The Asian Development Bank
Third World Provider or Predator?
Sightings from The Catbird Seat
Asian Development Bank – From the Asian Development Bank Website: Established in 1966, ADB is a multilateral development finance institution owned by 59 members, mostly from Asia and the Pacific.
ADB’s principal goal is to reduce poverty. Its related objectives are to foster economic growth, support human development, improve the status of women, and protect the environment.
ADB’s principal tools are loans and technical assistance, which it provides to governments for specific projects and programs. ADB’s lending volume in 1999 was US$5 billion. Technical assistance grants, amounting to US$173 million in 1999, are provided for preparing and executing projects and supporting advisory activities.
ADB’s headquarters is in Manila. It has … resident missions in 13 Asian countries, a regional mission for the Pacific, and three representative offices in Frankfurt, Tokyo, and Washington, DC. . . .
Shareholders and Management
Just like any other bank, ADB has shareholders. Of the 59 members, Japan and the United States are the largest shareholders, each with 15.9 percent.
The Board of Governors, comprising one representative from each member, meets annually. It elects the 12 members of the Board of Directors, with each director appointing an alternate. The ADB President is elected by the Board of Governors and is the chairperson of the Board of Directors.
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Some of the 59 member countries listed on the Website: Cambodia; Peoples’ Republic of China; Hong Kong, China; Indonesia; Japan; Republic of Korea; Nauru; Philippines; Singapore; Viet Nam; Russia; France; Germany; Switzerland; the United Kingdom and the United States.
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Honolulu Advertiser, 12/10/00: Honolulu’s Image Polished for Asian Development Bank Meeting – With five months to go before Honolulu gets its first chance to welcome some of the most powerful people in the world – possibly even the next U.S. president – during the Asian Development Bank’s annual meeting, organizers are making sure they are projecting the right image that will result in return business.
The Asian Development Bank holds heavyweight status in the Pacific Hemisphere. The Manila-based bank’s board of governors comprises the financial ministers from the 59 member nations who oversee the annual distribution of about $5 billion in loans, mostly to address poverty and infrastructure in developing nations.
With that kind of muscle, the bank’s big events command plenty of attention, with or without presidents.
For organizers here, who expect some 3,000 to fill the Hawai`i Convention Center May 7-11, the first ethic in planning events is to ensure that delicate diplomatic treatment is spread evenly among all delegations. That equality covers everything from the color and style of sedans assigned to each country to the details for subdividing a convention center meeting room … according to Gerry Silva, the person handling the day-to-day planning of the event …
Silva keeps a couple of file cabinets dedicated to the minutiae of serving as host to such an event. For instance, th notes that … transportation has to be worked out to the second. Finance ministers- some of the most powerful people in Asia- simply don’t wait for rides.
Organizers also want no mistakes because their strategy is to compel Asia’s well-connected leaders to come back. . . .
To play well, officials are planning for protests. At Chiang Mai last year, groups converged to protest the environmental effects of some development plans. Seattle had been slated as the site of this Asian Development Bank meeting, but interest waned after violent protests at the November 1999 World trade Organization convergence damaged city structures and bruised the civic self-image.
With its convention center and mid-Pacific location, officials here jumped at the chance to become the U.S. host for the meeting. As for security and crowd control, Honolulu’s distance from everywhere may simplify matters. Protesters can still mobilize, but for many the price of access will be steeper. . . .
The meeting will cost about $1 million but the state is hoping to recapture the money through business sponsorships and fees for companies and organizations renting space at an event expo. . . .
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Honolulu Star-Bulletin, 4/8/01:
ISLE SOLDIERS BRACE FOR ADB PROTESTS
While troops train for possible riots, protest organizers vow to remain nonviolent.
Protesters and the National Guard were preparing to confront each other at next month’s Asian Development Bank meeting . . .
Members of the Hawaii Army National Guard, donned in flak jackets and helmets with face shields, trained for riot control as part of their monthly drills yesterday at Kalaeloa, the former Barbers Point Naval Air Station.
Some 5,500 Air and Army Guard members are training this weekend, but spokesman Capt. Charles Anthony, said not all of them are preparing for the ADB meeting . . .
Other than batons, Anthony would not say whether yesterday’s training entailed the use of tear gas or other weapons.
Across the island at about the same time yesterday morning, about 17 members of ADB Watch, a coalition of peace, ecology and human rights groups, practiced nonviolent protests clad in T-shirts and shorts at Kanewai Community Park and the Quaker Meeting House in Manoa.
“We remain nonviolent even when the other side reacts with violence,” said Joshua Cooper, who conducted the first of a series of protest training meetings this month. . . .
“We have our minds. We don’t need Molotov cocktails,” Cooper told the group.
The National Guard and Honolulu police are bracing for what could be large protests against the Asian Development Bank.
The purpose of the ADB is to eliminate poverty in Asia. Environmentalists and human rights groups oppose the globalization policies of the 60-nation organization.
Honolulu police have estimated some $6 million to $7 million will be needed to meet safety and traffic concerns at the conference, which is expected to draw President George W. Bush and finance ministers from around the world. . . .
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[A Catbird-brain Suggestion: Cancel the meeting and give the $6 to $7 million directly to the poverty-stricken people in Asia!]
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Honolulu Star-Bulletin, 04/08/01:
HAWAII SOLDIERS TO CHAUFFEUR ADB OFFICIALS IN FREE LUXURY
As many as 70 Hawaii Army and Air National Guard members will serve as drivers for the finance ministers of the 59 member nations of the Asian Development Bank, said Capt. Charles Anthony, National Guard spokesman.
But the state is still not saying how many National guard members will be providing security for the ADB meeting at the Hawaii Convention Center May 7-11.
“In contract with the ADB, the host country picks up the cost of transportation,” said Jerry Silva, HTA director of communications and special projects. . . .
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[A Catbird Reminder to ADB Finance Ministers: The E-ticket rides on a U.S. Nuclear Submarine may not be available this year.]
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The Honolulu Advertiser, 04/15/01:
ASIAN DEVELOPMENT BANK – Isle Meeting Provokes Debate on Globalization.
PRO: Projects Help Those Who Are Poorest, by Shoji Nishimoto
In Indonesia, 10-year-old Amihan used to live on the streets of Yogyakarta, singing or selling newspapers to earn money and wasting her earnings on cheap alcohol and glue for sniffing. Her future seemed bleak.
Today, after receiving care and counseling at the Ghifari shelter for female street children, Aminah is back home with her parents. … She is on track for a more stable life.
Shelters like Ghifari are turning around the lives of girls who make up 20 percent of Indonesia’s estimated 170,000 street children, a figure that has escalated since the Asian financial crisis. The shelters help these girls, often victims of sexual abuse and prostitution, leave the aimless, hazardous existence of the street and return to safer, more productive and fulfilling lives.
In the Philippines, some families living in slums along a railway track or beside a mountain of garbage are being moved to new homes where they will receive safe water and sanitation facilities as well as access to money to learn new skills or to start small businesses. . . .
Money for these recently-approved projects, which are targeted at specific groups of poor people, come from a new $90 million Japan Fund for Poverty Reduction, financed by the Japanese government and administered by the Asian Development Bank. . . .
Economic growth is a powerful tool for reducing poverty by generating employment and income. Examples of ADB supported pro-poor growth programs include rural electrification programs in Bangladesh and Bhutan. . . .
CON: Bank’s Idea of Progress Has Made Many Suffer, by Joshua Cooper
Across the globe, an effort is under way to transform today’s conditions of third-world impoverishment and multinational control toward a new vision of a global civil society based on grassroots empowerment and social activism.
ADBWatch is among those non-governmental organizations that are committed to this vision.
