China’s Charm Offensive in Southeast Asia Bodes Ill for Mekong Basin Rivers
Kampot province in Southern Cambodia is a sleepy coastal region most
renowned for its fresh pepper, salt production, and durian fruit. The
Kamchay River weaves its way across the land, from the highlands of
Bokor National Park southward through a fertile valley of durian
orchards and rice fields before arriving in the provincial capital,
Kampot Town, where the steep-sided plateau of the national park
dominates the skyline. Rich in natural wealth, the national park is
also a popular tourist destination, especially the rapids and pools at
Touk Chuu on the Kamchay, where families play in the cool, clean water
and vendors from nearby villages serve freshly prepared local
delicacies.
This tranquil corner of Cambodia is soon to be transformed into the
country’s new powerhouse. Several kilometers upstream of Touk Chuu,
deeper within the national park, Chinese engineers are busy finalizing
surveys that will clear the way for construction later this year of
Cambodia’s first large hydropower scheme, the 193-megawatt Kamchay Dam.
The 110-meter-high dam’s reservoir will flood 2,000 hectares of forest,
or two percent of the national park’s area. According to a 2002 survey,
this protected forest is the habitat of 31 mammals and 10 endangered
species, including Asian elephants, leopard cats, and tigers. The
Cambodian Government has decided it is willing to sacrifice the forest
in order to secure desperately needed power, a constraint on economic
growth where electricity prices are among the highest in the world.
This is not the first time that the Kamchay Dam has been considered for
development. In the early 1990s the Canadian International Development
Agency (CIDA), strongly encouraged by the Cambodian government,
investigated the feasibility of the dam. CIDA concluded the project was
economically feasible, but withdrew its support following heavy
pressure from a coalition of Cambodian and international NGOs concerned
about the project’s poor social and environmental standards.
The project lay dormant for almost a decade. Then, in 2005, to much
fanfare, Chinese Premier Wen Jiabao and Cambodia’s Prime Minister Hun
Sen presided over an agreement signed in Kunming, China that approved
Sinohydro Corporation, China’s largest hydropower developer, to step in
and develop Kamchay Dam. High-level Cambodian and Chinese government
officials had pushed forward the Kamchay Dam’s revival in closed-door
negotiations that largely left other stakeholders, including the local
authorities and the public, out of the process.
Using a US$280 million concessional loan from China to Sinohydro
Corporation, the company will build, own and operate the Kamchay Dam
for 44 years, before transferring the project (quite late in its
expected lifespan) to the Cambodian government in 2050. Opposition
politicians have questioned the length of the contract, which are
typically 25-30 years in length. They have also questioned a July 2006
vote by Cambodia’s National Assembly to guarantee Sinohydro financial
compensation if the project faces difficulties or underperforms.
Leaders of the ruling party justified the guarantee by claiming that it
was necessary to secure Sinohydro’s investment. One abstaining
opposition lawmaker, H.E. Keo Remy, pointed out that the Sinohydro
contract had not been revealed to the lawmakers by the time of the
vote.
Villagers in Mak Prang commune living downstream of the dam site along
the Kamchay River remain blissfully unaware of the project’s potential
implications for their lives. Those living closest to the dam, who have
witnessed the arrival of excavators and other heavy construction
equipment from China, say their main concern is that “the dam will
collapse.” Poor river water quality, however, is a more real threat,
and could devastate the local tourism industry, pollute irrigation
water that feeds the abundant durian and rice fields, and contaminate
Kampot Town’s water supply, extracted just downstream of the planned
dam site.
While the project site’s location within a national park means there is
almost no resettlement, there will be a large number of people affected
by the impoundment of the reservoir. According to the local commune
chief, the poorest 30% of villagers in Mak Prang commune depend on the
collection of forest products such as bamboo, rattan, and malva nuts
from the proposed reservoir area to supplement their income. Neither
the company nor the government have yet to develop concrete plans to
replace their livelihoods, with some local government officials
suggesting that new industries will grow in Kampot and generate
employment. Realistically, the electricity will more likely feed
industrial growth in Cambodia’s capital, Phnom Penh, or in a planned
export development zone close to Cambodia’s only major deep-water port,
Sihanoukville.
