Chinese-linked hydropower in South-East Asia20 March 2020
A recent research project has investigated the motivations behind Chinese involvement in overseas hydropower construction, and the challenges and opportunities for local governments and populations
The “China goes global project: A comparative study of Chinese hydropower dams in Africa and Asia” (CGG) investigated the challenges and opportunities for local governments and local populations resulting from Chinese-linked hydropower projects in South-East Asia and Africa. The CGG project was led by the Centre for Development, Environment and Policy (CeDEP) at the School of Oriental and African Studies (SOAS) at the University of London and funded by the UK Economic and Social Research Council (ESRC)
Dr Frauke Urban, former Reader at SOAS and currently Associate Professor at KTH Royal Institute of Technology in Stockholm, Sweden, and Dr. Giuseppina Siciliano, Lecturer in Sustainable Development at SOAS were the main investigators of the project together with Prof Giles Mohan from the Open University in the UK and Prof May-Tan Mullins from the University Nottingham. Local institutions in South-East Asia, China and Africa, such as the Cambodia Development Resource Institute (CDRI), the University of Malaysia Sabah, Tsinghua University in Beijing, China, the University of Ghana, the Nigerian Institute of Social and Economic Research (NISER) and International Rivers in China and the US, were also involved.
Chinese involvement in overseas hydropower construction
The project was motivated by the extent of Chinese involvement in overseas hydropower construction and the increasing interests from academia and international organisations in investigating the main motives of Chinese state-owned banks and enterprises to invest in hydropower projects in low- and middle-income countries. Chinese companies and banks are currently the most prevalent builders and investors in large hydropower dams in many parts of the world, bringing with them abundant expertise and skills in building and managing these large energy infrastructures. In a time when the World Bank and major OECD-based firms and financiers reduced their activity in the large dam industry in the late 1990s and early 2000s, coinciding with the recommendations of the World Commission on Dams, Chinese dam-builders and financiers stepped up their activities.
Against this background, the ESRC-funded project was carried out using a case study approach to investigate the social, economic, environmental and political implications of four different large hydropower dams (with a capacity of more than 50MW) already built or planned with the involvement of Chinese companies and financiers: the Kamchay Dam in Cambodia, the Bakun Dam in Malaysia, the Bui Dam in Ghana and the Zamfara Dam in Nigeria.
The project was based on wide-ranging fieldwork carried out in the areas under investigation for the collection of primary data and information through conducting interviews with institutional actors like regulators and policy-makers in Cambodia, Malaysia, Ghana, Nigeria and China, international organizations, local communities affected by the hydropower projects, Chinese enterprises, NGOs and academia.
Bakun dam in Malaysia
Motives and local implications
Energy access is a key development issue in many parts of the world, including in South-East Asia. Due to the region’s abundant rivers, hydropower is seen by local governments and international organisations such as the World Bank and the International Energy Agency, as an opportunity to provide clean energy access to local populations. As a result, in the last decade or so, there has been an increase in the approval and construction of new hydropower dam projects across South-East Asia and other world regions, many of which are Chinese-linked.
South-East Asia seems to be the most desirable region for Chinese involvement in hydropower developments with about 40% of the total projects overseas during the period 2006-2017, which corresponds to an added capacity of more than 60,000MW (Jensen-Cormier S, 2017). Since 2017 new Chinese-linked projects are being planned or are under construction in the region and particularly along the Mekong River. However, caution is required when analysing the data. Many large dams that are being planned may never be build due to political, financial, technical, social or environmental reasons (Brautigam and Hwang, 2017).
In this context the CGG project examined the motives and drivers of Chinese investments in the region, analysed local and regional governance implications, and the ways Chinese actors interact with governments and local populations. The project also shone some light on how social and environmental safeguard measures have been managed to assure a sustainable and just development in the areas under investigation.
Looking at the main motives and drivers, the project found that Chinese-linked hydropower investments overseas are often motivated by diverse reasons, which can be economic, political, geopolitical and/or reputational. Political and economic reasons may be closely interlinked, and they refer to two main Chinese political strategies called the “going-out strategy” (emerged in 1999 and coincided with China’s 2001 admission to the World Trade Organization WTO) and the most recent “Belt and Road initiative” (established in 2013) which urged Chinese companies to invest in global markets and to expand Chinese trade and investments, including in energy infrastructure, along the Silk-Road Economic Belt.
From a geopolitical point of view, sometimes access to natural resources, such as water, minerals and fossil fuels, but importantly also geographic proximity, political relationships and cultural similarities, can be considered the main factors driving Chinese-linked hydropower investments especially in South-East Asia. Reputational reasons refer to the desire of China to play an important role in the dam-building sector at the global level, justified by its extensive domestic experience, skills and expertise in the sector, and the desire to play a role in international projects by helping countries from the global south to develop through, among other interventions, the development of energy infrastructures (Siciliano et al., 2019).
Chinese investors in the energy sector are attractive partners for South-East Asian countries which may have limited energy access and issues with energy security, and at the same time low investment and technical capacity to invest in large infrastructure projects such as large hydropower dams. Moreover, Chinese banks offer the opportunity to local governments to have access to finance with low or no-conditionality attached and often the dam projects are more cost-effective than if built by their OECD competitors.
Kamchay Dam in Cambodia
The project also examined large dam projects through an energy justice perspective. This focussed on the fair distribution of the costs and benefits derived from hydropower developments in terms of distributional justice and access to resources, and at the governance and decision-making process of hydropower development in terms of procedural justice looking at aspects of accountability, transparency, participation, and informed consent of those affected by energy projects, as well as safeguards measures and restoration of the socio-environmental impacts (Siciliano et al, 2018).
These aspects have been analysed looking at two specific Chinese hydropower projects in the region, namely the Kamchay dam in Cambodia and the Bakun dam in Malaysia.
For the future, it is likely that large hydropower dams will play an important role in energy systems due to climate change concerns and the need for cost-effective low carbon energy. Chinese dam builders and financiers, as well as other players from the large dams industry in other emerging economies and in the OECD, will play an important role here. Our research shows however, that the social and environmental implications of large hydropower dams need to be better addressed in the future.
Click here for more information about the project and its outcomes.
Brautigam, D. and Hwang, J., 2017. Great walls over African rivers: Chinese engagement in African hydropower projects. Development Policy Review
Jensen-Cormier S, 2017. Reflections on Chinese Companies’ Global Investments in the Hydropower Sector Between 2006-2017.
Siciliano, G., Urban, F., Tan-Mullins, M., Mohan, G., 2018. Large dams, energy justice and the divergence between international, national and local developmental needs and priorities in the global South. Energy Research & Social Science
Siciliano, G., Del Bene, D., Scheidel, A., Liu, J., Urban, F., 2019. Environmental justice and Chinese dam-building in the global South. Current Opinion in Environmental Sustainability, Vol. 37(4): 20-27.