Integrated development and poverty alleviation in Lao PDR mining region

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Poverty means lacking the income and resources for a sustainable livelihood. It causes malnutrition, limited access to education and other basic services and exclusion. In the past 25 years, the number of people in extreme poverty has more than halved to 836 million in 2015. While a remarkable achievement, one in ten people in developing regions still live on less than $1.25 a day.  All ICMM members implement the 10 principles that underpin our Sustainable Development Framework.  Principle 9 requires companies to continually improve their social performance, and contribute to the social, economic and institutional development of host countries and communities.

When the UN’s Sustainable Development Goals (SDGs) officially came into force in January 2016, the nations of the world committed to mobilise efforts to end poverty, fight inequalities and tackle climate change. Business has a significant part to play, alongside governments and civil society, in creating pathways for a greener, safer and sustainable future for us all. Metals and minerals are essential to almost all aspects of everyday life; they enable farming, healthcare, communications, construction, transport and energy and water supply. And they will arguably become more important as they help to deliver the infrastructure required for a low-carbon future. This is one of a series of case studies gathered from our members to highlight how companies are working to enhance their contribution to society and help industry to manage potential adverse impacts their activities may have on the realisation of some of the SDGs.

For many years prior to mining commencing the mountainous Vilabouly district in southern Lao PDR was ranked among the poorest areas of Lao PDR. MMG’s Sepon mine is an open-pit copper operation located in Vilabouly district, which has been operating since 2002.

The Sepon mine is 90 percent owned by MMG with 10 percent of equity held by the government of Lao PDR. MMG has developed a multi-faceted local programme, which includes local business development; infrastructure development; local procurement; a community trust fund; maternal and child health support; water and sanitation investment; and access to microfinance and banking services.

Methodology

Given the range of developmental challenges within MMG’s area of operation, an integrated approach was adopted to community development. This had several facets:

Maternal and child health support: Lao PDR is challenged by malnutrition, particularly for children under five in remote areas. Sepon has therefore sponsored a US$1.5 million 1000 Day Project in partnership with the Lao Ministry of Health and UNICEF to address child malnutrition in four southern provinces. The project is supporting 180,000 children under five, and 67,000 children under two. MMG and UNICEF are jointly fighting malnutrition by scaling up interventions, especially in health, water, sanitation and education.

Water and sanitation investment: In 2016, in partnership with the Lao Government and UNHABITAT, Sepon opened a clean water supply system in Vilabouly District. This US$1.5 million community project reinforces the company’s commitment to progress by supporting the Lao Government’s rural development objectives.

Most households in Vilabouly rely on wells or access to rivers and streams. Family members walk with containers to collect water for household use and sanitation facilities are limited. The new facility includes a treatment plant processing 1,000m3 of clean water per day and 15 km of pipe networks. The project will directly benefit 7,000 people in four villages close to Sepon mine.

Local business development: The mine supports 26 local businesses in Vilabouly, which have collectively earned US$3 million in 2014, (US$17 million since 2002). Indirect benefits through employment, training, business development, and Lao contract partners, have also contributed hundreds of millions of dollars to the Lao economy.

Infrastructure development: Expanding road networks and electrification are enhancing access to markets and enabling new economic activity. In the past, it took days to reach Vilabouly by road or river; now it takes only a few hours from Savannakhet.

Local procurement: Sepon purchases US$3 million dollars of local produce through 26 local businesses, delivering a combined income of around US$18 million dollars since the mine started. In cooperation with SNV (Netherlands Development Agency), Sepon has increased rice yields for 1,300 farmers through improved farming methods and new varieties. Sepon sources all its rice and most other agricultural produce sustainably through local sources.

Community trust fund: In close consultation with community leaders in 42 villages, benefitting more than 14,000 people, Sepon has invested millions of dollars to build schools, roads, latrines, fish ponds, and provide access to potable water. In addition, Sepon invests almost $1 million every year in a community development trust fund in cooperation with the Poverty Reduction Fund and Vilabouly District’s socio-economic development plan.

Access to microfinance and banking services: Microfinance facilities established by Sepon in partnership with GIZ (Germany’s Development Agency) and AusAID (Australia’s Agency for International Development) support 47 villages with 3,200 participating members and US$575,000 in capital. This program empowers villagers by providing access to savings and low interest loans.

Three years ago there were no banking services in Vilabouly. The Sepon mine encouraged several banks to establish branches, and there are now five branches in Vilabouly. People were initially hesitant and withdrew funds immediately. After a while, however, families started saving and taking control of household finances, changing the local economy.

Outcomes

MMG’s Sepon mine is working in close partnership with the Lao PDR government to support its objective of graduating from least developed country (LDC) status by 2020. The explicit alignment of mining efforts with regional and national development appears to be bringing multiple benefits.

The mine has monitored the impacts of its community development interventions through biennial household surveys. By February 2015, using data from the surveys, the company was able to demonstrate that household incomes had increased by a factor of ten since mining began. This led the Lao Government to announce that Vilabouly District, where the Sepon mine is located, had graduated from the 46 poorest districts in the Lao PDR. 

ICMM members supporting the SDGs