Features | Environment | Southeast Asia

Trouble on the Mekong

Europe’s Pöyry Energy and its controversial role as Xayaburi dam consultant have been challenged under new OECD CSR rules.

By Tom Fawthrop for
Trouble on the Mekong
Credit: International Rivers

Its turbulent currents snake their way through the tropical heart of Southeast Asia. The 4,880-kilometer Mekong river hosts the iconic giant catfish, the endangered Irrawaddy dolphin and the largest inland fisheries in the world. Its vast biodiversity – second only to the Amazon – offers myriad opportunities for ecotourism development

But are the wonders of the mighty Mekong doomed by a very different kind of development, fuelled by a rapacious demand for hydro-power in an energy-hungry region?

Construction of a $3.8 billion mega-dam project in Xayaburi, in the north of Laos, is already underway, with ten more dams slated for the mainstream of the river.

A group of Finnish nongovernment organizations have invoked European rules of corporate social responsibility, to challenge what they regard as reckless and irresponsible recommendations by Pöyry Energy AG, the Swiss engineering subsidiary of Finish consulting company Pöyry PLC, which has been hired by the government of Laos.

The Xayaburi dam project has been the subject of an international consultation process under the auspices of the Mekong River Commission (MRC), which comprises four member states: Cambodia, Laos, Thailand and Vietnam

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But the MRC has split between Laos and Thailand, which support the dam (Thailand is providing all the funding and will purchase 95% of the power generated), and Cambodia and Vietnam, which view dams on the Mekong as a cumulative threat to agriculture, fisheries and livelihoods.

Scientists warn that a cascade of dams threaten food security along the Mekong for around 65 million people. The prime minsters of both Cambodia and Vietnam have demanded further scientific studies on downriver impacts to be carried out prior to any construction, but supported by Pöyry’s recommendations, Laos has ignored its Indochina neighbors.

It was the deadlock inside the MRC that prompted the government of Laos to hire Zurich-based Pöyry Energy, allegedly with a view to circumventing the consultation procedures laid down by the 1995 Mekong Treaty

In response, fourteen Finnish NGOs filed a landmark case against Pöyry, alleging that it had violated OECD rules. Finland was obliged to set up a Corporate Social Responsibility Committee in 2012, to hear the complaint against parent firm Pöyry PLC, the parent company in Helsinki.

As the largest donor to the MRC, Finland has a special interest in the Xayaburi controversy. All development partners of the MRC have expressed deep concerns about the environmental impacts of Xayaburi,   the first dam to be built on the Lower Mekong.

The Finnish NGOs have accused the international consultant Pöyry of promoting a reckless and irresponsible mode of development, and undermining international cooperation among the riparian countries through the Mekong River Commission.

Pöyry has since announced that it has won a new eight-year contract to supervise construction of the Xayaburi dam.

Otto Bruun, Friends of the Earth campaign coordinator noted: “The Company reaps a lucrative eight-year reward for its deceptive behavior as a consultant. This conflict of interest is an outrage.”

A spokesman for Pöyry Energy in Bangkok denied to The Diplomat that there was any conflict of interest.

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The NGO case presented to the Finnish inquiry claimed that the Pöyry Compliance Report (August 2011) had been used as an instrument to bypass the MRC consultation process, secure an power supply contract with Thailand, and legitimize unilateral decision of the Lao government in to launch the dam.

The  Finnish CSR Committee concluded there was insufficient evidence to rule that Pöyry had violated OECD rules, but qualified that conclusion with criticism: “Companies should assess the risks of similar projects more carefully and act more transparently in the future…Pöyry should have addressed the ambiguities related to environmental issues and human rights more clearly in its report to the government of Laos.”

Oddly, however, the Finnish Committee permitted Pöyry to provide its submission in secrecy, without any right of rebuttal by the NGOs. Friends of the Earth’s Mr. Bruun complained that “The judgment has unfairly protected Pöyry from public scrutiny. The decision lets Pöyry off the hook.”

Speaking to The Diplomat, Finland’s Minister for International Development Heidi Hautala also expressed concern: “There were obvious problems with openness and clarity of the process. It is unheard of that the response of the company was declared a business secret.

Zurich-based Pöyry Energy was originally hired by the Laotian government to provide a report on the Xayaburi dam’s compliance with MRC design guidelines for safety and sustainable hydropower.

The MRC’s own panel of experts found many flaws in the report and recommended that Pöyry conduct transboundary impact studies first.

The Pöyry Compliance Report admitted the need for over 40 studies concerning the impacts of the dam, but then recommended that these studies could somehow be completed while construction is underway.

Dr. Jian-hua Meng, Sustainable Hydropower Specialist at the Worldwide Fund for Nature (WWF), believes that Pöyry’s stance is contrary to professional standards. “The Pöyry report recommends going ahead and fixing problems on the way. But you don’t get on board a plane while you are still are uncertain about how to design it, or even how to land it.”

Pöyry has attempted to address all concerns with a claim that it can mitigate the damage to fisheries to a high degree by incorporating a state-of-the-art fish pass into the dam design.

Fish pass technology has been widely used in North America, Norway and Switzerland, but not in tropical Asia. The rivers of Northern Europe typically feature only a relatively small number of fish of a few species, an entirely different scenario to the Mekong, which has an estimated 900 different species with many different behavioral patterns.

Dr. Meng ridiculed Pöyry’s concept: “Building a fish pass based on the experiences of northern Europe and Switzerland and transferring them to the Mekong is just not serious business.”

Pöyry has responded to the criticism by suggesting scientific opinion differs on the effectiveness of mitigation.

But Prof. Philip Hirsch, director of the Australian Mekong Research Centre at the University of Sydney, rebuffs this argument. “The overwhelming consensus of scientists, who understand how the Mekong River works, is that the mitigation measures proposed by Pöyry are unproven and unlikely to work,” he said.

Indeed, experts say Pöyry is gambling with untested technology. “They are playing roulette with the livelihoods of over 60 million people” says Dr. Meng.” It would not be acceptable in Europe, so why is it different in Asia?”

The Finnish fudge on corporate social responsibility has not provided a clear answer to that question.

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Tom Fawthrop is a Thailand-based journalist and producer. His work has appeared in The Guardian, Al-Jazeera and the New Statesman, among other publications.