Lao PDR: Government partners with the mining sector to support local communities

September 19, 2011

Conference on Mining and Community Development in Lao PDR takes place in Vientiane

Vientiane, September 19, 2011 – The Ministry of Energy and Mines of Lao PDR – in collaboration with Phu Bia Mining Ltd, MMG LXML Sepon, and the World Bank – organized the Conference on Mining and Community Development in Lao PDR: Community Development Funds. During the conference, participants from government, private sector, civil society and international agencies studied international and local experiences with community development funds related to the mining industry and discussed how the legal and regulatory requirements for community development funds could help ensure effective benefit sharing mechanisms.

In recent years, the prices of many minerals have reached unprecedented levels allowing solid profits to investors and important revenue to government.  Mining projects all over the world are increasingly expected to deliver sustainable benefits to local, regional, and national stakeholders. In response to this, many governments and companies are  considering the use of funds or trusts to share the profits and benefits of mining or oil and gas operations with the impacted communities.

In Lao PDR, the Minerals Law of 2008 makes it a requirement to investors that they contribute to Community Development Funds. To achieve such benefits, however, these community funds need to be integrated into the local development context and executed in consultation with the communities. Community Development Funds channeling revenues generated by mining operations back into communities can be the answer – especially in rural areas where public services may be weak and where connections to central or even local authorities may be limited. But such funds need to be designed and administered in close collaboration between companies, communities and government.  Examples from Peru, Australia, Lao PDR and other countries show that funds can be used to deliver community investment programs or even transfer mining profits directly back to local inhabitants. Funds have also been used to manage compensation funds and to continue local community support even after the mine has been closed. “We are happy that the World Bank has this opportunity to share some recent studies of what has worked in other countries with large mineral resources. But these examples naturally have to be tailored to what is needed in the individual projects in Lao PDR since every mining project has its unique characteristics and needs,” says Ms. Genevieve Boyreau, Senior Country Economist.

Mining projects have the potential of contributing positively to development through a number of channels, ranging from employment and tax payments, to local procurement and investment in areas such as infrastructure, training and education.  Mining companies can also help build the capacity of local authorities in order to help them achieve their community development objectives.  Community development funds can also help with sharing of benefits and compensating any community members who have been negatively affected by mining operations.

“When people see that benefits are shared fairly and promptly, it also helps strengthen local stability and it could be a strong instrument to align Lao PDR’s national development strategy with local needs,” says H.E. Mr. Somboune Rasasombath, Vice-Minister of Energy and Mines. Lao PDR already has had some notable successes in implementing benefit sharing mechanisms. Both Phu Bia Gold and Copper Mine and MMG LXML Sepon support effective programs which allow villagers and local authorities to identify projects and investments that are then financed from their respective community development funds. In addition to that, they also both have preferential procurement from the local communities and offer preferential employment to residents of villages near the project site.

These innovative funding and compensation schemes are helping to ensure the benefits from mining projects go beyond mere compensation for affected populations and expand to making important contributions to the positive development of communities affected by mining operations.

Media Contacts
In Vientiane
Meriem Gray
In Washington, DC
Mauricio Rios
Tel : (202) 4582458