, as predicted in the project's Social Development Plan, a 'collapse in the aquatic food chain' from the Nam Phit down to the Mekong."
Tens of thousands of people depend on the fish and other aquatic resources of the Xe Bang Fai River for protein and income. Blake's review of the project EIA found that the plan was severely lacking in detail and rigorous scientific analysis.
The official prediction of impacts on fisheries for the downstream rivers is based on only three field surveys, all conducted during the dry season. As a result, the EIA likely underestimates the number of fish species present in the Xe Bang Fai, and contains no study of fish migrations in either the Nam Theun or Xe Bang Fai river basins.
The EIA also ignores the importance of other aquatic organisms in the riverine ecology and food chain, and therefore fails to consider the implications of the loss of these resources for the food security and livelihoods of the people of the Xe Bang Fai basin.
Blake found that where the EIA does identify serious impacts likely to result from the project's operations, it expresses an unwarranted faith in mitigation methods to alleviate the impacts, despite a poor record of mitigation attempts at other regional hydropower projects. Blake also reviewed the plan for compensating villagers along the Xe Bang Fai.
According to the power company, "all and any negative impacts on villagers' socioeconomy . . . will be fully compensated" by "fair replacement or in alternative income at least equal to the value lost." However, Blake found that the program is "overly ambitious, poorly reflects actual experience in the region and leaves many questions unanswered."
One of the main plans is to replace freshwater fisheries with aquaculture. However, Blake says that aquaculture should not be considered as a direct replacement to "capture fisheries," as cultured fish do not have an equal economical, nutritional or cultural value in the diets of Lao villagers.
Moreover, experiences to date in Lao PDR suggest that adoption of aquaculture is a slow and gradual process, and that the poorest people often lack the land and capital resources to fully adopt aquaculture. Even if villagers did decide to take up aquaculture in any numbers, there is unlikely to be the human resources or supporting infrastructure present in the area to provide sufficient fish seed or offer training and extension services for many years to come.
According to Blake, "the compensation options proposed are incompatible with helping more than a fraction of affected people in the short to medium term, and even then there is a real danger that any benefits will only go to the better-off villagers, who are likely to be chosen for pilot-testing the options."
In this context, the power company's goal of replacing lost livelihoods along the Xe Bang Fai within five years of commercial operation is completely unrealistic. At the downstream Theun-Hinboun Hydropower Project, now six years after commercial operation began, many villagers remain without adequate compensation for lost fisheries and riverbank vegetable gardens, and while there have been some successes, many challenges remain.
Resettlement Failure?
The project will forcibly displace more than 6,200 indigenous people living on the Nakai Plateau, the area to be flooded by the reservoir. According to the developers' plans, resettlers' income will be tripled within seven years. To achieve this, they've promised new irrigated farmland and fruit trees, new livestock and community forestry operations, and a reservoir fishery capable of supporting over 1,000 fishermen. However, many of these plans are simply unrealistic or unviable, and even the developers admit that plenty can go wrong.
Just as villagers feared, the new farm plots are small, and the soil is poorly suited to crop production as it is "heavily leached and infertile," according to the Social Development Plan (SDP). High inputs of organic and inorganic fertilizer will be required to grow anything, but the company plans to help pay for fertilizer for only three years. In addition, there may not be sufficient land for grazing villagers' livestock, particularly their prized herds of buffalo. Instead, the resettlement plans require the villagers to adopt intensive livestock-raising techniques, requiring high levels of labor and inputs in the form of feed and animal health care.
According to the reviewer of the resettlement plans, "this proposed change in agricultural and livestock raising practices is nothing short of a revolution in farming methods for the resettled villagers," a revolution that has a "high likelihood of failure." Villagers are also supposed to derive some income from logging a community forestry area. However, even the developers aren't optimistic about this plan. They report that "profitability of pulpwood production is likely to be close to marginal given the poor sites available at the Plateau. . . . [and is] fraught with risks as many things could happen over the long term that pose a threat to the profitability of the crop."
Meanwhile, villagers will be losing a major part of their income from the collection and sale of nontimber forest products (NTFPs), many of which will disappear once the reservoir is flooded. While villagers were hoping that the community forest area could be used for collection of such products, the SDP reveals that due to the poor soils, this area will produce "very few NTFPs."
While the SDP also promises significant incomes for villagers from fishing in the reservoir, a review of the fisheries management plan by fisheries specialist Eric Theiss has found that it is unlikely that the Nam Theun 2 reservoir will be able to sustain a significant fishery. According to Thiess, "the fishery is intended to be developed from fish trapped by the dam, however, many of these fish will die, and it will be difficult to build a substantial population." Dam operations will shrink the reservoir to less than a fifth of its size during the dry season, which eliminates most of the underwater habitat. What water is remaining is likely to be lacking in oxygen, making it difficult for fish to survive.
According to Gráinne Ryder from Probe International, "A fair compensation plan would look very different from the current plans. Quite apart from investments in dubious livelihood improvement schemes, the Nam Theun 2 Power Company owes Nakai villagers for sacrificing their land and resources, and for enduring a decade of economic stagnation. The company owes anyone displaced by the project full market value compensation for lost resources, livelihoods, income, and opportunity, for at least as long as the project fails to triple resettlers'income as promised. Anything less makes Nakai villagers victims of the Nam Theun 2 Power Company, not its beneficiaries."
Nam Theun 2 studies miss the boat
by Aviva Imhof, World Rivers Review, Vol. 20, No. 1, February 1, 2005
Project documents mask flaws in World Bank project.
Please visit Probe International's Nam Theun 2 dam campaign on the Web.
A series of technical reviews by independent experts for the Nam Theun 2 Hydropower Project in Laos has revealed serious flaws in the project's environmental impact assessment and social development plan – flaws which call into question the project's viability and scale of its impacts. Reviewers note that the project documents lack critical analysis, data and information, and say the project's plans for compensating affected villagers have a high likelihood of failure.
The US$1.3 billion Nam Theun 2 Hydropower Project would forcibly displace 6,200 indigenous people and impact more than 100,000 villagers who depend on the Xe Bang Fai River for fish, agriculture and other aspects of their livelihood. The project is being developed by Electricité de France (a French utility) and two Thai companies in cooperation with the Lao government. One of its big selling points is that it will generate foreign exchange for Laos by selling the power to Thailand. The World Bank, Asian Development Bank and other donors will make a decision on whether to support the project in coming months.
Technical reviews of the EIA and Social Development Plan (SDP) were commissioned by NGOs on five different aspects of the project, including hydrology, water quality, impacts along the Xe Bang Fai River, and the viability of the resettlement plans for villagers living on the Nakai Plateau. Contrary to claims by the World Bank and the Nam Theun 2 Power Company that the project is "world class" and that studies are "comprehensive" and in compliance with World Bank safeguard policies, reviewers found major gaps in the documentation.
"Nam Theun 2 has been under preparation for more than a decade, which makes these gaps quite alarming," said Shannon Lawrence, with the Washington, DC-based group Environmental Defense. "Considering the project's size and scope and the significant resources that have already been poured into its development, it is shocking that more rigorous analysis of potential impacts and clear, feasible plans for compensating affected people still do not exist."
Viability in Question
The review of the project's hydrologic data found that the analysis is so deficient that it is impossible to predict how much water is available for power generation. The reviewers found that the lack of long-term stream flow and rain flow monitoring, coupled with questionable statistical analysis techniques, makes the project "high risk for meeting its power generation predictions and for estimating potential project impacts." In addition, the project developers have undertaken no analysis of how global climate change might affect flows in the Theun River.
"Project planners propose to make irreversible commitments of the hydrologic integrity of these two river basins, the livelihoods of basin residents, and a large capital investment," says Dr. Peter Willing, a hydrogeologist who reviewed the plans. "The EIA's underlying data is inadequate to sustain a conventional hydrologic analysis. The consequences will be vast and difficult to predict: flooding, erosion, disruption of biological and human systems."
The reviewers found that the project developers have also failed to examine how increased water flows will affect the upper and middle reaches of the Xe Bang Fai River, the river to which Nam Theun 2's water will be diverted. This is of concern as more than 7,600 people live along this stretch of the Xe Bang Fai and will be seriously affected by increased flooding and erosion, as well as by depleted fisheries and other impacts.
Fisheries Impacts Underestimated
David Blake, a fisheries specialist based in Thailand, looked at the project's potential impacts on fisheries in the Xe Bang Fai and other downstream rivers. According to Blake, Nam Theun 2 "is likely to have multiple serious, negative impacts on the aquatic resources of the Xe Bang Fai, Nam Phit and other downstream river basins. The likely result will be, as predicted in the project's Social Development Plan, a 'collapse in the aquatic food chain' from the Nam Phit down to the Mekong."
Tens of thousands of people depend on the fish and other aquatic resources of the Xe Bang Fai River for protein and income. Blake's review of the project EIA found that the plan was severely lacking in detail and rigorous scientific analysis.
The official prediction of impacts on fisheries for the downstream rivers is based on only three field surveys, all conducted during the dry season. As a result, the EIA likely underestimates the number of fish species present in the Xe Bang Fai, and contains no study of fish migrations in either the Nam Theun or Xe Bang Fai river basins.
The EIA also ignores the importance of other aquatic organisms in the riverine ecology and food chain, and therefore fails to consider the implications of the loss of these resources for the food security and livelihoods of the people of the Xe Bang Fai basin.
Blake found that where the EIA does identify serious impacts likely to result from the project's operations, it expresses an unwarranted faith in mitigation methods to alleviate the impacts, despite a poor record of mitigation attempts at other regional hydropower projects. Blake also reviewed the plan for compensating villagers along the Xe Bang Fai.
According to the power company, "all and any negative impacts on villagers' socioeconomy . . . will be fully compensated" by "fair replacement or in alternative income at least equal to the value lost." However, Blake found that the program is "overly ambitious, poorly reflects actual experience in the region and leaves many questions unanswered."
One of the main plans is to replace freshwater fisheries with aquaculture. However, Blake says that aquaculture should not be considered as a direct replacement to "capture fisheries," as cultured fish do not have an equal economical, nutritional or cultural value in the diets of Lao villagers.
Moreover, experiences to date in Lao PDR suggest that adoption of aquaculture is a slow and gradual process, and that the poorest people often lack the land and capital resources to fully adopt aquaculture. Even if villagers did decide to take up aquaculture in any numbers, there is unlikely to be the human resources or supporting infrastructure present in the area to provide sufficient fish seed or offer training and extension services for many years to come.
According to Blake, "the compensation options proposed are incompatible with helping more than a fraction of affected people in the short to medium term, and even then there is a real danger that any benefits will only go to the better-off villagers, who are likely to be chosen for pilot-testing the options."
In this context, the power company's goal of replacing lost livelihoods along the Xe Bang Fai within five years of commercial operation is completely unrealistic. At the downstream Theun-Hinboun Hydropower Project, now six years after commercial operation began, many villagers remain without adequate compensation for lost fisheries and riverbank vegetable gardens, and while there have been some successes, many challenges remain.
Resettlement Failure?
The project will forcibly displace more than 6,200 indigenous people living on the Nakai Plateau, the area to be flooded by the reservoir. According to the developers' plans, resettlers' income will be tripled within seven years. To achieve this, they've promised new irrigated farmland and fruit trees, new livestock and community forestry operations, and a reservoir fishery capable of supporting over 1,000 fishermen. However, many of these plans are simply unrealistic or unviable, and even the developers admit that plenty can go wrong.
