Released: 05-31-01
Activists Caution Proceeds from China Sovereign Bonds Could Fund Dam
Major investment banks, including Goldman Sachs, JPMorgan Chase, Morgan Stanley Dean Witter, Deutsche Bank, BNP Paribas and Barclays Capital, are currently pricing approximately US$1.75 billion in bonds for the People's Republic of China. Activists warn that these bonds may directly or indirectly fund the Three Gorges Dam project in China. Although the bonds will be sold in Hong Kong and Luxembourg, sales were intended for the US, according to the Financial Times (May 16, 2001). However, the Financial Times reports, China decided to sidestep the US market due to pressure from activists, including those who diminished the initial public offering of PetroChina last year.
The Financial Times also asserted that analysts believe China may have avoided selling bonds in the US because of more stringent US securities disclosure requirements - especially in light of outgoing Securities Exchange Commissioner Laura Unger's decision to require more reporting of human rights related issues.
"The SEC and investors are increasingly expecting foreign issuers to come to the US markets with US levels transparency," said Michelle Chan-Fishel, Green Investments Program Coordinator at Friends of the Earth (FoE). "Three Gorges Development Corporation has a long history of avoiding accountability and transparency; they ducked World Bank funding and disguised Three Gorges fundraising as general obligation bonds for the China Development Bank and the People's Republic of China."
The preliminary prospectus for this bond offering specifically mentions Three Gorges Dam. However, the document only discloses the bonds' use of proceeds as supporting "general governmental purposes."
Following a 1998 US$1billion China sovereign bond issue underwritten by Goldman Sachs and Credit Suisse First Boston, IRN was notified that $300 million in proceeds from that issue went to fund the Three Gorges Dam, recognized as one of the most environmentally and socially destructive projects in the world. The project is partly built, and the Three Gorges Project Development Corporation claims it will be completed by 2009.
In March 2001, five villagers from Yunyang County, an area slated for submergence by the Three Gorges Dam, were arrested and remain in detention after peacefully organizing petitions detailing inadequate compensation and mismanagement of resettlement funds. The men are being charged with disturbing public order, leaking state secrets, and "maintaining illicit relations with a foreign country." The last charge refers to their contacts with international press in Hong Kong. Articles 19 and 21 of the United Nations Human Rights Declaration list the freedoms of expression and peaceful association as inherent and inalienable human rights. The project plans to forcibly displace close to two million people, the largest forced displacement ever for a single project.
"Construction of the ill-conceived Three Gorges Dam is proving to be socially destructive and economically unviable. Concerned shareholders and customers of Morgan Stanley, JPMorgan Chase and Goldman Sachs should demand transparency and accounting for the use of proceeds from such bond underwriting," said Doris Shen, Three Gorges Campaign Coordinator at International Rivers Network (IRN). An activist web site, www.floodwallstreet.org is mobilizing letters of protest to US investment banks and calling for a boycott of Morgan Stanley's Discover Card services.:
