Press Responses : Sunday, March 19, 2000

PUBLICATION The Ottawa Citizen
DATE Sun 19 Mar 2000
BYLINE Jack Aubry

HEADLINE: Chinese corruption doesn't faze EDC
The Three Gorges Dam mega-project has been plagued by economic environmental, and political problems -- but the money from Canada just keeps flooding in. Jack Aubry reports.
The Export Development Corp., among the first international financiers to bless the much-criticized Three Gorges Dam in China, continues to back the massive hydroelectric project despite a recent string of serious environmental, economic and corruption problems.
The corruption surrounding the $30-billion project reached new heights recently when a Chinese official was sentenced to death for embezzling more than $2 million from funds targeted to relocate 1.3 million people out of the rerouted water path from the world's largest hydro dam.
The EDC has been criticized for being the first export credit agency on record to support the mega-dam. Six years ago it agreed to provide $170 million in financing for the sale of Canadian turbines, generators and computers for the project.
China's most spectacular construction since the Great Wall, the damming of the mighty Yangtze River will create a 660-kilometre inland sea that will be longer than Lake Superior.
The project is opposed by environmental and human rights groups around the world, which have noted the jailing of numerous Chinese experts and the censorship of critical documents in connection with the dam.
U.S. government agencies and the World Bank have shied away from the project, as have some private companies, including engineering giant Bechtel Group Inc.
Despite the recent death sentence and reports of massive graft -- along with construction problems and delays -- the EDC has no plans to back away from the project.
Eric Siegel, the executive president of the EDC, says the trade agency is making no apologies for its participation in the
much-criticized project.
"The Three Gorges was the subject of considerable study by the Chinese as well as the participants who made -- including the EDC -- site visits and who have reviewed the environmental impact assessment that the Chinese did.''
Mr. Siegel added he visited the Three Gorges site in 1984, when the Chinese first disclosed their plans.
"Canada's participation has been to put the best turbine technology into the project alongside a number of countries,'' he
said, citing Japan, France and Austria.
He says the U.S. never really rejected the project -- they just wanted more information, which they never received.
Mr. Siegel vehemently denies the characterization that if the EDC supports the Three Gorges project through its environmental
assessment process, it will support any project.
The agency made the move to back Three Gorges in 1994 after Prime Minister Jean Chretien pulled a stunning reversal of Liberal policy on environmental and international development issues by endorsing Canada's involvement in the project.
In the five years before taking power in 1993, the Liberals in opposition blasted the Conservative government of Brian Mulroney and demanded legislation to ensure loan guarantees would not be earmarked for Three Gorges.
But once in office, Mr. Chretien jumped on board with the project even though the United States Bureau of Reclamation, one of the world's foremost dam construction agencies, withdrew support for Three Gorges. The U.S. agency concluded it is not "environmentally or economically feasible.''
The EDC's record in China is not one of the agency's shining points. In 1989, about a month after the massacre at Beijing's Tiananmen Square, the EDC went ahead with a $130-million loan to the Bank of China for another hydroelectric project despite the Canadian government's loud denunciation of the People's Liberation Army for its bloody pro-democracy crackdown. Estimates at the time suggested 400 to 1,000 unarmed civilians and soldiers were killed in the crackdown.
Normally the deal would have been routinely announced in an EDC news release, but instead it was kept under wraps until details were leaked to a Canadian Press reporter.
For the Three Gorges project, the EDC is financing the sales of Monenco-AGRA's super computer for $12.5-million and that of Canadian General Electric's turbines and generators for $150-million. The computer is helping co-ordinate construction of the dam and the resettlement of the 1.3 million people.
Canadian General Electric has made it clear that it could not be involved in any mega-projects without the EDC's assistance.
\Without financing offers, you couldn't be in the business on the kinds of large projects that we get involved in. Customers who buy hundreds of millions dollars' worth of infrastructure capital goods projects are always looking for financing, and the rest of the world provides that,'' said Gerry Rowe, a retired vice-president of GE in Canada.
Under the Three Gorges deal -- a $320-million contract it is sharing with two German consortium partners -- Canadian GE will build three generators and three turbines out of its plants in Lachine, where the company employs about 600 workers.
Mr. Siegel said the EDC routinely turns down support for environmentally questionable projects through its internal assessment process, but refused to divulge any names or countries involved.
