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Lao dam tests Chinese company's resolve on standards

Although its dam projects in the Upper Mekong region will have serious ecological and human impacts, the positive development is that China's Sinohydro corporation has at last adopted an environmental policy consistent with international standards, says Grace Mang.


EARLIER this year, I had the opportunity to travel down the Nam Ou (Ou River) in northern Laos. The purpose of my visit was to assess the impacts of seven dams soon to be built by the world's largest hydropower company in this pristine and remote Upper Mekong region. The Nam Ou hydropower cascade is a large project by any measure, yet almost no information is publicly available about the dam plans and projected impacts. The dams' developer, China's Sinohydro, has not publicly released any documents about the project. International Rivers, the organisation for which I work, decided to travel the river to get information first-hand.

The Nam Ou is one of the biggest and most important tributaries of the Mekong River and critical for its fisheries. The region's remoteness meant that little study has been conducted in this basin. Above Phongsali, the largest town in the region, indigenous communities rarely see outsiders, let alone foreigners. The only way to travel here is by boat.

The region's remoteness has, however, not been an obstacle for the Chinese state-owned Sinohydro Corporation, which has been investigating options for a dam cascade since 2007. In April 2011, the Master Agreement for seven dams was signed. In Sinohydro's words, the Nam Ou is the 'first time that a Chinese company can obtain the development rights toward the whole river basin.' Under the terms of the deal, Sinohydro will build and own the dams for 25 years before handing them over to the Laotian government. After initial plans for the power to be sold to Thailand fell through, Laos now says that the dams will help meet the power demands of northern and central provinces, with the rest to be used for powering a high-speed rail link between China and Laos.

But what about the communities that will be affected - what do they think about the planned dams on their river? I found that villagers were certainly aware of the projects, but in many cases did not know the Laotian word for 'dam' or what a hydropower dam might look like. In fact, the first time they had seen a dam was the illustration on the cover of International Rivers' Laotian language report, 'Dams, Rivers and Rights'.

Many of these people live in villages that had been established for decades - and in a few cases, more than 200 years. All communities rely on the river for transportation and thus communication with the outside world. The river also provides them with food, and electricity from self-installed pico-hydro turbines.

There is no doubt that the lives of the Nam Ou people are very difficult. Several villagers lamented over failed rice crops this year. Young adults were almost always absent from the villages when we visited. Perhaps, then, it was not surprising that many of the people we met said they looked forward to the promise of roads, a new school, new housing, plentiful electricity and a medical clinic that they hoped would come with resettlement. But worry was in the air, too. A village leader said the dam company has 'made many promises if we are forced to move. Compensation is not clear and the new village location is not clear.'

We wondered how these communities might adapt to being relocated far away from the river they had come to rely on for so long. They didn't know either. 'We don't know if there will be enough water,' said one fisherman. 'How will I survive without my fruit trees? It will take me 100 years to establish a new farm,' said one farmer who had already lost half his farm due to road construction and expected to lose the rest to the dam.

The global context

Sinohydro Corporation is responsible not only for its $2 billion investment in the Nam Ou infrastructure, but also for compensating and restoring the livelihoods of those who will be impacted the most (as with most dam projects the world over, affected people living downstream of the dam project are not considered as 'directly affected' and therefore will be uncompensated for their losses). This will be the first time that Sinohydro has carried out such an undertaking. In China, local authorities rather than the dam builders are responsible for resettlement and environmental mitigation work. In the Nam Ou basin, the fate of thousands will be in Sinohydro's relatively inexperienced hands.

Making Chinese dam builders responsible for livelihood development programmes is a surprising turn. Chinese dam builders have only been active in the international hydropower market for the past six to eight years, following the adoption of the 'going out policy' by the Chinese government in 1999. Such encouragement led many state-owned companies to find new business opportunities overseas. China's dam-building industry has been one of the most successful. Driven by a saturated domestic market and low profits, companies such as Sinohydro have prospered overseas with the support of Chinese financiers such as China Exim Bank and China Development Bank. As with so much of China's rocket-like growth, few would have predicted that in less than 10 years, Sinohydro would control over 50% of the international dam-building market.

Laos' biggest dam project to date - the Nam Theun 2 Hydro-power Project - brought tensions between the dam's builder, the World Bank, and civil society. Non-governmental organisations (NGOs) opposed the project for its social and environmental impacts, but ultimately the dam was built. The NGO campaign resulted in the World Bank committing to delivering the best resettlement and livelihood restoration package possible.

Ten years on, the quick rise of China's hydropower companies in international dam building has helped Sinohydro stay under the limelight so far. With Chinese overseas dam builders and banks involved in more than 300 projects globally, it is clear that the business of global dam building has rapidly shifted from the somewhat public multilateral development arena into the closed boardrooms of Beijing.

International Rivers has certainly made headway in the boardrooms of Beijing. In January 2012 Sinohydro adopted an environmental policy consistent with international standards. We will be working to ensure that these policy statements translate to genuine change on the ground, including for the people of the Nam Ou.

Grace Mang is the China Programme Director at International Rivers, a non-governmental organisation that works to protect rivers and the rights of communities that depend on them. This article is reproduced from the International Rivers publication World Rivers Review (June 2012).

    A new guide published by International Rivers presents the lessons of past experience and informs interested NGOs how they can best influence the projects and policies of Chinese dam builders and advocate for social and environmental interests. The report provides an overview of the relevant actors, laws and standards in the Chinese dam-building sector, including Sinohydro's new environmental policy. It presents case studies of how NGOs have influenced Chinese overseas projects, and concludes with a list of addresses and other useful information. Entitled 'The New Great Walls', the 60-page report is available at www.internationalrivers.org/node/3962.

*Third World Resurgence No. 268, Dec 2012, pp 2-3


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