In many ways, the Kamchay Dam is a microcosm of the complex process
through which political, economic and social relationships are being
fostered between China and its downstream neighbors located along the
Mekong River that threads the countries together. Especially in
Cambodia, Burma and Laos, China is willing to support controversial
infrastructure projects as part of its diplomacy agenda. These
governments warmly welcome the investments.
A Growing Relationship
Political ties between Cambodia and China have warmed considerably in
recent years, smoothing the way for increased economic interdependence
and trade. In an interplay of politically motivated “development aid”
and profit-driven entrepreneurial spirit, Chinese State Owned
Enterprises (SOEs) have committed to investing in a number of
high-profile infrastructure projects including hydropower dams,
bridges, and highways. The projects are often backed by Chinese
government-supported “Policy Banks,” such as the China Export-Import
bank.
While Cambodia’s traditional Western donors, together with the World
Bank and Asian Development Bank, have been hesitant to support the
government’s ambitious yet contentious hydropower development strategy,
the Chinese government has proven willing to provide both technical
expertise and financial backing. The Cambodian government approved a
second major hydropower project in early 2007 and four more are known
to be presently undergoing detailed feasibility studies.
Signaling the countries’ strengthening relationship, in April 2006,
China’s Premier Wen Jiabao announced a package of $600 million in loans
and grant aid to Cambodia during high-level talks with Cambodia’s Prime
Minister Hun Sen, which included the financial backing for the Kamchay
Dam project. Hun Sen thanked Wen Jiabao for the “no strings attached”
loan, commending China for not interfering in the internal affairs of
Cambodia. The Chinese aid package, which will be disbursed over a three
to four year period, is marginally less than the amount pledged to
Cambodia by all Western donors combined for 2006.
Cambodia is not alone in receiving special attention from China in
mainland Southeast Asia. Burma and Laos have also been the recipients
of major aid packages, infrastructure investments, and, to varying
extents, military cooperation (mainly to strengthen domestic security
forces). They have welcomed China’s policy of non-interference in its
provision of aid, which is disassociated from human rights and good
governance conditionalities. Strengthened political relationships with
China benefit Burma, Cambodia and Laos on the global stage too, as
China proves willing to block or dilute international actions that harm
these weaker countries’ interests, as well as to moderate pressure from
the region’s more powerful players, namely Thailand and Vietnam.
In return, China expects little. Burma, Cambodia and Laos have publicly
announced their support for the “One China” policy (which does not
acknowledge Taiwan’s sovereignty) and recognize China’s interests,
mostly trade related, which China reciprocates, in principle, on an
equal footing.
In addition to increased opportunity for trade and investment, China
reasons that stimulating economic growth will reduce the risk of state
failure and, therefore, potential security threats at its borders.
China is also especially interested in countering US and Western
influence on its doorstep, an interest generally shared by Cambodia,
Burma and Laos. These warmer friendships are, of course, also strategic
alliances and open up opportunities within the region to China,
including trade routes and access to natural resources. For example,
Burma, offers overland access to the Andaman Sea, considered vital for
both trade and diversifying China’s routes for oil imports from the
Middle East and Africa. China’s oil imports currently arrive via
tankers that must navigate the Straits of Malacca – a pirate infested
region that could also act as a potential choke point in the case of
conflict.
China’s policies toward Southeast Asia have encouraged not only major
SOEs to invest in mainland Southeast Asia, but also Chinese traders and
workers to migrate to these countries to seek opportunity and profit.
As the volume of trade has grown, economic inter-dependence has become
more entwined, thus consolidating China’s influence in the region.
