Chinese dam company warns of legal action

The head of the Chinese company behind the recently scrapped Myitsone Dam in northern Burma has spoken of his consternation at U-turn announced last week by Burma’s president.

In a lengthy interview with China’s Xinhua news agency, Lu Qizhou claimed that Naypyidaw would have a “series of legal issues” owing to the agreements already made between the government and the state-owned China Power Investment (CPI) Corporation.

Lu added that he was “astonished” by he move, and found it “very bewildering”, particularly in light of an announcement by President Thein Sein in February this year when he was still prime minister, that CPI should “accelerate the construction” of the dam.

China’s Foreign Ministry Spokesperson, Hong Lei, had earlier urged “relevant countries to guarantee the lawful and legitimate rights and interests of Chinese companies.”

President Thein Sein has stated his commitment to the rule of law, but under the constitution is entitled to executive power over major infrastructure or energy projects. He said on Friday last week that the $US3.6 billion project would be suspended during his tenure, rather than an outright cancellation of the project, causing confusion about the exact situation.

Indeed a minefield of financial and loan agreements are already in writing and huge resources have been spent, with the construction of a smaller 2,000 MW dam at Chinbwe built solely to generate the electricity needed to build the Myitsone dam.

Lu noted that “the loss would go far beyond direct investment and financial expenses”, and that “there would also be tremendous amount of default claims from contractors.” On the Burmese side these include Asia World, run by military crony Steven Law.

China has committed to various major projects in Burma, including the trans-Burma Shwe gas pipeline and a corresponding high speed railway being discussed. The China National Petroleum Corp (CNPC), the main company in the Shwe project, said yesterday that it would go ahead despite the cancellation of the dam.

Professor Shuije Yao, an expert of Chinese economics from the Universityof Nottingham in the UK, told DVB that a cancellation of the 6,000 MW Myitsone dam project would be a “blow” to China in its bid for energy security.

He notes that the country has an extremely large carbon emissions-to-GDP growth rate. With every nine percent of GDP growth, the current annual rate, carbon emissions rise by roughly 20 percent.

China currently generates 80 percent of its electricity from coal, which is widely recognised as one of the worst catalysts for catastrophic climate change. It is strenuously looking to diversify its energy make-up, with hydropower one of the most effective alternatives.

China’s energy-hungry growth rates are largely as a result of its reliance upon manufacturing as an export base.

The CNPC announced on Monday that it would donate $US1.32 million to Burma to build eight schools along the pipeline route, which will now face scrutiny as critics smell blood.

The Myitsone cancellation has raised the imperative for China to woo the disaffected – as Lu claimed, “We provided each household [affected by the dam building] with a 100,000 kyat [$US120] living subsidy, a 21-inch colour TV and other living necessities”.

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