New guide on social responsibility for Chinese contractors abroad

The China International Contractors Association released its Guide on Social Responsibility in September. The text, which is bilingual and clearly adapted to the lingo of international CSR, mostly sticks to generalities and exhorts companies to obey laws — for example, by paying taxes (article 4.7.3).

Nonetheless, some parts go beyond the language we have been used to. For example, article 4.2.1 recommends treating job applicants of “different ethnicites, genders, races, nationalities, age, religions, disabilities, marital status and sexual orientation equally.” Such language is unusual in China, and although hiring disabled candidates in the construction industry may not be very realistic, it is nonetheless a nice idea. The same article also advises against the use of child labour, but since this is illegal in China, it is already covered by the Chinese government’s requirement that Chinese companies abroad comply with Chinese as well as local laws. Article 4.4.3 recommends localised procurement, and article 4.4.2 advises incorporating CSR standards into subcontracting arrangements.

According to International Rivers’ (IR) useful guide to the state of China’s international dam building industry, The New Great Walls, an updated version of which has just been released, Sinohydro’s 2011 policy, developed in consultation with IR, goes far beyond these guidelines: it adopts the World Bank’s principles on infrastructural projects, mandates “community” consultation and access to social and environmental impact assessments, commits  to a dialogue with NGOs, and requires at least equal income and livelihood levels for those displaced by projects. It also required informed consent by “Indigenous Peoples” where applicable, an interesting fact as China is not a signatory to the UN convention on indigenous peoples and the term is not used in China.

According to The New Great Walls, there were “at least 308 dam projects … in 70 different countries” being built with the help of Chinese contractors or financiers as of August 2012.

http://www.internationalrivers.org/resources/the-new-great-walls-a-guide-to-china%E2%80%99s-overseas-dam-industry-3962

China’s relationship with the ADB

An interesting article from the Financial Times has been reposted on the International Rivers mailing list. The author, Paul J. Davies, points out that where ADB and Chinese policy banks compete for projects, multilateral donors usually worry that Chinese loans undercut their more stringent labour, environmental, and other guidelines. For example, in the case of the Diamer-Bhasha dam in Pakistan, both China and Russia have made offers to support the project without a competitive tender. (The World Bank’s concerns here seem at least partly political; the project is near the border of Indian Kashmir, and the multilateral donors demand Indian consent; the U.S. opposes the project.)

As China is now a leading stakeholder in ADB, and as the ADB needs to compete against Chinese policy banks, questions arise whether its norms will eventually be eroded. Yet the article points out that China itself remains the third largest borrower from ADB, despite the fact that it can get the money elsewhere. Davies believes that “one of the main reasons why the ADB still lends money to China is to bring higher governance and safety standards to the country – and thereby legitimise some of its own infrastructure projects.” Rajat Nag, ADB’s managing director-general, says the bank’s presence helps China gain access to “best practice” and equipment and makes it easier for the government to impose higher environmental standards.

This suggests that the emergence of Chinese lenders on the international market may not result in a race to the bottom across the board, but that multilateral banks will retain a niche role in projects where social concerns are strong — in keeping with the new direction the World Bank’s new president wants to steer his institution.

Chinese hydropower company donates funds to Kachin refugees

Xinhua reports that Upper Irrawaddy Power, a Sino-Burmese joint venture that is building several dams in the Kachin State of Burma, has donated the equivalent of $24,000 via Christian organisations to Kachin refugees displaced by the fighting between the Burmese army and the Kachin Independence Army.

Earlier, a different Chinese hydropower company involved in the suspended Myitsone dam construction has built a Baptist church for local villagers at the dam site.

The efforts are indicative of steps taken by Chinese hydropower companies to improve relations with locals, especially as they are afraid that more projects may be stopped. These are buoyed by government instructions and public suggestions in China that state enterprises investing abroad should handle political risks more prudently and that they should not only deal with governments but also other actors.

This particular news is interesting not only because the beneficiaries are Christian churches — which tend to have close ties with U.S. organisations — but also because the Chinese government does not to recognise refugees in general and has leaned toward the Burmese government in the recent conflict.

The Malaysian dam case

On Chinadialogue, Kirk Herbertson of International Rivers describes the 12 ongoing dam projects by Chinese companies in the Malaysian state of Sarawak as a “time bomb of local opposition and a public relations disaster waiting to happen.”