Just as villagers feared, the new farm plots are small, and the soil is poorly suited to crop production as it is "heavily leached and infertile," according to the Social Development Plan (SDP). High inputs of organic and inorganic fertilizer will be required to grow anything, but the company plans to help pay for fertilizer for only three years. In addition, there may not be sufficient land for grazing villagers' livestock, particularly their prized herds of buffalo. Instead, the resettlement plans require the villagers to adopt intensive livestock-raising techniques, requiring high levels of labor and inputs in the form of feed and animal health care.
According to the reviewer of the resettlement plans, "this proposed change in agricultural and livestock raising practices is nothing short of a revolution in farming methods for the resettled villagers," a revolution that has a "high likelihood of failure." Villagers are also supposed to derive some income from logging a community forestry area. However, even the developers aren't optimistic about this plan. They report that "profitability of pulpwood production is likely to be close to marginal given the poor sites available at the Plateau. . . . [and is] fraught with risks as many things could happen over the long term that pose a threat to the profitability of the crop."
Meanwhile, villagers will be losing a major part of their income from the collection and sale of nontimber forest products (NTFPs), many of which will disappear once the reservoir is flooded. While villagers were hoping that the community forest area could be used for collection of such products, the SDP reveals that due to the poor soils, this area will produce "very few NTFPs."
While the SDP also promises significant incomes for villagers from fishing in the reservoir, a review of the fisheries management plan by fisheries specialist Eric Theiss has found that it is unlikely that the Nam Theun 2 reservoir will be able to sustain a significant fishery. According to Thiess, "the fishery is intended to be developed from fish trapped by the dam, however, many of these fish will die, and it will be difficult to build a substantial population." Dam operations will shrink the reservoir to less than a fifth of its size during the dry season, which eliminates most of the underwater habitat. What water is remaining is likely to be lacking in oxygen, making it difficult for fish to survive.
According to Gráinne Ryder from Probe International, "A fair compensation plan would look very different from the current plans. Quite apart from investments in dubious livelihood improvement schemes, the Nam Theun 2 Power Company owes Nakai villagers for sacrificing their land and resources, and for enduring a decade of economic stagnation. The company owes anyone displaced by the project full market value compensation for lost resources, livelihoods, income, and opportunity, for at least as long as the project fails to triple resettlers'income as promised. Anything less makes Nakai villagers victims of the Nam Theun 2 Power Company, not its beneficiaries."
The Story of the Dahe Dam: Chapter 6
|
The Three Gorges Probe serialization of The Story of the Dahe Dam continues.
Chapter 6 (excerpt), February 10, 2005
Tailor Wang travels to Beijing to bring local grievances to the attention of top authorities, and is shocked when he is immediately detained and sent to a holding centre for drifters.
www.probeinternational.org/pi/index.cfm?DSP=content&ContentID=12463
Will power
by Lisa Peryman, Odious Debts Online, a project of Probe International, February 18, 2005
Once again Canada has found cause to wag its diplomatic finger at Africa, this time shaking a despairing head over Kenyan President Mwai Kibaki and his government's failure to stamp out corruption. Canada isn't the only western nation on Kenya's case.
Foreign donors threatened to halt aid to Kenya earlier this month unless President Kibaki took action to crack down on abuses of the public trust.
The sharp increase in domestic and international pressure on the president follows the resignation of his top advisor on corruption and renewed charges of high-level graft by Britain's High Commissioner to Kenya, Sir Edward Clay.
Joining in the diplomatic fray this week was Canada's High Commissioner to Kenya, Jim Wall, who expressed doubts Kibaki's administration could even muster the necessary political will to fight sleaze.
Speaking to a media workshop on investigative journalism this week in Nairobi, Wall said: "Yes, the fight against corruption is more than one individual. Yes, institutions and systems are important, and yes, they take time to create and mobilize. But what is most important, and what is apparently lacking, is political will, the fire in the belly necessary to ferret out and to expose the crooks, to put them on the defensive, to ask the hard questions."
What Wall fails to acknowledge, however, is his own government's lack of political will to punish Canadian corporations that engage in Third World bribery.
It is no surprise that "Kenya's government isn't getting serious about stopping corruption when the Canadian government won't get serious about stopping the companies that offer the bribes in the first place," said Patricia Adams, the executive director of Canadian foreign-aid watchdog Probe International, in response to Wall's comments.
Ms. Adams is referring to the Canadian engineering company Acres International, the first international firm convicted of bribery in the now famous and ongoing Lesotho corruption trials involving a $12-billion Highlands water project in southern Africa. In 2002, Acres was convicted in the Lesotho High Court of bribing a local official to win a lucrative contract on the massive aid-financed, dam-building scheme. Acres appealed the court's verdict, lost, and in a landmark decision in 2004 became the first major multinational to be blacklisted from World Bank contracts.
Despite this, the Canadian government decided it wasn't important to send a clear message to Acres and other Canadian corporations that bribery doesn't pay and announced it would continue awarding public contracts to Acres through federal agencies, such as the Canadian International Development Agency and Export Development Canada. It seems Lesotho's call to western governments to stop publicly condemning bribes while privately winking at them fell on deaf ears but it did puncture the popular perception of corruption as a particularly "African" problem.
"It takes two to tango," said Lesotho's Minister of Natural Resources, Monyane Moleleki, following the Acres' conviction. The case showed "the rest of the world Lesotho had to be taken seriously by its friends in the First World" he said, and that it can "do business with integrity and decency."
Meanwhile, it was a year ago this month that Canada was drubbed in the world's press for a government scandal of its own.
Worldwide news agencies were quick to savour Canada's fall from grace as a do-gooder nation when the country's auditor general produced a bombshell report condemning the ruling Liberal government for the misuse of at least CDN$100 million in public funds. The UK's Financial Times couldn't resist shaming Canada further, pointing out that the country's government officials, so fond of "lecturing their counterparts from poorer countries" at international summits on "the debilitating effects of corruption," now had a corruption scandal to call their very own.
Canada has since returned to the international lecture circuit, it would seem.
The Story of the Dahe Dam: Chapter 5
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The Three Gorges Probe serialization of The Story of the Dahe Dam continues.
Chapter 5 (excerpt), February 10, 2005
Another feisty character who will play a lead role in the Dahe drama enters the fray, and senses danger in villagers' plans to cause trouble at the hydropower station.
www.probeinternational.org/pi/index.cfm?DSP=content&ContentID=12429
The Story of the Dahe Dam: Chapter 4
|
The Three Gorges Probe serialization of The Story of the Dahe Dam continues.
Chapter 4 (excerpt), February 10, 2005
Local officials go on the warpath against Teacher Xu after they realize he is the author of petitions that accuse them of misusing and embezzling compensation funds.
www.probeinternational.org/pi/index.cfm?DSP=content&ContentID=12386
Environmental NGOs in China: Encouraging action and addressing public grievances
Rapid economic growth has resulted in massive degradation of China's rivers, marshes, and forests, prompting the rise of a new generation of citizen activists who challenge government policies.
February 7, 2005
A presentation by Patricia Adams of Probe International to a Congressional-Executive Commission on China roundtable discussion on environmental NGOs in China.
"Thank you very much for the opportunity to participate in this Congressional-Executive Commission on China Roundtable.
I am the Executive Director of Probe International, a Canadian-based environmental NGO. For 25 years, we have worked with citizens in Third World countries to help them fight development projects that undermine the environments they depend on.
Since the early 1980s, Probe International has monitored the world’s largest and most controversial dam project, the Three Gorges dam on China's Yangtze river. We have done so by working with academics, researchers, and press in China, including Dai Qing, the celebrated Chinese journalist who spent 10 months in jail for publishing Yangtze! Yangtze!, a book authored by China’s most eminent scientists and scholars. Probe International translated and published Yangtze! Yangtze! and a subsequent book edited by Dai Qing, called The River Dragon Has Come! Both books are banned in China. We also published our own damning critique of the dam’s official feasibility study, which was financed by the Canadian government, conducted by Canadian engineers, and used to justify building the Three Gorges dam.
I am also the publisher of Three Gorges Probe, an Internet news service that Probe International began in 1998 to report on Three Gorges and other dams in China. Our goal has been to circumvent the ban on criticism of the Three Gorges dam. We believe that projects like Three Gorges can be built only in the absence of good information about their real costs and benefits, and in the absence of an informed public debate. Our goal is to let the facts, for and against dams, speak for themselves, and to help inform the public by providing the Chinese press, scholars, and activists with a safe forum in which to publish their views. But perhaps our news service’s most important goal is to record and publish details of the harm done by Three Gorges and other dams, in the hope that future generations will be protected from more of the same.
Three Gorges Probe is published in both English and Chinese. The two sites together have close to a quarter of a million page views per month and their readership grew at a rate of almost 150% last year.
Despite the fact that we often publish censored information, our site has generally not been blocked in China and our readers from the mainland have described Three Gorges Probe as the "best," "most accurate," and the only "truthful" source of information about the dam. Three Gorges Probe is relied upon by the press, scholars, environmentalists, and grassroots activists. Dam officials also read it: Sometimes, within days of our stories exposing a scandal or a threat to the dam, dam authorities would announce either that the problem doesn't exist or is being solved. Our stories have ended up on the front pages of the international media, including the New York Times and the UK's Guardian, on Chinese Internet sites around the world, in the chatrooms of China Youth Daily, Sina.com and even the Changjiang Water Resources Commission.
Here's a sample of the stories we've covered:
1) An exclusive report revealing endemic corruption, debauchery and an underworld that now robs and terrorizes dam evacuees who are being resettled by the Three Gorges dam;
2) The arrest, detention, trial and conviction of four representatives of dam evacuees from Yunyang county who attempted to recover their community’s compensation funds from corrupt local officials by appealing to the Communist Party in Beijing. They were sentenced to two and three year jail terms for "maintaining an illicit relationship with a foreign country" and for "disturbing the public order";
3) An energy analysis showing that Three Gorges power is more expensive than power from high-efficiency gas turbines and cogeneration, and ineffective at displacing coal-fired power;
4) Leaked correspondence between China's top leadership admitting that Qinghua University research shows that the dam's flood control benefits are inadequate and "smaller than declared by us." But, warn the correspondents, "never, ever let the public know this";
5) Warnings by two senior members of the Chinese Academy of Engineering that incidents of earthquakes and landslides indicate that the Three Gorges region is geologically unstable, that lives are at risk, and that geological-safety inspections of resettlement zones must be carried out immediately and checked and double-checked;
6) A report on cracks in the dam which are more than a meter deep and run all the way up the huge concrete structure, leading to emergency repair work and promises by dam authorities to take greater care in future;
7) A surprise announcement by dam operators that it would raise the reservoir level from 135 to 139 meters three years ahead of schedule, forcing the emergency evacuation of 1,300 residents from their homes. Independent experts think the reason was to protect electricity output which is threatened by an unexpected rise in the accumulation of silt behind the dam;
8) During the news blackout of the surging anti-dam protests at the Pubugou dam site in Sichuan province last October and November, we reported on the violent clashes with police resulting in several deaths, hundreds of villagers detained, several dozen farmers hospitalized and the emergence of the "dare-to-die brigade" – elderly men and women who taunted the police with shouts of, "Kill us, kill us! We will no longer have to move if you kill us!" (This period was one of the few in which our Web site was blocked.)