We are determined to speak to this vision when the Asian Development Bank meets here next month. It is important because we believe the bank and our governor are determined to push Hawaii into accepting globalization as the wave of the future.
It doesn’t have to be that way.
The May meeting of the ADB in Honolulu is cause for concern.
The Asian Development Bank’s record marks it as an international financial institution where anti-democratic policies cause misery and environmental destruction.
Those living in areas that have been touched by ADB policies understand that impact. They live with the unanticipated and undesired consequences of ADB-sponsored dams, drillings, and destruction of natural resources from forests to fish livestock.
Before construction of the Klong Dan project in Thailand, for instance, there was no environmental impact assessment and no public hearings.
Residents opposed the project due to pollution and the impact it would have on people’s livelihoods. Even though 100 Thai senators asked the bank to review the project, construction work intensified to build what is to be one of Southeast Asia’s biggest wastewater treatment facilities.
But while it will collect and treat wastewater from factories and households, it also will destroy the fisheries that provide employment. Treated wastewater will be flushed into the Gulf of Thailand, diluting the salinity level vital for mussel and shrimp farming.
On a local level, the Honolulu ADB meeting’s security polities aren’t intended to protect those of us who live here. Rather, they aim to protect an institution with a less than commendable record.
At its last meeting in Chiang Mai, Thailand, more than 5,000 people affected by the bank’s policy decisions- fishers, farmers and peasants- peacefully asked the officials to leave. Our politicians and police are doing everything within the law and even beyond to prevent even this.
The largest law-enforcement operation Hawaii has ever seen is simply not necessary. All we want to do is speak truth to power in a nonviolent way.
We want hard answers to hard questions: Why is poverty increasing with each ADB project? Why are natural resources dwindling? And, at home, what riot gear has been purchased? How is it intended to be used? How can our state declare city blocks a no-protest zone? Why can’t nonviolent organizers obtain march permits?
ADBWatch is creating a community rooted in resistance, celebrating life and our link with the `aina.
We want a world based on justice, equality, dignity and respect for human rights and fundamental freedoms for all.
The institutions and corporations associated with the Asian Development Bank exploit natural and human resources in the name of profit and progress.
We know there is an alternative mode. We have a choice.
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PRO: Global Capitalism Will Help the Poor, by Walter A. Dods, Jr.
Years ago, somebody coined that grandiose phrase, “Geneva of the Pacific,” to describe a dream niche for Hawai`i.
Truth is, efforts to make that dream into reality have stumbled, despite the best efforts of many fine minds.
In May, we have a chance to put some flesh on those old bones when Hawaii is host to the 34th Annual Meeting of the Board of Governors of the Asian Development Bank. The conference will bring to Honolulu 2,500 business and government leaders, including ministers of finance from most participating nations. The event also will attract corporate executives from around the region and world.
The Asian Development Bank aims to reduce poverty in our region by encouraging private-sector economic development, training and education; protecting the environment and improving the status of women. The bank provides loans ($6 billion last year) and technical assistance to governments and private entities. The help goes to giants such as China, Indonesia and India and to small nations such as the Cook Islands, Kiribati and Samoa.
Is this meeting a big deal? You bet.
The corporate community has pledged nearly $400,000 in cash and services because it believes this conference will help reposition Hawaii as more than a superb vacation destination. The meeting will validate our Islands as a place where serious business can take place – something locally based corporations have known for years. . . .
While listening to the critics, we must repeat the lesson of recent history: Globalization of capitalism has the best chance of raising standards of living around the world. At the same time, the challenge of globalization is to make sure that people don’t feel left behind. . . .
[Walter Dods, chairman and chief executive officer of First Hawaiian Bank, is chairman of the steering committee for the ADB Board of Governors meeting next month.]
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CON: Aid Projects Often Ignore Effect On Poor, by Allen Clark
Despite a decrease in the absolute number of the world’s people living in poverty, the gap between the poor and rich is growing dramatically.
Poverty is the catalyst for social unrest, yet the volice of the world’s 1.3 billion poor is seldom heard in deciding development projects that will have great impact on their lives.
Indeed, this has been one of the common themes of protesters gathered at meetings of international trade organizations and lending institutions such as the World Trade Organization, the World Bank and the Asian Development Bank.
Other major demands of protesters have included a call for transparency in the operations of such institutions as well as stronger consideration of the social, cultural and economic impacts of their funded projects.
They also demand economic reforms within recipient countries. . . .
Before one can realistically challenge and change these institutions, it is important to understand the complex process by which their policies and programs are derived. Besides the World Bank Group (which includes the World Bank and the International Finance Corp) and ADB, the major international and regional multilateral lending institutions are the International Monetary Fund, the Inter-American Development Bank, the African Development Bank and the European Bank for Reconstruction and Development.
These banks are unlike their counterparts in the private sector: They do not have measurable “bottom lines”; they are limited in their ability to “pick and choose” the projects they fund; and their stockholder nations cannot realistically pull out if performance is unacceptable.
There are three overriding groups that largely determine a development bank’s policy and programs: donor nations that set broad guidelines – some even project-specific – on how and for what purposes their contributions can be used; recipient countries that develop national programs to be funded – often with the assistance of bank personnel; and the respective boards of the banks.
Normally the boards of directors for the regional development banks are private individuals, 75 percent of whom are elected from member countries within the region, and 25 percent from member countries outside the region. . . .
A major deficiency in the decision process is the lack of direct input into policy and programs by the people most impacted in the project areas. . . .
This leads to the major cause of failure for bank programs: unanticipated impacts such as relocation of people in reservoir areas of dams, large-scale migration of workers for infrastructure projects, and illegal logging and narcotics trade in impacted areas.
Poor governance is another reason for high failure rates. . . .
Another important change in the world’s economic structure has been the movement of the centrally planned economies of the former Soviet Union, Eastern Europe, China and Indochina toward “free markets.” This strategy has been painfjul and difficult.
In most of these countries, these changes forced millions more into poverty. To a large extent, the world looked to the development banks and their programs to resolve these problems. What they found in many cases was that the banks’ existing policies and programs did not meet the needs of the changing world.
Indeed, rather than resolving critical environmental and social problems, they were contributing to them. Often this resulted from a lack of institution-building and adequate funding to mitigate social and environmental damage stemming from projects.
However, the dramatic increase in poverty and inequality of the last decade are more the result of failed economic policies, continued bad national governance and increased corruption rather than programs of the development banks.
Social and economic inequality within and among nations also results in large part because governments are not sharing the benefits of development programs with local communities. . . .
There is a clear need to establish better accountability for both large and small transnational corporations. Many smaller corporations have the most egregious records for exploiting the poor. . . .
The global community will no longer allow the world’s economy to be built on the backs of the 1.3 billion people, primarily women and children, who live on less that a dollar a day.
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From The Honolulu Star-Bulletin, July 4, 2001:
Security for bank summit cost city, state $3.8 million
The city will seek repayment from the federal government
By Nelson Daranciang
The Honolulu Police Department spent $3 million to train and provide security for the Asian Development Bank meeting held at the Hawaii Convention Center May 7-11.
The department spent $540,376 for riot gear, of which $525,000 was reimbursed by the Hawaii Tourism Authority, said Deputy Police Chief Boisse Correa during yesterday’s Council Planning and Public Safety Committee meeting.
State agencies reported spending $846,094 on security and related expenses for the ADB. Those agencies include the attorney general’s office, Hawaii Tourism Authority, Hawaii National Guard, the Department of Public Safety and the Department of Transportation.
That brings the total security cost for hosting the ADB conference to $3,861,470.
The governor’s office will be submitting the tab to U.S. Sen. Daniel Inouye this week to seek reimbursement from the federal government.
Whatever amount HPD receives from the federal government will go into the city’s general fund since the money — split evenly between regular salaries and overtime — was covered by the HPD’s fiscal year 2001 personnel budget.
