Findings from International Rivers’ Field Visit to the Theun-Hinboun Expansion Project

Robert Allen Jr.
General Manager
Theun-Hinboun Power Company Ltd.
P.O. Box 3382
Vientiane, Lao PDR

Dear Mr. Allen,

Findings from International Rivers' Field Visit to the Theun-Hinboun Expansion Project

As you are aware, International Rivers has been monitoring and advocating on behalf of communities affected by the Theun-Hinboun Hydropower Project for well over a decade. In September 2011, we visited seven villages in the Theun-Hinboun project area to ascertain the situation of people affected by the Theun-Hinboun Expansion Project (THXP). This was an informal survey which aimed to give us an understanding of the situation of people living in the project's relocation and resettlement sites. We also visited three villages along the Nam Hai that had not yet been relocated, but were expecting to be relocated this dry season.

In this letter and appendix, the actual words of people we interviewed have, where possible, been used to give a clear representation of the problems faced. Full interviews are not included in order to protect the identity of the interview participants, and to avoid negative repercussions for interviewees.

1. Downstream relocation sites

(a) Concerns about the scale of resettlement

Interviews were conducted in 34 households from six villages: Ban Gang, Ban Phousaat and Ban Phoumakneng are new relocation sites; Ban Kao was in the process of moving at the time of our visit; and Ban Hatsakhan and Ban Naphouak are due to move this dry season.

The THXP Project's Resettlement Action Plan (RAP), Part 3, Section 20.1, Page 8, states very clearly that for Zone 3a, "Some villages will require (backward) relocation or complete resettlement to an area outside the village while the majority will require livelihood restoration in the form of alternative livelihood production systems." However, from our meeting with you on September 28, 2011, and from discussions with villagers, it now appears that all villages in Zones 3a are being moved in contradiction to the Resettlement Action Plan.

In addition, during our meeting with you, you indicated that all villages in Zones 3b and 3c will also be moved in the coming one to two years. Again, this contradicts the Resettlement Action Plan, which states in Part 3, Section 20.1, Page 3 that no resettlement or relocation will be required for villagers in Zones 3b and c. In other words, it appears that the Theun-Hinboun Power Company is relocating all villages in Zones 3a-3c, despite having stated in the RAP that only some villages in Zone 3a would be moved and that no villages in Zones 3b or 3c would have to be moved.

While THPC has consistently claimed that the relocation that it is carrying out will be "within village territories", and therefore of less disruption to relocates than resettlement, it is clear that this is not the case. The three relocation sites we visited are all consolidations of multiple villages, and some of these villages have moved up to 8 km away from their original locations. The relocation sites have minimal land around the houses for gardens, animals are apparently not allowed in them, and as of September villagers had not received replacement rice fields nearby. It is hard to see how this could be considered a "milder disruption" than resettlement, as THPC has claimed in the past. Furthermore, project relocation is being done in the absence of any public plan that articulates which villages will be moved, where they will be moved to, how the resettlement will be conducted and what entitlements these villagers will have.

In this respect, THPC is in direct violation of the International Finance Corporation (IFC) Performance Standard (PS) 5, and therefore of the Equator Principles. Clearly, there has been no attempt to avoid or minimize displacement (PS 5, Paragraph 7). Indeed, it is still not clear how many people will be moved in the downstream areas and where they will be moved to. This is also a violation of the Equator Principles (PS 5, Paragraph 12), which specifies that a Resettlement Action Plan needs to be prepared for all people that will be displaced by the project.

International Rivers has been asking for a number of years about how many villages downstream will be moved; which villages will be moved; where these villages will be moved to and what is the schedule for moving these villages. Could you please provide comprehensive information on this very important matter?

(b) Relocation vs Resettlement

As noted on numerous occasions in correspondence from International Rivers to the Theun-Hinboun Power Company (THPC), the distinction between relocation and resettlement remains problematic, and results in serious questions about compliance with the Equator Principles. International Rivers is very concerned about the situation in the relocation sites we visited. People were given uneven and unfair amounts of compensation for their houses, and were expected to construct their new houses themselves. Many have gone into debt and have still not completed their houses. The compensation for fruit trees also appeared to be inconsistent and unfair. Many villagers have not received replacement land and do not know where they will be able to cultivate rice, and there is mass confusion about the dry season rice program and what kind of support THPC will be providing. There have been very few livelihood programs implemented so far, and villagers are receiving very little relocation assistance. There are serious concerns both about compliance with the Equator Principles and with the Resettlement Action Plan developed by THPC, as outlined below.

