Southern Grid pulls out of Cambodian projects

September 8, 2011

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

August 31, 2011

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.”

Eximbank official critical of Chinese companies’ communications abroad

February 24, 2011

Li Fusheng, Deputy General Manager of the Department of Assessments and Approvals (评估审查部), who is also a professor at the graduate school of the Chinese Academy of Social Sciences, published an article in the widely read Chinese-language edition of Global Times, often distinguished by its nationalist tone. This article draws conclusions from Li’s “inspection trip” to Laos and Cambodia, organised by a Western NGO.

Li writes that Chinese companies tend to respond to local criticisms (which he describes as “not the mainstreamvoices”) by saying that their practices are not the best, but also not the worst. This, he writes, is true, but not a convincing communication strategy. Li stresses the importance of conducting proper environmental impact assessments, but devotes most of his space to urging companies to communicate better and respond to critical voices.

This is not a particularly new or unusual opinion in today’s China, but considering that other commentators continue to view NGOs as nothing but a disturbance, it attests to the usefulness of the approach taken by those Western NGOs who are focusing on bringing Chinese scholars and officials into contact with overseas critics.

Global Times reports on Boeung Kak lake

January 19, 2011

The Boeung Kak development has been the most often cited negative example of Chinese investment in Cambodia since 2006. All NGO reports and Western news articles talk about how Boeung Kak Lake has been given to a secretive Chinese company to develop, which has started to move residents out but then stalled amidst their opposition. The case is cited as an example of environmental malfeasance (turning a lake into luxury real estate), cultural insensitivity (the area is said to be of symbolic significance to Phnom Penh residents),  rights violations (forcible evictions without proper compensation), greedy tycoons and venal officials in cahoots with China (the developer, Shukaku, is owned by Lau Meng Khin, an ethnic Chinese business strongmen close to the dictatorial prime minister).  A Sino-Khmer businessman assured me that the development was certainly not off the agenda, as Prime Minister Hun Sen personally supported it, and that it stalled simply because of the financial downturn and lack of investors.

Now, unusually, the generally nationalistic Global Times, an offshoot of People’s Daily, published an article that cites a Voice of America report and a Phnom Penh Post article alleging that locals are so angry about the affair that they want to boycott Chinese goods. The Phnom Penh Post reported that Shukaku recently signed a partnership with 鄂尔多斯鸿骏, a company from Inner Mongolia, which agreed to invest $40 million. Hun Sen initialed the agreement, which, according to Chinese media reports cited by the Post, was “part of a US$3 billion package of investment deals that also included a 750-megawatt power station in Sihanoukville,” presumable a coal-fired plant also owned by a Lau Meng Khin company in the Sihanoukville Special Economic Zone, “and a bauxite exploration project in Mondulkiri province.”

The lakeside development… rights groups say will ultimately displace more than 4,000 families … . Protests by Boeung Kak residents have become a weekly occurrence in Phnom Penh … villagers charge that they are being denied market value in compensation for their homes. (…)

“We will starve to death if they do not find a solution for us and
forcibly evict us from our homes,” 32-year-old lakeside resident Naon Sok Nen said yesterday. City Hall claims around 2,000 families from the lack have already accepted compensation packages. Those facing eviction have received varying compensation options, including cash payments of $8500.

According to Global Times, the demonstrators who demanded more compensation were paid by an NGO that “did not want to be named” to join the protest. The article makes the impression that this too is gleaned from the Post, but this is not the case. Global Times ominously, but in this case correctly, writes that the protests have been organised by “some human rights groups inside and outside Cambodia,” leaving no doubt that once again we are dealing with a Western plot to undermine China.

The article generated some discussion: over 6,000 people posted or reacted to around 160 comments to date. The most popular comment recommends the demolition team to go to Japan instead of Cambodia. But interestingly, aside from this anti-Japanese but irrelevant comment, the next most popular ones reflect that Chinese readers are not “buying” the account. They are critical both of the company and what they see as China “exporting” the way it deals with resettling populations, using the affair to criticise the government and thus in fact linking the investment to state behaviour in the same way as Western critics often do.

A hardwood importer’s story

December 5, 2010

A story called 东阳商人境外上演“疯狂的木头”  (Dongyang merchants perform in “crazy wood” show abroad), from 金华新闻网 (17 November 2010) has been circulated on China-Wire. I thought it contained a number of interesting details.

