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| June 2, 2001 | atimes.com | ||
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China
Investors warned off Three Gorges bonds WASHINGTON - Continuing with their effort to block financing of China's Three Gorges Dam, environmentalists are warning investors that bonds to be sold soon will indirectly finance the mammoth hydropower project that critics say will be a social and environmental disaster. Major investment banks, including, Goldman Sachs, J P Morgan, Morgan Stanley Dean Witter, Deutsche Bank, BNP Paribas and Barclays Capital, are currently pricing approximately US$1.75 billion in bonds for the government of China. The banks maintain that the use of proceeds from the bonds is not slated for the dam but will support "general governmental purposes". But environmental groups charge that the bonds will indirectly fund the dam, the largest hydropower project in the world, through the China Development Bank (CDB) and other state-run institutions. They point out that the preliminary prospectus of the bonds specifically mentioned the Three Gorges Dam. Since 1995, China International Capital Corporation (CICC), which is 35 percent owned by Morgan Stanley, has served as an advisor on overseas fund-raising for the Three Gorges Project Development Corporation. In January 1999, CICC purchased $250 million in bonds for the corporation. Board members of CICC include Morgan Stanley executive management. China Development Bank, a state owned bank established to finance large scale infrastructure projects, lists the Three Gorges Dam as its top loan commitment. In 1997 and 1999, US investment firms, including Morgan Stanley, helped underwrite $830 million in CDB bonds. "Concerned shareholders and customers of Morgan Stanley, J P Morgan Chase and Goldman Sachs should demand transparency and accounting for the use of proceeds from such bond underwritings," says Doris Shen, who coordinates a Three Gorges Dam campaign at International Rivers Network (IRN), a California-based advocacy group. Proponents say the dam is essential to control floods and provide electricity. Critics counter that it will generate only questionable economic results but definite environmental and human rights problems. The project is expected to be completed in 2009 at a cost of 203.9 billion yuan ($24.6 billion). The 185-meter-high and 23-km-long dam will power 26 generators with a capacity to produce 700 megawatts of power each. At the same time, its reservoir will submerge an area of 632 square kilometers, affecting 365 townships in 21 cities, districts or counties in Sichuan and Hubei provinces, displacing more than 1 million people. It will also put 657 factories, hundreds of archaeological relics, and 28,400 hectares of farmland and orchards under water. Already, many locals are having to move from the Yangtze's fertile banks to what, in most cases, will be less fertile land on slopes. In March, five villagers from Yunyang Country, an area scheduled to be submerged by the reservoir created by the dam, were arrested after organizing petitions detailing inadequate compensation and mismanagement of resettlement funds. The five men remain in detention and have been charged with disturbing public order, leaking state secrets and "maintaining illicit relations with a foreign country". "Construction of the ill-conceived Three Gorges Dam is proving to be socially destructive and economically unviable," says Shen. Activists say completion of the dam is not guaranteed, despite the Chinese government's insistence that it is. As costs for completing the dam increase, the demand for foreign assistance is growing, they argue. In 1992, the official cost of the dam was $11 billion, but now some estimates for completing the dam now exceed $75 billion. The dam's future "rests squarely in the hands of international bankers and investors", says Dai Qing, a vocal Chinese environmental activist who opposes the project. "Only if they continue to lend to this project can this disaster continue," she says. The World Bank, the US Export-Import Bank and the Asian Development Bank have all refused to finance the Three Gorges project. But environmentalists are accusing investment banks of stepping into the gap through the underwriting and pricing of Chinese bonds. The Financial Times of London reported in mid-May that sales of the bonds were intended for the United States as well, but following pressure from activists, including those who diminished the initial public offering of China's state-run energy company, PetroChina, last year, China decided to side-step the US market. China may have also avoided selling the bonds in the United States because of new, more stringent securities disclosure requirements, according to Michelle Chan-Fishel with Friends of the Earth. Outgoing Securities and Exchange Commissioner Laura Unger, for example, required more reporting of human rights related issues. "The Securities and Exchange Commission and investors are increasingly expecting foreign issuers to come to the US markets with US levels of transparency," says Chan-Fishel. She says the Three Gorges Development Corporation, which is constructing the dam, has a history of "avoiding accountability and transparency". The state-run corporation "disguised Three Gorges fundraising as general obligation bonds for the China Development Bank and the People's Republic of China", she says. Activists such as Chan-Fishel are encouraging people in the United States to directly question the banks about the Chinese bonds if they have a bank account credit card, retirement account or own shares in one of the financial institutions underwriting the bonds. Since last April, International Rivers Network has called on people to cut up their Discover Cards, a credit card service provided by Morgan Stanley Dean Witter, one of the banks underwriting the Chinese bonds. "It's time for customers to understand clearly how their money and business can be used as leverage to hold the company accountable," says IRN's Shen. (Inter Press Service) |
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