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Banks must prove they give a dam

By Mark Zirnsak, Sydney Morning Herald
Main
Banks
Dodgy deals
By International Rivers | Australia, Nov 27 2009

Given the role banks played in the global financial crisis, it is reasonable to expect they would understand the need to demonstrate their ethics with transparency. No longer is it reasonable to assume shareholders and customers will simply accept a "trust us, we have good policies" response. But this is exactly the response of ANZ when it comes to the Theun-Hinboun Expansion Project - a dam and diversion project under construction in central Laos.

This huge project is a hydro-electric scheme, with power being sold across the border to Thailand to bring in much needed export earnings for impoverished Laos. The project involves a 65-metre-high storage dam on the Nam Gnouang River and a doubling of capacity at the existing Theun-Hinboun hydro-power plant, resulting in a doubling of the amount of water diverted into the Hai and Hinboun Rivers. It is estimated the project will displace more than 4000 indigenous people from the reservoir area and will affect the lives of more than 50,000 people downstream.

ANZ is one of the banks helping finance the project. Commendably, the bank has also committed itself to comply with the Equator Principles, an international set of guidelines for banks that finance large-scale projects.

But a field visit to the area in May by BankTrack and International Rivers found evidence that the project was violating Laotian resettlement law and the Equator Principles. Already water levels along the Hai and Hinboun rivers have dramatically changed as a result of the existing dam, causing erosion and flooding, leading to the loss of fertile agricultural land, fruit trees, riverbank gardens, livestock and boats in more than 55 villages.

The evidence suggests the existing Theun-Hinboun project has violated the national law by failing to provide adequate compensation for the loss of livelihoods and property in downstream villages. This comes from one of the original consulting firms, Resource Management and Research, which was contracted to conduct the environmental impact assessment for the proposed expansion.

It estimated that by 2005, the original Theun-Hinboun project had caused the Hai River channel to widen by about 45 metres, leading to the loss of 68 hectares of land. RMR said the value of the land was between $US100,000 ($A108,000) and $US136,000, but the impoverished villagers had not received any compensation for the loss.

Moreover, RMR estimated at least 820 hectares of fertile rice paddy had been abandoned due to flooding - again with no compensation paid to villagers. The expansion project will violate local law by failing to provide food allowances and relocation assistance for those being resettled.

The Theun-Hinboun Power Company, which owns the projects, promised to provide displaced people with 440 kilograms of milled rice per person a year. Villagers claim to be getting less than this. THPC general manager Robert Allen has admitted to breaking this agreement, saying the promised amount is too much.

UCA Funds Management, an entity of the Uniting Church in Australia, operates several investment funds, all of which have investments in ANZ. As an ethical investor, it raised concerns with the bank about the evidence collected in Laos. The bank's response was that it would not "comment on the operations of individual clients". Instead, the bank says the Uniting Church needs to speak with THPC directly (its international partners have been doing this since 1998).

Surely the bank itself has responsibility to ensure its investments are socially and environmentally sound, and not rely on third parties for that assurance. And surely being transparent about those investments is part of that responsible behaviour. As a bank seeking to expand its operations within Asia, ANZ should be keen to demonstrate its commitment to ethical values. While client confidentiality needs to be respected, a demonstrated transparent accountability to ethical standards is something ANZ should also be seeking to embrace if it wishes to be regarded as a leader in this area. By contrast, another bank funding the project, BNP Paribas, has been far more open about the project and has promised a detailed response to the issues raised.

It is not being suggested that the dam projects be closed down. Rather, the issue is about ensuring that THPC obeys the local law and provides adequate compensation to the lives of dirt-poor villagers for the severe disruption its projects have and will cause. ANZ says it shares concern for this outcome, but it fails to understand the world now requires a "show us" response from banks rather than trusting their word - especially in the face of conflicting evidence from the ground.

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Dr Mark Zirnsak is director of the Justice and International Mission Unit at the Uniting Church in Australia, Synod of Victoria and Tasmania.

International Rivers Website

ANZ
The Australia and New Zealand Banking Group Limited commonly called ANZ, is the fourth largest bank in Australia, after the Commonwealth Bank,…
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