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WATER POLITICS

Courtesy of The New York Times, a report on Myanmar’s recent decision to halt construction was halted on the $3.6bn Myitsone dam being built by a Chinese company.  As the article notes:

“…Beijing has called on Burma to protect the rights of Chinese companies after construction was halted on the $3.6bn Myitsone dam, in a rare example of public disagreement between the two neighbours and close allies.

“[China] demands its companies to strictly follow the law of the countries they operate in but also calls on the respective governments to protect Chinese companies’ legal rights and interests,” said Hong Lei, a spokesman for China’s foreign ministry.

“[The] China-Burma joint investment project … has undergone scientific evaluation and strict examination by both sides,” Mr Hong added. “Issues during its implementation should be handled properly through friendly negotiations.”

On Friday Thein Sein, Burma’s president, ordered a halt to work on the project. The Burmese government had previously insisted that construction would proceed despite protests.

The Myitsone project’s main contractors are China Power Investment Corporation, one of the country’s big power producers, and Asia World Company, a Burmese group.

Sinohydro, a China Power subsidiary and one of the world’s largest dam contractors, and another Chinese state-owned dam construction company, Gezhouba, are the primary subcontractors.

The dam, the largest of seven planned along the Irrawaddy river, is located in Kachin state, an area which was long under the control of guerillas fighting for independence in the region. The planned relocation of thousands of people and controversy over the environmental impact assessment commissioned by China Power have sparked frequent protests.

The disruption could add momentum to a re-examination of Chinese state-owned groups’ push into infrastructure and power projects in often high-risk developing countries.

About $8,000bn in infrastructure investments are expected to be committed between 2011 and 2020, according to the Asian Development Bank and consultancy group McKinsey. China has made prioritised foreign infrastructure participation in its 12th five-year plan, allocating about $15bn for infrastructure projects in Burma and other member countries in the Association of Southeast Asian Nations (Asean).

As it becomes more difficult to obtain export finance from Japan and South Korea, construction and power companies are asking Chinese firms to join their invesment consortiums in order to qualify for financing from Chinese state banks, which typically apply less scrutiny than other lenders. But Beijing has started taking a closer look at potential political risk following wars in Sudan and Libya – two countries in which Chinese companies had been very active.

“When Chinese undertake a large project domestically, the developers, contractors, manufacturers, suppliers, lenders and off-takers are often state-owned and are pursuing a project that has been identified as part of a wider domestic priority,” said Christopher Stephens, a partner at Orrick, Herrington & Sutcliffe, the law firm.

“They have to deal with unfamiliar labour, environmental, tax, and other laws, local subcontractors and suppliers, and less friendly courts and regulators. It’s quite a different set of risk analyses.”