The article profiles a furniture manufacturer in Dongyang, near Shanghai, who has invested in a 50-year lease of 150 thousand mu (10,000 ha) of forest in Cambodia via a Hong Kong intermediary, for logging and a subsequent rubber plantation. (The intermediary part is interesting: in my research in Cambodia, I too encountered Hong Kong businessmen, often of Cambodian Chinese origin, acting as brokers/gatekeepers for Chinese investors.)

Presumably, the concession was granted for rubber, but the manufacturer considers the rubber plantation a liability and is only interested in the tropical hardwood that, according to an estimate commissioned from a Shanghai expert, could make up 3% of all timber. Since 2002, prices of certain kinds of hardwood in China have risen 400 times.

The article explains that Dongyang furniture makers used to import hardwood from Vietnam, but the supply dried up both because of exhaustion of resources and a ban by Vietnamese authorities. Importers then shifted to Cambodia, but that supply too has been exhausted. Now 90% of hardwood comes from Africa, but prices are much higher both because of local government restrictions passed under environmentalist pressure and because of rising local wages. (Interesting detail!)

(As an aside, there is a complete ban on hardwood export in Madagascar as of this year, an interesting comment on the relationship between the new government, which came to power after a coup partly driven by opposition to commercial land concessions, and environmental organisations such as the WWF, which also have land concessions in Madagascar, but for conservation purposes.)

Because of these price increases, more manufacturers in Dongyang have sought to go directly to the source instead of buying timber from exporters. One of them secured a 70-year logging concession in Cambodia back in 1997. The one portrayed in the article is also planning to set up a processing factory in Cambodia since costs are lower than in Dongyang.

In sum, the article demonstrates how the desires of Chinese consumers and  environmental campaigners produce complex changes on two continents: trees disappear, wages go up, jobs are created, and plantations that perhaps no one really wants spread.

Chinese trainers conduct environmental impact assessment training in Cambodia

October 26, 2010

The American Friends Service Committee, a Quaker organisation with a presence both in China (surprisingly!) and Cambodia, organised a week-long environmental impact assessment training program for Cambodian Ministry of Environment officials and NGOs in September. The training was conducted by Chinese Appraisal Center for Environment and Engineering (ACEE), which “operates under China’s Ministry of Environmental Protection (MEP) and provides training, drafts laws, and provides advisory reports on environmental issues.”

The training’s idea was clearly to generate trust between Chinese and Cambodian “stakeholders” involved in the investment projects, most of them highly controversial hydropower and mining investments, to suggest a way in which better practices could come from Chinese actors rather than from Western pressure, which has yielded little so far, but also to introduce Chinese planners to local perspectives:

Hearing from Cambodians about their lack of capacity in impact assessment, the sheer number of destructive projects being implemented, and about China’s role as the number one investor in the country, the Chinese trainers gained a sense of ownership in the project.

The popular Canton newspaper Southern Weekend ran a feature on the training with the headline Chinese Trainers, Cambodian Students on October 7, 2010.

Phoenix Weekly on Chinese investment in the Mekong region

April 17, 2010

After the disappointing Ming Pao story I blogged about earlier, Phoenix Weekly, the Rupert Murdoch outlet not known for a penchant for independent reporting, came out with a quite balanced feature on Chinese investment in Laos, Cambodia and Burma. The article, much of it reads like the more balanced of Western media coverage of the subject, takes its cue from the ubiquitous Qin Hui, who says that Chinese companies and individuals must “respect local civil society and rights [and] don’t play the games they are used to from home” if they are to play a constructive role in the region. The author starts with the example of the real estate development on Phnom Penh’s Boeung Kak Lake by a shadowy company that has been linked to a state enterprise from Yunnan province. Both environmentalists and 4,000 local residents facing resettlement who are dissatisfied with the compensation offered have tried in vain to contact the company, and the Chinese embassy refused to reply to inquiries as to whether the investment was indeed from China. (The Cambodian Development Council’s data do not list it as such.) Similarly, a Chinese company building a hydropower project in Koh Kong province apparently promised that it would build a school, a water reservoir and a road for local villagers, but the promise failed to materialise and the contractor refuses to accept responsibility. At this site, 200 out of the 500 workers are Chinese, while others tend to be migrant labourers from other parts of Cambodia, employed only for simple physical labour and getting $5-8 a day, which while a high wage for Cambodia is much lower than the 5-6 thousand yuan (around $1000) a month the Chinese workers make (suggesting, incidentally, that these workers are not, or no longer, as cheap as they have been believed to be.) These cases, the article comments, compare  unfavourably to the behaviour of investors from other countries. While  Chinese managers are quoted in the article, this part of the coverage relies mostly on local NGOs and Western-run media such as the highly critical Phnom Penh Post, generally in a sympathetic way.