9) A report on farmers in Hebei province who risked life and liberty in 2004 to dodge police and gather more than 11,000 signatures on a petition calling for the removal of Zhang He, the former mayor of Tangshan and the city's Communist Party boss. The petition accused Zhang He of stealing compensation funds intended for people who were forced to move in the 1990s to make way for the Taolinkou reservoir on the Qinglong River. Seven of the farmers were arrested by local police as they attempted to deliver their petition to the National People's Congress. Their lawyer escaped, however, and was chased by Tangshan police around Beijing, from one hiding spot to another, and one computer to another, from which he gave online updates of the unfolding drama and with which he did Google searches to get more information on the "assembly and demonstration law," "the Constitution of the PRC" and "the representative law of the National People’s Congress and people's congresses at local levels" to assist his clients.
10) We have posted the Chinese, and now the English version, of a remarkable book by a Chinese social scientist, Ying Xing, about the ruinous impacts of the Dahe dam built on a Yangtze tributary 30 years ago and the determination of ordinary citizens who fought for their rights in a 20-year struggle. Many of the 20,000 people affected by that dam are now being forced to move for Three Gorges. The book, The Story of the Dahe Dam, was published in China to great acclaim in 2001, and was banned six months later. It remains banned today.
Where do we get our information?
Until recently, details of citizen protests or criticism of dams in China have not come from formally recognized, government approved NGOs that are able to hang up a shingle advertising their existence. And, until recently, lawyers have not come forward to help aggrieved citizens. With the exception of a few aggressive newspapers, very little information beyond propaganda has come from the mainland media.
Instead, over the past 20 years, critical information about Chinese dams has come in an ad hoc way from journalists, activists, site research, the Internet, and dam authorities. Much of the expert opinion we rely on has come from Chinese scholars, many of whom are elderly and, having survived years of abuse for voicing their opinions, have become even firmer in their resolve to speak out for the sake of future generations. Over the years, academics who dared to criticize dam plans such as Huang Wanli, China's most eminent hydrologist, were made to do hard labour building the dams. They were deprived of their teaching posts and shunned in their professional lives. This has been a tragic reality for dam critics. Some have been deprived of research funds, others have lost their right to work and to publish. Others have been demoted. Still others have been visited in the middle of the night by the police and warned not to talk to foreign journalists.
Academics aside, average citizens such as He Kechang and his compatriots in Yunyang county have been jailed on trumped up charges because they sought justice for the losses they suffered because of the Three Gorges dam. The few mainland newspapers that have dared to disclose damming details about Three Gorges or other planned dams have had their top editors fired and their management charged with corruption. In our own work to publish critical information about the environmental, economic and technical problems with Chinese dams, we have had to take precautions. Most of our Chinese contributors use pseudonyms. We are always circumspect in our communication.
I believe this oppressive atmosphere is going to change.
The recent protests against the proposed construction of dams in Western China along the Nu and Jinsha (upper Yangtze) rivers in Yunnan and the Min River and Pubugou dam in Sichuan are a sign of the changing times: Chinese citizens affected by dams are becoming acutely aware of their rights and are prepared to fight for them; academics and environmentalists are able to help them, the press is very interested in covering their stories, and the Internet facilitates all parties’ communication. These protests have been so effective that, by the end of 2004, work on over a dozen dams had been suspended.
While environmentalists, NGOs, and the affected communities in China have made great gains in their struggles against these big dams, people such as Dai Qing report that everybody knows these victories are temporary. And, she adds, it is likely that the vested interest groups – powerful forces including officials of the dam enterprises and the ministries that sponsor them – will do everything possible to stage a comeback, cracking down on the environmental organizations and attacking the leaders.
But there is at least one reason to hope that the "benefit groups," as Dai Qing calls the beneficiaries of the current system, won’t resort to their old methods of repression to build their dams. It is this.
On January 18 of this year, the State Environmental Protection Administration (SEPA), China's top environment watchdog, accused 30 infrastructure projects (26 of which are energy schemes) in 13 provinces and municipalities, involving billions of dollars, of starting construction before their environmental impact assessment reports were approved. It then ordered them to suspend construction. This is an extraordinary and unprecedented move by the central government. The Chinese environmental enforcement authorities sent state enterprises and the private sector a message they have never heard before: We have a law that requires you to submit an environmental assessment for your project in order to get approval to proceed and if you don't abide by the law, we’ll suspend your construction until you do so.
According to China's Law on Environmental Impact Assessment, which took effect on September 1, 2003, construction projects should not be started before their environmental impact assessment documents are approved by environment authorities. Furthermore, the law is supposed to oblige project developers to consult with local communities before decisions are made. Indeed, Pan Yue, the vice-director of SEPA, announced that in future public hearings will be held on environmentally sensitive projects to allow residents and other parties into the decision-making process.
By January 24, construction on 22 out of the 30 projects had stopped.
Construction on the remaining eight of those projects continued, including three hydropower plants of the China Three Gorges Project Corporation. Two of the plants are part of the Three Gorges Dam complex (the Three Gorges Underground Power Plant and the Three Gorges Project Electrical Power Supply Plant) and the third is the Xiluodu Hydropower Plant along the Jinsha River, a section of the upper reaches of the Yangtze River, a $5.3 billion project that is the biggest among the 30.
SEPA threatened the China Three Gorges Project Corporation with legal action and the drama of the stand-off between SEPA – heretofore considered a toothless environmental regulator – and the China Three Gorges Project Corporation – one of the nation's most powerful and China's largest hydro-electric power company – mounted. The domestic media dubbed the actions as an "environmental impact assessment storm."
Then, on February 2, the developer of the Three Gorges Project Corporation backed down, agreeing to file environmental impact statements for two power plants and to hold up construction on a third.
The compliance of the Three Gorges company, which had refused to obey the order for a fortnight, was believed to come about as a result of direct pressure from the central government. Not only has China's Premier, Wen Jiabao, backed SEPA but, according to news reports, SEPA enlisted the support of the powerful National Development and Reform Commission (NDRC), the country's top planning authority, to enforce its order.
Furthermore, during the stand-off, SEPA and the National Development and Reform Commission issued a notice about the need for environmental protection during the building of hydropower plants. According to the notice, some projects start construction without environmental protection facilities, causing soil erosion, while others cause negative impact on the ecology of the lower reaches due to defects in design and operation. Great importance should be attached to the environmental impact assessment of hydropower development plans, the notice said. Hydropower projects should also take concrete environmental protection measures.
Li Dun, of Tsinghua University's Centre for the Study of Contemporary China, said the co-operation between SEPA and NDRC was encouraging, but he remained cautious. SEPA has not dealt with fundamental environmental issues such as whether those projects should be built in the first place. "It remains to be seen whether the Environmental Impact Assessment Law is just a process," he said.
Professor Li is absolutely correct.
SEPA's environmental assessment law is not going to save China's environment. My organization has a 20-year history of reviewing feasibility studies for large development projects, starting with the massive feasibility study for the Three Gorges dam, which included an environmental assessment. It was so rife with errors, omissions, and bias that we filed formal complaints of professional negligence against the engineering firms that conducted it.
Environmental assessments are usually conducted by the proponents, paid for by the proponents, or controlled by the proponents. Because the proponents are not held legally accountable to those they harm or put at risk, proponents can discount the costs they inflict on others. Their environmental cost assessments need not accurately or comprehensively match reality. Their assessments routinely overestimate benefits without substantiation, but with hyperbole. In the end, environmental assessments become nothing more than public relations exercises to whitewash bad projects.
I doubt that the environmental NGOs, legal commentators, and scholars who have followed SEPA's unprecedented actions over the past few weeks expect the agency's move to permanently stop any of these 30 projects. But SEPA's enforcement of China's new Environmental Impact Assessment Law could have a profound effect in a different way. By upholding the law, SEPA would force proponents to carry out environmental assessments and to consult with local communities before giving approval for infrastructure projects. In so doing, the central authorities would uphold and enforce the rights of Chinese citizens and NGOs to know, to debate, and to participate in the decisions that effect their environment. In a country where citizens have been jailed, fired, demoted, threatened and even physically attacked for attempting to exercise these basic rights, this is a fundamental step toward enshrining the right of citizens to protect their environment.
Many commentators look at China's 1.3 billion citizens and see them as the world's largest threat to the global environment. I don't see them that way. Instead, I see the Chinese government as the largest threat and the citizenry as the world's largest group of front-line defenders of the environment. Give Chinese citizens the right to know, the legal and political tools, and the security to exercise their rights and to hold accountable those who would destroy their environment, and the world will see a dramatic turnaround in the dismal state of China's environment.
Thank you."
PRESS RELEASE
Environmental NGOs in China: Encouraging Action and Addressing Public Grievances
Monday, February 7, 2005 at 2:00 p.m.
Rayburn House Office Building Room 2255
The Congressional-Executive Commission on China will hold its first Issues Roundtable of 2005, entitled "Environmental NGOs in China: Encouraging Action and Addressing Public Grievances" on Monday, February 7, from 2:00 – 3:30 p.m. in Room 2255 of the Rayburn House Office Building.
All CECC hearings and Issues Roundtables are open to the public and the press.
Rapid economic growth in China has resulted in massive degradation of China's rivers, marshes, and forests, prompting the rise of a new generation of citizen activists who challenge government policies. Victims of environmental pollution, farmers displaced by huge hydroelectric power projects, and citizens concerned with the loss of China's natural wildlife are joining an increasing number of Chinese environmental NGOs to make their voices heard on the issues that affect them.
This Roundtable will examine the role Chinese non-governmental organizations play in allowing Chinese citizens a voice on national environmental policy, and their ability to serve as a channel for the grievances of individual victims harmed by particular projects.
The panelists are:
Elizabeth Economy, C.V. Starr Senior Fellow and Director of Asia Studies, Council on Foreign Relations. Dr. Economy is an expert on U.S.-China. relations and Chinese domestic and foreign policy, with particular focus on the environment. She is a member of multiple academic and nongovernmental organizations focused on U.S.-China. and environmental issues, including the China-U.S. Center for Sustainable Development, the Scholars' Environmental Change and Security Project of the Woodrow Wilson International Center; and the National Committee on U.S.-China Relations. She is the author of The River Runs Black, a book on the environmental challenges to China's future.
Patricia Adams, Executive Director of Probe International, an independent think-tank which examines the environmental consequences of Canadian government and corporate activities around the world. Her books include In the Name of Progress: The Underside of Foreign Aid and Odious Debts: Loose Lending, Corruption and the Third World's Environmental Legacy. She also edited the English language translation of Yangtze! Yangtze!, the critique of the Three Gorges dam by Chinese experts that was banned after its publication resulted in the postponement of construction on the dam.
Other panelists may be called to testify.
The Story of the Dahe Dam: Chapter 3
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The Three Gorges Probe serialization of The Story of the Dahe Dam continues.
The story so far:In Chapter 1 of The Story of the Dahe Dam, author Ying Xing described the mixed emotions of four people who watched the sluice-gate closing ceremony at the dam in July 1975. One of these was engineer Zhu Yundun, who was worried that the turbulent water discharged from the dam would scour the banks of the river downstream and wash away the area's best farmland. In Chapter 2, soon after the hydropower station went into operation, Zhu the engineer saw his worst fears materialize. One local leader recalled that after villagers lost their land to the raging river, 'women in my production team were forced to go begging for sweet potatoes, and even potato leaves, to feed their families.'
