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FOCUS June 2000 Volume 20

Marginalization and Globalization: Commercializing Natural Resources in the Mekong Region

Satoru Matsumoto

People's movement against the ADB projects

Thousands of people holding banners criticizing the Asian Development Bank (ADB) surrounded the most extravagant hotel in Chiang Mai, a quiet tourist town in Northern Thailand, in early May 1999. The hotel was the venue of the 33rd ADB Annual Meeting. There were, however, more members of the police force present than protesters. The majority of the protesters are not anti-globalization urban elites but people who are affected by development projects initiated by the ADB and other international aid institutions.

While the Bank has propagated its people's participation policy, the Chiang Mai scene cynically proved that the Bank preferred "police participation" to people's participation. It did not allow the participation in the meeting of direct stakeholders like project-affected people as the protesters pointed out. The ADB President, Mr. Tadao Chino, a former high ranking official of the Ministry of Finance in Japan, did not meet the affected people even though they proposed direct communication with him several times. Tight schedule of meetings with government officials and business representatives was the excuse.

It was the first time for the ADB Annual Meeting to face such a large-scale grassroots protest. One of the banners brought by the protesting farmers was quite symbolic. The banner shows a drawing of fishes. The big fish named "World Bank" swallows the "IMF" fish, which swallows the "ADB" fish, and which swallows in turn "Ratthabaan Thai" (Thai government) fish. At the end of the line is the smallest fish, "Chaunaa Thai" (Thai farmer) leaving behind bones and a farmer's hat.

The protest was organized by the coalition of 38 people's organizations in Thailand. The protest consistently criticized three problematic ADB loans to Thailand: 1) Agricultural Sector Program Loan, 2) Samut Prakarn Wastewater Management Project Loan, 3) Social Sector Program Loan.

The Agricultural Sector Program Loan is being criticized for urging the Thai government to introduce new irrigation service fee as a conditionality of the loan. Small farmers are afraid that it will limit their access to irrigation water if they cannot afford the new fee. The Samut Prakarn Wastewater Management Project distresses the fisherfolk living close to the project site because of possible impact on water quality and fishery resources. They claim that the planned facilities are not designed to process heavy metallic wastes from factories. They also claim that there has never been an adequate environmental impact assessment done on the project. The third controversial loan, the Social Sector Program Loan, is alleged by the protesters as imposing the privatization of educational and medical systems in Thailand.

The most controversial issue among the poor farmers in Thailand is the new irrigation service fee contained in the Agricultural Sector Program Loan. Although the ADB provided counter-arguments on each point raised by the farmers, there is one crucial question that has not been properly answered. The question is "why does the ADB, whose new overarching goal is poverty alleviation, prescribe the introduction of irrigation fees not only for agri-business investors but also for the poor farmers?" The Bank explains that the irrigation service fee improves the use and management of water and land for the benefit of the farmers. It also asserts that small farmers, in particular, can increase their access to rural credit. However, the Bank appears to ignore the fact that the poor farmers depend on natural resources such as water and land not for agri-business but mainly for their own subsistence. Also, a huge number of farmers in Thailand are suffering from debt burdens under existing rural credit schemes. The protesting farmers see that commercialization or privatization of water resources will lead to the control of the water market by the capital-rich business sectors. Deprived of access to water resources, the poor farmers will be marginalized.

This case points to the issue of resource tenure. The system for using a resource whether land, forest or water affects the access right of people. This right is adversely affected even more when resource tenure is defined along political-economic power relations. It is clear that free access to water is indispensable to maintain the subsistence livelihood of the rural population of Thailand and thus it is a right they are entitled to claim. The ADB project will distort such right of the poor.



Globalization and foreign aid to Laos

The World Bank Group Private Sector Development Strategy paper explains globalization in the following manner:

"Economic liberalization, combined with advances in communications and transport, has led to the growing integration of world markets for goods, services, and capital. This process, known as globalization, accelerated in the 1990's as an increasing number of countries embarked on structural adjustment programs-designed to reorient their economies towards private sector production and international trade and to improve their competitiveness."

The paper explains that in 1994 the share of private capital flows and official capital flows in the net long-term capital flows to emerging markets was 178 billion and 46 billion US dollars respectively. In 1997 it was 299 billion and 39 billion US dollars respectively. The outstanding domination by private capital in the capital flows to the emerging markets especially in Asia is partly caused by "aid fatigue" among donor countries. This situation urged the international financial institutions (IFIs) like World Bank and ADB to change their role from aid providers to "catalysts" of private money for development projects.

In Laos, a small land-locked country in the Mekong River Basin and categorized as one of the Heavily Indebted Poor Countries (HIPCs), projects initiated by the IFIs induced private financing and resulted in marginalizing vulnerable rural populations. The ADB-financed Nam Theun Hinboun hydropower project is an example.

The communist-led government of Laos initiated its open market economic policy called the New Economic Mechanism (NEM) in 1986. The collapse of the former Soviet block and the peace process in Cambodia in the early 90's triggered the pouring of development funds into the Mekong region including Laos. Consequently, IFIs' lending accelerated during that period. ADB, at the same time, began its own development program for the Greater Mekong Sub-regional Economic Cooperation (GMS) to finance various trans-border projects among the six Mekong countries namely Laos, Thailand, Cambodia, Vietnam, Burma and Yunnan province of China. The GMS initiative by ADB and the IFIs' engagement in development projects in Laos and other Mekong countries coincided with globalization trends in the region.

