Burma

World Bank Arm Defends Mandalay Cement Factory Project Amid Civil Society Opposition

By Seamus Martov 26 June 2017

Following an open letter sent to the World Bank’s President Jim Kim by a coalition of community-based organizations opposing a proposed plan to support the expansion of a cement plant in Mandalay Region and the coal mine that fuels it, the International Finance Corporation (IFC) maintains that the project is worthwhile.

The open letter was endorsed by 174 organizations, all but two of which are based in Myanmar. Sent earlier this month, it claimed that the IFC’s proposed financial backing of the expansion of the Shwe Taung Cement Factory and related coal mine contradicted a long list of World Bank and IFC guidelines and objectives.

“We emphasize the sheer irresponsibility of this investment and the multiple ways it undermines the IFC’s commitment to sustainable investment and ‘shared prosperity’ through private sector development,” it stated.

The proposed plan to expand the cement factory also includes enlarging operations at a coal mine operated by the firm in Sagaing Division that exclusively supplies the cement factory.  The IFC’s backing of the coal mine expansion and the project’s use of coal is one of the major points of contention among civil society groups.

The letter from the coalition also pointed out that Shwe Taung Group chairman Aik Htun co-founded and ran a bank targeted by US authorities for being a “Financial Institution of Primary Money Laundering Concern.”  The Asia Wealth Bank collapsed in 2003 amid a massive crisis in Burma’s banking industry.

The letter also noted that Aik Htun was described by US authorities as someone with “connections with the narcotics trade.”  The Sino-Burmese tycoon whose business interests stretch from construction to real estate has denied these allegations, characterizing them as the result of petty jealousy spread during a period when the country was closed off.

The explanation does not appear to hold water with civil society groups that warned in the letter that “financing this project would send the message that the IFC disregards the reputational risks associated with the borrower, and is more interested in lining its pockets and that of Myanmar’s crony elite than promoting sustainable development in accordance with its mandate.”

The IFC’s country chief in Myanmar, Vikram Kumar, explained in an email response to The Irrawaddy the merits of the IFC’s proposal to invest US$15 million and provide a loan of US$20 million in the project that is expected to cost a total of US$110 million.

“We believe the cement sector to be critical for Myanmar in the next few years. IFC’s financing for Shwe Taung Cement Company (STC) will help triple its productivity, and meet growing demand for raw material for key sectors like infrastructure, housing and ultimately manufacturing,” wrote Kumar.

The IFC predicts that the project if it moves forward would generate 200 direct jobs and potentially as many as 4,000 “indirect jobs,” a figure that was obtained using case studies on the cement industry from other developing countries.

Kumar and his colleagues also disagree with a number of claims made in the letter concerning the project’s compliance with IFC and World Bank guidelines.  The civil society coalition claims the IFC’s proposed investment does not comply with World Bank coal-screening criteria.  The letter also claimed that the IFC involvement in the project contradicted a promise from the World Bank that it would avoid supporting coal projects in Myanmar.

“As the World Bank has pledged not to finance coal power plants in Myanmar due to their devastating environmental, health and climate impacts, it is not clear why the IFC is considering funding this project,” the letter stated.

Kumar counters that the World Bank screening policy on investing in coal-fired power only concerns power plants that contribute power to a national grid.

“The project is aligned with this policy in that coal mined by the company is not being used for power generation at the plant, but solely in the cement kiln, a widely used practice internationally,” explains Kumar.

Another concern flagged by the coalition opposing the IFC’s proposal is that the Environmental and Social Impact Assessment (ESIA) commissioned for the project “falls short in a number of areas, including failing to adequately assess existing pollution levels in project site areas.”

When asked about this claim, Kumar responded that the consultancy that carried out the ESIA, the UK-based Environmental Resource Management (ERM), is “an international and reputable consultancy which is aligned with the IFC’s Performance Standards.”

The work of ERM, which calls itself the “world’s largest pure play environmental and sustainability consultancy,” is described somewhat differently in the open letter, whose authors contend that the consultations with local villagers were “farcical” and were “undertaken in an attempt to comply with the IFC Performance Standards.”

“Some villagers reported a 5-minute question and answer session. This undercuts the Shwe Taung Group’s and the IFC’s social license to operate,” the open letter claimed.

While the open letter also claimed that farmers living near the cement plant had been subjected to “judicial harassment” for complaining about the impact of the cement plant – which began operating in 2010 – on their land and livelihood, Kumar paints a very different situation.

“Consultations by IFC and ERM with villages and communities in proximity to the cement plant and mine indicate support for the project and appreciation for community outreach activities by the company,” said Kumar.

Date of IFC Decision on Project Unclear

Although a summary of the project posted on the IFC website says the IFC’s board was tentatively scheduled to decide about the IFC’s involvement at a meeting in Washington on June 8 – one day after the letter was sent to World Bank chief Jim Kim – this did not happen. It remains unclear when the 25-member board that Kim chairs will decide on the project.

“This project hasn’t been submitted to the board and the exact board date is not confirmed yet,” said Kumar.

The long list of groups who signed the letter represent a wide swath of Myanmar civil society and include organizations based in every state and region of the country, a number of whom are internationally known including the Karen Environment and Social Action Network (KESAN) and the Kachin Development Networking Group (KDNG).  The latter organized a well-attended protest outside a high-end hotel in the Kachin State capital Myitkiyna last year, citing concerns that the IFC was failing to consult with communities that would be affected by the IFC’s water mangement plan.

Another group that signed the letter, Earth Rights International (ERI),  a legal-focused NGO that was co-founded by Karen activist Ka Hsaw Wa, is currently suing the IFC in US court on behalf of peasants in Honduras in a suit that alleges that the IFC’s backing of a controversial palm oil project on contested land has had lethal implications.

ERI’s legal team alleges that the IFC continued to support the Dinant Corporation’s plantation project despite there being widespread allegations that the firm “employed hitmen, military forces, and private security guards to intimidate and kill local farmers who claim Dinant’s owner stole their land decades prior.”

ERI gained widespread attention in international legal circles for suing a US oil giant on behalf of villagers from eastern Myanmar who alleged that they had been used as forced labor for a pipeline project.  The lengthy case was eventually settled out of court after the villagers achieved a series of precedent-setting legal victories.

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