In this excerpt from Chapter 3, after yet another calamity befalls local people, a man who will play a pivotal role in their long struggle for compensation enters the scene. Teacher Xu is articulate and savvy, and warns his 'peasant brothers': 'Don't you know that accusing officials of wrongdoing is like picking a fight with a tiger? Be careful not to wind up getting hurt yourselves!'
www.threegorgesprobe.org/tgp/index.cfm?DSP=content&ContentID=12271
Iraq: loans for 'destruction and war'
BrettonWoodsProject.org, February 2, 2005
Iraq's creditors "would rather give up their claims under the guise of charity than have the spotlight of international arbitration expose that they financed a vicious dictator against his people." – Patricia Adams
In November, Paris Club creditors agreed to write off 80 per cent of Iraqi debts. Thirty per cent would be written off immediately, another 30 per cent tied to an IMF standby programme expected in mid-2005 and a further 20 per cent to be cancelled in 2008 if Iraq completes the three-year IMF programme. The US has cancelled 100 per cent of the $4.1 billion it says it is owed by Iraq, contingent on the completion of the Fund programme.
Mahdi al-Hafez, Iraq's minister of planning, said that the Paris Club plan does not go far enough and that Iraq seeks the cancellation of 95 per cent of its debts: "Iraq will resort to international arbitration if negotiations with these states reach a dead end." Finance minister Adel Abdul Mahdi said that Iraq had considered designating some of its obligations as "odious debt," loaned for "destruction and war," which need not be repaid. Civil society groups have said that the imposition of IMF conditions on the repayment of odious debt adds insult to injury. Mohammed Kamil of the Iraqi Prospect Organisation: "when Saddam executed people, he used to charge their families for the bullets used – this is precisely what the creditor countries who financed Saddam are asking of Iraqis today."
In mid-December Iraq cleared $110 million of overdue debt payments to the World Bank. Payment of the arrears was necessary to allow the resumption of BWI lending, however observers have questioned the logic which sees a country at war and with infrastructure in tatters making such a payment at this time. "The World Bank, IMF, and Iraq's other state creditors – who account for 90 per cent of claims against Iraq – want to bury their mistakes. They would rather give up their claims under the guise of charity than have the spotlight of international arbitration expose that they financed a vicious dictator against his people," said Patricia Adams, author of Odious debts: Loose lending, corruption and the third world's environmental legacy.
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Three Gorges Probe released the second installment of The Story of the Dahe Dam this week. Three Gorges Probe is serializing the translation of this fascinating and detailed account of the years-long struggle for redress pursued by thousands of Chinese people who were plunged deeper into poverty by the construction of the Dahe dam. Many of the farmers uprooted for that dam, which was built 30 years ago on a Yangtze tributary in what is now Chongqing municipality, are being moved again for the Three Gorges project.
In this excerpt from Chapter 2, author Ying Xing writes that 'soon after the hydropower station went into operation, Zhu the engineer saw his worst fears materialize.' One local leader recalls that after villagers lost their land to the raging river, 'women in my production team were forced to go begging for sweet potatoes, and even potato leaves, to feed their families.'
www.threegorgesprobe.org/tgp/index.cfm?DSP=content&ContentID=12264
The original Chinese version of the book, published under the title Dahe yimin shangfangde gushi (A Tale of Migrants Displaced by the Dahe Dam), was banned in China in 2002, but is available on our Chinese site. The on-line publication and translation of this book by Three Gorges Probe, a project of Probe International, have been made possible by the Open Society Institute. To view more publications by Probe International, please see: http://www.probeinternational.org/probeint/publications/booklist.html
Dai Qing: Out on a limb
by David Wilson, South China Morning Post, January 23, 2005
Probe International fellow and preeminent Chinese journalist Dai Qing speaks to the South China Morning Post about her dream to become a translator of children's books, her work as a military spy and her efforts to champion 'freedom of thought and independence of personality' in her homeland.
Despite, or perhaps because of, the ban on her writing, Dai Qing, 63, is China's best-known female journalist. Dai's own story, which seesaws between farce and tragedy, must rival any she has covered. Her father – a friend of Chen Duxiu, a one-time leader of the Chinese Communist Party in its formative years – was executed during the Japanese occupation. Her mother was tortured by the Japanese, but survived.
It was Dai's mother who persuaded her to enrol in the Harbin Military Engineering College in 1960. Despite having no interest in weapons, Dai applied herself to please her mother, who – Dai says with a sarcastic tone – was impressed by the institution's "high technology".
After graduating in 1966, Dai worked at a secret plant specialising in intercontinental nuclear missiles. She detested it, she says. "I don't like war. I hate war."
Before the year ended, the Cultural Revolution interrupted her work at the plant. Dai's growing disillusion with Chinese society sharpened acutely when her mother was subjected to torture again – this time by the Red Guards, who wanted to know how she had survived the Japanese occupation when her husband hadn't.
Blocking out the horror, Dai enlisted in a foreign language college and studied English, hoping to become a translator of children's books. "That was my dream," she says. But the dream remained just that. As a result, Dai had plenty of spare time, so she wrote a short story, called Longing For. It revolved around a couple who sacrifice their lives for country and party, but only really long to be together.
The story was published in 1979 in the Enlightening Daily newspaper, which had a circulation of one million. The success inspired Dai to take writing more seriously. This highlighted her English-language skills, bringing another strange twist: a job as a spy.
"Military spy," Dai says, wheezing with laughter. Dai was recruited in 1980 with a brief to cultivate and profile foreign writers. She was sent to Paris to attend a writers' conference. "But before we went, we got another big political task. The 'operator' asked us to get the Taiwanese out. 'Kick them out!'"
The attempt to force Taiwan out of the conference turned into a public relations disaster. "Everyone thought we were terrible," she says. No other countries wanted to meet the Chinese, "except Israel", says Dai, laughing again. And Dai says that she wasn't much of a spy. When chatting with writers, for instance, she often forgot her secret agenda. She says she would suddenly remember and feel dreadful. "I really, really hated my job," she says. Among her targets was the US writer Studs Terkel, who came to China in 1981. "He was very happy to make friends with me," she says.
Dai says she found it easy to write a report on him because he appeared pro-China and sympathetic to the plight of ordinary people. Unaware of Dai's deception, Terkel wanted to maintain their friendship, but Dai, from embarrassment, kept her distance. Even after giving up spying, she says it took her a decade to find the courage to renew their friendship.
Meanwhile, she began to write for the official Guangming Daily, and became concerned by the ramifications of the Three Gorges Dam. Dai says the potential consequences include disruption to the migratory patterns of birds, soil erosion, deforestation, avalanches and the build-up of industrial pollutants that may pose an acute threat to the water conservation area behind the dam.
Determined to expose the dangers, she published Yangtze! Yangtze!, a collection of interviews with informed sources who were opposed to the project. In 1989, the book was banned because it "abetted the turmoil" of the pro-democracy movement. She was banned from publishing in China and imprisoned for 10 months in Beijing's Qingcheng prison – six of which she spent in solitary confinement.
Afterwards, determined to continue speaking her mind, Dai addressed the dam issue again in her 1997 exposé, The River Dragon Has Come. She has followed this by documenting her Qingcheng ordeal, in her new memoir Tiananmen Follies (EastBridge), in which she's candid about succumbing to pressure from guards and signing false confessions.
In the foreword, author Ian Buruma writes: "Dai Qing's ideal, as a public intellectual, can be summed up in her own words: 'Freedom of thought and independence of personality.' This might seem like a modest ambition, banal almost, but in China it is actually very hard to achieve."
Even so, Dai is careful to rarely, if ever, condemn the government outright. Instead, she pragmatically casts herself as neither an anti-Beijing activist nor an unalloyed supporter of western democracy.
When an eruption of violence in Tiananmen Square looked inevitable, Dai joined other reporters who headed for the area to try to calm demonstrators. Those actions – and the fact that she was adopted by the late Marshal Ye Jianying – may explain why she hasn't been punished as harshly as other critics. The spirited way she expresses herself underlines the degree of liberty, even privilege, she experiences.
By her own reckoning, she stands close to the top of Chinese society. In 1990, she was granted permission to visit the US to undertake a fellowship at Harvard University. Feted by the west, she received the 1992 Golden Pen for Freedom (Prague), the 1993 Goldman Environment Award (San Francisco) and, in the same year, the Conde Nast Environmental Award.
But China remains her home, and she says she'll never leave. She says she believes she has a mission on the mainland, and portrays herself as its conscience.
Dai is still forthright about the dam. "On the surface, it's a hydroelectric project," she says. "It's actually a political project to show the glories of socialism."
She admits she feels powerless to stop its completion, in 2009. "But we're fighting and we're happy fighting," she says.
Yangtze! Yangtze! (1994) and The River Dragon Has Come (1998) are both publications by Probe International.
Panel takes aim at World Bank's development legacy
Probe International's Gráinne Ryder will serve as a panelist this afternoon, January 26, at a York University discussion on "Bank Meltdowns: International Financial Institutions in the Global South". The three-person panel will explore how the market-oriented development agendas of the World Bank, IMF and other international financial institutions (IFIs) have affected Ghana, Guatemala and Laos. Panelists will also examine the devastating effect IFIs have had on local populations, resistance efforts to IFIs and North-South solidarity toward ending harmful IFI policies.
Each panelist will describe the experience of one country.
Gráinne Ryder, the policy director for Probe International, will make her presentation on "Why the World Bank Should Be Shut Down: A 20-Minute Tour of the World Bank's 'Model' Development Project in Laos." Gráinne's talk comes just as the World Bank is about to decide whether or not to finance the Nam Theun 2 dam – 50km downstream of the Theun Hinboun dam in Laos (pictured). Nam Theun 2 would be Southeast Asia's largest and most environmentally destructive hydro dam, and is expected to displace and destroy the livelihoods of thousands. To visit Probe International's Nam Theun 2 campaign Web site, please see: http://www.probeinternational.org/pi/Mekong/index.cfm?DSP=titles&SubID=231.
Amin Alhassan, a professor who teaches in the York/Ryerson Graduate Program in Communication and Culture, will present on "The World Bank's Strategies of Survival: The Ghana Story." Amin will focus on two cases – water privatization and telecom deregulation as bank strategies of survival and will suggest ways to raise public awareness about the bank's responsibilities.
Human rights lawyer Grahame Russell co-directs Rights Action, a group that raises funds for community development and human rights advocacy projects in Mexico, Central America and Haiti. Grahame will present on "Guatemala: Global Impunity and the Chixoy Dam Reparations Campaign." Grahame will argue that the World Bank, the International Development Bank and the governments that control them must be made accountable for the death of more than 400 Mayan-Achi people and must make reparations for loss of home, community and land associated with the construction of the Chixoy hydro-electric dam in Guatemala.
The Bank Meltdown panel will take place today, Jan. 26 in Room 305, York University, York Lanes, from 2:30 p.m. to 4:30 p.m. For map details, please see: http://www.yorku.ca/web/futurestudents/map/.
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Over the next few weeks, Three Gorges Probe will be serializing the English translation of a fascinating, detailed account by a young Chinese sociologist of the years-long struggle for redress pursued by thousands of people forcibly resettled and inadequately compensated for a dam built in the 1970s on a Yangtze tributary. Below, crusading environmental journalist and Probe International fellow Dai Qing introduces the book, which was published in China under the title Dahe yimin shangfangde gushi (A Tale of Migrants Displaced by the Dahe Dam). The original Chinese version of the book was banned in China in 2002, but is available on Three Gorges Probe's Chinese site. The translation and on-line publication (in Chinese and English) of the book have been made possible by the Open Society Institute.
