Is the Global Era of Massive Infrastructure Projects Coming to an End?

Such news — unquestionably a blow to China’s geopolitical and economic ambitions and a chilling development for prospective investors — clearly signals a growing realization that big infrastructure projects have deeper and more serious risks than many realize. “The closer you look at infrastructure, the more you see that its environmental, social, financial, and political risks are completely interwoven,” says Mahmoud Mahmoud, a researcher with Nigeria’s National Oil Spill Detection and Response Agency.

The torrid expansion of infrastructure is the biggest direct driver of environmental disruption, especially in developing nations, where around nine-tenths of all new infrastructure projects are planned or occurring. My colleagues and I in the conservation biology community have found that, because of the burgeoning human footprint, 70 percent of the world’s forests are now less than 1 kilometer from a road or clearing. Further, our work reveals that half of the 35 global biodiversity hotspots retain just 3 to 10 percent of their original intact habitat. Many wildlife populations are collapsing, especially in the tropics, while protected areas are becoming ever-more isolated and assailed by illegal settlers, loggers, and poachers.

Roads are the most ubiquitous of all infrastructure and often open a Pandora’s box of environmental problems, such as deforestation, habitat fragmentation, fires, and illegal mining. In Brazilian Amazonia, our work reveals that an incredible 95 percent of all forest destruction occurs within 5.5 kilometers of roads. New roads are crisscrossing the Congo Basin, where in the past decade they have helped ivory poachers to slaughter two-thirds of all forest elephants. Numbers alone don’t convey the realities, as evidenced by this heartbreaking video of a Bornean orangutan trying to repel an excavator destroying its forest home.

Beyond their high environmental costs, infrastructure projects can founder on the shoals of myriad other risks, many of which are hidden from view. This is an alarming prospect for investors, who assume they can reasonably judge the tradeoffs between financial risks and rewards. One recurring problem is that corruption benefiting key decisionmakers creates a systematic bias in favor of project approval.

“We see it again and again,” says Priya Davidar, a conservation biologist from Pondicherry University in India. “Big projects that should never proceed get approved, massively enriching a few power-brokers and land speculators while many people gain nothing.” Alleviating poverty is among the most frequent arguments for big infrastructure, but the World Bank has labeled such projects a “blunt instrument” for aiding the poor.

The distorting effects of corruption, compounded by declining trust in public and private institutions, are causing many to rethink the wisdom of major infrastructure investments — even for projects that once seemed highly promising. In Papua New Guinea, a $19 billion pipeline and liquid-natural-gas project known as PNG-LNG was widely heralded as an economic savior for the nation. But recent reports by the Jubilee Australia Research Center have branded PNG-LNG a “development failure” for delivering just a fraction of the employment, income, economic growth, and government revenues promised by its proponents.

As local frustrations rise, social conflicts and violence are spiking in indigenous territories along the 700-kilometer long pipeline project, with some indigenous groups threatening to close the megaproject down permanently. For investors and the Papua New Guinea people alike, the PNG-LNG is increasingly looking like a sprawling, multibillion-dollar quagmire — and one that would extract a high environmental toll in a nation whose once-vast tropical wilderness areas are being eaten away by logging, mining, and other human activities.

On the other side of the planet, investors were stunned when Brazil recently reversed its decades-long policy of building giant hydropower dams in the Amazon Basin. Such dams can have serious environmental and social costs — flooding forests, displacing people, and requiring new roads and power-line corridors that slice into remote forest areas and spur sharp increases in deforestation, illegal colonization, and land speculation. 

The conservative government of Brazilian President Michel Temer had long favored Amazon megadams, but abruptly stopped supporting them earlier this year. Clearly, staunch resistance from environmental and indigenous rights groups played a major role in the decision, as did a stuttering Brazilian economy. But the biggest blow was deep corruption, cost overruns, and illegal kickbacks that riddled the dam projects. The bribery was so bad that one corporate official was sentenced to more than 40 years in prison — along with former Brazilian President Lula, who received a sentence of nine-and-a-half-years. Investors in Brazil and beyond have been massively defrauded.