The article also diverges from the usual triumphalims in pointing out that the success of Chinese companies in securing infrastructural investment has been enabled by the retreat of international lenders from most dam and mining projects. In Laos, donors and lenders have reconsidered their inititial support in 1999. In part, the article comments, this was to avoid projects that were vulnerable to NGO criticism, but in part it was caused by the steep rise in costs that these projects entailed after they were required to conduct stringent environmental and social assessments and ensure that their construction follows a sustainable strategy. Chinese companies are not subject to these strictures and enjoy access to politically facilitated capital, but as Qin Hui points out, they too are encountering difficulties: in Laos (and in northern Thailand) resistance to projects on the Mekong mainstream is such that Chinese companies can only count on building smaller dams on corollary rivers, while the capacity and profitability of hydropower projects in Cambodia (where Chinese companies have achieved a near-hegemony on the market) is limited. This leaves Burma, where political risk is the highest.

The article ends with what now seems a “politically correct” view in Chinese policy circles: the fuss kicked up by Western media about China’s “resource imperialism” is politically motivated, but this does not mean that Chinese companies’ actions are beyond reproach. Indeed, the author warns, while Chinese loans and aid are an attractive alternative to the strings-attached World Bank packages, a windfall of resource revenues under non-transparent conditions in badly governed countries will increase corruption, and locals might “mistakenly” blame it, as well as environmental damage and rapid social change is, on Chinese investors or even China itself.  A conclusion that could have been written by Sarah Raine or another Western analyst.

Elsewhere in Phoenix Weekly, Qin Hui wrote approvingly that in Laos, the feasibility studies companies must supply for the government approval of their projects include showing a positive or at least neutral impact for local residents and the advanced settlement of land acquisition issues — rather than, as in China, merely showing that the project will be good for the country and expecting that the government will then take care of land settlements. This is part of a long and decidedly un-academic Laos travelogue, observant in parts and simplistic in others, but generally written on a note of positive feelings for a country that does not seem to embrace high-speed development but appears to offer its people a considerable measure of existential security and community pride. (I am paraphrasing Qin here.)

In yet another article, written for Jingji Guanchabao (Economic Observer) but republished on the website of Qiushi, traditionally the Communist Party’s conservative journal for “Marxist theory,” Qin writes about disputes over dams on the Mekong within China. His point here is while the dams have varying and often effects on downstream countries — for example, if they cause drought in Laos they will likely prevent flooding in Cambodia — nobody there seems ever to thank China for the positive effects, while blaming it automatically for the negative ones. This, he says, is because the Chinese government refuses to acknowledge that it has any responsibility for whatever happens downstream. His advice to the government: be open with downstream NGOs, and then you can take credit for some of the positive outcomes.

Qin Hui’s talk in Kunming on Chinese investments in Southeast Asian power

December 12, 2009

The prominent social thinker/economic historian Qin Hui from Tsinghua University — described by his friend David Kelly as a social democrat — has recently written a number of articles on Chinese mines and infrastructure investments abroad, particularly in the Mekong region, but also Australia and Africa. Merriden has now received the text of a talk he gave on 19 November in Kunming, entitled “Participation in Mekong River Development: Chinese Companies Should have Rules,” which has been circulating on the Internet in an English translation by Jason Tower.

Here are some excerpts:

Chinese Companies Abroad: Both Risks and Opportunities 

There are already many Chinese companies abroad, and there has already been something of a shift from an older
investment model which was labor intensive and involved importing a large number of workers from China, to one which is focused more on capital investment, operation, and on the construction of BOT projects. The status of Chinese companies in the Mekong region has improved as a result. 