Introduction to Ying Xing's
The Story of the Dahe Dam
by Dai Qing
Strange and ridiculous things can happen in today's China, and here is a good example. A purely academic work, a sociological study of the impacts on about 20,000 people of a small dam built 30 years ago in southwest China, was published in a modest print run of 7,000 copies as part of the Harvard-Yenching Institute monograph series and, within six months, was banned by the Chinese government. Even in that short period of time, the book had become widely read, its reputation spreading rapidly by word of mouth not only in mainland China, but also in Hong Kong, Taiwan and beyond. Readers in China and abroad were impressed by the author's ability to penetrate the lives of ordinary people and reveal the inner workings of Chinese society through his detailed accounts of struggles between individuals and authorities at all levels.
Of the 50 or so academic works that have appeared in the series put out by the Harvard-Yenching Institute, which selects the projects it supports with great care, this book is one of the best read. It is also the only one that has been banned in China. Why has this book attracted so much attention? Who is the author, and what story does he tell?
Some would say that Ying Xing is really telling the story of the Three Gorges dam in his book. Certainly, people in China are eager to read about the big dam from a different perspective than the one, officially sanctioned point of view promoting the project. This book is so appealing because the author, though very young, possesses keen insight into Chinese society and people's lives. His supervisor also deserves praise – a well-known scholar who guided and inspired his student to do a wonderful job. Intellectuals and academics such as the author have become precious in China, as rare as phoenix feathers and unicorn horns, surrounded as they are by many others who aspire only to get close to the centres of power, and to achieve personal prosperity.
There was another reason Ying Xing produced this book. Nobody knows quite why the Communist Party of China decided that PhD students from the prestigious think-tank, the Chinese Academy of Social Sciences, should be dispatched to the countryside to be tempered by the experience of working for a while as local officials, particularly at the county level. Many young scholars see this as a golden opportunity to make the transition from academe to a promising political career, and some have already followed this path to become career politicians.
But Ying Xing seized the opportunity to gain a better understanding of rural China, not because of any political ambition but out of genuine academic interest. Here was a young man from the city who knew little about life in the countryside but felt a deep sympathy for rural people, many of whom are still mired in poverty and misery. As it turned out, he was sent to Yunyang county in Chongqing municipality. This is one of the counties most affected by the Three Gorges project, with more than 120,000 people forced to move to make way for the dam. He was given the option of working in one of three fields: agriculture, education or Three Gorges resettlement. Without hesitation, he chose to work as an aide to the vice-governor in charge of resettlement.
The county level occupies a place of special importance in China's political landscape and bureaucratic system. For more than 2,000 years, the governor of a county has been the representative at the grassroots level of the country's top leaders. After the founding of the People's Republic in 1949, the county became the lowest administrative unit entrusted with state functions such as tax collection, and maintaining public order and social stability. The county is also the lowest level to which funds are allocated by the central government.
As an aide to the vice-governor in charge of Three Gorges resettlement in the county, Ying Xing had privileged and timely access to key policy decisions taken by Beijing. He was also able to review old records and documents, and to communicate freely with the local officials responsible for resettlement in towns and villages throughout the county. He was in an ideal position to gain insider knowledge about a highly political project that normally would remain closed to outsiders.
While Ying Xing was working on Three Gorges resettlement, he began to gather tales of woe about an older dam in the area. He focuses his account on that dam, the Dahe, which was built on a tributary of the Yangtze River between 1970 and 1975 without so much as a basic feasibility study, let alone adequate resettlement planning or proper treatment of the displaced people. Now the Dahe dam, which stands 150 metres above sea level, will be entirely submerged by the Three Gorges reservoir as it rises in the next few years to 175 metres above sea level. About 4,000 people were relocated for Dahe, and many of them are being moved again for Three Gorges. The Dahe migrants' miserable experiences give a sense of the suffering that has been endured by the tens of millions of people who have been displaced by China's 80,000 dams and reservoirs.
Dams have become a major flashpoint in relations between the government and people, with uncertainty and controversy swirling around other schemes, such as those planned for the pristine Nu River and spectacular Tiger Leaping Gorge in Yunnan province. In late 2004 alone, at least three shocking events in the Yangtze River area were connected in some way to dams. In September, about 200 people died and millions were affected when violent rainstorms pounded southwestern China for days on end; television images showed torrents of water spewing over the Three Gorges dam, which was put on alert as reservoir water levels surged above warning levels. (One of the hardest-hit areas, Kaixian county, not far from the Dahe dam, was also the site of the December 2003 blowout of the Gaoqiao natural gas well, which spewed poison fumes that killed 243 people, according to the official toll.)
In October 2004, a minor altercation between pedestrians on a street in Wanzhou, in the heart of the Three Gorges area, flared into a mass riot involving tens of thousands of people. (The city has been plagued by high unemployment and simmering social tensions since being rebuilt on higher ground to accommodate some of the people displaced by the Three Gorges dam.) And then, in November, as many as 100,000 local people protesting against the Pubugou dam in Hanyuan county, Sichuan province, forced work on that project to grind to a halt.
When something big happens in China, it has become routine for the authorities to try to conceal the truth and stifle sources of accurate information. Amid this lack of transparency, it is often difficult to know how or why certain political decisions have been made. What we do know at the moment is that the central government has decided to temporarily halt construction work on the Pubugou dam, and also to earmark an additional five billion yuan (more than US$600 million) to deal with problems stemming from the mass population resettlement for the Three Gorges project, one of the toughest issues surrounding the big dam.
The government's decision to suspend work on the Pubugou dam, which looks to be a temporary measure, also appears to be something of a conciliatory gesture toward the people. But it is also the case that many things remain unchanged in China. The political system has undergone little significant reform, and big dams are still being built to produce personal benefits for the powers-that-be. Administrative orders still come from on high, and local residents enjoy few rights to do anything other than comply. People with perfectly legitimate grievances have no option but to appeal to higher authorities for help – or to create a disturbance in order to survive.
To learn more about what goes on behind the scenes in China, this book about the ruinous consequences of one small dam is an excellent place to start. The author is particularly good at tracking the interactions among the high-ranking officials who control the purse strings in such projects, the dam builders who benefit from the schemes, the local officials who pocket money earmarked for population resettlement, the affected groups who suffer so much, and the many other players who really have nothing to do with the projects, but seek to profit from them. Ying Xing's book provides a rare window onto the relationship between ordinary people and the unelected officials who hold sway in the Chinese countryside.
In fact, struggles between officials and local people in China are occurring not only around dams, but also in Beijing, which is charging ahead with development in the run-up to the 2008 Olympics, and in Shanghai, where the economy is expanding at breakneck speed. With The Story of the Dahe Dam describing events of a kind that are occurring all around the country, it is an opportune moment to present the English translation of this book, for all those with an interest in China, and its society, its politics and uncertain future.
In the first installment of The Story of the Dahe Dam, author Ying Xing describes the mixed emotions of four people who watched the July 1975 sluice-gate closing ceremony at the dam. To read chapter one, please see:
www.probeinternational.org/pi/index.cfm?DSP=content&ContentID=12251
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Damming Belize
by Colin Woodard, E Magazine Vol. XV, No. 6, November 12, 2004 Belize's western mountains are an ecotourist's dream: a largely uninhabited region of dense tropical forests, wild rivers, cave complexes, Maya ruins and bountiful wildlife. While many of its Central American neighbors were clearing forests to make way for slash-and-burn agriculture, Belize has been making far more money keeping the trees in place. Today tourism of the nation¹s economic activity and employs a quarter of its workforce. The mountainous Cayo region is one of the main draws. But Belize's government is dead-set on building a dam on the upper Macal River, smack in the heart of Cayo. The $30 million Chalillo dam will flood 2,800 acres of tropical forest that is home to jaguars, ocelots, tapirs and the country¹s only known flock of the rare and colorful scarlet macaw. "This is the prettiest river in the country," says Mick Fleming, who owns the Chaa Creek Lodge, an ecotourism resort set in the jungle 20 miles downstream from the dam site. "We're going to lose something incredibly valuable in return for an extremely small amount of power."
Plenty of people in Cayo agree with Fleming's assessment. The city council in the district capital, San Ignacio, opposes the dam, and the vice mayor testified against the project during an unsuccessful attempt to block construction brought before the Privy Council in London last year. T-shirts and banners bearing such slogans as "The Macal is Ours" are seen all over town. "We use the river for drinking and swimming and tourism and canoeing," explains San Ignacio hotel owner Maria Preston. "The river is everything for us."
Belize is extremely short on electricity, but it's unclear whether Chalillo is the best way to meet the shortfall. Fortis Inc., the big Canadian company that will build, own and operate the $30 million dam, says it will double generating capacity on the Macal River. "We believe hydroelectricity is the most environmentally friendly type of energy out there and the most cost-effective for Belize," says spokesperson Donna Hynes.
But while the dam will substantially boost domestic electricity production, most of the power will be generated at times of day when it is more expensive than importing it from Mexico. A 2000 study by the California-based Conservation Strategy Fund estimated the project would be a net drag on the Belizean economy. The dam is also being built near an active fault line, and Fortis admitted that it mischaracterized the geological properties of the site.
"This a bad project all the way around," says Gráinne Ryder, policy director of Probe International in Toronto, which has led a campaign against Chalillo in Canada. "Fortis may make a quick profit out of it, but Belizeans will be left with the real costs for generations."
Consultations continue over funding guarantee for controversial power project in Lao PDR
by CIOB International News (The Chartered Institute of Building), October 12, 2004
The World Bank would do well to take more than usual care over its decision whether or not to provide a partial risk guarantee for the Nam Theun 2 hydro-electric power project in Lao PDR. Powerful people in the U.S. Government have been taking a close interest in the Bank's lending policies of late and are none too happy about the way the Bank has been working in relation to development funding.
Though a decision was expected this year, the World Bank says it has still not made up its mind whether it will provide a partial risk guarantee for the Nam Theun 2 hydro-electric power project, a joint venture between the electricity generating authorities of Thailand and the People's Democratic Republic of Laos. This controversial scheme will on the latest estimates cost more than $1.3 billion to implement, based on a proposal from the Nam Theun 2 Power Company led by Electricité de France. Construction is due to start in mid-2005.
According to one view, the scheme has the potential to provide a model for major development projects involving environmental and resettlement issues; according to another, it would be a costly, unreliable and environmentally damaging addition to Thailand's power system.
The World Bank appears at present willing to listen to both sides of the argument: it puts the situation like this: "The Bank is interested in NT2's potential – if properly designed and implemented – to benefit the Lao people by increased revenues for poverty reduction and environmental conservation. Others are not so sure, and claim that the assorted issues make the project too big, too complicated and/or too risky to warrant the Bank's 'green light'."
So as part of an effort to engage more directly with international stakeholders, the Bank organised a series of international workshops to discuss differing views of the project, based on background research and analysis.
In partnership with the Asian Development Bank, the series of workshops met in such fashionable locations as Bangkok, Tokyo, Paris and Washington. The series ended on September 24, 2004, with a meeting in Vientiane at the invitation of the Laos National Committee for Energy. The purpose was "to ensure that the project's objectives, potential benefits and impacts are transparent not only to the citizens of the Lao PDR but also to a broad-based group of international stakeholders."
Ian Porter, the Bank's country director for Lao PDR, said: "These workshops are just the latest step in what has been – for the World Bank at least "an unprecedented process of research, consultation and disclosure on a single project. The intensity of this effort reflects our strong desire to ensure that the project would deliver real, durable benefits for the people of Laos. That is the only basis on which we would support it."
The prospect of real and tangible benefits for the people of Laos has not convinced Canada's Energy Probe Research Foundation. On the contrary its policy director Gráinne Ryder believes that NT2 would give the French and Thai power corporations a hand-out at the expense of consumers in Thailand and the rural poor in Lao PDR.