The IFC's Performance Standards have two definitions of resettlement: "physical displacement" and "economic displacement" (PS 5). Under IFC's definition, both relocation and resettlement villagers affected by the Theun-Hinboun Expansion Project are considered to be physically displaced. Under these standards, THPC is obliged to follow PS 5's requirement for physical displacement for both relocation and resettlement people.

By continuing to offer fewer entitlements to relocated communities, we believe that THPC continues to be in violation of the IFC's PS 5, and therefore the Equator Principles, in the following ways:

• For the downstream relocation sites, we found that adequate replacement housing has not been provided and cash compensation for housing is not at full replacement cost in violation of PS 5, Paragraph 6. In addition, people stated that they were not given a choice of options for adequate housing in violation of PS 5, Paragraph 8. According to our interviews and as confirmed in our meeting with you, people have been given cash compensation for their old houses but have been required to build their new houses themselves. Many households, although not all, were provided with roofing, concrete posts, nails and some rice for work to complete fences around their properties. However, many people stated that they had spent all of their compensation money on their house and/or had gone into debt to construct their new houses, and many people have half-finished houses that they are unable to complete as they have run out of money. This is likely to greatly impact the ability of relocatees to meet THPC's income targets, not to mention the serious disruption in their lives.

• There are serious problems with land allocation in the relocation sites. Villagers are uncertain about where they will be able to cultivate rice in the future. We understand that some villages are expected to go back to their old village to cultivate dry season rice and others will be provided with new land. However, some villagers reported to us that their old land was six to seven kilometers away from their relocation sites, a distance that is too great for them to sustain. This should certainly be considered outside the bounds of village territory, as claimed by THPC. We are concerned that this failure to provide adequate replacement land is in violation of PS 5, Paragraph 8, and would like to urge THPC to take immediate steps to rectify the situation before a food security situation emerges. In our discussion, you mentioned that every village that had moved more than two kilometers away from the old village would be given land-for-land compensation. The wide and varying reports we heard indicates that this has not yet occurred, and needs to be rectified as soon as possible.

• THPC is reneging on its commitment to subsidize electricity for dry season irrigation pumps for the life of the Concession. The Resettlement Action Plan Part 3, Section 24.4.2, Page 42, states that; "Where pump irrigation remains the only means to ensure PAPs have an opportunity to cultivate rice, the cost of pump irrigation (installation and energy) will be borne by THPC until end of Concession Period." As noted in the appendix, several villagers told us that they would have to pay 50% of the electricity costs for dry season irrigation. This was confirmed by you in our meeting.

• Very little relocation assistance was provided to relocated communities (IFC PS 5, Par 16), meaning that people got little assistance from the company to physically move their houses and other assets. In addition, they have not been getting any transitional food or other support from the company (PS 5, Paragraph 20).

• Compensation for fruit trees has been poorly handled, inconsistent and often unfair with wide variations in compensation. Many people stated that they did not receive cash compensation at full replacement value, as required by IFC PS 5, Paragraph 8. People are unclear on why they received what they did, as the methodology for determining compensation was poorly explained.

All of the above violations stand in contrast to the entitlements given to those resettled from the reservoir area, who received new houses that were built for them by the company, were able to choose from a range of housing options, and who were provided with transitional relocation assistance. Those resettled from the reservoir area also received replacement land, although there appears to be serious concerns about the quality of this land, as outlined below. But nevertheless, there is a clear distinction between how "resettlers" and "relocatees" are being treated, and there is no justification for this differentiation under the Equator Principles.

(c) Other concerns at the relocation site

Villagers also reported to us a range of other concerns that they were facing at the relocation sites. Some of these are as follows:

• Many people were ordered by THPC officials to complete their houses by the end of 2011. This is problematic since many people have run out of money to complete their houses.

• Some villagers had to pay 50% of the cost for electricity connections to their houses, despite the fact that this was supposed to be free.

• In Ban Phoumakneng, there is concern about the flooding of the road levees that often occur as a result of just one day of heavy rain, which has the effect of cutting off the village, leaving people stranded.

• Livelihood programs are behind schedule. The only program reported in our interviews was that of frog and fish ponds, and this program is of such a small scale that it is of limited livelihood benefit.

• The grievance mechanism does not appear to be functioning well. People were either unclear of the process for making grievances, or afraid to make a complaint.

• Villagers received mixed messages and unclear commitments about who would be responsible for paying the cost of electricity for their houses.

2. Ban Nongxong Resettlement Site

International Rivers visited Ban Nongxong (a resettled village and a host village). Due to the limited time, only six households were interviewed. Whilst this is a small sample of the people living in this village, we would like to draw your attention to the following issues of concern reported to us by these people. These include:

• Problems with the quality of land provided to resettled people. The soil quality is poor and the preparation of the land by THPC was inadequate. The terracing was done unsuitably and the canals for irrigation are poorly constructed and not sufficient for the needs of growing crops. It was reported to us that 55 of the 108 households had not accepted the land as part of their compensation due to its poor quality.