Leading Canadian environmentalist Elizabeth May said taxpayers should be concerned about the federal government's backing of a project that is condemned by so many others.
\We seem to be prepared to back the most disastrous projects,'' she says.
It has led another leading environmentalist, Garry Gallon, who puts out a well-read environmental newsletter from Montreal, to write that Canada's participation in such projects as Three Gorges is giving Canadians a new identity as \The Ugly Canadians.''
He says the country may have a Boy Scout image on the world stage, but in fact its government is supporting some of the most environmentally dubious projects on the planet through the EDC.
It is a charge the EDC recently rejected categorically, writing to Mr. Gallon to say his statement that \EDC has made mistakes'' is \groundless.''
However, EDC chairman Patrick Lavelle took a more conciliatory tone during a recent interview with the Citizen, stating he is prepared to place the Crown corporation under the scrutiny of the commissioner of sustainable environment in the federal Auditor General's Office.
Mr. Lavelle also distanced himself from the Three Gorges project, saying the financing was approved before he joined the Board.
"My response would be: `I wasn't there.' ... I think on the basis of a commercial arrangement, they went ahead.
"I think, obviously, there's reason for people who look at the EDC to be aware of environmental issues,'' added Mr. Lavelle, pointing out that environmental guidelines have been introduced under his stewardship.
He acknowledged the argument that if Canada doesn't get involved, it will simply lose the business to another country. But there are limits to Canadian opportunism, he insists.
"I think we have to be aware that no self-respecting country should be involved if there is a high risk of creating an
  environmental disaster.''
There are signs that Three Gorges is fulfilling the worst predictions made a decade ago.
Doubts about the project in central Hubei province surfaced in public last year when Premier Zhu Rongji issued a stern warning to officials to ensure there was no \negligence'' in construction of the dam -- the brainchild of his predecessor, Li Peng.
A month later, the official press in China revealed that about 100 officials linked to the project had been sanctioned for  corruption. The government-run media has in the past blamed corruption for problems in the relocation program. By 1998, only 60 per cent of the new houses that should have been built to house people had been finished.
In the most extreme case, the former director of the district construction bureau in Fengdu received a death sentence on Feb. 25 for stealing more than $2 million. It is the first death penalty handed down since reports of massive graft started swirling around the project.
China's auditor general said in January that about $1 billion earmarked for the resettlement had been embezzled -- 12 per cent of the relocation budget.
It is believed the corrupt officials poured the cash into the stock market, the construction of buildings and the setting up of new companies.
Last week, the official press revised the embezzled figure down to 7.4 per cent of the relocation budget.
The government has also revealed that an official from the migration bureau in the Wanzhou district was jailed for life last
May for corruption. Wang Sumei was convicted for taking money from  the bureau and losing it in extravagant mahjong gambling parties.
Officials told the media in January that criminal proceedings had been started against 14 more officials involved in dam corruption.
At the end of 1999, some 190,000 Chinese had been resettled while housing for another 80,000 was prepared.
Qi Lin, director of the Yangtze Three Gorges Development Project, told the state media in January that 1.3 million would be  resettled by 2009, but refrained from stating how many would be moved by 2003, when the generation of electricity is scheduled to begin.
There are some estimates that place the total cost at $70 billion by the time it is completed.
Originally all resettlement was expected to be done locally, but following an inspection by Premier Zhu last April, it was determined the original resettlement program is vastly behind schedule because of disagreement and confusion over the  resettlement issues.
One of the reasons the authorities have started relocating people far away from the dam area is to dampen local anger over the corruption.
Probe International in Canada, which is monitoring the project, says it is believed that only 100,000 people have been moved, while the total number of people to be moved tops two million.
The People's Daily newspaper said last year that \some problems'' had emerged over the dam's viability because of shoddy construction and environmental deterioration. Among the dangers cited were siltation and toxic buildup behind the 175-metre  ** structure, and the destruction of endangered species, including the Chinese river dolphin and the Siberian crane.
The Three Gorges project was first envisioned in 1919, but it was not until 1992 that it was approved by the government in the face of unprecedented opposition in China's parliament.
The Chinese government, which is hungry for the 18,200 megawatts the dam will produce, will turn the Three Gorges area into a police state if necessary to force resettlement.