"Bank financing for the Nam Theun 2 power deal" she says, "would ensure that the Thai power market is over-supplied with cheap power; discourage investment in higher-value, lower-cost generating options; and sink Electricité de Laos further into debt."
The International Rivers Network based in the USA weighed with another line of attack, alleging that the $1.3 billion project would forcibly displace 6,200 indigenous people and affect more than 100,000 villagers who depend on the Xe Bang Fai River for fishing and agriculture. The ecology of two major river systems would be permanently altered, says IRN, if the hydro-electric project is built: $300 million or more of donor funds and guarantees would be better utilised on poverty alleviation programs that do not carry the enormous risks associated with working in Laos.
In common with other NGOs, the International Rivers Network does not give much credence to what the World Bank regards as an unprecedented process of research and consultation. The civil society organisations believe that the consultations should give an opportunity for participants to discuss whether the NT2 project meets the World Bank's criteria for funding.
"Instead", they say, "the World Bank has decided to hold 'technical workshops' to solicit input into the project documents, not to debate the merits of the project. Reports from those already conducted indicate that the workshop formats did not allow for meaningful dialogue and debate. Critical questions from the floor were sometimes ignored or answered only superficially, and one moderator did not allow for views critical of the project to be fully expressed.
World Bank staff defend the project
"Despite World Bank assertions that it has not yet made a decision on whether or not to support the project, the World Bank staff present at the consultations defended the project rather than acknowledging the many legitimate concerns of the participants. These workshops cannot and should not be considered credible international consultations, but rather promotional workshops for the project developers."
The statement points out that Nam Theun 2 hydropower scheme is the first large dam project to be supported by the World Bank since declaring last year that it would re-engage in high risk/high reward infrastructure projects. NT2 may well be high risk, but the question is, high reward for whom? Further concerns about the Bank's lending policies have been raised by the recently announced decision to adopt Development Policy Lending as a replacement for what the World Bank describes as one of its main lending instruments, Adjustment Lending. James Adams, head of the Bank's Operations Policy and the Country Services Network, said the new policy acknowledges that there is no single blueprint for reform that will work in all countries. Therefore, he said, governments must take ownership of reforms to develop a program that meets their countries' needs.
The Bank has learned that one of the key ingredients to successful economic growth is greater scope for the private sector. This is certainly the aim of the Nam Theun 2 proposals. As well as promoting the rule of law and a functioning judiciary, said Mr. Adams, the new policy also seeks to ensure broader participation in government policy-making by emphasising that reforms should not be implemented without consultation with stakeholders, nor without deeper understanding of the social and environmental impact."
He added: "There is a much clearer statement about the desire to see governments working with civil society and other actors in the development front in putting together policies to reduce poverty. The Bank is willing to support a country's agenda, if we think the policies are sound, workable and are truly owned by the government and its citizens."
Has that test been passed? Last year, as the Energy Probe Research Foundation in Toronto records, the Thai electricity authority EGAT faced an unprecedented challenge from the country's National Economic and Social Advisory Council – including among others the Law Society of Thailand – which called for an end to the power supply monopoly and recommended separation of the State-owned transmission system from EGAT's generating business, allowing new producers to gain access to the grid.
This is surely a situation in which the World Bank is called upon to act in conformity with its redefined development policy, as Mr. Adams said, to ensure broader participation of the stakeholders and working more closely with civil society. Reports about the outcome of the recent workshops do not indicate that this shift of attitude on the part of the World Bank has had much impact on the discussions over Nam Theun 2. The Bank would do well to take more than usual care over this decision: powerful people in the U.S. Government have been taking a close interest in its lending policies of late and are none too happy about the way the Bank has been working in relation to development funding.
Do you like your beans green?
Toronto Business Times, October 9, 2004
The Green Beanery, a non-profit company that aims to help small coffee farmers in the Third World, has become Canada's newest merchant in specialty green coffee beans.
After just six months in business downtown on Brunswick Avenue, Green Beanery joins the home-coffee-roasting market, providing Canadian consumers with a variety of specialty beans.
"We stock gourmet beans from Malawi, Yemen, India, Papua New Guinea, Burundi – countries dominated by small coffee farmers with distinctive tasting beans that are generally unavailable here," said Green Beanery founder Lawrence Solomon.
"By bringing these beans to the public, we plan to expand the market for the Third World's small farmers while supporting research into activities that harm small farmers around the world."
Green Beanery's profits support the activities of Probe International, a federally registered charity that fights hydro dams and other large-scale projects that force farmers off their land.
Solomon helped found Probe International 20 years ago. He also helped found the World Rainforest Movement, Friends of the Earth Canada and Energy Probe Research Foundation.
Green Beanery also offers a selection of home coffee roasters, coffee grinders and other coffee accessories.
Sold down the river
www.threegorgesprobe.org/tgp/index.cfm?DSP=content&ContentID=11572
'In relation to the Mekong, China has become an unchallenged hegemon,' writes a Sydney-based Mekong specialist and author of nine books on Southeast Asia. Remarkably, little was known by outsiders about China's plans for dams on the Mekong before 1996. The dams have been, and are being, constructed in remote areas of Yunnan, far from any casual visits by foreigners. Eventually, there will be a "cascade" of eight dams on the upper Mekong. There is, of course, nothing new in such a major commitment to dam building in China. As the famed Chinese investigative journalist, and Probe International fellow, Dai Qing, has pointed out in her book The River Dragon Has Come: The Three Gorges Dam and the Fate of China's Yangtze River and Its People, there were virtually no major, modern water projects undertaken in China before 1949. That situation changed dramatically during the Great Proletarian Cultural Revolution. [Full text] – by Milton Osborne, Australian Financial Review, October 8, 2004.
Commentary by Patricia Adams on Iraq's odious debts
Commentary by Patricia Adams, executive director of financial aid watchdog Probe International and publisher of Odious Debts Online. This commentary aired on Marketplace, 6 p.m. in Washington, DC, Friday, October 1, 2004.
"Saddam used money western countries lent him mainly to oppress his people and build himself opulent palaces. So should his victims have to pay it back?
The lenders – including France, Russia, Germany and even the United States – say 'Yes!' To them, there's no difference between loans for oppression and loans for food. The only question – and they're now discussing it behind closed doors at IMF meetings in Washington – is how much of the debt to forgive.
How convenient for the West. No muss, no fuss, no embarrassment. But it's wrong.
Iraqis should be free to review and challenge debts accumulated under Saddam. They want to pay back loans used for food or housing, but not for chemicals used to gas them or to build torture chambers.
And international law supports them. A century ago, America liberated the Cuban people in the Spanish-American War and repudiated Spanish debts used to oppress them.
So evolved the Doctrine of Odious Debts. That doctrine has it that debt incurred by despots to benefit their regimes but not their people don't need repaying.
The French and the Russians don't like that doctrine. I say let's have a public process. Let these countries demonstrate under open international arbitration, that they acted responsibly in financing Saddam. I'm sure most of their claims would fail.
Closed-door meetings to determine how much the West can squeeze out of Iraqis amounts to a cover-up Iraqis will deeply resent. Instead, our support for the public airing of disputed loans would put America on the same side as all sectors of Iraqi society.
What better way to demonstrate the power of democracy and the rule of law than to establish a precedent telling filthy financiers everywhere their money isn't safe when they finance tyrants against their people.
In Toronto, this is Patricia Adams for Marketplace."
Patricia Adams is executive director of Probe International, a financial watchdog group. Her remarks are adapted from her recent Cato Institute study.
Marketplace airs at 6 p.m. in Washington, D.C. www.wamu.org/ and can be heard on their Web site.
You can tell friends around the U.S. to check local listings for stations and times: http://marketplace.publicradio.org/stations/marketplace_pm.html
Transparent arbitration should be used to handle Iraq’s odious debts
Iraqis should beware of closed-door, Paris Club solutions to debt reduction: Patricia Adams.
Washington: Most debts created by former Iraqi dictator Saddam Hussein were used to oppress the Iraqi people or were otherwise not used in the public interest. Such debt should qualify as "odious," according to international legal doctrine on the matter. Debt arbitration, which relies on the rule of law and a public judicial process, should be used to determine how much of the more than $120 billion in claims creditors currently hold against Iraq are legally enforceable, a new Cato Institute study contends.
The process of determining the legitimacy of Iraqi debt should be open and based on arbitration, as opposed to the politicized, closed-door process favored by the group of state creditors known as the Paris Club, argues Patricia Adams in "Iraq’s Odious Debts."
"The Iraqi people are entitled to be informed about the claims against them, in detail, not just in aggregate; they are entitled to a fair hearing in which they can make legal representations; and they are entitled to an unbiased adjudication of claims in which no adjudicator has an interest – pecuniary or proprietary – in the outcome," writes Adams, executive director of Probe International.
Iraqis should be wary of creditors enticing them to the Paris Club, as the organization would treat the debts of Hussein's regime as the legitimate debts of the Iraqi people and would seek to avoid accountability for its members' lending. Indeed, the overwhelming majority of claims against Iraq are from state, not private, lenders. Adams calls the Paris Club "the world's premier bailout agency, using western taxpayer dollars to rescue misplaced loans by public lenders."
The principles that define the Doctrine of Odious Debts are well known and have been applied by the United States in the past, Adams argues. Applying that doctrine today would discourage lending to oppressive governments and stabilize international finance by increasing accountability for creditors and borrowers alike.
"Deciding the disposition of Iraq's debts by the rule of law, through a public judicial process that allows Iraqis, the domestic and international press, and anyone else to understand who lent how much to whom and for what purpose, would give Iraqis confidence that government can work in their interest," she concludes.
Full text of Policy Analysis 526:
http://www.cato.org/pubs/pas/pa526.pdf
FOR MORE INFORMATION
Patricia Adams, Probe International
416-964-9223, (patriciaadams@nextcity.com
Jonathan M. Block, media relations manager
202-789-5263, jblock@cato.org
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202-789-5204, epierre@cato.org
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India battles the red river dragon
by Arun Bhattacharjee, Asia Times Online, September 8, 2004
India fears a horrific deluge if a blocked river in Tibet bursts. The dangerous situation highlights the need for comprehensive agreements between China and its downstream neighbours, a commentator writes.
New Delhi: India's fear of a downstream deluge in the Sutlej River in the northwestern state of Himachal Pradesh, should a blockage on the Peerechu river in Tibet burst, highlights the need for trust and comprehensive agreements between South and Southeast Asian nations and China. It is a fear that has brought several serious problems to light in India, including the country's vulnerability to environmental warfare.
A lake appeared late last month after a landslide blocked the Peerechu River, a tributary of the Sutlej River that also flows into India, forcing the government to evacuate at least 3,000 people from eight downstream villages in Himachal Pradesh. In 2000, more than 120 lives were lost and large scale damage to property was caused by a flash flood along the same stretch of the Sutlej River, as there was no warning.
China issued an early warning this year, but refused to grant Indian engineers permission to visit the site. After three weeks of cliff-hanging suspense, China informed India through diplomatic channels that the natural blockage on the river could not be blasted without a proper study of possible upstream damage.
A prominent technology company, which does not want to be named, says its experts have calculated that a breach at the natural blockage of this lake would affect half a million people and cause property damage worth US$13-15 million. The Press Trust of India quotes P. Perumal, a hydrologist at the Indian Institute of Technology in Roorkee, as saying, "The Peerechu Lake burst will have horrific effects, as water is likely to rush down to the hilly slope through a narrow gorge. It will not be like floods in the plains where water can spread out. What one expects is a huge wall of water moving in bulk without its height getting diminished.
