Western Banks Violate Rights, Law in Lao Dam Deal

International Rivers and BankTrack
Monday, November 16, 2009

ANZ, BNP Paribas and KBC Investment in Theun-Hinboun Dam Violates Equator Principles and Lao Law

The Theun-Hinboun Expansion Project - a dam and water diversion project now under construction in Central Laos - poses a threat to the livelihoods and food security of local communities living in the project area. The project also violates Lao law and the Equator Principles, according to Expanding Failure, a new report and video released today by International Rivers; BankTrack, FIVAS, Les Amis de la Terre; and Justice and International Mission Unit, Uniting Church in Australia.

The report, based on a field visit by BankTrack and International Rivers to the project area in May 2009, documents how Lao villagers are being sold down the river in a hydro deal that will displace thousands of people from their homes and land, and deprive thousands more of access to fertile rice fields, riverbank vegetable gardens, grazing lands, forests and fisheries, undermining local communities' rights to access food.

The Theun-Hinboun Expansion Project involves a 65-meter high storage dam on the Nam Gnouang River and a doubling of capacity at the existing Theun-Hinboun hydropower plant, resulting in a doubling of the amount of water diverted into the Hai and Hinboun Rivers. The project is being financed by three international banks* - ANZ of Australia, BNP Paribas of France and KBC of Belgium- that have adopted the Equator Principles, a set of social and environmental guidelines for private banks.

The report found that the project was in violation of Lao government resettlement law and the Equator Principles in numerous instances. The Theun-Hinboun Power Company is also failing to comply with its Concession Agreement and Resettlement Action Plan (RAP). These violations include: Compensation for loss of assets and livelihoods in the downstream villages as a result of the original Theun-Hinboun Project has not been paid [Violation of Lao resettlement law Article 6]; no provision of a range of resettlement options to the downstream villagers [Violation of Performance Standard 5], and no documentation on "good faith negotiations" with the affected indigenous communities [Violation of Performance Standard 7].

Ikuko Matsumoto, Lao Program Director for International Rivers and the report author says, "The violations documented in the report are unacceptable for a project that claims to be adhering to international standards, and that is being financed by three banks that have adopted the Equator Principles. The Theun-Hinboun Expansion project will undermine food security for up to 50,000 Laotians and the plans to restore livelihoods are woefully inadequate. The banks funding the project have promised that people's lives will be restored. They must take this responsibility seriously and put people before profits."

The project is displacing 4,186 indigenous people from the reservoir area and will affect another 51,441 people living downstream, on project construction lands, and in host villages. Already water levels along the Hai and Hinboun Rivers have dramatically changed as a result of the existing dam, which has caused erosion and flooding along the rivers leading to the loss of fertile agricultural land, fruit trees, riverbank gardens, livestock and boats in more than 55 villages. The new project will result in additional flooding and displacement, making life unbearable for many people. As one of the villagers in Tha village told the researchers, "The project company did not appropriately compensate for the existing project and we are already poor. With the expansion project, the company will make us poorer!"

The report was sent for comments to the three Equator Banks and Statkraft, the Norwegian owner of the project, in advance of its public release. In their response, the three banks stated that they considered the project in compliance with the regulatory framework but refused to discuss the details of the project with civil society.

Sonja Willems, Campaign Officer for BankTrack says "Equator Principles Financial Institutions need to be publicly accountable and transparent in their implementation of the Equator Principles. We are calling on the banks financing this project to conduct a mission to the project site, engage with the company to ensure compliance with the Equator Principles and Lao law, and withhold disbursements to the company until the project is brought into compliance."

*Financial information about the project: In October 2008, the ANZ, BNP Paribas, and KBC participated in a US$187.5 million syndicated loan arranged by Exim Bank of Thailand. The four Thai banks, Bank of Ayudhya, Kasikorn Bank, Siam City Bank and Thanachart Bank, participated in a 13,940 million baht syndicated loan also arranged by the Thai Exim Bank. Exim Bank of Thailand also provided a US$100 million project finance loan. (Exim Bank of Thailand Press Release, October 8, 2008). The Theun-Hinboun project is owned by the state utility Electricité du Laos, the Norwegian state-owned energy company Statkraft and GMS Power of Thailand, who together comprise the Theun-Hinboun Power Company (THPC).

Media contacts: 

International Rivers

Aviva Imhof (USA), Tel: +1-510-717-4745, aviva@internationalrivers.org

Sonja Willems (The Netherlands), Tel: +31-24-3249220, sonja@banktrack.org

Justice and International Mission Unit, Uniting Church in Australia, Mark Zirnsak
Tel: +61 3 9251 5265, Mark.Zirnsak@victas.uca.org.au, www.victas.uca.org.au

Les Amis de la Terre, Yann Louvel (France)
Tel: + 33(0)1 48 51 18 92, yann.louvel@amisdelaterre.org, www.amisdelaterre.org

FIVAS, Silje Lundberg (Norway)
Tel: +47 22 98 93 25, silje@fivas.org. www.fivas.org