World Bank Group

Germany backs dam project but other nations shy away

PUBLISHED : Sunday, 27 October, 1996, 12:00am
UPDATED : Sunday, 27 October, 1996, 12:00am

GERMANY has decided to back its companies tendering to supply turbines for the controversial Three Gorges Dam by offering government export credit guarantees.

No formal announcement has been made but sources say the German government is now satisfied that China can meet its requirements on environmental protection and the involuntary resettlement of over one million people.

The German Green Party and environmental lobbyists have spoken out against any involvement in the world's most ambitious hydro-electric power scheme.

Other countries including Switzerland and Japan are expected to reach a similar decision before December 18, the deadline China has set for tenders. Competition among the international consortia preparing bids is intense.

Contracts just for supplying generating equipment could total US$1 billion and altogether foreign companies could win business worth $3 billion.

The United States Import-Export Bank has reached no decision, although other US government agencies have shied away from involvement in the project.

Sources said the Import-Export Bank was uncommitted because it had not obtained enough information on China's resettlement plans to judge whether they complied with its loan criteria.

Some sources believe that United States involvement is a political decision which will only be made after the US presidential elections two weeks away. In the meantime, leaders from other countries including the Swiss president and the German foreign minister have held discussions on the project during recent high level visits.

Two years earlier, Canada became the first country to offer an export financing package. Other countries chasing contracts and which might offer government export credit guarantees include Russia and France. Unlike Germany and other countries, the latter is not obliged to take a public position on loan criteria before French companies tender.

Until recently, Western governments had been nervous about offering support for the project and declined to provide development funds because of widely expressed doubts over China's ability to meet international human rights standards when resettling such large numbers. International aid agencies including the World Bank have also chosen not to participate.

China has taken few concrete steps to persuade foreign governments that fears about its implementation of resettlement policies are unjustified.

So far, it has not supplied any foreign government with a formal plan for resettlement although it has released technical information on environmental issues which have reassured foreign experts. 'They have not announced a timetable and we don't even know if they have a plan,' a western diplomat said.

'They didn't give us much information, just a lot of assurances,' another said.

'Still, we decided it is better to have a stake in the project and then try to influence them.' In the past week, Chinese Premier Li Peng toured the Three Gorges and discussed resettlement plans with local officials. He told them that successfully managing resettlement was vital because this would reflect on China's international image.

'It is clear that Premier Li will try and ensure things are done well because if things go badly wrong there will be a lot of bad publicity,' a diplomat said.