February 5, 2003

Mr. Fraser Reilly-King
National Coordinator
The NGO Working Group on the EDC
Halifax Initiative
153 Chapel Street, Suite 104
Ottawa, Ontario
K1N 1H5

Dear Mr. Reilly-King:

This is in reply to your letter of January 17, 2003, co-signed by the International Rivers Network in which you express concerns about our support for the Three Gorges Hydroelectric Project in China.

First some facts for the record. EDC provided financing for the provision of project management systems technology and systems training and six (6) turbines and generators. Financing was provided to Chinese banks in support of sales by Agra Monenco (now AMEC) and a consortium lead by GE Canada. Financing dates from January 1996 and October 1997 and totaled USD12.5 million and USD153 million respectively. These transactions were thoroughly reviewed according to the standards prevailing at the time.

You will note that Canada’s involvement in this project is minor. Of total financing of USD 165.5 million, Canadian participation represents less than 1% of the value of the Three Gorges Hydroelectric Project, the total cost of which is conservatively estimated at USD 25 billion. As a result, our ability to influence project implementation and impacts is very limited. The Chinese government has undertaken this project based on its national priorities, and has managed and financed the project largely with their own resources.

In December 2001, we introduced our Environmental Review Directive (ERD) which strengthens our processes for reviewing the environmental and social impacts of projects. We continue to improve and strengthen our approaches here, as well as in the area of political risk assessment.

While we continue to stay abreast of issues related to the Three Gorges Hydroelectric Project, a project which has attracted considerable public interest, you have appropriately drawn your concerns to the attention of the Government of Canada. The Canadian government takes an active role in making representations to the Government of China on human rights and related issues.

We trust that this clarifies our position, and we appreciate the opportunity to exchange views on this matter.

Yours sincerely,

A. Ian Gillespie

Cc: Peter Bosshard, International Rivers Network

      Doris Shen, International Rivers Network