Both private and state enterprises can now be found in the region. Private investment is focused on trade and
labor intensive manufacturing – for example textiles in Cambodia. There are few controversies surrounding this investment. On the other hand large scale monopolistic state owned enterprises have also been investing in areas such as
hydropower and resource extraction, and there are a wide range of controversies related to this. (…)

(…) Chinese companies are doing BOT investments, and after operating for 20-25 years they will need to transfer over their investments. This may result in developers focusing more narrowly on short term interests. In order to begin generation as soon as possible, they may rush to complete the first installation in the shortest time possible. (…)

Role of Chinese Enterprises 

(…) In China there is a saying that “Westerners are afraid of the people, people are afraid of the government, and the government is afraid of Westerners,” in Laos and Cambodia the Chinese have become the “Westerners.”  

However things may not go so smoothly for Chinese investors which get cozy with government officials. In places like Laos and Thailand, civil society is rather developed and the
“people do not fear the government, what they are afraid of are ‘foreigners’ – afraid that foreigners will harm local interests.” 

Chinese enterprises are not necessarily accustomed to the practices of Southeast Asian civil society.  Take the practice of resettlement for example. In China the practice is to first submit a feasibility study to the relevant authorities of the government, only after which can the land be acquired,
with government always doing the job of requisitioning the land; in Laos on the other hand, when a company submits the Feasibility Study to the government, it must also submit evidence that it has obtained the land – this means that
companies must first come to an agreement with those who have an interest in the land. When Chinese companies try to use the many different tricks that they have developed in China to obtain land in Laos, not only do they have difficulties, they also incite many protests on the part of local people against Chinese investors. The reputation of Chinese business has been impacted as a result. 

Standards – Chinese Like Low, Not High

Chinese companies have a tendency to apply the lowest standards they possibly can. Some companies look to see whether local standards are lower than Chinese standards – if so they apply local standards. If local standards are higher than Chinese though, they will apply Chinese standards. One common complaint foreigners make against Chinese business is a good example of this – that Chinese do not promote local employment. If Chinese labor standards are lower than those of the countries where they are investing, and if these lower standards are applied, local workers are not willing to work, and Chinese companies are certain to use Chinese workers. It is important to point out though, that Chinese workers only go abroad to work when standards are higher than those they can
get in China. 

The main reason that Chinese companies use Chinese workers is that local workers are not willing to do some jobs. While Laos is not very developed (…) Chinese are being brought in to do manual labor, as locals are not willing to do this. When
the World Bank and western countries were driving the development of Laos, they needed a large number of engineers, which they trained. However after these countries went green, all of these workers were left without jobs. These are
the people that Chinese companies are hiring. 

Chinese enterprises should shift to apply the highest standards possible. Once this concept has been internalized by Chinese companies, this will also help to improve their behavior back in China. I am very supportive of Chinese companies going abroad, as it is possible for all parties to benefit from it.
On the one hand, Chinese companies can contribute to the development of other countries, while making using of China’s excess capital. On the other hand, as Chinese companies are criticized abroad, they will have pressure to improve the
way that they behave. Chinese companies should take advantage of these suggestions and improve their investment behaviors, and their employment practices. Once they have improved their behavior overseas, they can bring
these new practices back to China. If Chinese companies can be a bit better to the Chinese people, and treat their own workers better, then our own society will become more harmonious. (…)

VU student’s critical book on development aid in Cambodia

March 2, 2009

In her new book, somewhat mysteriously titled Swimming in a New Aquarium, Gea Wijders, a PhD student at the Culture, Organisation and Management department of the VU and until recently an advisor to Cambodia’s Ministry of the Environment, concludes that Western development aid to the country has failed. More generally, it is a critique of the idea of “doing good” in a “different culture” (or a new aquarium, in her metaphor). Gea is now engaged in a project looking at the role of Cambodian returnee migrants, most of them Sino-Khmer. I am looking forward to discussions with her about China’s position in the process.

Cambodia said to be opting for large-scale dam on the Mekong mainstream

January 6, 2009

In an article for IPS dated 1 January and posted on the LaoFAB listserv, “”CAMBODIA:  Opting For The Big Dam”, Andrew Nette writes that

several informed sources in Phnom Penh claim the Cambodia government has already made an in-principle decision to press ahead with the larger configuration

of the two that have been developed by China Southern Power Grid Company for the hydropower project on the Mekong mainstream at Sambor in Kratie Province.

This option

envisages a 2,600 Mw run-of- river dam barraging the entire width of
the Mekong [and] is a variation on the original scheme proposed by the then
Mekong Secretariat in 1994 for a 3,300Mw structure blocking the entire

Nette writes that large mainstream dams have become more popular options for the Cambodian, Lao and Thai governments because of higher fossil fuel prices.