• Ban Nongxong was promised a market and temple, as well as tables and chairs for the village hall, as per the Resettlement Action Plan. These have still to be completed.

• Stoppage of rice support: the villagers from Ban Nongxong could not understand why rice support was stopped between January to March 2011 and then restarted again in April.

3. Recommendations

It is clear that THPC has failed in many aspects of compensation and adherence to commitments in the Resettlement Action Plan. THPC have given villagers mixed and inconsistent messages, and there is a real risk of villagers falling into a debt cycle in the relocation sites. We hope that these issues will be resolved as quickly as possible. International Rivers makes the following recommendations:

1. Relocated villages should be given the same rights, entitlements and compensation as that of the resettled villages.
2. Land compensation in relocation areas needs to be addressed immediately. For any person whose old land is more than two kilometers away, compensation should be paid in the form of ‘land for land of equivalent size and productivity. THPC needs to redress and rectify the issue of who has received land compensation and who has not. This should be done by an independent assessment of land in old villages in consultation with villagers, to be presented to THPC, village chiefs, funders and the relocated community.
3. THPC must commit to supply free electricity for dry season irrigation for the life of the concession, as outlined in the RAP. In addition, THPC needs to establish a consistent policy about what other subsidies it will give for dry season rice.
4. THPC has stated on a number of occasions that electricity connection to houses in the relocation areas was to be free. THPC should investigate the issues that we have raised on this matter and reimburse those who had to pay a connection fee.
5. THPC should review their education and information programs to all resettlement and relocation villages to ensure people are aware of what they are eligible for in terms of land, electricity and water costs, building materials and toilets. In addition, financial planning and education should be an integral part of the package.
6. THPC should redress the fruit tree compensation so that it is fair and equitable. An independent evaluation of fruit tree compensation should be conducted to ensure that people receive compensation in accordance with their entitlements under the RAP, and that THPC sets up systems to ensure that future compensation is handled equitably. We also recommend that as a matter of good faith THPC starts a small fruit tree nursery in each new village and makes these trees available to all at no cost.
7. For houses that are in the process of being completed, financial and labor support should be given to help villagers finish building their houses. We also urge THPC to resolve inconsistencies around who received building materials (poles and roofs); who had the cost deducted from their compensation; and those who received nothing at all. People who have not yet begun the process of constructing their houses should be provided with new houses built by the company or provided with labor and financial support to ensure that they have the necessary resources to build their new houses.
8. THPC should resolve the issue of all-weather road access to the resettlement and relocation sites. In particular, the causeway at Ban Phoumakneng should be upgraded this dry season so that it can withstand at least normal wet season rain.
9. THPC should work with the people from Ban Nongxong to rectify the problem of poor quality land and poor quality terracing. THPC should conduct an independent review into agricultural land allocated to people who have been resettled. The review should incorporate soil quality, preparation of land by THPC, and irrigation systems (including sustainability and quality of canals).
10. THPC should fulfill its promises that are in the Resettlement Action Plan, including a market and temple and tables and chairs for the village hall in Ban Nongxong.
11. THPC should commit to rice support for all resettled and relocated people until they are able to grow sufficient rice to feed their families and reach income targets.

Finally, in our discussions with you in September, we were told that THPC is making a list of entitlements for the relocated villagers that you said you would provide us with. Could you please send us these entitlements?

We look forward to receiving a detailed response to the issues raised in this letter and outlined in more detail in the appendix below.

Yours sincerely,

Ame Trandem
Southeast Asia Program Director

Cc Mr. Etienne Viard, CEO, PROPARCO
Mr. Nanno Kleiterp, CEO, FMO
Mr. Bruno Wenn, Chairman, DEG
Dr. Peter Thimme, Director, Sustainable Development/Environment Department, DEG
Tore Haga, Senior Vice President, International, Statkraft
Mr. Mike Smith, CEO, ANZ Bank
Mr. Bruce McMullin, CSR Department, ANZ Bank
Mr. Jan Vanhevel, CEO, KBC Bank
Mr. Bruno Tuybens, Head of Environmental and Social Unit, KBC Bank
Mr. Jean-Laurent Bonnafe, CEO, BNP Paribas
Mr. Patrick Bader, BNP Paribas
Mr. Anthony Jude, Director, Energy Division, SE Asia Department, Asian Development Bank
Senator Lee Rhiannon, Australia

• See Appendix - Detailed findings from field visit
• Download full letter with appendix