“We did receive assurances that we were going to be reimbursed, right?” City Councilman John Henry Felix asked Correa.
“No, we did not,” Correa answered.
State officials expected the ADB to boost Hawaii’s economy by $17 million and the convention center’s image as a venue for similar international bank meetings.
“Sounds like everybody benefitted except the city, and we got left holding the bag,” said Councilman Duke Bainum. “We were told the feds were going to help us; we were told the state was going to help us. Where is that help? Maybe we need to collect up front from the state.”
Honolulu police had expected to spend up to $6 million for the meeting.
“We were very lucky. Some of the people (protest groups) who said they were going to come here did not come,” said Correa, who was in charge of coordinating Honolulu police security for the ADB. . . .
But he warned Council members that if a larger international bank organization meets in Hawaii, the cost for providing security could easily quadruple.
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From Pacific Business News, Nov 2, 2001:
Congress okays ADB reimbursement
Congress is approving $1.6 million for Hawaii law enforcement agencies to reimburse them for expenses incurred when the Asian Development Bank met in Honolulu in May.
Sen. Daniel Inouye says a measure to authorize the compensation cleared a House-Senate conference committee this week. This means there is no difference of opinion between the two houses over details of the reimbursement and final approval is expected to be pro forma.
The Honolulu Police Department and Department of Public Safety said they spent about $3.3 million on everything from gas masks to overtime for ADB, and Congress decided to pay half, as did it earlier for an ADB meeting in Seattle.
Inouye said the approval was not easy because Honolulu volunteered to host the conference and some members thought it should not get any federal assistance as a result. . . .
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From Probe, May, 2000:
Why Consumers and Citizens Should Pull the Plug on the Asian Development Bank
(A critique of the ADB’s role in the electricity sector)
by Gráinne Ryder
The Asian Development Bank should exit from the electricity business. Without market discipline or public oversight, the ADB is a financial and environmental menace, providing a breeding ground for electricity investments that destroy the environment, create poverty, sink Asian citizens in debt, cost taxpayers in donor countries money, and deprive consumers of cheaper, better generating options. The Bank promotes electricity investments without responsibility by transferring the risks associated with electricity investments onto the public sector. It has no enforceable standards for promoting sound investments because it does not respect the rights of citizens and consumers.
The Legacy of Electricity Aid
The electricity systems that generate and distribute electricity in much of Southeast Asia are a product of three decades of foreign aid. Publicly-funded lending institutions, particularly the Asian Development Bank and the World Bank, teamed up with governments to finance large centrally-operated power plants and transmission networks. They advised governments on the policies, laws, and institutions needed to govern electricity production, transmission, electricity prices, on the fuels and technologies to develop, and created the monopoly powers and privileged state utilities mandated to provide cheap and reliable electricity supplies to consumers, whatever the real costs of generation were.
The conventional economic wisdom at the time was that governments were best placed to provide the cheapest and most reliable electricity supplies to fuel industrialization and stimulate rural development.
The world expected that with billions of dollars worth of aid capital, free technical assistance, training, and policy guidance, these publicly-owned utilities would be shining examples of sustainable development, in sound financial shape, providing high-quality service to all consumers, large and small, urban and rural, using state-of-the-art generating technologies, operating to the highest environmental standards, and charging reasonable rates for service.
But that is not the case.
Instead, these utilities are debt-ridden, owing billions of dollars to their international patrons, the Asian Development Bank, the World Bank, and the Japanese government,. and having difficulty servicing those debts.
These utilities have built or made commitments to billion-dollar power schemes that consumers either don’t need, don’t want, or can’t afford. Electricity service, in many places, is crippled by aging, polluting, and inefficient power plants. Expansion plans are opposed by local communities and environmental groups who object to environmentally-damaging power projects. Consumers are being hit with rate increases yet they have no control over the services they pay for, or their source of power and how much they pay for it.
Governments have also allowed state utilities to take away people’s resources without consent or fair compensation. Citizens whose health, resources, and livelihoods have been harmed or destroyed by polluting power plants are powerless to hold power producers accountable or liable for damages. Rural communities are powerless to stop governments and utilities from taking their resources without their consent or fair compensation.
In the last decade or so, unable to finance the uneconomic megaprojects they have become famous for, governments in the region have struck secret deals with Western utilities and companies — extending to them the same powers and privileges that state utilities have always had — allowing them access to other people’s resources without local consent, to pollute with impunity, and to profit from electricity production without taking responsibility for the real costs and risks of their schemes.
Some Asian utilities now allow large or politically connected consumers to generate their own power using clean and small-scale generating technologies that can be financed and operated independent of the state-owned system. But millions of ordinary household consumers, meanwhile, remain consigned to buy electricity from costly, massive-scale, and polluting coal plants, or large hydro dams that drown land, destroy fisheries, and impoverish riverine communities. Tens of millions of people still have no electricity service at all.
How did the electricity sector get into such a mess, creating private fortunes for some while draining public finances and impoverishing others?
The Asian Development Bank and the World Bank (MDBs) will tell you that there will always be winners and losers in development. They will tell you that past mistakes will be avoided in future. They will tell you that the debt-ridden electricity sector is the result of government incompetence and corruption. They may even tell you that the problem is Asian culture.
But the problems in the electricity sector are much more fundamental and have little to do with Asian culture. Utilities around the world have experienced the same problems but it has only been in the last decade or so that consumers and citizens have begun to understand why and demand changes.
The Asian Development Bank is Part of the Problem, Not the Solution
The problem is investment without responsibility.
Electric utilities and their international financiers, such as the Asian Development Bank and the World Bank, are not subject to market discipline or public oversight. Unaccountable aid institutions have lent money to unaccountable governments that, in turn, have given electric utilities extraordinary privileges and powers in the name of public service. The result has been financial and environmental wreckage, costly and unreliable electricity service, and citizens sunk in public debt.
For years, citizens groups and rural communities across Asia have urged the ADB to stop financing environmentally damaging power plants and hydro dams that flood people off their land, create poverty, and destroy people’s resources and livelihoods. They have demanded that the Bank take its share of responsibility for the damages inflicted on communities and environments by ADB-backed power producers.
Citizens groups in the Philippines have also argued that ADB lending for obsolete and uneconomic power projects has discouraged private investment in cleaner, lower-cost generating technologies such as small-scale renewable energy systems (i.e., fuel cells, solar, and biogas systems) that are commercially viable and ideally suited for rural communities and islands (i.e., in Indonesia, Malaysia, Lao PDR, Philippines, and Tibet). They argue that the ADB and other multilateral development banks (MDBs) should direct funds away from the massive-scale power projects that governments have long favoured to the new technologies that provide greater benefits to consumers and the environment.
This assumes that the ADB would do the right thing if only it received proper guidance about which technologies to support. But the real obstacle to productive electricity investments is the institution itself: the ADB is incapable of promoting sound investments in the energy sector (or any other sector) because it is not subject to market discipline or public oversight. Nor does it respect the rights of citizens to decide the fate of resources upon which they depend.
The Bank is incapable of evaluating which power projects are productive investments because its clients externalize costs and fail to respect the rights of citizens. For example, the ADB is co-financing a $605 million waste water treatment plant in Thailand that, if completed, would collect industrial waste water from factories near Bangkok and release treated water into the sea. The ADB and its client government promote this as an environmentally friendly project while local communities want it scrapped because the plant is not designed to treat heavy metals and toxic chemicals that will be released along with the treated waste water, poisoning coastal mangroves and fisheries, and threatening hundreds of fishing-based livelihoods in two provinces.
The ADB is a government-run institution that borrows money on the good faith and credit of taxpayers in donor nations and lends it to governments in Asia.