In the eyes of the leaders of Burma, Cambodia and Laos, China provides
an attractive alternative development model to that offered by the
West, under which they need not cede decision-making or bend to western
interests' mandates. The realities of the environmental destruction and
widening social inequity that accompany China’s development model are,
at this point, largely unacknowledged by the region’s decision makers.
Despite the significant benefits of partnering with China, the
Governments of Burma, Cambodia and Laos are hesitant to completely
depend upon China’s Guardianship for both historical and practical
reasons. They have, therefore, continued to court other donors and
powerful players to act as a counter-balance to China’s growing
influence.
China woos Laos
In July 2007, Laos celebrated the thirtieth anniversary of their
Friendship and Cooperation Treaty with Vietnam, its traditional
regional ally since resistance to French colonialism and, more
recently, as Communist states sharing a common struggle. In reality,
however, Laos is widely viewed as a Vietnamese client state. Yet the
nature of the relationship is changing, according to Andrew Symon of
Asia Times Online, who writes: “Economics and business, rather than the
old fraternal bonds among aging Communist Party cadres, will be the
ties that bind future bilateral relations.” Symon observes that, on the
back of increasing regional integration, Vietnam must now compete with
Thai, Chinese and Western investors for access to Laos’ rich natural
resources, including its massive hydropower potential that is coveted
for export to meet the growing energy demands of its regional
neighbors.
In August 2007, Laos’ Prime Minister, Bouasone Bouphavanh, visited
Beijing where he met with Chinese President Hu Jintao. Hu told Bouasone
that China and Laos had huge potential to cooperate on key areas, such
as trade, energy and infrastructure. Bouasone said, “Development of the
bilateral relations not only serves the fundamental interests of the
two peoples, but also helps maintain the regional and world peace and
prosperity.” Both Laos and China, although Communist states in name,
have recently made moves towards adopting market economic principles.
Through China Exim, China has already financed the controversial 40
megawatt Nam Mang 3 dam, located 80 kilometers northeast of the Laotian
capital of Vientiane, which provides power for the Lao and Thai
markets. The project, completed in 2004, affected thousands of people
and flooded 1,000 Ha of National Park. The project was the scene of the
first ever villager-led protest, when some 40 ethnic Hmong men armed
with sticks and guns, infuriated that they might be evicted from their
lands without having received information about where they would be
relocated, halted dam construction for five days (see WRR, April 2003).
Chinese companies are known to be involved in developing at least eight
proposed hydropower projects in Laos to date, including the
controversial proposed Paklay Dam on the Mekong mainstream.
In the future, some projects are expected to export electricity to
China, including the 640 MW Nam Ou 8, to be co-developed by Sinohydro
Corporation and Laos Government. The project could affect up to 50,000
people, displacing some 7,000 in the reservoir area. The
300-square-kilometer reservoir would inundate part of Phou Dendin
National Biodiversity Conservation Area.
China befriends Burma
China has built close relations with Burma’s military regime, pledging
continuing economic cooperation, especially in the development of
economic infrastructure. China has funded major road improvements that,
at the same time, improve its access to Burma’s Andaman Sea and Bay of
Bengal deep-water ports. China’s support for Burma counters US
pressures on Association of South East Asian Nations (ASEAN),
undermining US and EU sanctions.
China has been a willing supporter of hydropower development in Burma,
both for potential export to China and Thailand, and for domestic
supply. It is the major backer and developer of the Myitsone Dam in
Kachin State that would displace 10 villages along the upper Irrawaddy
River, one of seven or more dams planned by the same Chinese company
amounting to at least 11,760 MW. Three of the five hugely controversial
dams on the Salween River (altogether around 15,000 MW) have known or
suspected Chinese involvement (see WRR, October 2006).
