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Massive Mekong dams taking a toll on local communities

In Laos, the rapid and unsustainable development of massive Mekong dams is taking a toll on communities

In 1998, a large hydropower project was completed in central Laos that diverted water from one Mekong tributary – the Nam Theun-Kading – through a tunnel down an escarpment, from where it flowed rapidly down into the Nam Hinboun river to eventually rejoin the Mekong opposite Nakhon Phanom province. The 210-megawatt capacity Theun-Hinboun Hydropower Project (THHP) was part-financed by the Asian Development Bank (ADB), alongside loans and development assistance from the Norwegian and Swedish governments, who portrayed it as a means to reduce poverty in Laos. Sixty per cent of the Theun-Hinboun Power Company (THPC) formed to build, operate and own the THHP was owned by the Laos government, while the remaining 40 per cent was split equally between Norwegian state utility Statkraft and Thai company GMS Power. At the time it was built, the ADB claimed it would be a “win-win” project, due to its high economic benefits and ability to reduce national poverty on one hand, and minimal social and environmental impacts on the other, making it an exemplary project of its kind.

Fast forward a few years and the ADB, alongside the World Bank and European Bank of Investment, gave the leviathan Nam Theun 2 project the green light for construction upstream. The Nam Theun 2 removed a considerable amount of the water that would otherwise have flowed into the Theun-Kading river, reducing the potential of the THHP to generate power and the THPC to generate profits. Around the same time and emboldened by the World Bank’s stamp of approval for Nam Theun 2, the Laos government was rebranding the country the “Battery of Asean” and quickly there were plans to construct dozens of dams throughout the country, on virtually every reasonable-sized river. Most were being planned with the primary intention of supplying electricity to neighbouring countries, with the lion’s share targeted at Thailand’s insatiable energy market, but also to a lesser extent Vietnam. In 2007, the Thai government signed an agreement with its Lao counterpart to purchase 7,000 MW of power by 2020, most of it from a handful of dam projects with Thai corporate investment.

One of the projects earmarked for inclusion in this bilateral agreement was the Theun-Hinboun Expansion Project (THXP) which, as its name suggests, was planned to increase the power output of the existing project by an additional 290 MW, of which 95 per cent would be sold to the Electricity Generating Authority of Thailand. The THXP entailed the construction of a 70-metre-high storage dam on the Nam Gnouang river creating a 105-square-kilometre reservoir, parallel tunnels drilled through the mountainside to new turbines and the doubling of downstream water discharges into the Nam Hai and Hinboun. The total project cost is estimated at about $720 million (Bt23.2 trillion). About 4,200 people were directly displaced by the new reservoir and required resettlement in THPC-built villages, but less clear from an early stage of the project was the fate of approximately 30,000 people living in villages located downstream of the powerhouse on the Nam Hai and Hinboun floodplain.

These people had already suffered serious impacts to their livelihoods arising from the initial THHP activities, as was apparent in a 2004 evaluation of the project’s mitigation and compensation programme (MCP) that I was personally involved in, as part of a three-person review team. The review found that the MCP had only been partially successful in restoring the livelihoods of the impacted villagers and solving the project’s environmental impacts, while highlighting that significant challenges remained, especially in helping some of the poorest and most vulnerable members of the affected communities. Such concerns were vindicated by an environmental impact assessment (EIA) commissioned by THPC itself for the expansion project, which found that between 1998-2006 downstream villages had experienced $11 million-$13 million of direct economic losses, none of which had been compensated for. These included losses of agricultural land to erosion, damage to rice crops from exacerbated flooding, fishery and aquatic resources declines, loss of riverbank gardens and loss of livestock. The EIA was suppressed and a more developer-friendly version was commissioned in its place.

The unresolved issues surrounding the existing THHP seemed to be of little concern to the investors in the THXP, with banks representing Australia (ANZ Banking Group), France (PROPARCO and PNB Paribas), Germany (DEG), Belgium (KBC), The Netherlands (FMO) and no fewer than five Thai institutions involved (Export-Import Bank of Thailand, Bank of Ayutthaya, Kasikorn Bank, Siam City Bank and Thammachart Bank). Ironically, the banks from Australia, France and Belgium are all signatories of the Equator Principles, a voluntary code of conduct designed especially for financial institutions to manage environmental and social risk arising from overseas development project investments. One area where THXP seemed particularly weak was its apparent breach of the Equator Principles guidelines with regards to definitions of “resettlement” and “relocation”, with the estimated 8,000 downstream villagers effectively obliged to move due to project-induced flooding being classified as only subject to “voluntary relocation”, according to THPC.

The THXP was completed in 2012 and officially commissioned in January 2013 at a grand ceremony attended by the Lao Deputy Prime Minister, Somsavat Lengsavad, and various other dignitaries from Laos and investing nations. The news reports of the event in the local state-run media were unsurprisingly complementary of the project’s contributions to reducing poverty. It has become increasingly difficult in recent years for both journalists and international activists to get unfettered access to hydropower projects to provide a more objective picture of the situation at the local level. Hence, it is interesting to note that International Rivers, a critic of the Mekong-region narrative that favours rapid and unsustainable development of large-scale dam projects, has recently released a report based on a field study of five downstream villages impacted by the THHP and THXP.

The report claims that the project has increased food and livelihood insecurity for families through, “the nearly complete decimation of capture fisheries, the loss of access to other natural resources from the surrounding floodplain, the continued flooding of the areas where people traditionally cultivated wet season rice, and the failure of alternative livelihood projects to fill the gap in lost food and income sources”. Land that was previously cultivated for wet-season rice has been overtaken by floods and abandoned on a massive scale. It also charges that locals obliged to move to new settlement villages find they are not entitled to the same level of assistance had they been classified as “involuntary resettlement”. Villagers already relocated and those slated to move in the coming year or two expressed private disquiet about the grievance system for resettlement and compensation is inadequate, as it is not overseen by an independent third party. Meanwhile, it was found that many of the livelihood mitigation and restoration programmes had largely failed, confirming the fears and reservations expressed by the MCP review team in 2004. Thus, it would seem that not only has the THXP compounded many of the impacts caused by the first THHP, but it has magnified them, making the Nam Hai and Hinboun floodplain an inherently more hostile and less sustainable place for humans to live.

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