It is protected from lawsuits and court injunctions so there is no way that citizens can stop its activities or seek compensation for damages caused by projects it has financed.
It is not subject to democratic political controls although its investment decisions are often politically motivated and have little to do with economic viability. Its appearance of profitability comes not from its funding of successful projects — which is the measure of any commercial bank’s success — but from the fact that its loans are guaranteed by governments in the North while its borrowers in the South are propped up by an endless stream of new loans.
Unlike a commercial bank, when an ADB project fails, the Bank itself suffers no penalty. Its borrowers, on the other hand, not only have to repay the project loans but they usually borrow more money to do so and also to correct project failures. Taxpayers in the borrowing countries, not only suffer the consequences of the failed project, but eventually they have to pay back all the debts incurred by their governments.
Despite the Bank’s stated commitments to the principles of market economies, private enterprise, and competition, the Bank knows monopolies and cronyism best.
It dispenses loans and grants to governments in the South to create friends abroad and in the North to award contracts to favoured companies in order to win votes at home. The borrowing governments, in turn, used ADB money to setup state utilities and a host of other state enterprises. So while the ADB champions the private sector, it has more in common with Asian governments operating centrally planned economies than with private enterprises. It knows nothing of commercial risk-taking, self-reliance, technological innovation or accountability to shareholders.
The ADB has promoted electricity investments without responsibility, thus providing a breeding ground for unproductive investments that have destroyed the environment, victimized rural communities, sunk Asian citizens in debt, and cost taxpayers in donor countries money.
The utilities the Asian Development Bank financed suffer from the same debilitating condition. Without market discipline or public oversight, utilities across Asia have become bastions of cronyism and inefficiency. Investment decisions were driven by central planning and political patronage rather than the needs of ordinary citizens.
As British energy expert Walt Patterson writes, Third World electricity structures “echoed the political power structure, and the financial implications were likewise profound. Patronage, influence, and corruption figured significantly in staff appointments, investment, and procurement decisions, permits, licences and tariffs. Central-station electricity was a potent lever to steer political processes to the advantage of those in power. In due course the legacy of these beginnings was to prove crippling.”
Insulated from the scrutiny of credit markets, utilities were able to ignore many of the financial and technical risks associated with the investments they undertook, and borrowed excessively from multilateral development banks (MDBs), including the ADB. Because they did not depend on consumers to finance their investment budgets, investment proposals were not subject to local or national scrutiny. With easy access to other people’s money (foreign aid) and captive customers, the utilities became reckless spenders and borrowers. Those responsible for planning and operating the system were insulated from the risks of failure, of ill-advised investments, underperforming technologies, overpriced contracts with suppliers, or system breakdowns.
Unlike a commercial entity, electric utilities were never required to recover costs from consumers and they could always count on taxpayers at home or in donor countries to bail them out. Just like the ADB, if a project failed, the utility and its project managers suffered no penalty. Profitability was not determined by successful investments or customer satisfaction but by the ability of utilities to capture foreign aid and ever larger shares of the state investment budget.
One of the most destructive and discredited policies upon which all MDB lending for the electricity sector rested was the idea that selling electricity for less than its worth was essential for stimulating economic growth and rural development. Keeping rates below the actual cost of production — as a way of stimulating investment and electricity demand — has been the undoing of utilities across North and South America, not just in Asia.
While governments saw this as a way of currying favour with business cronies and the general electorate, in the end it thwarted economic efficiency in the electricity sector and undermined the long-term interests of citizens.
It encouraged wasteful consumption of electricity which, in turn, drove up demand for new power plants, thus inflicting more environmental damages upon rural communities.
In the name of providing cheap power, governments conferred on the utilities sweeping powers of the state which forced costs and risks onto others. They expropriated resources (i.e. land, water) upon which local communities depended, without local consent or compensation. They destroyed resources and livelihoods with impunity.
Governments used the state utilities as a one-company industrial strategy, promoting industrial expansion in certain regions by offering discount electricity or investing in large-scale power projects to stimulate economic growth and create jobs in others.
The ADB would finance large capital-intensive hydro schemes and coal plants that provided ”cheap’ electricity to consumers, often hundreds of kilometres away, but provided little or no benefit to local communities.
Large or politically favoured groups of consumers benefitted from this policy while the needs of the politically weakest or poorest communities were often overlooked. The combined effect of these powers and privileges has been wasteful electricity consumption by some while others went without basic service, environmental degradation, and over-expansion of supply.
For a time, the aid-financed utilities were able to conceal their real costs from consumers and taxpayers but inevitably, inefficiency pervaded the utilities and public support for electricity monopolies began to crumble.
Utilities in Crisis
By the late 1980s, after a decade of rapid expansion in many parts of Southeast Asia, state utilities owed billions of dollars to the MDBs, governments were on the hook because they had guaranteed the utilities’ borrowings, electricity rates were not covering costs, and utilities didn’t have the capital needed to upgrade and maintain their systems.
The ADB expected the region’s electricity demand to double during the 1990s, requiring an additional 300,000 megawatts — equal to about 500 large power plants — at a cost of roughly $50 billion a year until 2000. China, Malaysia, Philippines and Thailand all had ambitious investment programs but didn’t have the capital reserves they needed to finance the projects themselves, nor were they considered creditworthy by commercial lenders.
The MDBs, by this time, were worried about the excessive borrowing and spending habits of state utilities which put an enormous strain on public finances. The specter of utilities across Asia defaulting on their loan payments loomed large. At the same time, the MDBs were under pressure to launch privatization in borrowing countries when experience in donor countries (i.e., Great Britain and the United States) was demonstrating that the private sector was capable of raising capital for electricity investments and lowering costs.
The Introduction of Private Power
The MDBs began promoting private investment in power plants as a fast way to get new generating capacity “when the lights are going out, incumbent power enterprises are financially unviable, and the public purse is nearly empty,” according to Karl Jechoutek and Ranjit Lamech, energy finance experts at the World Bank.
A typical private power deal would involve a local company, usually set up and owned by foreign investors, that would sign a contract with the host government under which the company would then agree to finance, build, own and operate a power project.
The host government in return would agree to pay or guarantee revenues to the local company sufficient to repay the capital costs and provide a reasonable rate of return to the investors. In theory, the government gets the much-needed power project without having to borrow or drain its own limited foreign currency reserves to build it.
Private Profit at Public Risk
So advised by the MDBs, state utilities began licensing private power producers to supply the state-owned grid while keeping their position as monopoly buyers of electricity, controlling all sales, deciding which power producers would have access to the state grid, which fuels and technologies would be used, where, and at what price.
To cajole private investment, state utilities accepted certain risks on behalf of the private power producers supplying electricity to the state grid.
For example, utilities would often assume “demand risk” which obliged the utilities to pay the private power suppliers even if the utility had no customers or market for the power produced.
The National Power Corporation of the Philippines, for example, accepted political risks and foreign currency risk on behalf of private power producers, which meant that the state would have to compensate private investors if any such problems arose.
By assuming financial risks that private investors would not assume, the utilities undermined the very reason for introducing private power in the first place — to cap public debt and force private power producers to take the financial risks instead of governments.
Private power deals that were supposed to relieve the host country of many of the liabilities associated with financing and building power projects did just the opposite. As project finance expert Kent Rowey explained in the Financial Times, “The reality is that many of the risks of the project remain with the host government under the support contracts they enter into.”
Utilities allowed private power producers to externalize environmental costs and liabilities, which encouraged investment proposals for oversized power plants that use the cheapest available fuel (usually coal). And because utilities guaranteed revenues and negotiated deals without an open and competitive bidding process, the private power producers had little or no incentive to keep costs down.
