Saturday, Aug 19, 2017, 11:04 PM CST – China

Society

Three Gorges Dam

HYDRO POWER CORRUPTS ABSOLUTELY

The Central Committee for Discipline Inspection has trained its crosshairs on the State-owned Three Gorges Corporation - putting a previously untouchable prestige project in the firing line of its expanding anti-corruption campaign

The last set of generators connected to the Three Gorges Dam is put into operation, July 4, 2012 Photo by CFP

Access to the Three Gorges Dam is heavily restricted Photo by CFP

A dream floated by Chairman Mao that, once realized, destroyed the ecology of the Yangtze River, forced the evacuation of over one million people, and has perhaps even increased the likelihood of a range of natural disasters from drought to earthquakes, the Three Gorges Dam was once, despite its controversy, firmly out-of-bounds when it came to domestic criticism.

Now, however, China’s Central Committee for Discipline Inspection, the Party’s anti-corruption watchdog, appears determined to take this sacred cow to task. A three-month inquiry into the Three Gorges Corporation, the State-owned entity in charge of the dam, has concluded that corruption has dogged the project since its infancy. Among a raft of charges levied include claims of insider trading, embezzlement and general negligence.

Given the prestige attached to the Three Gorges project, these revelations, though hardly surprising, were followed by a wave of media coverage on the dirty deals conducted by the dam’s parent company, though the State media has been careful to tiptoe around criticizing the project itself, focusing instead on the Three Gorges Corporation as emblematic of the corruption which is perceived to have taken root in most of China’s State-owned enterprises (SOEs).

With the investigation turned over to higher authorities, observers are waiting to see if the leaders behind the Three Gorges Dam prove to be among the corrupt “tigers” that President Xi Jinping has repeatedly pledged to strike down as part of his anti-corruption drive.

Corruption

According to media reports, the China Three Gorges Corporation rigged the bidding process for at least 100 billion yuan (US$16.7bn) worth of construction projects every year, allegedly offering contracts to cronies of its leaders. A bidder who gave the alias Liu Hu told Time Weekly, a Guangzhou-based newspaper well known for first specifying the corporation’s scandals, that his company’s bid was passed over in favor of a much more expensive bid by a company which, according to Liu, had faked its business licenses.

“When I sent all the proof to the Three Gorges Corporation, one of the corporation’s leaders told me that fraud is ‘common practice’ in the bidding process,” said Liu. “Even though I had proven fraud, they refused to reopen the bidding process.”

He added that the corporation had previously attempted to solicit a one million yuan (US$162,800) bribe from him, a demand he turned down.

Both the winning bidder, China Huashi Enterprises Ltd and the China Three Gorges Corporation have refused to comment on the case, but NewsChina found an open letter posted on the bulletin board of the online portal NetEase in 2012 which made similar allegations against both companies.

According to the 21st Century Economic Report, another Guangzhou-based financial journal, Rao Daoqun, a retired electrical engineering director formerly of the China Three Gorges Corporation, was put under disciplinary investigation at the end of 2013 on suspicion of insider trading. Media said the bid invited by the Three Gorges Corporation for electrical engineering equipment values at 200 billion yuan (US$33.3bn) in total.

Wang Jingping (alias), a construction company owner from Sichuan Province who had also bid on projects related to the dam, told Time Weekly that China Three Gorges Corporation generally nominated bidding panels itself rather than determining eligible bids on the suggestion of higher officials. Although Chinese law explicitly forbids collusion between project managers and bidders, these laws are routinely flouted by large enterprises in order to maximize potential kickbacks.

While official sources are remaining tight-lipped as to whether any such collusion took place, the inspection group indicated in their work report that many “leaders” of the China Three Gorges Corporation, along with their friends and relatives, had “interfered” in various bidding processes, despite the fact that some had no background in the technical fields in which contracts were being awarded.

“[Fraud] is quite common in the [Three Gorges] Corporation and a great number of people will be incriminated if the investigation goes any deeper,” an anonymous insider told the 21st Century Economic Report. “The problems exposed thus far are only the tip of the iceberg.”

Shock

Although Cao Guangjing, chairman of China Three Gorges Corporation, has claimed publicly that the media is “hyping up” the corruption in his company, which, he believed, was “nothing special” compared to that in other SOEs, the fact that the entire project is publicly funded has outraged taxpayers. 

Since 1992, when ground was broken on the Three Gorges project, China’s State Council slapped a 0.2 fen (0.03 US cent) surcharge on the price of every kilowatt-hour of electricity nationwide to fund the dam, a charge named the Three Gorges Fund. Although it was a tiny amount of money for individuals, the fund, thanks to China’s huge population, had collected over 107 billion yuan (US$17.3bn) by 2008, according to official data.

