Basic Information

Chinese Name: 桑河二级水电站
Location: Sesan District, Stung Treng Province, Cambodia
Type of Project: Energy
Project Developers: Hydro Power Lower Sesan 2 Company Limited, a joint venture of Hydro Lancang International Energy (subsidiary of China Huaneng Group), 51%; Royal Group of Cambodia, 39%; and Electricity Vietnam International, 10%.
Main Contractor(s): Sinohydro Engineering Bureau 8 Company Limited (a subsidiary of Power Construction Corporation of China); Gezhouba Group No.1 Engineering Company Limited (a subsidiary of China Energy Engineering Corporation).
Known Financiers: Equity investment from the developers and financing from Chinese banks including the Industrial and Commercial Bank of China, Bank of China, China Development Bank, and Export–Import Bank of China.
Cost: 781 million USD
Project Status: Operational

Project Outline

Lower Sesan 2 is a 400-megawatt hydropower dam in northeastern Cambodia, operated by Hydro Power Lower Sesan 2 Company Limited. When full, the reservoir created by the 75-metre-high, 6.5-kilometre-long dam has a capacity of 2.72 billion cubic metres. The reservoir inundated an area of more than 34,000 hectares, which encompasses the customary lands of several indigenous and ethnic minority communities, as well as almost 10,000 hectares of land leased to companies for long-term agricultural development under economic land concessions. The project cost an estimated 781 million USD and is operated under a 45-year build–operate–transfer agreement. This includes a five-year construction period; ownership will be transferred to the Cambodian Government after 40 years of commercial operation.

 The dam is in Sesan District, Stung Treng Province. According to commune and district population records, the most directly impacted communes—Srae Kor, Kbal Romeas, Talat, and Pluk—have a combined population of more than 12,000 people. Three of these communes are directly impacted by the reservoir (Srae Kor, Kbal Romeas, and Talat) and the fourth (Pluk) is immediately downstream. The following table shows the population and ethnicity of the impacted villages and communes, and the map shows key settlements. The impacted communities have traditionally depended on rice cultivation, forest products, and fisheries.

The project was first investigated as far back as the 1990s, when the Asian Development Bank (ADB) commissioned a consultancy firm to look at the possibility of constructing two dams on the Sesan and Srepok rivers. A decade later, the Vietnamese state energy utility Electricity Vietnam (EVN) began to study the project and combined the two dams into one single dam downstream of the confluence of the Sesan and Srepok. The company planned to develop the project to provide low-cost, domestically produced energy for Cambodia, especially to serve industry, and to provide energy exports to Vietnam. During 2011–12, with EVN International facing financial challenges, the project was taken over by Chinese and Cambodian companies, with China’s Hydro Lancang International Energy taking a 51% stake, Cambodian tycoon-owned conglomerate Royal Group with 39%, and EVN retaining a 10% stake. Hydro Power Lower Sesan 2 Company Limited was established to implement the project.

Timeline of Project Implementation and Related Developments

The controlling shareholder, Hydro Lancang International Energy, is a subsidiary of the Chinese state-owned enterprise China Huaneng, which is one of China’s top-five power-generation companies. Although the project had been under study since the 1990s and was initiated by a Vietnamese company, after a Chinese firm took a controlling stake, Chinese state media increased its coverage of the project and, along with the project developer, frequently referred to the project as being part of the Belt and Road Initiative (BRI).

The developer recruited various contractors to lead specific parts of the project, including several major Chinese state-owned enterprises. For example, two subsidiaries of Power Construction Corporation of China—Huadong Engineering Corporation Limited and Sinohydro Engineering Bureau 8 Company Limited—were contracted for the design and construction of the power plant, while Gezhouba Group No.1 Engineering Company Limited, a subsidiary of China Energy Engineering Corporation, was contracted to dig the open channel for the dam.

Details of the exact financing arrangements for the project are challenging to confirm. However, it appears that the project consortium financed 30% while the remaining finance came from bank loans. This includes financing from two of China’s ‘big four’ state-owned commercial banks, the Industrial and Commercial Bank of China in the form of financial leasing and the Bank of China. The policy banks China Development Bank and Export–Import Bank of China also provided some form of financing, and the project was underwritten by China Export and Credit Insurance Corporation (Sinosure).

Chinese companies and banks play a crucial role in the development of Cambodia’s energy sector, and all of Cambodia’s large hydropower projects are built and financed by Chinese actors (for a more detailed discussion of China’s role in Cambodia’s energy sector, see this essay on the Global China Pulse blog).

