DAMNING THE MEKONG: PROJECT FINANCE'S INABILITY TO CURE THE STEEP COSTS OF HYDROPOWER DEVELOPMENT IN THE MEKONG RIVER BASIN

Project finance is a system of financing employed to fund large infrastructure facilities, and it has been a driving force of investment in undeveloped countries. While project finance's capacity to facilitate high levels of investment is facially appealing, its implementation and management illustrate an alarming accountability problem. Project finance's dispersal of risk has created a glaring accountability gap that allows project participants to systematically thrust environmental and social harms upon local communities. Moreover, because infrastructure development often occurs in undeveloped countries, host governments and third parties are often disinterested or incapable of stepping in to mitigate those harms. Nowhere are these flaws more plainly illustrated than in the Mekong River Basin, where hydropower development has sharply risen since the 1990s. This rapid and widely criticized development has caused both acute and cumulative harms throughout the Basin. Nearly one hundred dams are causing irreversible damage to the Basin's ecosystems, and the region's 60 million inhabitants are bearing the brunt of that harm through flooding, destruction of farms and fisheries, and forced resettlement. Although some of project finance's principal actors have taken steps to mitigate these harms, their efforts have largely fallen short. There is thus a critical need for a new mechanism that addresses project finance's accountability gap and holds project participants accountable for the harms inflicted upon project-affected communities.