Since the shutdown of the Myitsone dam project in Burma, Chinese media have been abuzz with talk about better political risk assessment for megaprojects abroad. Herbertson cleverly ties in with this by blaming not the Chinese companies for ignoring local livelihoods etcetera, but the Sarawak state government for misinforming them on the risks — both business risks, as power generation in Sarawak may not be as lucrative as expected, and what political risks — he does not call them that, but the Chinese press would — of indigenous litigation. “According to Mark Bujang, head of the Borneo Resources Institute of Malaysia, there are 327 ongoing court cases related to native customary land issues.”

Malaysia is a complex sem-authoritarian semi-democracy, with competing political establishments and with an increasing recognition of  “native title.” So in case “indigenous groups” indeed sue a Chinese company, it will be somewhere in between places like Burma or Cambodia, where local groups can only pursue their interests via global coalitions with foreign partners, and Canada or Australia, where “First Nations”  and land councils are demanding to negotiate with  “the Chinese”  directly. In Ecuador (see News, 16 March) or Peru, where Indian groups are demanding that Chinese gold miners negotiate access rights with the “community,” the situation is similar to Canada or Australia but enforcement is less strict.

Chinese hydropower company inaugurates Baptist church at Myitsone dam site

Yunnan International Power Investment Co., a daughter of China State Grid, inaugurated a Baptist church at the resettlement village built for villagers resettled from the site of the now-suspended Myitsone Dam. The ceremony, according to the report in Chinese media, was attended by some 500 people, including the “chairman of the Myitkyina Baptist Association” and, surprisingly, nuns. 2,146 people have already been resettled. A clinic, a school, a police station, a post office, an electricity and water grid have also been constructed.

The article makes no mention of the fact that the dam construction has been stopped. What will happen with the resettled people?

In related news, Sinopec signed a new agreement with the Burmese government on increasing assistance to the areas affected by the construction of its oil pipeline from the port of Kyaukpyu to China. So far, Sinopec has offered $6 million for health and education purposes, including the construction of 8 schools. The new agreement is to build 18 village clinics and one hospital. Sinopec has also pledged to donate $1 million annually to the areas affected. So perhaps these are all efforts to improve the image of Chinese companies in Burma and hedge against political risks, as demanded by the Chinese government.

Chinese reactions to the suspension of the Myitsone dam project

Chinese reactions to the suspension of the Myitsone Dam project have been diverse.

Du Ping, a political talk show host at the Hong Kong-based and very mainland-friendly satellite broadcaster Phoenix, called the stop on Myitsone an American plot and insisted that Burma “should be made to feel that it has sustained an irreparable loss.” But Zhu Feng, deputy director at Peking University’s Institute for International Strategic Studies, wrote that

unless China begins to offer necessary public goods — which in addition to trade must include mature regional governance based on the rule of law, human rights and regional economic growth — its neighbours will not sincerely consider China’s interests

and the appropriate response to the dam issue is “more cooperation” rather than “turning tough.” And Peking University international relations professor Zhao Daojiong wrote, in Singapore’s Lianhe Zaobao, that “nothing can replace transparency” in China’s energy projects abroad.

More surprisingly perhaps., the English edition of the generally nationalistic Global Times published an editorial entitled “China has reasons to be happy about Burma’s changes.” It notes that, so far, Burma is showing no signs of “Westernisation” but is rather undergoing a process of “self-correction” after a period of military extremism. This process entails uncertainties, but the opportunities that a more independent Burmese politics (compared to its past reliance on China) would bring China more opportunities than problems. To think that China will lose in a free competition to access the Burmese market is ignorant, as is to compare reforms in Burma (open access to BBC and Twitter, for example) with those in China, as such indicators in themselves cannot be used to describe the “overall level of political modernization.”

The liberal Southern Weekend published a fairly neutral report from the site — the reporter had been duly detained by the Burmese military — noting nonetheless that China Power International has already paid resettled villagers compensation in cash, a year’s rice, and land plots, constructed a new village of two-story houses and a sewage treatment plant, and was now constructing a church.

