Hydropower projects can tap into the Mekong River’s natural source of energy and contribute to economic growth and energy security in the region. Conversely, they can also affect the environment and residents of the river basin who may lose access to water and other related resources. To make up for the losses and spread the benefits expected from hydropower development, benefit sharing mechanisms (BSM) are an important element of these projects’ planning.
Although most hydropower project include some measures of compensation for the people resettled from the project sites, these constitute the bare minimum and are usually a one-off package covered under the costs of the project financed by the developer. In contrast, benefit sharing consists of a range of long-term mechanisms that governments apply based on an agreed regulatory framework.
For hydropower development, local benefit sharing should apply to communities living in the project impact zone, as identified in, for example, project environmental and social impact assessments. This would typically include individuals, households, entrepreneurs and local businesses based in the project area. The intention is to go beyond the resettlement community to recognize others in the reservoir area, upstream and downstream who may also be affected by the project.
Monetary and non-monetary benefit sharing mechanisms may span the economic life of hydropower projects, from planning to operations. Unlike compensation, which is usually covered under the projects’ costs, benefit sharing typically takes a small percentage from the revenues generated by the project.
Monetary benefit sharing may include revenue and equity sharing, taxes and royalties, and preferential electricity tariffs to local communities. These benefits are typically shared when the project starts generating revenue.
Non-monetary forms range from facilitating access to natural resources and project-related development opportunities for riverine communities, to providing electricity connection and reliable electricity supply to communities in the project areas. Additional indirect benefits include investments on public infrastructures, human capacities and jobs.