China's Investments in Hydropower in the Mekong Region
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China’s Investments in Hydropower in the Mekong Region: The Kamchay Hydropower Dam, Kampot, Cambodia1 By Mark Grimsditch January 2012 Email: [email protected] 1 This paper was funded by the World Resources Institute with the generous support of the C.S. Mott Foundation and is one in a series of papers examining social and environmental safeguards in international development finance. 1 Acknowledgements The author would sincerely like to thank all those who gave their time to be interviewed, provide comments and offer support during the research and drafting of this paper. The field-trip to Kamchay was a success due to the kind support of the staff of Adhoc in Kampot, and my research assistant, Ms. Kol Leakhana. The author is extremely grateful to the affected residents and local officials who gave up their valuable time to meet and discuss the project. During the course of the research, the author met formally and informally with a number of people and would like to acknowledge the kind assistance of the Environment Program at The NGO Forum on Cambodia (Hydropower and Community Rights Project), Licadho, American Friends Service Committee, International Rivers, and Mr. Sam Chanthy. Finally, for reviewing drafts of the paper and providing insightful comments and words of support, many thanks to Kirk Herbertson, Jason Towers, Grace Mang, Ame Trandem, Cao Ke and Pyrou Chung. 2 Table of Contents Acknowledgements ................................................................................................................... 2 Executive Summary .................................................................................................................... 4 Introduction ............................................................................................................................... 9 Hydropower in Cambodia ........................................................................................................ 10 Cambodia’s energy shortfall ........................................................................................................................ 10 Development of Cambodian hydropower ................................................................................................... 11 Chinese investment in the Cambodian hydropower sector ........................................................................ 12 Background of the Kamchay Hydropower Project ..................................................................... 15 History of the Kamchay dam ........................................................................................................................ 15 The project developer and financier ............................................................................................................ 17 The environmental and social impacts of the Kamchay Hydropower Project ............................. 18 Impacts on the Bokor National Park ............................................................................................................ 19 Impacts on fisheries ..................................................................................................................................... 20 Water quality ............................................................................................................................................... 20 Loss of farmland and fruit trees ................................................................................................................... 21 Explosions at company quarry rain rocks on neighbouring villages ............................................................ 23 Loss of access to non-timber forest products (NTFPs) ................................................................................ 23 Impacts on local tourism .............................................................................................................................. 25 Employment on the project ......................................................................................................................... 26 Access to information and public consultation ........................................................................................... 27 National environmental and social safeguards ......................................................................... 33 Cambodian legal framework and relevant regulations ............................................................................... 33 The Kamchay Environmental Impact Assessment: “The rice is already cooked” ........................................ 37 Environmental and social safeguards of the developer and financier ........................................ 39 Oversight of Chinese foreign aid and investment ....................................................................................... 39 Nine Principles on Encouraging and Standardizing Foreign Investment ..................................................... 40 Guidelines to state-owned enterprises ....................................................................................................... 40 Draft regulations on overseas investments of Chinese enterprises ............................................................ 41 China-Exim Bank’s Guidelines on Environmental and Social Impact Assessments ..................................... 41 Sinohydro Corporation’s policies and guidelines ......................................................................................... 43 Chinese development assistance and investment in Cambodia ................................................. 45 Misreporting of Chinese “aid” to Cambodia ................................................................................................ 45 Aid and investment with Chinese characteristics ........................................................................................ 46 Is Cambodia growing tired of the traditional donors? ................................................................................. 48 Moving forward ....................................................................................................................... 50 On-going concerns at Kamchay ................................................................................................................... 50 The Cambodian Government ....................................................................................................................... 51 China-Exim Bank and Sinohydro .................................................................................................................. 52 The Chinese Government ............................................................................................................................ 53 Civil society engagement ............................................................................................................................. 54 Conclusion ............................................................................................................................... 55 Annex: Summary of social and environmental safeguards contained in Cambodian law ........... 58 3 Executive Summary The Kamchay hydropower dam is located 15km from the provincial capital of Kampot province in the south of Cambodia. Standing at over 100 metres in height and with an installed capacity of 194 megawatts, the Kamchay dam is Cambodia’s first ever large-scale hydropower project, and is seen by many as a symbol of the increasingly strong ties between Cambodia and China. The dam is being developed by China’s largest hydropower company, Sinohydro, with financing provided by the Export-Import Bank of China. At a cost of approximately US$280 million, the project was Cambodia’s single most expensive infrastructure project and the largest foreign investment in the country’s history at the time of its approval. It has since been overtaken by larger and more expensive hydropower projects in the southwest provinces of Koh Kong and Pursat, which are also being developed by Chinese companies. Based on extensive desk research, interviews, and field visits, this paper seeks to explain the significance of this project in terms of both Cambodia’s development and the increasing role China is playing in financing infrastructure developments in the country. The paper looks at the national and institutional safeguards for protecting the rights of affected people and avoiding or mitigating environmental harms, as well as the shortcomings in the application of these safeguards, and opportunities for future reform. Due to the country’s chronic shortage of electricity, the Cambodian Government has been eager to develop the hydropower sector for a number of years, but as one of the world’s least developed countries it has limited resources and technical capacity to do so. China has proved to be a willing partner in supporting this burgeoning industry. Over recent years, aid and investment from China has been warmly embraced and at the same time the Cambodian Government has become increasingly frustrated with “traditional” donors and the perceived conditionalities attached to their lending. Chinese aid and investment has the potential to bring significant benefits to Cambodia, and has injected much needed resources into its long neglected infrastructure. However, this also poses new and interesting challenges for those working to encourage donor accountability, corporate social responsibility, and adherence to social and environmental safeguards. Cambodia’s demand for electricity has grown