The first so-called Independent Power Producers (IPPs) in Asia could mark up costs because they didn’t have to worry about finding enough customers to buy their output or the risk that customers would opt for cheaper power elsewhere. They knew that the state utilities would be there to force their uncompetitively priced power onto captive consumers and force other risks and costs onto taxpayers and rural communities.
Nor did private investors have to worry about winning public approval for their schemes or controlling pollution because they were supplying electricity to utilities empowered to making decisions without public scrutiny or consent.
Under such terms, the response from the private sector was overwhelming. Giant state-owned utilities and multinational energy companies from the industrialized countries flocked to the region in search of new business opportunities. Thailand, Indonesia, and the Philippines quickly approved a string of oversized and polluting coal-fired plants, to be developed mostly by American and Japanese companies and their local counterparts.
�� Before the region’s economic collapse in 1997, the Indonesian utility, PLN, signed 26 over-priced and politically-linked deals with American power companies, including a 4,000 MW coal-fired complex on the East Java coast. Most of these deals were canceled or shelved indefinitely in the wake of the economic crisis.
�� The first private power deal approved by EGAT, Thailand’s utility, was the $1.2 billion 1400-MW coal-fired Hin Krut power project to be developed by a politically connected Thai company, Union Power, and two major energy companies from Finland and the United States. The private proponents assumed that the buyer, EGAT, would be able to externalize environmental costs (i.e., pollution of air and water, destruction of marine resources, and local tourist-based economies). But the environmental protests provoked by the project have caused delays and made it difficult for the companies to attract commercial financing. According to Thailand’s National Energy Policy Office, potential investors are also nervous about EGAT’s ability to honour its commitments to buy private power, given its financial woes and the country’s electricity demand slowdown.
�� In the Philippines, the National Power Corporation, a state-owned utility, approved a 345-MW hydro scheme to be built by a consortium led by Marubeni of Japan and Sithe Energy of the United States. With guaranteed revenues from the state utility and loans totaling $702 million from Japan’s Export-Import Bank, developers are preparing to build the 195-metre high San Roque dam on Luzon Island. If completed, the dam will destroy the river-based livelihoods of thousands of indigenous Ibaloi people while generating power that is at least twice as expensive as power from combined cycle gas plants. The developers have refused to take responsibility for environmental and other risks (i.e., drought, siltation, and earthquakes) that could cause the project to fail.
�� After a decade of excessive borrowing from MDBs, China approved its first privately-financed power project in 1987, a 700-MW coal-fired project in Guangdong province which was developed by the Hong Kong-based company Hopewell (now known as Consolidated Electric Power Asia (CEPA)). CEPA later financed an even larger coal-fired plant (1980 MW) in Guangdong province for $1.87 billion.
New Generation Technology
With few exceptions, the first wave of private power deals in the early 1990s were for oversized, outmoded, and polluting power plants that the MDBs have traditionally financed.
Elsewhere in the world, wherever competition and private power producers have been introduced, big hydro dams, along with nuclear power stations, and big coal plants, are being replaced by a new breed of power plant: clean and efficient combined cycle gas turbine plants and small-scale renewable energy systems.
Technological advances have made it possible to profitably generate electricity on a smaller scale at lower costs, making the old-style megaprojects and long-distance transmission lines obsolete and uncompetitive.
Private investors prefer combined cycle plants because an average sized plant (50 to 200 MW) can be installed in under a year for one-third to half the capital cost of a conventional power plant. They can be installed close to consumers so they don’t require additional investments in transmission lines. They burn low-cost natural gas which produces no smog or acid rain. And they can be easily switched on and off, generating electricity and heat, depending on the customers’ needs.
Some utilities in Asia have granted licenses to industrial and municipal power consumers with large electricity and heat requirements, allowing them to take advantage of this generating technology. By installing and operating their own combined cycle plants (in sizes ranging from 5 to 50 MW, and 100 to 200 MW range), sugar mills, pharmaceutical companies, oil companies, and fertilizer factories have been able to lower their production costs while reducing demand on the state-owned grid.
In Thailand, for example, a semi-conductor manufacturer, Alphatech Electronics, set up its own power generating company and installed a 210-MW combined cycle plant that supplies electricity and steam on-site and to housing and commercial facilities in the vicinity, and sells its surplus to EGAT. By generating its own electricity, Alphatech expects to save approximately US$40 million a year on its electricity bill. The plant also includes a gas-fired cooling system to produce chilled bottle water as a byproduct. (Alpha Power is 20 percent owned by the U.S.-based power company Sight, and it bought the plant technology from France, Japan, and Switzerland.)
The main constraint on these high-efficiency, cost-effective, cleaner power plants are the monopoly utilities themselves. The utilities decide who can become “self-generators” while licensing other small power producers as supplemental suppliers to the grid. Small power producers are not allowed to bypass the utility and enter into contracts with consumers directly. In fact, more small-scale power producers could be displacing costly and inefficient power plants (utility-owned and private) if only they were allowed direct access to consumers.
The ADB knows that private investors prefer combined cycle plants to large hydro schemes.
In its 1995 study of hydropower potential in the six-country Mekong region, the ADB described the first private power deal in the Philippines — a 210-MW combined cycle plant built and financed by the Hong Kong-based Hopewell (now CEPA) for $41 million within a twelve month period.
Compare that to the ADB’s newest hydro dam in Lao PDR, the 210-MW Theun Hinboun project, which was financed by the ADB, Nordic state utilities, and Nordic export credit agencies, cost $260 million, and took six years to build. As for the payback period, the dam’s developers are hoping they will break even after 10 years of operation (weather permitting).
Unlike Hopewell’s plant, the Theun Hinboun dam in Lao PDR took almost a decade of planning that cost the Norwegian government more than $12 million worth of aid grants.
The Alternative Electricity Model: Competition in a Decentralized Market
If all consumers are to have access to cheaper and better generating technologies, a new institutional structure is required. Now that new generating technologies (i.e., combined cycle plants, micro-turbines, fuel cells, and small-scale solar systems) have made decentralized power production commercially viable, there is no longer any reason to have a monopoly entity controlling the electricity system. Only the transmission and distribution networks, which are natural monopolies, need a central coordinator to maintain grid stability and allow power producers access to the grid. Transmission lines can be operated much like a public highway, that is, open to anyone, provided users pay an access fee, and conform to basic rules of the road. In this way, a diversity of power producers can use the grid to sell power directly to customers or setup small power plants to supply customers independent of the state grid.
As the number of self-generating consumers and private power companies offering credible alternatives increases, the market uncertainty for the utilities’ traditional large-scale power plants increases. As such, there is no valid public policy reason to risk public funds in the electricity sector any longer or to support monopolies in electricity generation. This does not mean that governments must give up control of the electricity sector, but rather that the public interest can be more effectively safeguarded through regulation than through public ownership. (If governments want to provide assistance to low-income or rural consumers for electricity services then they should do so by giving them a direct subsidy rather than subsidizing electricity rates and power producers. Deciding whether and how to protect the poor and provide subsidies to them should be the responsibility of governments not power producers.)
Peddling an Obsolete Electricity Model
The institutional alternative for cheaper, cleaner power is competition in a decentralized market. The ADB knows this. In Vietnam earlier this year, Mike Bristol, an ADB project engineer, told the World Commission on Dams (partly financed by the ADB) that the introduction of combined cycle plants in Thailand, and the growing availability of low-cost natural gas in the Mekong region, is driving electricity prices down, leaving hydro schemes less competitive, and a regional transmission grid unnecessary.
In other words, the ADB’s vision of giant hydro schemes connected by a six-country transmission grid to serve Thailand’s electricity market — a vision the Bank has promoted for the last decade — no longer makes economic sense now that decentralized power production is commercially viable.
Bristol also reported that investments in large-scale power plants and long distance transmission lines are increasingly at risk of becoming stranded — that is, the investment cost is unrecoverable from ratepayers as cheaper and better generating options become more available in the region. Yet the ADB will continue to finance large hydro schemes in the region, he said, as long as governments want to build them.
