Estimates for dam attacked
CHINA'S latest funding estimate for the controversial Three Gorges hydro-electric project is being criticised by a mainland economist as outdated and unreliable.
The head of the Three Gorges branch of the Construction Bank, Mr Xu Xiangsheng, has been quoted by the Beijing-based Financial Times as saying that China was capable of financing the huge project, estimated in 1990 to cost 57 billion yuan (about HK$77 billion at official rates).
However, the co-ordinator of the China Business Centre of Hongkong Polytechnic, Dr Thomas Chan Man-hung, yesterday cast doubts on the reliability of the estimates.
He said the estimate itself was outdated, considering the increases in prices over the past two years.
Dr Chan said that although China managed to contain the overall national inflation rate to around six per cent last year, the price of construction materials had increased by more than 20 per cent.
The 1990 estimate of 57 billion yuan was itself adjusted upward by 60 per cent from a previous estimate of 36.1 billion yuan in 1986.
To be completed by 2008 and with a capacity of 17,800 megawatts, the project has strong support from top leaders including Premier Li Peng.
But it has aroused criticism from local officials, intellectuals and environmentalists.
Building the 180-metre dam in central China will flood more than 24,300 hectares of farmland and force more than one million people out of their homes.
The National People's Congress gave the go-ahead to the project at its plenary session in April 1992, although with a record number of abstentions.
According to Mr Xu, more than 90 per cent of the total cost will be financed domestically and the remainder will be covered by overseas funds, including loans from governments and investment consortiums, share and bond issues, and donations.
Taiwanese businessmen have expressed keen interest taking part in the construction.
''In view of the trend of the country's economic development, I am confident we are in a strong position to finance the project,'' said Mr Xu.
He said the main source of funding would come from the Three Gorges Construction Fund.
A special electricity levy introduced nationwide will contribute up to two billion yuan a year.
Revenue from electricity generated by an existing hydro-electric power plant on the Yangtze River, Gezhouba, will amount to 700 million yuan a year.
Both the Gezhouba and the Three Gorges project will be controlled by the Three Gorges Development Corp.
In the ninth year after the start of the project, Three Gorges will start generating electricity.
It is estimated that in the 10 years between the ninth and the 18th years, revenue from electricity generation will total some 40 billion yuan.
Domestic sources of funding include state allocations, bank loans, stock and bond issues, as well as public donations.
Mr Xu did not provide a breakdown on the percentage of each of these categories.
Dr Chan said the fact that China lowered the percentage of foreign funds to less than 10 per cent showed that Beijing was aware of the difficulties of dispelling concern about the project's environmental impact.
The chances of relying on the World Bank to finance the project were slim as China was already a heavy borrower, he added.
He was doubtful whether provinces other than the direct beneficiaries, such as Hubei, would be willing to share the heavy financial burden.
He noted that recent government efforts to issue securities had been met with poor response, which might affect its ability to raise funds for the Three Gorges.