"It's weight, combined with gravity effect [Himachal is just below Tibet, will flatten everything on the route for several kilometers within a few hours," Perumal says. The private company study used 2001 census data and remote sensing for the analysis, to claim the flood water would cause damage as far away as 230 kilometers and "might extend up to 1.2 km-0.6km each side of the river with a depth of up to 20 meters".
According to a defense analyst, the danger posed by the lake in Tibet is just the tip of the iceberg. India's geographical location at the foot of the Himalayas makes it vulnerable to "environmental attacks" from the numerous glaciers precariously perched atop the mountain range. These mountains of ice can be "toppled" by remote triggering with explosives or their melting accelerated by covering them with carbon black to enable them to absorb more sunlight. This could result in flooding the whole Indo-Gangetic plains, the scientist said.
Analysts say Chinese scientists have been extensively mapping the Himalayan glaciers for nearly three decades with the help from the International Center for Integrated Mountain Development in Kathmandu. As most of South and Southeast Asia's 10 major rivers originate from Tibet, China has first user rights, and continues to use river water without comprehensive treaties with its downstream southeastern and southwestern countries.
India, a secondary user, is also facing problems with neighbor Bangladesh over its decision to connect India's major rivers through 37 links covering over 6,000 kilometers to meet the water shortage and agricultural needs of India's water deficient regions. Although the river-link project is still in a conceptual stage, it signed an agreement with Bangladesh in October 2003 to consult Dhaka before the final project report was prepared.
Even within India, a former government minister is heading a 12-member committee of "concerned citizens", including environment activist Medha Patkar, to oppose the river-link project on the grounds that "hydraulic equality at the national level did not mean transfer of water from water-endowed basins to dry areas for inefficient and commercial uses through socially and economically wasteful projects, not approved through open professional assessments".
A Ranganathan, a member of the committee of 12 says, "India is a democratic country and the environment groups have a lot of clout which is not true for China." He says this is the principal reason why a comprehensive treaty on water use and the rights of the downstream countries are required. The Tibetan plateau is the principal watershed in Asia and the source of its 10 major rivers, including the Brahmaputra (or Yarlung Tsangpo in Tibet), the Sutlej and the Indus. About 90% of the Tibetan rivers' runoff flows downstream to India, Bangladesh, Nepal and Pakistan. Southeast Asia's water needs are met by the Mekong, which also originates in Tibet.
India's major concern is the diversion of the Brahmputra, which will jeopardize its river-link project. A team of Chinese experts was studying part of Sang Po (Brahmaputra) as part of its plans to construct a major hydropower project in the Tibet Autonomous Region during the visit of former prime minister Atal Bihari Vajpayee to China. India originally planned to link 30 rivers at a cost of $5.6 billion by 2020, but a public interest law suit against the government for not implementing major plans brought on an order issued by the country's Supreme Court to implement the project by 2012. Under Supreme Court pressure, a task force under former minister of water resources, Suresh Prabhu, completed the feasibility report on six links instead.
Meanwhile, last December, activist groups in Thailand and Myanmar called on China to consult countries downstream before building 13 large dams on the Salween River. The dams, planned for the upper part of the river in China's Yunnan province, would have severely damaged the ecosystems and livelihood of people in Thailand and Myanmar, who depend on the 1,700 mile-long river for fishing and farming, the groups said. The Bangkok Post reported the groups had handed a protest letter to the Chinese Embassy in Bangkok. The Salween, called Nu Jiang by the Chinese, originates high in the Tibetan mountains and flows through Yunnan province in China into Myanmar, forms part of Thailand's northern border with Myanmar, before emptying into the Andaman Sea. It is Southeast Asia's second longest river after the Mekong.
"China is going to exploit the Salween, which is the last free-flowing international river in the region, the way they are already doing it to the Mekong river," complained Chainarong Sretthachau, director of the Southeast Asia Rivers Network.
Shui Fu, Chinese author of The River Dragon Has Come [published by Probe International], writes that there were virtually no large-scale water projects in China before 1949. "It was since the years of the Great Leap Forward [1958-60], the Chinese Communist Party has heavily promoted dam construction as part of a massive national campaign," claiming that in less than 40 years all of China's major rivers would be dammed.
While the debate over water harvesting and conservation and building high dams lasted for decades and led to a political struggle, the dam lobby supported by Mao Zedong won, although Zhou Enlai expressed his strong reservations after the 7,000-Cadres Conference in 1962. "I've been told by doctors that if a person goes without eating for a few days, no major harm will result. But if one goes without urinating for even one day, they will be poisoned. It's the same with land. How can we accumulate water and not discharge it?" he said.
After the accumulation lobby won, "accumulation" was taken to the extreme. Anhui Province built an excessively large "river irrigation network," while people in the north took the policy of accumulating rain water for irrigation to such extremes that their fields became waterlogged. Thus the "water conservancy campaign" was ultimately reduced to a campaign to build reservoirs and dams, and by 1990, 83,387 of them had been built in China. "Three hundred and sixty six of them had a capacity over 100 million cubic meters, 2,499 had a capacity of 10 million to 100 million cubic meters, and more than 80,000 had capacities below 10 million cubic meters", writes Shu Fu. No one, not even Zhou Enlai, was able to block the national "dam building campaign". As a result, from 1949 to 1959, 8,000 million cubic meters of earth was moved – 580 million cubic meters in 1958 alone. Before 1949, only 23 large or medium-sized dams existed in all of China.
One, the Fushan dam on the Huai River, was used to block passage across the Huai during an attack against the Wei Kingdom in AD 516. The scale and sophistication of the Fushan dam was unprecedented for that time, but the knowledge gained through its construction was not passed on. It disappeared with the collapse of the imperial autocracy. The Fushan dam also demonstrated to the world the kind of disasters that large dams can produce. Four months after the dam's completion, the Huai overtopped the Fushan, releasing 10,000 million cubic meters of water, killing 10,000 people downstream.
Granted, the 80,000 dams and reservoirs built over the past 40 years have played an important role in flood control, electricity generation and irrigation and have provided water for urban areas and industry. These achievements should not be underestimated, but dam construction, especially during and after the Great Leap Forward, had disastrous consequences too. By 1973, 40% (or 4,501) of the 10,000 Chinese reservoirs with capacities between 10,000 and 1 million cubic meters were found to have been built below project specifications and were unable to control floods effectively. Even more dams had problems relating to the geology of the dam site, and to sedimentation.
More serious, however, were the numerous dam collapses. By 1980, 2,796 dams had collapsed, including two large-scale dams (the Shimantan and Banqiao dams). One hundred and seventeen medium-sized and 2,263 small dams had also collapsed. On average, China witnessed 110 collapses per year, with the worst year being 1973, when 554 dams collapsed. The official death toll resulting from dam failures came to 9,937 (not including the Banqiao and Shimantan collapses, which had a combined estimated death toll of up to 230,000).
China privately claims that among the more than 2,000 dam collapses, only 181 involved fatalities; not considered credible by the Western diplomatic community. The number of formally recognized dam collapses had risen to 3,200 - roughly 3.7% of all dams in China. According to a deposition before the Central Committee by Ma Shoulong, the chief engineer of the Water Resources Bureau of Henan Province, "The crap from that era [the Great Leap Forward] has not yet been cleaned up." In 1958, more than 110 dams were built in Henan; by 1966 half of them had collapsed. Of four key dams on the Yellow River – the Huayuankou, Wei Mountain, Luokou, and Wangwang Village dams – two were dismantled and two were postponed. According to experts, if the riskiest of these dams were to fail, hundreds of thousands of people could be killed not only in China, but in some of the downstream countries.
But current levels of funding are woefully inadequate to repair or reinforce the dams. At least $45.7 million would be required for the large and medium sized reservoirs alone. During a 1991 conference on dam collapses in Vienna, participating countries exchanged information on collapses in their respective countries, as is the practice. Only the Chinese representative said that China had no dam collapses to report. Foreign experts attending the conference commented to China's representative, Pan Jiazheng, that it was miraculous for a country as big as China, a country with 80,000 reservoirs, to have had no dam collapses.
Meanwhile, as an official of India's Water Resources Ministry points out, China is building dams over Sang Po, known as Brahmaputra in India and Meghna in Bangladesh. But Bangladesh only voices its complaints with India. No protest was ever sent to China. The Ganges flowing from India, and the Meghna, are the two major rivers that meet the water needs of Bangladesh. He says that dam bursts or collapses are short term disasters compared to the long term impacts on the downstream countries in terms of loss of irrigation water, destruction of fish and other aquatic flora and fauna that sustain the ecosystems of South and Southeast Asia. For instance, the rice bowls of Southeast Asia will suffer badly if the water flow in the Mekong River suffers. Fifty-three percent of Vietnam's employment comes from agriculture (mainly rice) and rice accounts for 50% of its gross domestic product, covering 82% of the countries farmland – or 6.3 million hectares. Thailand exports 6.39 million tons of rice and is a net exporter today, and that is mainly because of the Mekong. Laos and Cambodia's economies depend entirely on Mekong, on which 54 dams are being built (six are in progress). Cambodia's Tone le Sap Lake, as large as Lake Victoria in East Africa, may suffer equally with its 93 types of exotic fish species.
The World Wide Fund (WWF) warned in June: "China's Yangtze River faces a greater threat from dams than any other river in the world. China has 46 large dams planned or under construction on the Yangtze. The dams could destroy habitats of endangered species, including the Yangtze River dolphin, of which only a few dozen remain. Downstream communities also suffer from the depleted fish stocks and low water levels created by dams," said WWF. China has more dams planned or under construction than any other country, according to WWF. Eighty-eight dams are being built and at least 36 more are in the planning stages. China's Three Gorges Dam is the largest in the world. Alarms have been sounded recently about the country's plans for 16 new dams on the Salween River, which runs into Myanmar and Thailand. Even some of the country's top hydroelectric engineers have expressed doubts, saying that most people will benefit little from the Three Gorges Dam, as was reported by the BBC.
But the good news is that China is slowing taking note of global differences. According to diplomatic sources here, Prime Minister Wen Jiabao has ordered a review of a 13-dam project on Western China's Nu River, citing environmental concerns. The long-term Chinese reaction to South and Southeast Asia's growing concern has to be balanced against China's desire to become a global economic power, which needs cheap energy for industrialization. Besides, nearly two thirds of China still depends on Monsoon rains.
Arun Bhatttacharjee, post graduate in Mass Communications from the University of Calcutta and Minnesota, was South Asia Bureau Chief for Depth News Asia and joint chief of Bureau for Kolkata-based Amrita Bazar Patrika, to name a few. He has authored several books, including Indian Press: From Profession to Industry, Dateline Mujibnagar, Chasing the Missing Link, and Gender Bias in Reporting: A Journalist's Handbook.
Shady Acres
Convicted of bribery in Lesotho, this company is a case study in how not to handle a crisis of reputation.
by Matthew McClearn, Canadian Business, August 16, 2004.
Richard Bentley, the 18th-century English scholar, once observed that "no man was ever written out of reputation but by himself." It is so, too, with corporations. A striking demonstration of this is Acres International, which recently became the first large multinational to be banned from participating in World Bank projects. It's a case study in how not to handle a crisis of reputation.