Shortly after the World Commission on Dams meeting in Hanoi, the ADB announced an $80 million loan to the Vietnamese government for its first public-private partnership in dam building.
The 260-MW Se San 3 dam on the Se San river — a Mekong tributary flowing from Vietnam’s central highlands down through Cambodia — is expected to cost $300 million. If completed, Se San 3 will be the second dam on this river blocking the seasonal migration of dozens of fish species that move back and forth between the Mekong mainstream, Cambodia’s Great Lake, and other tributaries.
Prior to the Se San 3 loan, the ADB provided a $1.2 million grant to the Vietnamese government for packaging Se San 3 as a “model project” and another $150,000 grant for developing procedures for forced resettlement . . .
In a recent policy announcement, the ADB claimed that such private-public partnerships “balance development goals with commercial interests.”
But the truth is that public-private partnerships are designed to protect private investors from the real costs and risks associated with their schemes. They do not serve electricity consumers or citizens well because they are based on monopoly deals between state utilities and private investors that put their own interests before those of consumers and citizens.
The ADB is simply cajoling private capital into uneconomic hydro ventures with uncreditworthy governments, allowing investors to secure the profitability of their schemes by forcing costs and risks onto taxpayers and ratepayers.
The ADB is encouraging governments to risk public funds on hydro dams that make for unreliable and uncompetitive power providers.
Creating Moral Hazard
By promoting power deals between governments and the private sector, multilateral lenders, such as the ADB, have created a fatal condition economists call “moral hazard.”
The ADB works with governments and state utilities to convince private investors to take risks they otherwise would not — by relieving them of the financial and environmental risks associated with their schemes. With captive markets, predetermined rates of returns, prices set by decree, and guaranteed revenues, private investors were able to take financial risks with little fear of a loss. This weakens the integrity of investment decisions and the scrutiny that contracting parties would otherwise apply to each other.
The ADB encourages private investors and power producers to proceed with schemes that are uneconomic because they know that if the utility can’t pay for the power, governments would bailout the utilities, and the governments would, in turn, be bailed out with loans from the ADB and the World Bank (called “Public Sector Reform Loans” and “Power Sector Restructuring Loans.”)
By protecting investors from the risks of doing business, instead of encouraging effective regulation, the MDBs have reinforced or bankrolled inefficient electricity systems. . . .
Certainly, the ADB has no credibility for advising governments in the region about shaping an open, accountable, and competitive electricity market. It is an institution above the law, it is not part of any local economies, cultures, or political systems, and it has a track record of setting policies and rules that protect private investors and power producers at the expense of consumers and taxpayers. An institution that knows no market discipline or public oversight is not well placed to preach to Asian governments or power producers about such practice.
It is time for the ADB and other aid institutions to exit the electricity sector so that consumers and citizens can drive the reform process.
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ADB-Financed Power Projects That Have Created Poverty and Destroyed the Environment
Mahaweli Hydro and Irrigation Project, Sri Lanka
The ADB and a host of other aid institutions financed the five-dam multi-billion dollar Mahaweli hydro and irrigation scheme which displaced and impoverished 60,000 families since it began in 1970. In 1999, the ADB approved a $250,000 grant to the Sri Lankan government for developing “a policy applicable to involuntary resettlement in public and private sector development projects,” based on the rationale that past resettlement schemes have failed. In its description of the proposed grant, the ADB notes that the current rate of suicide among people resettled by the Mahaweli scheme is four times higher than the world average.
1998 — Meizhou Wan Coal-Fired Power Plant, Fujian province, China.
The ADB loaned $50 million to the state-owned Fujian Pacific Electric Company for a 720-MW coal-fired project now under construction on the Zhongmen Peninsula. Co-financed by French and Spanish export credit agencies, and four commercial banks, the project cost $828.5 million. The ADB reports that Meizhou is expected to alleviate chronic power shortages in Fujian province due to inadequate investment and an over-dependence on unreliable hydrodams that depend on seasonal rainfall.
Nam Ngum Hydro Dam, Lao PDR
The ADB loaned $24 million to Thailand’s state utility, EGAT, for the transmission line from the Nam Ngum dam in Lao PDR to Thailand. The bank also partly financed construction of the 150-MW Nam Ngum dam in the 1970s which flooded several hundred square kilometres of forest, wiped out riverine fish stocks, and opened up the watershed to logging.
The bulk of the dam’s electricity is sold cheap to Thailand because drought and siltation in the dam’s reservoir have reduced the dam’s generating capacity by one-third, making it an unreliable source of power. Dozens of communities displaced by Nam Ngum are still impoverished, trying to eke out an existence on surrounding hillsides, without access to safe drinking water, schools, and other basic facilities. In the last five years, the ADB has financed construction of two smaller dams, Nam Song and Nam Leuk, designed to divert water to the depleted Nam Ngum reservoir.
1995 — Masinloc Coal-Fired Power Station, Philippines
The ADB loaned the National Power Corporation $254 million for transmission lines and a second 300-MW generating unit at Masinloc coal-fired power station. The first unit was financed by the World Bank in 1990 despite opposition from local communities and environmental groups who fear that the project will poison century-old mango orchards, fisheries, and farmland upon which nearby communities depend.
1994 — Theun Hinboun Hydro Project, Lao PDR
The ADB loaned $60 million to the state utility, Electricitéé du Laos, for its 60 percent stake in the Theun Hinboun Power Company which owns and operates a 210-MW dam for exporting electricity to Thailand. The project is 20 percent owned by Nordic utilities, Statkraft and Vattenfall, and 20 percent owned by MDX, a Thai real estate developer.
Completed in 1998, the $260 million dam destroyed riverine fisheries in two rivers upon which dozens of rural communities — or about 6,000 people — depended for their livelihoods. The ADB approved the dam contracts which have restricted the power company’s obligation to pay for compensation and environmental mitigation. Villagers are still waiting for compensation and environmental mitigation measures promised by the power company and the ADB.
The ADB’s commitment to defending dam investors from the real costs of their schemes is evident from its handling of the Theun-Hinboun project. When citizens’ groups exposed the fact that the Theun Hinboun Power Company in Lao PDR had ignored and underestimated environmental costs in order to inflate the company’s profitability, and failed to provide compensation to people harmed by the company’s dams, they demanded that the company take responsibility for these costs.
The ADB responded with a warning that efforts to force its client, the Theun Hinboun Power Company, to pay additional costs would damage the confidence of foreign lenders and investors in Lao PDR. The ADB also insisted that it is up to the Lao government, not the company, to either use its revenues or seek out new aid sources to pay for long-term environmental costs. As for the ADB’s responsibility, project engineer Mike Bristol explained recently in Hanoi, the ADB “is not a social and environmental agency,” and as such it has “little influence over project outcomes.”
1994 — Lingjintan Hydro Dam in Hunan Province, China
The ADB loaned $116 million to the state-owned Hunan Electric Power Company for a 240-MW hydro dam which is also expected to regulate releases from the 1,200 MW Wuqiangxi hydro scheme, situated 41 kilometres upstream on the Yuanshi river. Still under construction, the $367 million dam displaced 4,060 people.
According to the ADB, people are still waiting for compensation and have been promised income from plantations that could take five to 20 years to materialize. The authorities have forced nearby communities to share their rice land with displaced people, reducing their rice harvests by half. The dam has blocked fish migrations in the Yuanshui river and may also adversely affect fish stocks in Lake Dong Ting. Without land to produce food and no income to buy food, people have left the area to find jobs elsewhere, the ADB reports.