A church. The state-owned company that, according to the Chinese Communist Party news portal, offered a new model for “overseas Party construction” 海外党建 at its Myitsone site. Party members, the report said, were at the frontline of danger after the “terrorist attacks” on the site in 2010. It was also the Party’s task to raise Chinese workers’ morale dampened by their isolation (they are not allowed to leave the site, which has been subjected to periodical sabotage by the Kachin Independence Army). And finally it was the Party’s task to apply the “mass line” and the “Yanan spirit,” known from the mythical days of the CCP’s struggle for power, to Burmese villagers: building roads and schools, donating to the poor, importing provisions from China in order to avoid causing a rise in local prices. I am sure the church construction was also a Party project.

40 thousand Chinese workers were projected to work on the site during the peak of the project. Before the suspension, the project employed over 5,300 Chinese and some 4,500 Burmese, according to the Party website. Gao Fengbiao, a Chinese worker at Sinohydro’s Fourth Office, one of the project’s contractors, wrote a bitter post about the “humiliation” of the project’s suspension, asking what would have happened if the Burmese government had stopped an American project. To add insult to injury, the announcement was made on the eve of the anniversary of the founding of the People’s Republic of China, an official holiday. “When will the Chinese people straighten their backs?” the worker asks. “Wake up, all the Chinese!” He then launches into a litany of recent national humiliations — from Japanese, Korean and Philippine military exercises near disputed islands to American pressure to let the yuan depreciate — and concludes that China is in an encirclement (四面楚歌) and its officials are failing to react. Even a “small country” like Burma dares bully China. Why is China, which has not yet eliminated hunger, “throwing money right and left to buy diplomacy” and “save foreigners”? Gao finishes his post with an evocation of the “spirit of the people’s army.” He does not ask why the Burmese government wants to stop the project if it is in fact a gift of aid. (According to Chinese articles, it is, rather, an extension of a plan to use power generated in the country’s west to supply the eastern seaboard.) The story bears an uncanny resemblance to the famous case of the Wusong Railway, China’s first railway built by Western concessionaries, then bought and torn up by the Qing government in 1876.

Whether or not the Myitsone project eventually restarts — construction of the smaller Chinese-built dams in the area continues — the reactions to its suspension are a reflection of the complex and contradictory narratives around China’s development export. A strategic project whose stopping is a humiliation to China; an undeserved gift to a “poor, backward, corrupt and closed” country (in Gao Fengbiao’s words); a result of China’s skewed incentives for state companies that lead to ignoring political risks; a reflection of a wrong-headed diplomacy that is insensitive to popular opinion. All of these views are publicly voiced in online and print media, sometimes by the same individuals.

Burma stops Myitsone dam, or the extraordinary Peter Bosshard

In a second, but much larger setback — or sign of a policy change? – following the announcement of Southern Grid’s withdrawal from Cambodia, the Burmese president has announced the stopping of the construction of Myitsone Dam, the largest planned dam in Southeast Asia and the largest Chinese hydropower project abroad, which has been the source of armed conflict in northeastern Burma. Environmental organisations and ethnic ceasefire armies, as well as the Burmese democratic opposition, have opposed the project.

Although other Chinese dam plans in northern Burma are going ahead, there are signs that the Chinese government (or some of its agencies) is once again demonstrating sensitivity to criticism and political risk. I have written about how existing Chinese criticisms of the wastefulness and lack of foresight in Chinese investments abroad, probably already embraced by the Development and Reform Council, were amplified after the loss of projects due to the ouster of Gadhafi in Libya. Since then, several high-level government officials called for better risk assessment before projects go ahead.

Days before the Burmese announcement, a Chinese trade publication called 中国能源报 (Chinese Energy) published a remarkable interview with Peter Bosshard, director of International Rivers and one of the main campaigners against the Myitsone dam. The interview, which was then posted on the People’s Daily website, was occasioned by the IPO of Sinohydro on several stock exchanges. The IPO was more limited than originally planned due to delays in a number of contracts. Even so, it is extraordinary that a publication subordinate to the Ministry of Energy would publish a critical article featuring a foreign activist instead of celebrating the success of the IPO. (In the article, very unusually, only Bosshard’s Chinese name is used, so that readers may be unaware that he is a foreigner. Citing foreign critics in such contexts is routinely associated with hostility to China.) Such an act almost certainly signals a policy shift on the part of the ministry, which must already have known, and probably been consulted on, the Burmese decision.

