Funding was assured today for a controversial project to dam a
tributary of the Mekong River in Laos to provide power to Laos and
Thailand. Development banks say the hydroelectric project will help
lift Laos out of poverty and conserve a protected area, but
environmental groups say it will displace indigenous people and ruin
the area for fish, drinking water and agriculture.
The Asian Development Bank (ADB) approved funding today for the
Nam Theun 2 Hydroelectric Dam Project, offering US$130 million in
loans and risk guarantees. The ADB joins the World Bank in funding
the dam project. The World Bank Thursday extended a US$270 million
loan and risk guarantee package.
As part of its package, the ADB will provide US$20 million public
sector loan to the government of the Lao People's Democratic
Republic to purchase equity shares in the Nam Theun 2 Power Company
Ltd, which will develop, construct, and operate a 1,070 megawatt
trans-basin diversion power plant on the Nam Theun River, a
tributary of the Mekong river, in central Laos.
The Nam Theun River in the area that will be flooded for the
hydroelectric project (Photo courtesy Nam Theun 2 Power Company)
The
Asian Development Bank says completion of the US$1.25 billion dam
will help Laos achieve its poverty reduction and development goals.
"This project forms a critical element of the government of Lao
PDR's long term development plan," says Rajat Nag, director general
of ADB's Mekong Department. "The revenue it generates will help the
government improve the lives of some of the poorest people in Asia."
"The Lao PDR is well positioned in terms of natural resources and
physical location to develop hydroelectric energy as a major source
of growth and to generate revenues to implement the government's
poverty reduction and environment conservation initiatives," Nag
said.
"The project will help preserve the Nakai Nam Theun-National
Protected Area, one of Southeast Asia's few remaining intact
tropical rainforests and wildlife habitats," said Nag.
The Nam Theun 2 Power Company Ltd is owned by a consortium
including EDF International of France (35%), the Government of Lao
PDR (25%), the Electricity Generating Public Company Ltd of Thailand
(25%), and the Italian-Thai Development Public Company Ltd also of
Thailand (15%).
"ADB's participation was actively sought to catalyze significant
amounts of long-term US dollar debt from commercial lenders to
support the power sectors of Thailand and Lao PDR," Robert Bestani,
director general of the ADB's Private Sector Operations Department,
said today.
The US$1.2 billion Nam Theun 2 is the biggest single project
undertaken in Lao PDR, and is expected to provide the country with
up to US$150 million in additional annual revenue. This will enable
spending on basic health and education to rise by as much as 25 to
30 percent in the project’s first year of operation, the World Bank
says.
World Bank President James Wolfensohn, said that Nam Theun 2 and
the other initiatives were an effort to assist a country which has
great needs and few options. “Lao PDR has an average income level of
less than a dollar a day, and in many rural areas, it is
considerably less than that,” he said.
“But to get out of this poverty trap, the country has few options
to generate income," Wolfensohn said. "It relies on mining, timber
and hydroelectricity. We believe that a sound approach to selling
hydroelectricity, supported by improved government policies, is the
best way for the country to increase the amount of money it can
invest in health, education and basic infrastructure for the benefit
of the poor."
Laotian children on the Nakai Plateau (Photo courtesy NTPC)
But the World Bank
Project Information Document for the Nam Theun 2 Hydroelectric
Project dated December 2004 states that, "Throughout the 25 year
concession period ending in 2034, "revenues are expected to amount
to around five percent of projected [Lao Government] revenues."
The International Rivers Network (IRN), an environmental group
based in San Francisco opposes the project because it may bring more
benefits to the Lao government elite and foreign consultants than
Laos’ poor.
Aviva Imhof, IRN campaigns director says, "We fear for the lives
of the tens of thousands of poor Laotian farmers who will lose land,
fisheries and other resources as a result of the project."
A joint statement issued Thursday by IRN and Environmental
Defense casts doubt on the ability of the Nam Theun 2 Hydroelectric
project to relieve poverty in Laos and says the dam affected people
will suffer, not prosper.
Nam Theun 2 will displace 6,200 indigenous people living on the
Nakai Plateau and will affect another 100,000 people living
downstream of the project along the Xe Bang Fai and Nam Theun who
rely on these rivers for fish, drinking water and agriculture, the
groups say.
"Experience from other hydropower projects in Laos shows that
replacing subsistence livelihoods is extremely difficult," the
environmental groups report." Independent reviews of the mitigation
and compensation plans reveal that these plans are overly ambitious
and have a high likelihood of failure."
On the Nakai Plateau, villagers will be given small plots of land
with soil that is poorly suited to crop production as it is "heavily
leached and infertile," according to project documents.
High inputs of organic and inorganic fertilizer will be required
to grow anything, but the company plans to help pay for fertilizer
for only five years, the environmental groups point out.
"There will not be sufficient land for grazing villagers’
livestock, particularly their prized herds of buffalo. Villagers are
also supposed to derive some income from logging in a community
forestry area. However, the profitability of this operation is not
ensured as most of the high quality timber has already been logged,"
IRN and Environmental Defense warn.
Aerial view of the pilot village. The LTPC says that in the
future reservoir waters will come close to the eastern side of the
village, in the upper part of the photo, allowing access to
fisheries and providing irrigation water to the fields.
(Photo courtesy NTPC)
For downstream
communities, the project plans to replace freshwater fisheries with
aquaculture. But again, the groups rely on past experiences in Laos
to warn that aquaculture is no substitute for freshwater fisheries,
and that "the poorest people often lack the necessary land and
capital resources" to make such as business profitable.
But World Bank President Wolfensohn says the Bank's decision to
underwrite the development is based in part on his own first-hand
observations.
“My colleagues and I have visited the project area and spoken to
the villagers on many occasions over the past several years – in
fact I was there just in February - to talk with them and hear
directly from them about their hopes and concerns," Wolfensohn said.
"We have also had many intensive discussions with the Lao Government
and the project developers, making it clear that we all share the
responsibility for this project succeeding in the years ahead.”
The Asia Development Bank acknowledged in its statement today
that stakeholders have raised concerns about the Lao PDR
Government's experience with projects of this size and questioned
the government's ability to effectively and transparently undertake
the project and said the concerns are "important and significant
risks to the long-term project success."
ADB believes these risks are "manageable with substantial and
careful oversight." Included in the project design are mechanisms to
minimize these risks, including:
- Multidonor technical assistance to help the government improve
its overall public expenditure management program
- Oversight through audits and public expenditure surveys to
monitor the utilization and effectiveness of the government
revenue from the project for agreed priority programs,
- Technical review by the international dam safety review panel
- Long-term funding and technical assistance for conservation
programs as part of the overall project cost
- Commitments from the Nam Theun 2 Power Company to providing
funding and to share management and operational responsibility for
the outcomes of environmental and social mitigation and
compensation programs, including resettlement on the plateau and
in the downstream areas
- Delineation of the roles, responsibilities, and authorities of
the central, provincial, and district government agencies of the
government with regard to project activities and programs
- A program of transparent monitoring and evaluation of project
performance including the publication of project performance
evaluations, progress reports, and monitoring data.
"A
project of this size and impact will affect many people and many
parts of an economy like that in the Lao PDR," Nag of the Asian
Development Bank said today. "The government, the project
developers, and the international development partners participating
have rigorously researched and studied the project and its potential
impacts. We are convinced that if managed properly, it has great
potential to bring large and lasting benefits to the people of the
Lao PDR." The European Investment Bank has yet to weigh in with its funding
decision. Construction on the project has already begun but will be
speeded up once funding is complete.
The Nam Theun 2 hydroelectric plant is scheduled to start generating power by 2009.