Project Impacts

• Employment: The company reported employing more than 2,000 local people during construction. In September 2021, the company told local media that around 110 Chinese and 100 Cambodians were employed in operations.
• Fisheries: The dam has dramatically altered water and fish circulation in the Srepok and Sesan rivers, with implications for the Mekong Basin more broadly.
• Deforestation: Forests have been logged in areas flooded by the dam reservoir and beyond.
• Land and fisheries conflict: Conflicts over land and fisheries between local communities have escalated since the project due to a major influx of migrants during and after dam construction.
• Indigenous peoples: Frictions exist between the Bunong parties in an indigenous communal land title claim area and the Stung Treng Provincial Government.
• Displacement and threats: Involuntary resettlement has dramatically disrupted community livelihoods, cultural ties to customary lands, and intracommunity relationships. Villagers reported intimidation by the military and police during episodes of active resistance to the dam.
• Transparency: Villagers identified poor transparency on the part of government and the company during resettlement negotiations, which fell short of international safeguards, including those that protect the rights of indigenous communities.

The project has been the focus of sometimes fierce criticism, most recently in a report from Human Rights Watch, which received extensive local, regional, and international media coverage. The report called out failures in planning and implementation relating to consultation and impact mitigation, which led to economic, social, and cultural rights violations, including the displacement of nearly 5,000 people to poor-quality resettlement sites and payment of inadequate compensation, as well as impacts on the livelihoods of tens of thousands of others upstream and downstream.

This report elicited a strong reaction from the Cambodian Government. National Assembly member and Cambodian People’s Party spokesman Sous Yara published op-eds in a number of local outlets and China’s nationalist tabloid Global Times accusing Human Rights Watch of having a political agenda. Other government officials pointed to the need to balance negative impacts with larger development objectives, and claimed that resettlement conditions were in fact an improvement and environmental impacts had been studied and were under control. The company did not directly respond, but the local Khmer Times newspaper ran pro-company articles and Chinese state media published positive reviews of the project.

Despite the positive narratives of the government and developer, the project has had significant impacts. As Cambodia’s largest dam, Lower Sesan 2’s impacts are felt upstream and downstream of the dam site, and ripple throughout the Mekong Basin. The initial environmental impact statement and related studies anticipated significant disruptions to fish migrations and aquatic species at the dam site and beyond. The developers constructed a fish ladder to address this, which is considered ineffective relative to the size and impacts of the dam. This is consistent with local accounts gathered by the author during fieldwork. These accounts indicated that fish numbers boomed in the first two years of the reservoir’s flooding, attracting fishers from further downstream, but the species composition then started to change, and fish and shellfish populations started declining, in part due to fishing pressures. Fisheries-related conflicts have emerged between newly established communities and new settlers.

Although a significant part of the area covered by the reservoir was already allocated to land and forest concessions, the project escalated forest loss. Villagers’ accounts show the reservoir area was extensively logged prior to its flooding, which is a normal part of dam development in Cambodia and elsewhere. Any remaining non-valuable forests were then flooded by the reservoir. According to the author’s field interviews, these changes have reduced villagers’ access to critical forest-based livelihood resources.

In 2013, Royal Group–owned Ang & Associates Lawyer Company Limited reportedly signed an agreement with Sok Vanna, the brother of Sokimex founder and tycoon Sok Kong, to log the reservoir area. Soon after, reports emerged that the company was logging beyond the reservoir area and laundering timber through the dam zone. This led to a temporary suspension of logging in the area until full demarcation was conducted. Such accusations continued to plague the project and another ban was implemented in 2018, with a government spokesman saying the logging was ‘out of control’. The non-profit Environmental Investigation Agency documented evidence of continued illegal logging despite the bans, with felled timber transported in trucks across informal border crossings into Vietnam.

Communities and households that accepted resettlement packages face several ongoing challenges. While company accounts of resettlement are generally positive, many villagers cite difficulties in re-establishing their livelihoods with the designated compensation—that is, 5 hectares of farmland, a house plot with either a standing house or a cash payment of 6,000 USD for house construction, and variable compensation payments depending on household assets before resettlement. The author’s field research revealed that a key constraint is lower land fertility and agricultural productivity in their new location. As the resettlement villages are some kilometres from the reservoir (2 kilometres in the case of New Kbal Romeas), access to a reliable water supply is a crucial issue as they previously accessed water from the river. In at least one settlement, however, the water sourced from wells with pumps supplied by the developer has high levels of biological contamination. Villagers there must pay for water deliveries, which is a major monthly cost. Taken together with the loss of other aquatic and forest products, the livelihood pressures on resettled communities are significant. In early 2020, some families reported they had sold part of or all their allocated 5 hectares of land to get by. Villagers also regretted the tensions that developed between households that resettled and family members who stayed behind, closer to their flooded village.

