The November edition of Ethical Investor featured a substantial profile of the Sepon Gold & Copper Mine in eastern Savannakhet, and its parent company, the Australian Oxiana Limited (Ethical Investor, Nov 2006, Issue 61, pp.14-16). This is the most recent in a long line of publicity that has established Oxiana as the pin-up mid-sized company of the Australian mining sector, with a rocketing share price and plaudits for its social and environmental conduct in Laos.
There is no doubt that the Sepon Mine has been a highly significant project for Laos. It was the first major mining project to move into production phase in the country, and since then has contributed a significant portion of the government’s revenue stream. Perhaps most importantly, the Sepon Mine, closely followed by the Australian-owned Phu Bia mine in Xaisomboun (parent company Pan Australia Resources), was a trailblazer for a sector that many international investors considered too risky to support in Laos. Now mining is the flavour of the day, and along with hydro development, is considered essential for Laos’ prospects of emerging from LDC status.
The development of the resource economy – particularly hydropower and minerals – has long been claimed as the only solution to Laos’ chronic revenue gap. Interestingly, the Australian private sector has played a critical role in both these sectors. In the early 1990s it was the Snowy Mountains Engineering Corporation (SMEC), and then Transfield, that pioneered the Nam Theun II hydroproject as the first Independent Power Producer (IPP) project with a still economically conservative Lao regime, and established it as the nation’s flagship project. If we are to believe the public communication around this project, it is central to all the nation’s aspirations for poverty alleviation and environmental conservation. Transfield virtually wrote Laos’ first National Resettlement Policy.
SMEC and Transfield were closely followed by the Tasmanian Hydro Electric Commission with its high profile signing of the Xe Kaman 1 project in 1994, involving both the Australian and Lao Prime Ministers. Together these projects went a long way to establishing the privatised Build-Own-Operate-Transfer model as a viable path for hydro development in Laos. Now Lao hydro planning – with over 60 potential projects – is entirely structured around this model. Australian consultancy companies also played a significant role in the hydro industry circuit throughout the nineties, acting for investors, donors (such as the World Bank and AusAID) and for the GOL.
The significant role of Australian companies – often with high levels of support from the Australian Government – in the development of the Lao resource economy is a subject worthy of further attention, especially as there is still an open question as to whether there is a resource curse (a la African oil and gas projects) associated with it. Australian developers have often promoted themselves as technically superior and environmentally responsible, in industries full of corporate cowboys. But is there any evidence to back this up?
One major concern is the closeness of the relationship between developers of projects worth hundreds of millions of dollars, and a government that keeps a tight reign on any voices of dissent. This has been a major underlying controversy behind Nam Theun II’s so-called public participation process. The Tasmanian developers of Xe Kaman 1 also became very closely mixed up in a complex contestation of power between the province, military and central government. The Australian General Manager of that project was temporarily jailed in Laos in 2001.
It is clear that Oxiana also has a very close and solid relationship with the GOL. What’s the worry though? The recent article in Ethical Investor, following a multitude of others (including one by Laos guru Martin Stuart-Fox) established Oxiana as a world’s best practice miner. The problem is, as far as I am aware there has only been one source of information about the Sepon Mine’s amazing social and environmental credentials – Oxiana. Of course, that by no means suggests that it is not true – I hope that it is. But who’s to know?