In recent years, financiers of varying stripes — from billionaires, to private and public banks, to large institutional investors such as pension and insurance funds — have shown heightened interest in big infrastructure. But the closer they look, the more they see gauntlets of risk. Conflicts over land ownership are deterring projects in many developing nations. Transnational ventures, including transportation and energy projects that would stretch for thousands of kilometers, are encountering stiff political and economic resistance. A lack of strategic land-use planning, slapdash environmental and social impact assessments, unstable prices for export commodities at the heart of big projects, and changing political tides in host nations can all sink infrastructure schemes. Faced with such diverse perils, one might wonder if due diligence for many infrastructure projects is even possible.

Of all nations, China is by far the biggest driver of big infrastructure and resource-extraction projects — and related environmental destruction. And China is leveraging its impacts by drawing in other investors from around the world. For example, more than 80 nations have become members of the China-led Asian Infrastructure Investment Bank. The member nations are keen to profit from infrastructure while gaining greater access to China’s massive domestic markets.

But there are many reasons to be leery of China’s policies and intentions. Despite a rain of documents promising that the Belt and Road Initiative would be environmentally responsible, there is heated debate in Beijing about its ecological safeguards, according to insiders. Big Chinese corporations (with international ambitions and assets that overseas courts can confiscate) want clear guidelines to minimize their liability. Smaller companies, of which there are many, want the weakest standards possible.

The debate is ongoing, but it is nearly unimaginable that the Chinese government would limit its thousands of smaller companies from seeking development riches. Most likely, it will do what it has done in the past: issue lofty guidelines that a few Chinese companies will attempt to abide by, but that most ignore. China’s explosive economic growth has arisen by giving its international corporations enormous freedom — not by micromanaging them.

Unfortunately, China’s aggressive and unyielding approach is uniquely dangerous to the natural world. Few Chinese firms abide by international environmental, social, and debt-sustainability standards. According to Chinese official assessments last year, 58 percent of Chinese companies in Belt and Road nations have never published any corporate social responsibility or sustainability reports. To make matters worse, China has a heavily controlled media and is notoriously intolerant of government criticism. And thanks to President Xi Jinping, the Belt and Road Initiative is now formally inscribed in the constitution of China’s Communist Party — making it a crime for any Chinese national to openly criticize the program. This obviously has had a chilling effect on public discourse, reducing transparency and increasing the likelihood that high-risk infrastructure projects will be approved and run awry.

I recently argued that a prime strategy for reducing the risks of infrastructure projects is simply to slow them down, providing better opportunities to disclose and debate their relative merits —and to filter out ill-advised projects before they ever break ground. My colleagues and I are currently attempting to halt one such project in Sumatra, Indonesia. 

Last year, biologists in northern Sumatra described a new species of great ape, known as the Tapanuli orangutan. With fewer than 800 individuals known alive, it is one of the rarest animals on earth. The Tapanuli orangutan survives in just a small tract of rainforest that is being eroded by illegal deforestation, logging, and poaching — threats that propagate around roads. When a new road appears, the ape disappears, along with many other rare species such as the endangered Sumatran tiger. The most imminent threat to the ape is a $1.6 billion hydropower project that Sinohydro, China’s state-owned hydroelectric corporation, plans to build with funding from the Bank of China and other Chinese financiers. If the project proceeds, it will slice through the ape’s tiny remaining habitat with new roads, power lines, and pipelines, greatly increasing its chances of extinction. 

Not only is the dam a recipe for ecological Armageddon for one of our closest living relatives, but it would also flood the territory of indigenous people. Other major lenders such as the International Finance Corporation and Asian Development Bank aren’t touching the project, having evaluated it as being too perilous environmentally. The hydropower scheme is part of the Belt and Road Initiative, and here we have an acid test to evaluate China’s promises.

Yet, to date, despite irrefutable evidence of imminent risks to the critically endangered Tapanuli ape and heated protests from leading scientists around the world, the Chinese proponents and their Indonesian partners continue to press ahead with their dam.