Mekong Utility Watch

Local NGO adds to pressure on World Bank

The Nation
September 24, 1997

Non-government organisations have demanded that the World Bank address fundamental questions regarding the proposed Nam Theun 2 (NT2) dam before it goes ahead with the next stage of the US $1.5 billion project in central Laos.

In a letter to bank president James Wolfensohn endorsed by local and international NGO’s Witoon Permpongsacharoen, the director of TERRA, an NGO which monitors economic development in the Mekong region, questioned the banks legitimacy as a development institution as it continues to provide political and technical support for the proposed hydroelectric dam.

NGOs focusing on environmental and rural development have questioned whether the NT2 dam will truly be the “future source of revenue for the Lao government” claimed by the bank.

“This strategy is even less valid given Thailand’s economic slowdown and the resulting decline in the demand for new sources of electricity,” the letter stated.

The economic downturn in Thailand has seen the expiration of the power purchase agreement with the Electricity Generating Authority of Thailand (EGAT), the only customer of the proposed 900 megawatt NT2 dam.

The cost of generating electricity within Thailand is becoming more competitive, Witoon said, adding that inflation which has had a severe impact on the value of the Lao currency, will increase the project’s construction costs. These factors, he contended, call into question the market competitiveness of the project.

In the past five years, the estimated cost to build NT2 has almost doubled from US $800 to $1.5 billion while the predicted annual revenue for the government of Laos has declined by 85 percent, from $250 million to $38 million.

Due to these economic risks, private commercial banks have refused to lend money to the project. Consequently, the World Bank has created a new financial instrument called an “enclave guarantee” which is designed to allow it to insure the investments of private commercial banks lending to companies.

“We’re concerned that the bank is helping the Nam Theun Electric Consortium transfer risks which they should rightfully bear by themselves to the people and the government of Laos,” Witoon said.

NGOs have also expressed concern about the impact of the dam on the environment of one of the world’s poorest countries, its people and the Mekong region.

If constructed, NT2 would flood more than 450 square kilometres of forest, wetland and riverine habitat unique to the Nam Theun river basin. This area is relied upon by the vast majority of people in the Mekong region for their livelihood, security, and income.

Even worse, NGOs claim the World Bank’s involvement in the project paved the way for the logging of more than 200 square kilometres of Nakai Plateau forest before the project was even approved by the bank for appraisal.

Bank staff, they say, have consistently played down this destruction and have instead promoted the establishment of a conservation forest adjacent to NT2 as a “benefit”.

Categories: Mekong Utility Watch

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