The Debate | Opinion

Cambodia Needs to Increase the Transparency of Key Infrastructure Projects

The Tatay River Hydropower Dam in southwestern Cambodia has become a case study in how not to do things.

Cambodia Needs to Increase the Transparency of Key Infrastructure Projects

A view of the Tatay River in Koh Kong province, Cambodia.

Credit: Flickr/Judith

A decade ago, Cambodia relied heavily on neighboring states for its electricity supply. However, the kingdom’s domestic power generation capacity has increased twelve-fold over the last fifteen years, with hydropower representing 41 percent of total energy generation in 2020, representing Cambodia’s second-largest source of power

But as this segment of the energy sector grows, a lack of transparency in major projects has resulted in confusion and criticism. One such project is the Tatay River Hydropower Dam, a 246-megawatt (MW) project located in Koh Kong Province in southwestern Cambodia.

Construction on the Tatay project began in 2010 under a 42-year Build-Operate-Transfer (BOT) agreement between Cambodia and Cambodian Tatay Hydropower Ltd. (CTHL), facilitated by a $540 million loan from the China Export-Import Bank (EXIM Bank). Even though Chinese investment in the country’s infrastructure is generally useful in filling the funding gap in these areas, Cambodia needs to increase the transparency in the development and implementation of projects funded by Beijing.

As a partner of the BRI Monitor, a web resource for checking the transparency of Belt and Road Initiative projects, Future Forum conducted a case study on the Tatay hydro dam. This study, which used the CoST Infrastructure Data Standards (IDS) for proactive disclosures, one of the global standards for assessing the transparency and accountability level of infrastructure projects, found significant issues in the Tatay project’s transparency – or rather, the lack thereof.

Most of the information found within Future Forum’s Tatay report, for instance, had to be obtained from third parties like local and international NGOs and news agencies rather than from the stakeholders themselves.

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One obvious area of confusion revolves around the Tatay project’s budget, with a variety of sources providing a wide range of figures, and no clear answer as to which source is correct. In 2009, a report from SINOMAC, the state-owned Chinese parent company of Cambodia Tatay Hydropower, listed a budget of $505 million. Later, in 2012, project design documents submitted to the United National Framework Convention on Climate Change’s Clean Development Mechanism (CDM) listed the budget as $482 million.

Interestingly, some studies contain an even bigger budgetary gap. A 2008 report by International Rivers and the Rivers Coalition of Cambodia, a 2009 JICA report, and a 2013 Royal University of Phnom Penh study put the estimated cost at just $215 million. However, the final budget reported by many news agencies, particularly after the project’s completion, was $540 million. This unofficial inaccurate information naturally prompts questions as to what the real number is and why so many different figures have been made public.

Equally important, public access to the project’s Environment Impact Assessment (EIA) reports remains highly limited. The Ministry of Environment (MoE)’s website does not publish these documents, so the Future Forum study team visited MoE’s library in June 2021 to seek them out. But the EIA for the Tatay project was not found among the available EIA reports. Previously, the Ministry has shared some draft EIA reports with NGO Forum, an umbrella organization for Cambodian civil society, for comments and consultation.

But in 2020, NGO Forum complained to the MoE after the ministry stopped sharing new development projects’ EIA reports. This has raised even more doubts about this particular project and general concerns about the absence of EIA report transparency. While this is not a legal matter – Sub-degree No. 72 on the “Environmental Impact Assessment Process” does not oblige the government and contractors to publicly disclose EIA reports – it nevertheless does demonstrate a significant shortfall in governance transparency.

There is also reason to believe that other regulations around environmental impact assessment reports have not been followed. The Southeast Asia program director of International Rivers sent a letter to the CDM executive board review, arguing that the Tatay hydropower plant project violated Article 6 of Cambodia’s Law on Environmental Protection and Natural Resource Management (1996).

That provision of the law states that “An environmental impact assessment shall be done on every project and activity, private or public, and shall be reviewed and evaluated by the Ministry of Environment before being submitted to the Royal Government for decision.” According to this letter, the Cambodian government approved the Tatay project (in 2009) before the Final EIA’s approval took place in early 2011. No response from the CDM has been found. As a result, doubts persist.

Furthermore, lack of access to the Tatay hydro dam procurement documents raises doubts as to the fairness and openness of the tender process. Legally – on paper at least – the procurement process occurs in order to ensure the project is transparent, accountable, and  implemented effectively. But since the project took place before the Law on Public Procurement was adopted, Tatay was not required to abide by this legislation. One issue that law would have flagged related to the Tatay project has to do with conflicts of interest.

Future Forum’s Tatay hydro dam report on BRI Monitor found that the project owner of Tatay hydro dam contracted two Chinese companies to conduct the feasibility study. These two companies shared significant business interests with that project owner.

According to the report, Cambodia Tatay Hydropower Ltd (CTHL), the project’s owner, was established as the sole investment of Beijing Sanlian International Investment Co. Ltd, a joint venture between China National Heavy Machinery Corporation, owned by the Chinese state-owned company SINOMAC, and two other Chinese companies. Before starting construction, CTHL signed two Chinese contractors for organizing the feasibility study report. China Jikan Research Institute of Engineering Investigations and Design Co., Ltd., shares the same parent company (SINOMAC) as CTHL. And Powerchina Northwest Engineering Corporation Ltd. was a minority shareholder of CTHL (but was later no longer listed as a shareholder). Thus, these two contractors maintained preexisting links to the project owner of the Tatay hydro dam.

It’s important to note that if the procurement practices of the project had been governed by the  government’s 2019 Standard Operation Procedures on Procurement for All Externally Financed Projects/Programs, these contractors would have been disqualified. This SOP considers that potential conflicts of interest in the bidding process could threaten the effectiveness and efficiency of Cambodia’s portfolio of externally assisted projects and affect the nation’s ability to achieve sustainable development.

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To resolve these issues with this sector, the responsible ministries or other government entities need to be proactive in providing information on all projects by publishing information, including an official allocated budget, procurement documents, and a final EIA report on either designated websites or in open-access libraries. This will increase community engagement to sustain the effectiveness of these projects. Moreover, this study suggests that a centralized source of information and database on investment projects would be useful, both to future researchers and to the general public. On the other hand, the Kingdom also needs to have a legal instrument to apply fairly to all investors and donors to release environmental impact assessments for infrastructure projects publicly.

As electricity demand continues to increase across the kingdom, Cambodia must take this chance to pursue more transparent development initiatives, which guarantee long-term benefits for the country and its people.

This article is based upon Future Forum’s Tatay River Hydropower Dam Case study report on BRI Monitor.