The article mentions that International Rivers has consulted Sinohydro repeatedly, and cites Bosshard as saying that the company has now agreed to refuse projects that are seriously damaging to the environment or local society, including any project in a World Heritage area or national park; that it will enter into dialogue with local “communities” before carrying out a project; that it will set up a complaint mechanism; and that it will implement World Bank social and environmental impact assessment guidelines as a minimum standard.

But these measures are explained in terms of managing risk, rather than as ends in themselves. Bosshard is quoted as saying that they are necessary if Chinese companies are to solve “problems of reputation and control.” There is no doubt that International Rivers’ willingness to adopt such language instead of that of radical environmentalism that has given it unprecedented access to Chinese hydropower companies and state media.

Southern Grid pulls out of Cambodian projects

In an — I think — unprecedented move, China Southern Grid’s spokesman, Rambo Niu, announced the company was pulling out of its planned power projects in Cambodia, South China Morning Post reported (Toh Han Shih, “Controversial Chinese projects in Cambodia bow to public pressure”, Sep 03, 2011) . These are the very projects on the Sesan and Srepok rivers that the Caijing journalist wrote about recently (see 31 August post).

 

 

Caixin reporter in Cambodia

Inviting Chinese reporters to Cambodia (and Laos) so they get first-hand experience of issues related to dam construction is an approach that was pioneered, I think, by the American Friends Service Committee, but seems to be increasingly popular. Zhang Hong, the London-based Europe reporter for the Caixin financial news website a long and thoughtful post on her blog about a visit, arranged by the NGO 3SPN, to the villages in Ratanakiri Province that is the site of a planned dam on the Srepok River, to be built by an affiliate of Datang. (Here is an abbreviated English translation of her post.)

To her surprise, villagers said they wanted “no electricity, no dam, no compensation.” Apparently it wasn’t, as she had expected, a matter of appropriate consultation, mitigation, and compensation. No: these villagers really didn’t want development.

Was it something that “extremist” NGOs convinced them of — as one of her Cambodian interlocutors suggested? A result of insufficient information and knowledge on the benefits of electricity? Or is it really that these villagers think differently from their peers in China? “I am very curious why ‘development is the hard truth’ has penetrated human hearts so deeply in China … but it doesn’t work in these Southeast Asian countries.” Doesn’t it? If it doesn’t, why? This is indeed the crucial question.

As if confirming her point, the Chinese comments on her blog unanimously defend Deng Xiaoping’s dictum “development is the hard truth.”

Opposition to Chinese dams in northern Burma escalates

As Thomas Maung Shwe writes on the Shan exile news website Mizzima, a letter in which the Kachin Independence Organization (KIO) warns PRC Chairman Hu Jintao that constructing the Myitsone Dam in northern Burma could lead to civil war signals an escalation of public opposition to the the largest Chinese hydropower project abroad. The article says that “while the KIO has previously opposed the Myitsone Dam, the language contained in Lanyaw Zawng Hra’s letter to the Chinese president is unprecedented in its criticism of the project.”

The series of dams in northern Burma (see News, 10 February 2011 and 4 March 2010) is a project that exceeds China’s Three Gorges, and is opposed by environmental and human-rights groups. KIO, which has maintained relations with the Chinese government, says it will not allow the Burmese army into its territory despite an announcement by the junta that it will begin “necessary procedures” at the project location. As Kevin Woods has argued, Chinese investments in northern Burma serve to strengthen the military state, which has already eliminated the de facto autonomy of Kokang, one of the four “special zones” (another is run by the KIO). It  may mean the death knell for the KIO as anything other than a guerrilla force, unless it is willing to be incorporated into the new developmentalism as a subordinate partner.

The KIO letter reiterates that it is open to negotiations over dam construction, but is concerned about massive relocations resulting from the current plan and the fact that one of the sites is near its command centre. The National League for Democracy, Aung San Suu Kyi’s party, has also expressed opposition to the dam.

Meanwhile, Burma Rivers Network reports that the Burmese junta ordered the relocation of 8,000 people from the site of the hydropower project 50 km southeast of Naypyidaw, being built by a consortium that is headed by a Swiss company called Af Colenco and includes a British company called Malcom Dunstan & Associates and Yunnan Machinery Export-Import Company. This project, which started in 2004, is a further signal of the return of Western investors — benefiting from Chinese labour — to dam building.