1990 — Singkarak Hydropower Project, West Sumatra, Indonesia
The ADB loaned $185.8 million to Indonesia’s state utility, PLN, for a 175-MW hydro dam. Completed eight years later, the dam devastated fisheries and fishing communities around the Singkarak lake and Ombilin river, disrupted water supplies in two river systems. It also opened up the project area to logging, threatening local wildlife populations, including the endangered Sumatran tiger; the dam also wiped out fish stocks and drastically reduced flows which led to increased incidence of skin and intestinal sickness, and waterborne disease.
1981 — Batang Ai Hydropower Project, Sarawak, Malaysia
The ADB loaned $40.4 million to the Sarawak Electricity Supply Corporation, a state-owned utility, for a 108-MW hydro dam. Completed in 1986, the Batang Ai dam displaced 21 Iban longhouse communities, close to 4,000 people.
Fourteen years later, many of those people are still waiting for replacement land or cash compensation promised them by the authorities. Some left without land or enough replacement income to survive have left their once self-sufficient communities to find jobs in Kuching or at industrial sites elsewhere in the country.
1977 — Mae Moh Power Project, Thailand
ADB loaned about $150 million for lignite mine expansion, transmission lines, and the first generating units at this lignite-fired power station in the 1970s. And since 1980, the Bank has loaned EGAT another $390 million for new generating units at Mae Moh, one of the largest point-sources of poisonous sulphur dioxide emissions in Southeast Asia.
The Bangkok-based environmental group, TERRA, has described Mae Moh as “one of the most serious public health disasters in Thailand’s history.”
At least 42,000 people near the plant suffer chronic respiratory diseases, breathing problems, and skin disorders; livestock regularly fall ill and die; large orchards, vegetable gardens and rice crops wilt from acid rain; streams and waterways are blackened by the emissions as well as by the run-off from the lignite mining operations nearby. In 1996, six villagers from the Mao Moh valley died of blood poisoning, suspected to be caused by sulphur dioxide emissions from the Mae Moh plant.
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WANT TO SEE MORE?
Then climb into the Catbird Seat and take a look at some of the birds that flock with their fellow high-flyers at
Asian Development Bank.
Bank of Hawaii – From greaterthings.com, by Greg Wongham: HAWAIIAN BANKS LINK: China-US Campaign Scandal and Illicit Capital
Flow – The Link Between Mochtar Riady and the Clinton Administration. The problems with the FDIC/Donna Tanoue and the two big
Hawaii banks will undoubtedly effect people throughout the country. I believe that the Hawaii links to Mochtar Riady are attempting to gain
access to the American capital market through Riady’s brother-in-law, Mumin Ala Gundawun. Riady was too hot (BCCI, Chinagate), so they
wisely chose to approach their plan via the Hawaii connection.
Sec. Treas., Robert Rubin played a major role in setting up this new bank scandal by lobbying for repeal of the Bank Holding Company Act. The purpose for this action is to allow Bank Holding companies (Hawaii’s Pacific Century Financial Corp and BancWest) to expand their financial services, thus allowing them to become full service securities brokerages. This seems like an ideal front to legitimize their deals to the American capital markets. . . .
Overview. I am the producer/host of a public access TV show called “Corruption in Hawaii.” I have spent 6 years exposing different aspects of the Hawaii machine. . . .
During the month of August … a segment of my show (was) titled, “What does Hawaii’s Bank Losses Mean to You?” The show featured a guest who described the losses he experienced in his family trust which was handled by Pacific Century Financial Corp (formerly Bank of Hawaii). He lost $1 million, plus $300 thousand in legal fees.
Numerous people called and said that they too, had experienced significant losses. Last week the public access station pulled the segment of the show. The next day the CEO of Pacific Century resigned. Two of the board of directors for the public access station are with the two big banks. . . .
The important points in this story revolve around the fact that Hawaii’s Democratic machine played a major role in the Chinagate scenario that grew out of the investigation into illegal foreign campaign fundraising.
The machine headed by Hawaii’s political godfather, Senator Dan Inouye was being investigated by the FBI during former (R) President George Bush’s tenure. The basis of the investigation stemmed from allegations of extortion and bribery aimed at the administration of former (D) Gov. John Waihee. The investigation was killed by Clinton’s friend Webster Hubbell, the number three man in the Justice Dept under Janet Reno. (AP story by J. Solomon: FBI failed to act of fund-raising of ex-Hawaii couple.) . . .
Eventually the investigation focused on Indonesian banking tycoon, Mochtar Riady and his Lippo Group. The basis of the story I am trying to relay to you is that Hawaii’s Democratic Machine used the billions of dollars of the Kamehameha Schools / Bishop Estate assets to undertake the task of underwriting and orchestrating the initial public offering of the Xiamen International Bank on the Hang Seng and the NY Stock Exchange.
This would have the effect of legitimizing a Communist Chinese banking entity on the biggest stock exchange in the U.S. and opening the doors allowing American money to capitalize a communist regime. . . .
It begins in 1963 to 1970, when a group of Hawaii legislators killed a Bank Examiner Bill. They were already employed as legal counsel or otherwise associated with the top banks. This, I felt, was a good point to begin telling you the story because it begins to reflect a pattern of using politically appointed people to legally white-wash or cover-up the wrong-doing of the big banking and financial interests here in Hawaii.
Today the same thing is happening, and this time they were successful in persuading President Clinton to push Hawaii’s Donna Tanoue to become the head of the FDIC. The significance in this is that the only time anyone here in Hawaii ever heard of Ms Tanoue was when she was tapped to cover-up the scandals that arose when 9 out of 20 of Hawaii’s Industrial banks failed. Many of them were linked to former (D) Gov. George Ariyoshi and the high ranking Democratic ‘old boys’. The results were that no one was convicted or sentenced to do time and the people of Hawaii ended up footing the bills. . . .
The point is … that once again Hawaii’s top banks are in a financial tail-spin and Donna Tanoue has been conveniently positioned to allow the banks to expand throughout Asia, the Pacific-Rim and the western part of the U.S. . . .
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Need we say that Bank of Hawaii is one of the major backers for bringing the Asian Development Bank conference to Honolulu, Hawaii?
Industrial and Commercial Bank of China – From The Straits Times-Asia, 10/31/00:
Anti-graft Audits to Include Top Leaders
China’s chief auditor plans to take his fight against corruption to almost the top of the country’s political system, according to state media.
This follows the discovery of US$11 billion in mismanaged funds at Chinese government offices and businesses.
The astounding sum, reported by Mr. Li Jinhua, Auditor-General of China’s National Audit Office, is one of the strongest indications of how mismanagement is in China. . . .
“Corruption thrives under a lack of efficient supervision,” the paper said . . .
According to earlier official reports, the auditing led to the discovery of misuse of funds at the Industrial and Commercial Bank of China, and the Construction Bank of China, causing losses worth more than 10 billion yuan (S$2 billion). . . .
Mr. Li’s auditors found that individual officials and managers had misappropriated 590 million yuan. But this marked only a fraction of the 96.17 billion yuan mismanaged, if not embezzled, by offices and firms, the China Daily said.
The reports did not give details of how the funds were misused . . . But in previous reports over the past 18 months, Mr. Li has criticised officials for diverting government subsidies and spending lavishly on offices. There has also been talk of speculation in stocks. . . .
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Asia 2000, 11/8/00, by Jeremy Page:
CHINA SENTENCES 14 TO DEATH IN SMUGGLING CASE
China sentenced 14 people to death on Wednesday, including senior police and customs officials, in the first verdicts of a multi-billion
dollar smuggling scandal, the biggest corruption case of the Communist era.
Those sentenced to death included the former customs chief and deputy mayor of the southern port of Xiamen, and the former deputy police chief of southern Fujian province . . .
But state media said the mastermind of the smuggling scam, businessman Lai Changxing had fled overseas after being tipped off by police….
