ENVIRONMENT: European Subsidies Feul Asian Dam-Building

By Pratap Chatterjee Reprint | | Print |

Pratap Chatterjee

MONTREAL, Oct 22 1996 (IPS) - On the heels of nabbing a contract to build a major dam in Malaysia, Asea Brown Boveri (ABB), a Swiss- Swedish industrial conglomerate, has asked the German and Swiss governments to support its bid to participate in the mammoth Three Gorges dam project in China.

Both dam projects have spurred great controversy, especially from environmental groups who claim that the dams’ ecological and social effects could be disastrous. For those reasons, the U.S. Export-Import Bank decided earlier this year against financing U.S. companies which were hoping to take part in the Three Gorges project.

ABB has applied for 280 million dollars in political risk insurance from the Swiss government for a construction contract on the Three Gorges dam which, if completed, will be the world’s largest.

The dam would create an inland sea 600 kilometres long. It would submerge more than 100 towns and villages and 170 factories. It would also displace 1.3 million people from their homes and destroy 14,500 hectares of the China’s best farmland.

Next week Exportrisikogarantie, the Swiss government export insurance agency, will decide whether to give ABB financial protection against civil war or nationalisation in China when it begins work on the dam. A positive decision will have to be approved by the Swiss cabinet in early December.

Two weeks ago, a consortium of companies, including ABB, were awarded political risk insurance for the Three Gorges dam by the Hermesburgschaft, a German government agency. The amount of the policy has not been made public.

Companies in other countries have not been as lucky as ABB. Caterpillar and several other U.S. companies applied for support to the Export-Import Bank but were refused. The World Bank, the largest lender for projects in developing countries, has an informal policy not to provide money or other backing for the project.

Bruce Rich, director of the international programme of the Environmental Defense Fund in Washington, says that ABB’s success in acquiring government backing for participation in controversial projects is a perfect example of the lack of common international environmental and social standards.

“Taxpayer support for these projects are working at cross purposes. If we don’t do something about this we will have a race to the bottom for the lowest environmental and social standards,” says Rich.

What’s worse, he says, is that the companies do their best to avoid public accountability. For example, Rich says ABB successfully lobbied Hermesburgschaft to approve the insurance the day before the German parliament was scheduled to discuss the matter.

Unlike Exportrisikogarantie, Hermesburgschaft does not have to get political approval, so German politicians were upset at what they perceived to be a deliberate attempt to make public debate irrelevant.

“For the parliament, this decision is an affront. What is the use of parliamentary debate? It shows the arrogance of the government,” complained Wolfgang Schmitt, a Green member of parliament, the day after Hermesburgschaft made its decision.

A week before the German controversy, ABB signed a contract to help build the 5.4-billion-dollar Bakun dam in Sarawak, Malaysia. It will flood an area of tropical forest the size of Singapore and displace some 9,000 indigenous people from their homes.

The project became controversial after local people and environmental groups held public protests against it. Last June, a Malaysian court ruled that the government’s environmental impact assessment for the Bakun dam had fallen short of legal requirements. It also noted that the rights of the affected indigenous people had been ignored. The matter is still in the courts.

Swiss environmental activist Peter Bosshard of the Bern Declaration has been leading an international letter-writing effort to get ABB to wait for the legal matters to be resolved before agreeing to work on the Bakun dam.

“Why is it that ABB is signing a contract to participate in a project which at this moment is so clearly in breach of standards of procedure that ought to be respected? ABB’s action in hurrying to sign the contract is a disreputable one,” he wrote recently.

Percy Barnevik, ABB’s chief executive of ABB, defended the company position by noting that “a company is not in a position to stop or not stop the project; we just follow the decisions of our customer.”

“Neither is ABB ‘hurrying’ to do anything premature. The project has been under investigation for 15 years and we, as well as a number of our competitors, have been working on specifications for a few years,” he added.

Stephan Schmidheiny, ABB’s largest shareholder and a member of the company’s board of directors, declined to answer IPS’ questions about either of the dams.

However, Martin Holdgate, a member of ABB’s environmental committee who has been asked to help with the Bakun dam, told IPS that the situation was a little “uncomfortable.”

“The decision to build the dam was made by the Malaysian government and not by us. ABB follows the highest possible environmental standards, and I will encourage it to do the best possible job,” he said.

Holdgate said that ABB was urging the government to protect the 1.5-million-hectare watershed area near the dam from logging and to compensate for the devastation caused by the project.

But Bosshard says that this is an extremely difficult task. “It’s easy to promise to protect the area. In order to build the dam they will have to build a road that will allow illegal loggers to enter the forests and extract timber,” he says.