Acres is an Oakville, Ont.-based engineering consulting firm brought low by graft. In the late 1980s and early 1990s, it won several contracts (worth US$20 million) on a massive hydroelectric and water project in the tiny African nation of Lesotho. Acres paid an agent handsomely to help clinch these contracts--an agent who, it was revealed, used 60% of Acres' payments to bribe a senior government official. Acres was indicted along with a slew of other multinationals in Lesotho's High Court shortly after the scandal broke in 1999.
The company maintained that the agent was acting on his own. That position became increasingly untenable as Swiss banking records and other evidence mounted. Management further endeared themselves to Lesotho by declaring that the country's judiciary lacked sufficient experience to handle a case of such complexity. Their testimony provoked the judge to declare they lacked integrity. "The prosecution of Acres left a bad taste," prosecutor Guido Penzhorn said in a speech earlier this year.
Lesotho's High Court found the company guilty. Acres indignantly appealed, and lost. Acres "will live in the shadow of the taint of the corruption," opined the Appeals Court. According to officials in Lesotho, the company has now defaulted on paying the fine of 15 million maloti, or about $3.2 million. (Acres denies this and says it will pay its final instalment soon.)
Meanwhile, investigators at the World Bank, which provided US$70 million of the water project's financing, also concluded that Acres knew about the bribery or, at the very least, turned a blind eye. The bank's sanctions committee, which reviews allegations of corruption, initially cleared the company in 2002 for lack of evidence. But when confronted with new evidence from the trial, the bank reopened proceedings earlier this year. In July, World Bank president James Wolfensohn debarred Acres from participating in bank-financed projects for three years.
In a terse statement, Acres says it is "deeply disappointed" with the debarment. "The events in Lesotho occurred 10-15 years ago and the five-year period over which Acres has responded to these allegations has been very trying for our employees," it reads. Acres seems oblivious to how trying corruption can be for a Third World country; for one thing, it diverts aid money from its intended purpose. What's more, Acres seems to have missed the central lesson in all this: that companies can be held responsible for the actions of their agents.
Contrast that with other recent corporate crises. In August, WestJet CEO Clive Beddoe accepted responsibility for acts of corporate espionage allegedly conducted by recently dismissed vice-president Mark Hill. Royal Dutch/Shell agreed to pay US$150 million in fines to settle allegations of impropriety regarding downward revisions to its oil reserve estimates. While damaging in the short run, coming clean has at least allowed these companies to start rebuilding their reputations today.
But Acres is unrepentant. On its website, one can find a list of engineering awards the company has won, but its search engine cannot locate a single mention of the words "bribery," "corruption" or even "Lesotho." Its only concession has been to introduce a "business integrity management system." Patricia Adams of Probe International, an aid and trade watchdog, has reviewed the model on which Acres' system is styled. "As far as we can see, it's all internal," she says. "I can't see what good it would do. Acres had internal procedures in place before."
During the past year or so, Acres has shrunk by about 300 employees, to 800. In June, its shareholders--comprised largely of hundreds of current and retired employees--sold the company to Hatch Ltd., a larger engineering firm based in Mississauga, Ont. In giving the deal his blessing, Acres president Tony Hylton said, "Acres has now gained enormous strength and opportunity for growth, with a company that shares similar values and vision to our own." For the sake of both Hatch and the Third World, let's hope not.
Corruption: Canada backs firm banned by World Bank
by Marty Logan, Inter Press Service (Johannesburg), July 30, 2004.
It is business as usual between Canadian government agencies and a local company barred from World Bank contracts after being convicted of bribery in Africa.
In September 2002, engineering firm Acres International was found guilty in the High Court in the southern African nation of Lesotho for trying to bribe the official responsible for the multi-billion-dollar World Bank-financed Lesotho Highlands Water Project (LHWP).
Acres, based in Oakville in the province of Ontario, appealed and last year had one charge dropped. But the conviction was maintained on the second count and the firm was fined the equivalent of two million U.S. dollars.
Three other international companies working on the project have also been convicted in the Lesotho courts, and the World Bank said Thursday it is considering debarment proceedings against one of them, Lahmeyer International.
Last week the World Bank, which contributed 90 million dollars to the LHWP, announced it will not award new contracts to Acres for three years. But that mark against the firm's name will not affect its relationship with Canadian agencies.
"We have met with them, we have discussed with them, and we have been assured by Acres International that they have put internal systems in place that are designed to prevent this kind of occurrence in the future," Andre Lemay, spokesperson for Canada's department of foreign affairs and international trade told IPS.
"There's no reason to believe they wouldn't live up to their commitment," he added.
Asked if the government should not be sending a stronger signal that it will not tolerate corruption at home or abroad, Lemay added, "from what we've seen, from what we've discussed, from what we've analysed, our decision was that having the World Bank debar (Acres) for at least three years, that is basically the punishment they're getting. As far as Canada is concerned, we're satisfied."
Similar comments were made by spokesmen from the Canadian International Development Agency (CIDA) and Export Development Canada (EDC).
EDC's Glen Nichols told IPS his agency had hired experts to examine internal changes Acres made after being indicted in the Lesotho court in 1999.
"The company . . . came back and said 'yes,' so on the basis of that and discussions with Acres at that time we decided we could do further business with them," he added in an interview.
EDC has no projects with Acres at the moment, said Nichols.
One critic calls Acres new safeguards inadequate because they do not include external oversight. The firm had internal mechanisms in place while working in Lesotho but they did not prevent the bribery, added Patricia Adams of Toronto-based Probe International.
"(The corruption) was secret, it was premeditated, it was deliberate; it went right to the top of Acres. So I don't see why an internal procedure that is a self-regulating system that does not have external, independent forensic auditors checking – the way you have when you go through a court proceeding – I don't see what good it's going to do," she told IPS.
"The Canadian government in this particular case has a lot to hide as well, because the agent that Acres used and other companies used as well, was Canada's honorary consul. He was a civil servant, he was a federal cabinet appointee."
Adams also suggests the World Bank's blacklisting of Acres was in response to external pressures – particularly an ongoing probe by the U.S. Congress into corruption in international funding agencies – and does not reflect a strengthened resolve within the Washington-based agency to fight corruption.
"The bank is obliged to the laws of no land. It is above the law and it can do what it wants. The only risk it takes is that it loses public support in OECD countries and that it loses its budget."
Adams added: "I do believe that the reason there is so much corruption in the Third World is because of the (practice) of transferring money through these big institutions, bilateral aid agencies, the multilateral aid agencies and export credit agencies. It's a perfect environment for corruption."
But a spokesman says World Bank President James Wolfensohn has acted strongly to stamp out corruption since 1996. "He has made a very clear case that corruption does get in the way of development; it does hurt the poor," the spokesman Damian Milverton said in an interview.
While the bank communicated its decision on Acres to Ottawa, he said "we don't go out there with an agenda to influence governments to act as we do."
Milverton said the bank awarded four contracts to Acres while the Lesotho case was moving through the courts. To exclude the firm from the work would have been unfair, he argued.
"If a company has been found innocent and we've denied them work during that particular period in time, we may have hurt them financially, and also damaged their reputation."
CIDA Spokesman Steven Morris told IPS that his agency, the government's international cooperation arm, has three current contracts with Acres: one in India worth 3.5 million dollars and two others, in China and Central America, in which Acres is a member of a multi-firm consortium.
All of the government spokesmen stressed that Canada was a party to the 'Convention Against Bribery of Foreign Public Officials in International Business' (1999) of the Organisation for Economic Cooperation and Development (OECD), and noted that Ottawa had passed its own anti-corruption law, the Corruption of Foreign Public Officials Act, in 1999.
"We have been and continue to be, as a nation, strongly committed to combating corruption. We're committed to making sure that everything is transparent, and we've been promoting the rule of law, democracy and human rights," said Lemay.
Testifying before a committee of the U.S. Congress last week, the lead prosecutor in the Lesotho case said few of the governments whose companies were charged with bribery – which are all outspoken opponents of corruption – assisted the prosecution.
"Apart from Switzerland, and to some extent France, which helped with an application for mutual legal assistance, no assistance was received from any other overseas country," Guido Penzhorn told the Senate's foreign relations committee.
"There is a lingering impression in Lesotho, as well as in South Africa, that the interest of First World countries in the present prosecutions lies not so much in the successful outcome of these prosecutions but rather in protecting the interests of its companies that are involved. Hopefully this impression will in time prove to be not correct," he added.
World Bank blacklists firm
by Charlotte Moore, The Guardian (U.K.), July 23, 2004
The World Bank has blacklisted its first multinational, debarring Canadian engineering company Acres International from new contracts for three years.
The bank said the company was engaged in corrupt activities to influence the Lesotho Highlands Development Authority, which was responsible for the multibillion-dollar Lesotho Highlands water project.
The project provides water to South Africa and electricity to Lesotho.
"This action is part of the bank's broad anti-corruption efforts initiated by president James Wolfensohn in 1996," it said in a statement.
Lesotho convicted Acres for bribing Masupha Sole, the former LHDA chief, almost two years ago.
The move to disbar Acres was welcomed by anti-corruption campaigners."This move is an important signal to show companies the consequences of corruption can be devastating," said Patricia Adams, a spokeswoman for Probe International, an environmental group that monitors Canada's involvement in foreign aid.
"But we think the bank has really dragged its heels and only made this decision because of pressure from the US Congress and the general public."
Damian Milverton, a spokesman for the bank, said: "We believe we put as much pressure on ourselves as we receive from the outside.
"We know how corruption takes resources away from those who really need them."
The development bank is stepping up its anti-corruption efforts and will be hiring more investigators, Mr Milverton said.
Acres said it was "deeply disappointed" by the ruling, saying the events in Lesotho occurred 10 to 15 years ago. "The five-year period over which Acres has responded to these allegations has been very trying for our employees," it added.
The bank began its inquiry when Lesotho first charged Acres with corruption but later closed it, saying it did not have sufficient evidence.
When Acres was convicted of bribery in 2002 by the high court, the bank reopened its inquiry.
Related articles:
Press Release: Landmark decision will lead to other debarments
by Probe International, July 23, 2004
Canadian-based foreign aid watchdog Probe International predicts the World Bank's blacklisting of Acres International will lead to more debarments of other companies convicted in the Lesotho corruption trials.
www.probeinternational.org/pi/index.cfm?DSP=content&ContentID=10952
Acres is blacklisted for graft
by Lesley Wroughton, Business Report (South Africa), July 26, 2004
The World Bank had blacklisted Canadian engineering firm Acres International for three years for "corrupt activities" related to the bank-sponsored Lesotho Highlands Water Project, it said at the weekend.
www.odiousdebts.org/odiousdebts/index.cfm?DSP=content&ContentID=11015
World Bank penalizes Canadian company
by Karen MacGregor and Karen Howlett, The Globe and Mail, July 24, 2004
The World Bank has, for the first time, levied penalties against a Western company for corruption, banning prominent engineering firm Acres International from bidding on bank-financed projects for three years.
www.odiousdebts.org/odiousdebts/index.cfm?DSP=content&ContentID=11039
World Bank puts sanctions on Oakville engineering firm
by David Bruser, Toronto Star, July 24, 2004
Acres barred from bank-funded work following overseas bribery conviction.
www.odiousdebts.org/odiousdebts/index.cfm?DSP=content&ContentID=11018
World Bank bars Canada's Acres for corruption
Reuters, July 23, 2004
The World Bank announced today it had blacklisted the Canadian engineering company Acres International for three years for corruption in a massive bank-financed dam project in Lesotho.
www.odiousdebts.org/odiousdebts/index.cfm?DSP=content&ContentID=10923