Lai’s Yuanhua Group smuggled more that $6 billion worth of cars, luxury goods, oil and raw materials in the early 1990s, paying off city and provincial officials to facilitate and cover up duty evasion, Xinhua said.
“The group also used money and women to seduce a number of government officials for the convenience of their smuggling activities,” Xinhua said.
The smuggling “caused serious damage to the normal economic order, brought huge financial losses to the state, led to rampant corruption, and impaired the social, political and economic life in China,” it said. . . .
The death sentences included Xiamen’s former customs chief Yang Qianxian and former vice mayor Lan Pu, and former Fujian deputy police chief Zhuang Rushun, Xinhua said.
Ye Jichen, head of the Industrial and Commercial Bank of China in Xiamen, was also given a death sentence . . .
See also: Xiamen International Bank
Nauru – From About.com by Linda DeLaine, 11/23/99: Nauru, Hiding Place for Russia.
Nauru is a 21 sq. mile Pacific island located south of the Marshall Islands. It is surrounded by sandy beaches which rise to raised coral reefs with a phosphate plateau in the center. The primary industry has been phosphate mining, conducted primarily by England, Australia, and New Zealand. This has turned about 90% of the island into a wasteland. Revenues from over 90 years of mining are expected to be exhausted by the year 2000.
For a time, Nauru enjoyed the highest income per capita in the world and lived the indulgent life-style that goes with wealth. The other two main industries are financial services and coconut products. . . .
It seems that Nauru has, not only figured out how, but has implemented a way to bolster its economy and Russian citizens are, allegedly, helping. Nauru, as an off-shore banking center, has been one of the best kept secrets, up to now. . . .
According to Victor Melnikov, deputy chairman of the Central Bank of Russia, roughly $70 billion was transferred from Russian banks to accounts chartered in Nauru, in 1998 alone.
The primary purpose was to avoid taxes. In reality, the money never transits the island. It is moved from the Russian account to the Nauru account and then to accounts which the Nauran banks have at other foreign financial institutions. Nauru is using its state of independence to charter accounts and offer clients anonymity as they wheel and deal in the international financial system. . . .
The number of such accounts, registered on Nauru, is impossible to determine. These, so called, banks exist only on a ledger. There are no buildings, bank tellers, safes, etc. Working within the international banking system, funds are electronically transferred to and from accounts registered with the Nauru banks and other financial centers, such as New York. . . . Nauru exercises stricter secrecy than even the well known Swiss bank accounts enjoy. . .
Panin Group – From The Honolulu Star-Bulletin, 10/29/97, by Rick Daysog: Bishop, partners alter Chinese bank plan. . . . The turmoil in
Hong Kong’s stock market may hamper plans by Bishop Estate and its partners to take a mainland Chinese bank public. . . . With the
benchmark Hang Seng index losing more than a fifth of its value during the past weeks, analysts said that a proposal to list shares of Xiamen
International Bank on the Hong Kong Stock Exchange could be put on hold.
The development underscores Bishop Estate’s growing exposure to global economic trends. It also calls attention to the $10 billion trust’s high-risk, high-reward investment strategy. . . . Bishop Estate, the state’s largest private landholder, owns nearly 5 percent of Xiamen, which last year applied with the People’s Bank of China to list its shares on the Hong Kong Stock Exchange.
Henry Peters, a Bishop Estate trustee and a member of Xiamen’s board of directors, conceded that the volatile Hong Kong market may delay Xiamen’s initial public offering. But he said the bank’s partners are committed to taking it public, which would greatly enhance the estate’s investment. . . .
Critics say the trust should not be investing in exotic companies such as Xiamen. They argue that the nonprofit foundation — which finances Kamehameha Schools — should avoid high-risk ventures in emerging markets such as China. . . .
The list of Xiamen International Bank’s investors reads like a who’s who of Wall Street and Pacific Rim finance. They include former U.S. Treasury Secretary William Simon, Manila-based Asian Development Bank and Long-Term Credit Bank of Japan Ltd. . . .
The largest shareholder is Min Xin Holdings Ltd., formerly the Panin Group, which owns 36.75 percent of the bank. An affiliated company, Panin Bank, formed Xiamen in 1985.
Panin was founded by Indonesian businessman Mu’min Ali Gunawan, a brother-in-law of Indonesian banking tycoon Moshtar Riady . . .
Riady, who heads the Lippo Group, is at the center of the campaign finance scandal plaguing the Clinton administration. . . .
Peters said he was unaware of the relationship between Panin Bank and the Riady family. …but investments of Simon, Panin and the estate have been linked for years. The estate was a big shareholder in First Interstate Bank of Hawaii Inc. when Simon sold the local bank to First Hawaiian Inc. in 1991. Simon, in turn acquired much of his stake in First Interstate in the mid-1980s from Panin Bank executives. . . .
Peters was a director of the local affiliate Panin North America Inc. in 1983 when he was a legislator, according to filings with the state Ethics Commission.
For more, GO TO > > > Broken Trust
Xiamen International Bank – On Sept 28, 1974, Luso International Bank was incorporated in Macau. In 1975, it was acquired by Panin
Group (renamed Min Xin Group in 1988), Hong Kong.
In Nov 1985, Panin Group, with three PRC-based institutions, Industrial and Commercial Bank of China; Fujian Investment and Enterprise Corp (renamed Fujian International Trust & Investment Corp); and Construction and Development Corp of Xiamen Special Economic Zone (renamed Xiamen Construction and Development Corp, Ltd.) jointly founded Xiamen International Bank, the first joint venture bank in the People’s Republic of China.
Luso International Bank was injected as part of the capital to the bank, thus becoming a wholly-owned subsidiary of Xiamen International Bank.
In Nov 1991, XIB was joined by three more shareholders: Asian Development Bank; The Long-Term Credit Bank of Japan, Ltd.; and Sino Finance Group, Ltd. (owned by Hawaii’s Bishop Estate and former U.S. Treasury Secretary, William Simon).
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GreaterThings, by Greg Wongham: The Ripple Effect is one way we, the people of Hawaii, can attempt to tell the rest of the country about the way the Asian-influenced financial world of Hawaii could cost you and your children every penny in your bank.
Hawaii’s political powerbrokers, led by Hawaii (D) Senator Dan Inouye, have been very busy manipulating the financial world from Wall Street to the White House. Inouye knew Wall Street could be had if he were able to get a big powerhouse brokerage firm like Goldman Sachs to make a market for one or two of his big Asian banker friends, like Mochtar Riady’s Lippo Group (who was the center of the “Chinagate” investigation) and his brother-in-law, Mumin Ala Gundawun, who controls Xiamen International Bank.
Other Chinese-Indonesians like Atang Latief and his former son-in-law Sukarman Sukamto (now named Sukamto Sia), played a big role in the “high finance” world that has dominated Hawaii and Hawaii politics for decades. Latief, for example, was credited with controlling 10 offshore banks in Hong Kong.
The $6 billion Kamehameha Schools Trust provided the financial “brick and mortar” used to build the bridge that would span the gap between Asia and U.S. capital markets. The Democratic Party-controlled Kamehameha Schools Trust spent $500 million to purchase 10% of Goldman Sachs stock. . . .
Kamehameha Schools’ lead investment trustee, Henry Peters, stated that they were going to put Xiamen International Bank on the N.Y. stock exchange. This was a plan to create a conduit allowing the American public’s capital to flow through to their business partners in Asia, in some cases subsidizing a communist regime. The Clinton appointment of Robert Rubin as Secretary Treasurer was the other link to Hawaii’s financial and banking world. . . .
For more GO TO > > > Broken Trust; Dirty Money, Dirty Politics and Bishop Estate
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MORE TO COME
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Last updated November 20, 2001, by The Catbird