ADB-financed Nam Theun Hinboun hydropower project

The most advanced project under the ADB's GMS initiative is the Nam Theun Hinboun hydropower project located in central Laos. The project began to generate 210 MW of electricity in March 1998. Ninety-five percent of the electricity generated is exported to Thailand in order to increase the foreign currency earning of the Laotian government. This is the first dam project in the Mekong region where ADB catalyzed private funding for a large-scale infrastructure project. The executing agency is a joint venture company named Theun-Hinboun Power Company (THPC), which is 60 percent owned by Electricit? du Laos (EdL), 20 percent by MDX Company Limited (Thailand), and 20 percent by Nordic Hydropower AB (Sweden and Norway). ADB provided 60 million US dollars to complement the sharehold of EdL. But it constitutes only 20 percent of the total project cost. ADB is proud that its relatively small funding support to this project inspired private financing. It also believed that the project would have little social and environmental impact.

An NGO investigation however revealed that there are negative impacts occurring just after completion of the dam. The investigation found serious "unexpected" damage on affected people's lives. The reduction of fish capture and the flooding of the vegetable gardens along the original riverside were found to be calamitous. After organizing a few missions to the affected area, ADB finally realized the extensive damage caused by the "environmentally sound dam project." The newly-defined project-impact zone covers 53 villages instead of 21 as originally considered, and includes an estimated 4,283 households of about 25,000 persons (0.5 percent of the total population in Laos).

Despite the ADB admission of the wide-ranging negative impact of the dam in early 1999, the affected people received very little compensation for the damage suffered. The responsibility for providing appropriate compensation is unclear. The agreement provides that THPC is obligated to bear the costs of providing compensation, resettlement, and environmental mitigation up to one million US dollars only. According to ADB, the amount of dividends and royalties that THPC paid to the government of Laos reached 36 million US dollars from April 1998 to February 2000. And yet THPC does not intend to compensate the affected people beyond one million US dollars. Since this project is mainly privately financed, ADB has been reluctant to take the responsibility for providing compensation. While the stakeholders of THPC received economic benefits in more than expected amount, the unexpected damage the poor fisherfolk face remains unsolved.

This is a typical case of commercialization of water resources to generate more money rather than help the rural fisherfolk in Laos. More than 20 middle and large-scale hydropower projects are either being constructed or studied in this country. These projects may not only destroy the physical environment but also marginalize a large portion of the population of Laos, especially the vulnerable people making a living through free access to natural resources in rural areas.

What is the real target: globalization and marginalization?

Many more cases can be cited in the Mekong region related to commercialization of natural resources. An example is the Nam Theun 2 project, another hydropower dam project in Laos. The project has been waiting for a financial guarantee from the World Bank in order to mitigate the political risk on the investment by foreign private financiers. Relying on the expected World Bank guarantee, the Laotian government gave a logging concession to a military-owned logging company to clear 450 square kilometers of forest in the Nakai Plateau (considered to have rich-biodiversity). This logging concession caused the loss of livelihood on forest products of local people. In Cambodia, ADB recommended the amendment of the land law. NGOs criticized the draft amendment for supporting foreign investors and undermining the right of indigenous people to possess and utilize land. The draft amendment would limit the access of the indigenous people to natural resources.

These criticisms against foreign aid (especially funds from the IFIs) indicate the increasing influence of globalization in the Mekong region, where the majority of rural people still rely on natural resources for their subsistence. Rural people fear that the commercialization of natural resources and the private financing of projects will marginalize their livelihood.

Activists criticizing destructive projects of IFIs cannot be considered promoting "anti-globalization" however. Bureaucrats in the Mekong countries often criticize globalization because it appears to be imposing "Western" standards. Anti-globalization can sometimes be understood in this region as legitimacy or justification for government control and intervention in economic activities.

One social activist in Thailand, Mr. Witoon Permpongsacharoen, the co-director of the NGO Towards Ecological Recovery and Regional Alliance (TERRA), insisted at the International Conference on ADB and Mekong Development held in Sydney last June 1999 that "We are not anti-globalization activists. We are just concerned about the development projects which marginalize the people living [in the project areas by] undermin[ing] their livelihood." He suggested avoiding the discursive arguments about symbolic terms such as globalization. Instead, energy should be focused on the institutions marginalizing people. These institutions are visible compared to globalization. While the great influence of globalization is admitted, it should be kept in mind, at the same time, that real institutions affect people's lives and their involvement in specific projects should therefore be monitored as a matter of necessity.


Satoru Matsumoto is currently the Secretary-General of Mekong Watch, Japan. He teaches development and environment issues in the Mekong River Basin at the Hitotsubashi University (Japan) and works as a visiting researcher at the Institute of Global Environmental Strategies (IGES) based in Kanagawa prefecture (Japan) to analyze the deforestation in the Mekong Basin countries. E-mail: mekong-w@path.ne.jp

Mekong Watch, Japan is a research and advocacy-oriented NGO based in Tokyo.


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