The 52 households from Old Kbal Romeas who chose to remain on customary lands near their flooded villages encountered different issues. Initially, these communities faced heavy surveillance and pressure from the police, military, and government to move to the official resettlement villages. The author’s field research in 2019–20 found these people stayed on in these informal settlements and gradually worked to gain official recognition as a village to receive services such as health care and schools. Land security was an ongoing concern for these groups, prompting the Bunong community of Old Kbal Romeas to apply for Indigenous Communal Title under Cambodia’s Land Law. The application was prepared with civil society help. However, their initial claim of around 7,000 hectares was whittled back to 400 hectares by the provincial government. For minority groups such as the Lao, land security remains elusive as they are not recognised as an indigenous group eligible for Indigenous Communal Title.

As noted above, dam construction and the flooding of the reservoir brought a major influx of migrants that is contributing to land and resource conflicts. For example, Bunong villagers in the resettlement village of New Kbal Romeas who wanted fishing access to the reservoir had to pass through one of two new settlements of migrant fishers. These new settlers had moved to the area soon after the Bunong families were resettled, coming with boats and heavy-duty fishing equipment that enabled them to harvest fish and shellfish at a commercial scale. According to the author’s field research in 2019–20, land purchases by these new settlers were also reported, and there were regular conflicts with Bunong community members.

The nongovernmental organisation International Rivers conducted assessments of the Lower Sesan 2 project in 2015 and 2019, looking at the policies of China Huaneng and the practical implementation of the project. Among the critiques of the project was a lack of information disclosure, including crucial documents such as the final environmental assessment report, plans for the fish passage design, livelihood support programs, water-quality monitoring reports, and information regarding the implementation of resettlement. The organisation met with China Huaneng several times and requested these documents, but none was forthcoming.

In 2018, communities in several villages filed a complaint to the private-sector arm of the World Bank, the International Finance Corporation (IFC), seeking an independent mediation process to address their concerns through its Compliance Advisor Ombudsman (CAO). The IFC was exposed to the project indirectly due to its equity investment in the Vietnamese ABBank, which has a financial relationship with minority project partner Electricity Vietnam. The Cambodian Government declined to participate in a dispute-resolution process proposed by the CAO, and the complaint remains at the assessment phase.

In-Depth Sources

Amarthalingam, Sangeetha and Say Tola. 2021. ‘Cambodians Displaced by Dam Struggle to Retain their Identity.’ China Dialogue, 27 May. Link.

Asian Vision Institute. 2020. CSR Report (China Huaneng). Phnom Penh: Asian Vision Institute. Link.

Baird, Ian G. 2016. ‘Non-Government Organizations, Villagers, Political Culture and the Lower Sesan 2 Dam in Northeastern Cambodia.’ Critical Asian Studies 48(2): 257–77. Link.

Grimsditch, Mark. 2012. 3S Rivers Under Threat. April. Ratanakiri, Cambodia, & Berkeley, CA: 3S River Protection Network & International Rivers. Link.

Human Rights Watch. 2021. Underwater: Human Rights Impact of a China Belt and Road Project in Cambodia. 10 August. New York: Human Rights Watch. Link.

International Rivers. 2015. Benchmarking the Policies and Practices of International Hydropower Companies. Berkeley, CA: International Rivers. Link.

International Rivers. 2019. Watered Down: How Do Big Hydropower Companies Adhere to Social and Environmental Policies and Best Practices? Berkeley, CA: International Rivers. Link.

Key Consultants Cambodia. 2008. Environmental Impact Assessment for Feasibility Study of Lower Sesan 2 Hydropower Project, Stung Treng Province, Cambodia. October 2008. Phnom Penh: Royal Government of Cambodia. [Source unavailable online]

Piman, Thanapon, Tom A. Cochrane, Mauricio E. Arias, Anthony Green, and Nguyen Dinh Dat. 2013. ‘Assessment of Flow Changes from Hydropower Development and Operations in Sekong, Sesan, and Srepok Rivers of the Mekong Basin.’ Journal of Water Resources Planning and Management 139(6). Link.

Weatherby, Courtney, Allison Carr, and Regan Kwan. 2021. Energy Development in the 3S Basin. Washington, DC: The Henry L. Stimson Center. Link.

Acknowledgments

The author wishes to acknowledge the contribution of other Cambodia-based researchers who do not wish to be named for security reasons.