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Cablegate: Vietnam Prepares to Build First Mdb-Financed Dam

VZCZCXRO7131
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHHI #0359/01 0880939
ZNR UUUUU ZZH
R 280939Z MAR 08
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC 7493
INFO RUEHHM/AMCONSUL HO CHI MINH 4506
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHC/DEPT OF INTERIOR WASHINGTON DC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 02 HANOI 000359

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EAID ECON SENV ENRG TRGY SOCI IBRD AID VM
SUBJECT: VIETNAM PREPARES TO BUILD FIRST MDB-FINANCED DAM


HANOI 00000359 001.2 OF 002


1. (SBU) Summary: The Government of Vietnam (GVN) is set to begin
construction in 2009 on the Song Bung IV hydroelectric dam,
Vietnam's first multilateral development bank-financed hydropower
project. USAID Senior Environmental Policy Advisor Leslie Johnston
recently traveled to Vietnam to conduct due diligence on the dam and
coordinate USG review of the environmental impact assessment (EIA).
Over several days of meetings, GVN officials identified the Ministry
of Natural Resources and the Environment (MONRE) as the agency that
leads EIA reviews. Although officials emphasized generally their
commitment to mitigate the negative impacts of hydropower
development, they often demonstrated a lack of awareness of the
potential implications, particularly the impact to fisheries.
Johnston ultimately said she was undecided whether to recommend
support to USAID for Song Bung IV, calling the EIA "weak on baseline
data," including the analyses and mitigation measures. End
Summary.

2. (SBU) USAID Senior Environmental Policy Advisor Leslie Johnston
conducts due diligence on multilateral development bank (MDB)
projects, including coordinating USG review for environmental and
socioeconomic assessments related to the development of hydropower
projects. Johnston, who is currently assessing the impacts of
hydropower development in the Mekong Basin, visited Vietnam from
February 25-March 7 to conduct due diligence on the 180-megawatt
Song Bung IV hydroelectric dam, Vietnam's first MDB-financed
hydropower project, financed partly by the Asian Development Bank
(ADB). Before arriving in Vietnam, Johnston toured the site of
another MDB-financed hydropower project, the controversial (and much
larger) 1070-megawatt Nam Theun II dam in Laos. (Note: After a
moratorium on the financing of large dam projects during the 1990s,
the World Bank/IFC and the Asian Development Bank (ADB) are again
lending their support to hydropower development while attempting to
demonstrate to critics that they can mitigate the negative impacts
that invariably accompany such projects.)

DECIPHERING THE GVN BUREAUCRACY
-------------------------------

3. (SBU) Over several days of meetings in Hanoi, ministry officials
described to Johnston and Econoff the baffling process by which the
GVN vets EIAs for infrastructure development projects. Officials
ultimately identified MONRE as the agency that leads the review of
EIAs for projects of "national significance" - that is, those
projects approved by the National Assembly and the Prime Minister.
The giant 2,400-megawatt Son La hydropower station currently under
construction 320 kilometers northwest of Hanoi is one such
endeavor.

4. (SBU) For smaller scale projects, the responsibility falls to the
provincial-level Department of Natural Resources and the Environment
(DONRE). If, however, the project spans two or more provinces, the
central ministerial project sponsor - typically the Ministry of
Industry and Trade (MOIT) - evaluates the EIA. The Prime Minister
has the authority to exempt certain projects from an assessment.
MDB-financed projects require two assessments - one using the bank's
regulations and a parallel EIA according to GVN requirements. MOIT
officials pointed out, however, that the "Hanoi Declaration," signed
by APEC leaders in 2006, established a goal to harmonize parallel
assessments wherever possible.

5. (SBU) Although GVN officials emphasized generally their
commitment to mitigate the negative impacts of hydropower
development, they often demonstrated a lack of awareness of the
potential implications, particularly the impact to fisheries.
Moreover, they often seemed reluctant to accept direct
responsibility to ensure that developers executed all of the
mitigation measures listed in the impact assessment. Officials at
both MOIT and MONRE admitted that they do not possess sufficient
capacity to ensure that developers implement every safeguard for
each infrastructure project. Electricity of Vietnam (EVN) Vice
President Dinh Quang Tri said EVN typically hires one of its own
subsidiaries, a quasi-private consulting firm, to draft
environmental assessments and supervise the state-run electricity
monopoly's development work. Tri took pains to minimize any
appearance of a conflict of interest by adding that EVN does not
meddle in its consultant's work. He acknowledged, however, that EVN
still owns a controlling share in the firm.

SONG BUNG IV
------------

6. (SBU) On February 29, Johnston and Econoff met with local EVN
officials in the central port city of Da Nang to discuss the
forthcoming construction of Song Bung IV, scheduled to start in
2009. The dam, 120 meters high, 360 meters long and 340 meters
wide, will create a reservoir with a storage capacity of 621 million
cubic meters and a surface area of 18.4 square kilometers. Located
on the Song Bung River in Vietnam's central highlands, the area is

HANOI 00000359 002.2 OF 002


one of Vietnam's poorest and most isolated regions, inhabited
chiefly by Ca Tu ethnic minorities. Song Bung IV Project Manager
Truong Thiet Hung said the GVN has allocated 500 billion VND ($31
million) to relocate four Ca Tu villages comprising 209 households
(1,178 people), and would provide monetary support for the purchase
of rice for one year and other foodstuffs for six months.

7. (SBU) ADB safeguard policies mandate the implementation of a
livelihood restoration program for those impacted by a project.
Hung claimed Song Bung IV would have a nominal effect on the
livelihood of villagers, chiefly riparian fisherman and subsistence
farmers, because they would have access to new land and could fish
in the dam's reservoir. Johnston asked Hung if EVN had conducted
any preliminary studies to assess the potential adverse effects on
fisheries production and other aquatic life. Chuckling, Hung
replied, "not yet, but historic practice shows that fishing is
easier in a reservoir." He also seemed amused by Johnston's
suggestion that EVN conduct a study to ascertain where fish might
congregate in the reservoir. "We don't think that will be
necessary," he replied.

8. (SBU) After the meeting, Johnston, Econoff, ESTH Assistant and a
guide from EVN traveled to western Quang Nam Province to visit the
project site. EVN has yet to build access roads and the group set
out on foot to reach the remote site. After walking for about one
kilometer, however, a destroyed river crossing halted further
progress. As such, we were unable to visit the site, speak with
locals who would be affected by the dam's development, or glimpse
any of the 140-hectare Song Thanh Nature Reserve, half of which will
be inundated by the reservoir.

9. (SBU) Johnston ultimately said she was undecided whether to
recommend support for Song Bung IV to the USAID Board, calling the
EIA "very weak on baseline data," including analyses and mitigation
measures. On other projects, she said, "these deficiencies have
resulted in a technical recommendation to not support the project."
The USAID Board is not scheduled to meet to review the project until
August, so there is still time for the developers to submit
additional information, she added. Johnston said she would
circulate her own assessment for comments before the August meeting.
Although a decision by USAID to withhold support would not affect
the project financing, it would send a signal to the World Bank/IFC
and ADB that the USG expects these institutions to ensure that
developers write objective EIAs and execute all safeguard provisions
or risk losing the support of the American taxpayer.

10. (U) Song Bung IV and Son La, with a combined capacity of
2,580-megawatts, are just two of the planned hydro projects in
Vietnam's ambitious bid to add 50,000 megawatts of electricity,
including 14,050 megawatts of hydropower, to the national grid by
2015.

MICHALAK

1

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