Are Thai Bankers’ and Hydro Projects Ready for the Equator Principles? An Interview with the Secretary-General of The Thai Bankers Association

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As a growing number of Thai banks finance ever more hydropower projects in the Mekong region, IFC is striving to raise the sustainability of such multi-million dollar infrastructure investments by familiarizing banks with environmental and social risk management tools.

Earlier this month, IFC and The Thai Bankers’ Association held a workshop in Bangkok to discuss how Thai banks can manage their exposure to environmental and social risks while taking leadership in fostering sustainable economic growth in the Mekong region.

Much of the workshop was focused on the Equator Principles, a set of best-practice guidelines for environmental and social risk management in project finance based on IFC’s Performance Standards. More than 70 banks worldwide have adopted the Principles, but only one in developing Asia (Industrial Bank in China).

IFC Communications Consultant Marianne Gadeberg caught up withTwatchai Yongkittikul, Secretary-General of The Thai Bankers’ Association, on the sidelines of the workshop to discuss why Thai banks may consider adopting the voluntary principles going forward.

Q: Why are environmental and social standards important to Thai banks?

A: Many Thai banks are involved in big industry and infrastructure projects. Past experience shows us that when these types of projects are done without an analysis of the social and environmental impacts, they result in much higher project costs than originally expected. I think it is time for Thai banks to start paying attention to environmental and social issues and to learn how to manage their risks.

The workshop helps Thai banks learn more about practical steps and procedures involved when adopting social and environmental standards, such as the Equator Principles. Thai banks are aware that they must adopt these principles to avoid unexpected costs, difficulties in project management, and reputational risks.

Q: What is the current progress for Thai banks to adopt the Equator Principles?

A: So far, Thai banks have yet to adopt the Equator Principles, but after this second workshop, I think the discussion will become more serious. One perspective we have to consider is that in many of these infrastructure projects, it is government departments that are the sponsors of these projects. Ironically, while adhering to environmental and social best practices will reduce costs in the medium term, costs will increase in the short term if a financier adopts the Equator Principles. This is particularly true when the project requires relocation of local communities. Because of governments’ budget constraints, Thai banks hesitate to move ahead.

However, I think that the more banks that can speak with one voice on this matter, the more we can influence governments to accept the adoption of international standards and the associated higher up-front costs.

Q: What will be the tipping point that will lead to a wider adoption of the Equator Principles among Thai banks?

A: I think Thai banks will look to their peers for incentives, and the big Thai banks are all looking to be leaders in their field. Additionally, as Thai banks begin to invest in international projects, they will need to be able to compete with other banks, which have already adopted the Equator Principles. Otherwise, they may lose opportunities to be involved in international or regional projects.

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