The ties that bind
China’s reemergence as a global power has resulted in a renewed
projection of influence into Southeast Asia, not attained since the
time of the Ming Dynasty in the 15th century. In sharp contrast to the
tribute-based relationship of the past, China has worked hard through
economic support and diplomatic suaveness to present itself as a benign
neighbor and dispel fears of a Chinese threat of hegemony in the
region. Mainland Southeast Asia presents a complex playing field for
strategic political games, a region of diverse states, cultures, and,
of course, checkered historical relationships with China.
To allay the region’s fears, China has engaged in multilateral
dialogues, such as through the Association of South East Asian Nations
(ASEAN) and relaxed its claims in long standing regional disputes. On
the other hand, China has built strong, direct bilateral links with
Burma, Cambodia, and Laos, weaker members of ASEAN that hold key
strategic economic and security interests to China.
China has also actively participated in the ADB’s multilateral Greater
Mekong Subregion (GMS) program, which focuses mainly on regional
economic integration through major infrastructure developments, which
is completely in-line with China’s economic interdependence strategy
and the opportunities this presents for China to progress its regional
leadership aspirations. The GMS regional transportation network, for
example, facilitates the economic integration of western and southern
China with mainland Southeast Asia. China has been a keen supporter in
pushing forward construction of the Kunming to Bangkok highway via
Laos.
In contrast to the weaker states of mainland Southeast Asia, China has
sought to build economic cooperation and trade with Thailand and
Vietnam, both of which have closer relationships with the US and are
perceived as economic rivals to China. As an example of China’s
keenness to build economic interdependency, despite ongoing electricity
shortages, China has signed agreements with both Thailand and Vietnam
to export massive amounts of electricity in the near future.
Presenting itself as a friendly neighbor seeking win-win solutions,
China has on-the-whole won over cautious Mekong region governments that
have accepted the inevitability of China’s rise and sought
opportunities within it, including as a counter-balance to US regional
influence.
Whether China can sustain its current benign approach towards diplomacy
with its Mekong region neighbors is at present an open-ended question.
In part it will depend on China fulfilling its promises on mutually
beneficial economic partnerships, which in turn depends upon its own
sustained economic growth - another open question. China has proven
itself willing to support controversial infrastructure projects
throughout the region in exchange for political points, and has
generally adopted an un-transparent frontier-styled capitalism both
with its government partners and private sector traders.
But China’s aid projects are developed according to environmental and
social standards that are substantially weaker that the already
less-than-admirable standards of Western bilateral donors and Export
Credit Agencies, and many of these projects will not endear Chinese
investors to the region’s general population. A better way forward
would be for China to recognize the importance of healthy river systems
to the region’s people, and work to sustain these natural support
systems for the common good rather than exporting their riches through
the common grid. In the longer term this will ensure a fruitful result
from China’s efforts to build better relations with its neighbors and a
brighter future for all.
China’s Upstream Dams Undo the Charm
Despite sleek diplomatic maneuvers, like all great powers, on occasion
China has acted unilaterally and in naked self-interest. Nowhere is
this more readily apparent than on the Lancang River, the local name
for China’s stretch of the Mekong River that links Yunnan Province, to
its downstream Southeast Asian neighbors, and where China plans an
eight dam cascade on the mainstream totaling over 16,000 megawatts. Two
of the dams are already complete, and a further four are under
construction. Villagers in downstream Thailand complain of dwindling
fish stocks and erratic water levels because of China’s dam operation.
Despite an open-ended invitation, China has declined to join the Mekong
River Commission (MRC), formed 12 years ago by Cambodia, Laos, Vietnam
and Thailand to help manage the international river upon which 60
million of their citizens depend. As the upstream country with an
extensive hydropower development program already underway, China
appears concerned that joining the MRC would cede too much power to
those downstream.
Ironically, at the GMS conference in Kunming in 2005, Wen Jiabao told
the delegates, “All GMS countries are close neighbors of China.
Nourished by the same river, our people have fostered long-standing
friendship… We are resolved to work together with other countries to
further consolidate and develop traditional friendship and constantly
expand equal-footed and mutually beneficial cooperation.”