The dam was finished in 2010, but the fund has continued to collect its toll. According to Tan Qiwei, director of the fund’s local office in Chongqing, a municipality in which part of the dam’s reservoir falls, the fund’s assets will reach 240 billion yuan (US$40bn) by the end of 2019, when it is scheduled to be liquidated. Half this amount is slated for use on follow-up work on the Three Gorges Dam.

“How could the Three Gorges Dam, the ‘good child’ paid for by all the Chinese people, turn out to be a black sheep?” ran an acerbic commentary on the Tencent online news portal, which drew criticism from conservative outlets as attempting to provoke public anger against the dam itself.

“The Three Gorges Dam has greatly eased electricity shortages and played a big role in flood prevention. Besides this, it also generates a lot of tax revenue,” said Zhang Boting, an irrigation engineer from the China Society of Hydroelectric Engineering, quoted by the official Xinhua News Agency.

Such claims that the dam generates more money than it costs ring hollow when its parent corporation spends millions on, to date, three luxurious headquarters, in Beijing, Chengdu in Sichuan Province and Yichang in Hubei Province, while also spoiling its executives with free, brand-new Audi sedans generally valued at tens of thousands of US dollars.

A raft of other allegations against the Three Gorges project have spilled out in Chinese media, among them claims that the corporation manipulated its government ties to procure land through a third-party company at a massive discount, which, according to the developer, it planned to sell cheaply on to employees and officials. All of these sidelines were believed to have been paid for with taxpayers’ money, which has infuriated the Chinese public.

In 2009, Beijing resident Ren Xinghui made a Freedom of Information request to the Ministry of Finance demanding publication of the China Three Gorges Corporation’s expenditure and revenue stream, only to be rebuffed. Ren then made the same demand to the State Council, China’s cabinet, as well as the State-owned Assets Supervision and Administration Commission and the China Three Gorges Corporation. Unsurprisingly, all three entities turned down his request.

“The corporation is neither a government department nor a government-funded organization, so regulations on government information disclosure do not apply,” ran the response from the Three Gorges Corporation.

Ren refused to buy this explanation. “As a taxpayer, I am a sponsor of the Three Gorges Project. I have the right to know how my money is being spent,” he told the media.

Government Ties

As with most allegations against State-owned enterprises, the public remain cynical about the prospects for genuine openness when it comes to SOEs and their dealings with the government. “How can we ensure that corruption will not return as soon as this campaign ends?” ran one online post in response to Cao Guangjing’s pledge that his company “will not tolerate any corruption.”

Since the end of 2013, the Party’s Central Committee for Discipline Inspection  has expanded its anti-corruption investigations into SOEs, which are major targets of public anger over the misappropriation of public funds. So far, 17 senior officials have come under scrutiny, however this has only led to greater calls for answers, with many asking how so many top leaders have been able to avoid censure for so many years.

“The close relation between SOEs and the government has facilitated the monopolization of State resources, abusing power under the guise of doing business,” economist Zhao Xiao commented in Economy & Nation Weekly.

A typical example is the recently-detained Jiang Jiemin. The former president of CNPC (China National Petroleum Corporation), Jiang also served as the former director of the State-owned Assets Supervision and Administration Commission – other than the country’s highest leaders, few people had authority over him.

The leaders of China Three Gorges Corporation typically hold dual roles in government. Cao Guangjing, for example, serves as the deputy director of the Three Gorges Committee under the State Council, a ministerial-level position. The committee leadership also includes governor of Hubei Province Wang Guosheng and mayor of Chongqing municipality Huang Qifan.

Thanks to its government backing, the corporation, which reportedly possesses over 220 billion (US$36.7bn) yuan in net assets, has now monopolized the development of all four huge hydroelectric stations along the downstream stretch of the Jinsha River that demarcates Sichuan’s border with Tibet. The corporation even holds exclusive rights to tourism resources in the Three Gorges zone, charging every visitor an entry ticket price of 105 yuan (US$17), despite calls at the highest level for the area to be freely open to tourists.

“Heads of SOEs are usually too powerful to be supervised and they often have the sole say in major decisions,” the inspection group warned in its work report.

Calls for the separation of top SOE personnel from government posts have been growing for years, but the tight web of connections between State enterprise and the organs of State has prevented any significant reform. With everything from freedom of information to the court system firmly in the hands of the government, those wishing for true transparency will likely have a long wait ahead.

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