Letter Urges ADB to Suspend Mekong Power Grid

Wednesday, January 28, 2004

International Rivers calls on the ADB to suspend its Mekong Power Grid plan, on the basis that it violates a number of the bank's own policies.

Mr. Tadao Chino
Asian Development Bank
PO Box 789
0980 Manila

Dear Mr. Chino,

Enclosed please find a copy of “Sizing Up the Grid: How the Mekong Power Grid Compares Against the Policies of the Asian Development Bank,” released this month by International Rivers. This analysis examines the Bank’s development of the Greater Mekong Subregion Power Interconnection and Trade Initiative (“Mekong power grid”) and its compliance with Bank policies and strategies.

The Mekong power grid initiative involves the construction of 12 hydropower projects and hundreds of miles of transmission lines across the region, at a cost of roughly $43 billion. Bank documents state that the Mekong power grid will provide cheap, reliable and environmentally sustainable power for Thailand and Vietnam. However, as the enclosed analysis shows, the Bank has not proven that this initiative is economically, environmentally or socially sustainable. The ADB has promoted this initiative through a poor process of development, violating its safeguard policies on energy, water and indigenous peoples, and contravening its poverty reduction strategy, strategic environmental framework for the GMS and the recommendations of the WCD.

Some of the ADB policy violations discussed in the analysis are summarized below.

1. Lack of participation and consultation
Relevant policies: Operations Manual Section 47, Water Policy, Energy Policy

The Bank’s operations manual explicitly states that participatory development processes will be adopted which allow stakeholders to influence decision-making throughout project development cycles. Bank water and energy policies also state that the Bank will encourage participation and consultation in its initiatives. Despite these stipulations, members of civil society have been excluded from participation in the development of the Mekong power grid initiative over the last ten years. Discussion and debate has been largely restricted to meetings of high-ranking government officials; ADB, World Bank and aid agency officials; and hydropower industry representatives. Basic information on the Mekong power grid and its potential benefits and costs has not been presented to the public and nongovernmental stakeholders.

2. Indigenous Peoples Not Engaged in Development Process
Relevant policies: Indigenous Peoples Policy

The ADB’s indigenous peoples policy states that initiatives should be conceived, planned and implemented to the maximum extent possible with the informed consent of affected indienous communities. The ADB's policy on indigenous peoples is applicable to ethnic minority groups in the Mekong region. The Mekong power grid and the hydropower projects that the grid would support are likely to impact ethnic minorities. Thus far, ethnic minority representatives have been excluded from the planning process. They have not had an opportunity to voice their concern, provide their consent or discuss alternatives.

3. Environmental and Social Concerns Not Guiding Decision-Making
Relevant policies and strategies: Energy Policy, Poverty Reduction Strategy

In its energy policy and poverty reduction strategy, the ADB states that environmental and social considerations will be at the forefront of decision-making and energy planning, with these considerations factored into project costs. The energy policy states specifically that the Bank should support regional power trade where this meets environmental standards. In spite of these policy statements, the Mekong power grid is going forward without an adequate assessment of its environmental impact and without proof that it meets environmental standards. Two influential ADB-financed studies on regional energy development focused on technical and economic issues, while failing to adequately address the potential social and environmental impacts of such activities.

4. Impacts to Fisheries Resources Not Assessed
Relevant policies: Fisheries Policy

The ADB’s policy on fisheries states that the impacts of Bank projects on fisheries must be thoroughly assessed and eliminated or mitigated. However, the ADB has not fully assessed the fisheries impacts of the Mekong power grid or the hydropower projects it would support. These projects are likely to have significant impacts on fisheries and subsequently on the livelihoods of people who depend on them.

5. Cumulative Impacts Not Considered
Relevant policies and papers: Energy Policy, Strategic Environmental Framework for the Greater Mekong Subregion

The ADB’s energy policy states that potential hydropower projects will be evaluated in the context of integrated water resource management. The Bank’s Strategic Environmental Framework for the GMS was created to ensure that the cumulative impacts of infrastructure investments would be considered at an early stage in the planning process. Despite these provisions and aims, the Bank is proceeding with the Mekong power grid although no assessment of the cumulative impacts of planned hydropower projects in the Mekong basin has been completed.

6. Cost-effectiveness Not Proven
Relevant policies: Energy Policy

The ADB's energy policy stipulates that the ADB should support power trade that is cost-effective for all parties. However, the cost-effectiveness of the initiative has not been proven. The master plan explicitly states that there are uncertainties regarding the initiative’s cost estimates and environmental implications and that further studies should be completed before investment decisions are taken. The scenario recommended for development in the Regional Indicative Master Plan on Power Interconnection in the GMS is estimated to save about $900 million compared to a non-grid option. This represents savings on the order of 1-2 percent on a generation and transmission system estimated to cost $43 billion.

Despite the policy violations outlined above, the ADB is continuing to press forward with the Mekong power grid initiative. In April 2003, the ADB approved a technical assistance grant to develop a Power Trade Operating Agreement (TAR: STU 36035). In late 2003, the ADB approved technical assistance grants for the Nam Theun 2 Hydropower Project (TAR:LAO 37734) and for power interconnection between Thailand and Vietnam (TAR: OTH 36044).

Instead of rushing ahead to implement the Mekong power grid, we urge the ADB to step back and take a cautious approach to development in accordance with Bank policies and strategies. We urge the Bank to suspend the Mekong power grid, in light of its potential social, environmental and economic costs and questionable benefits for electricity consumers in Thailand and Vietnam. Instead, the Bank should ensure that a comprehensive assessment of energy options for the region is undertaken in line with the recommendations of the World Commission on Dams. As part of this assessment, studies should be carried out to examine the cumulative environmental and social impacts of the Mekong power grid.

Thank you for your time. I look forward to your response.


Susanne Wong
Southeast Asia Campaigner

Read the ADB's response.