Mekong Utility Watch

World Bank backs dam project in Laos

The Nation
March 1, 1998

The World Bank spoke openly for the first time this week about its strong commitment to the Nam Theun 2 hydro-electric dam in Laos and vowed it would not drop the project because of pressure from the public outside the country.  Paul Mitchell, the bank’s chief of regional operations, said the US$1.5-billion project was in the pre-appraisal process, during which financial packages and measures to mitigate the social and environmental impact were being looked at. Although the time frame for final approval has not yet been set, he expressed confidence in the project’s potential.

”If we hadn’t thought the project was viable, we would not have gone this far. [This is an] expression of our interest in the project,” he told The Nation on Thursday.

Mitchell’s statement was in contrast to the earlier position made by other World Bank staff, who appeared reluctant to take a clear stance on the controversial project.

The senior officer said that the project was essential for reducing poverty in Laos as well as protecting remaining forests around the proposed reservoir area, which would otherwise be degraded by villagers’ activities, he said.

He said before the project could proceed to the bank’s board of executive directors for approval, price negotiation and power-purchasing agreements among the Electricity Generating Authority of Thailand and the Nam Theun 2 Electricity Consortium (NTEC) and the Lao government would have to be in place.

However, the economic slump in Thailand has affected the country’s demand for electricity from Laos. The three Thai companies in the consortium, Phatra Thanakit Plc, Italian Thai and Jasmine International, have also suffered losses in Thailand’s economic difficulties.The other companies are Transfield Corp of Australia and Electricite de France.

Mitchell said: ”As far as I know, they still want to go ahead with [the dam project].”

Under consideration is whether the World Bank will provide the project with a political-risk guarantee, which is crucial because potential commercial lenders, including Deutsche Bank of Germany, Societe Generale of France and Barclays Bank of theUnited Kingdom require it before they make loans available to NTEC.

The 680-megawatt Nam Theun 2 project has come under criticism by international environmental groups during the past few years as the project is located on the Nakai Plateau, one of Laos’ best wilderness areas, where a number of new wildlife species have just been identified.

The International Rivers Network, a US-based group which supports the sustainable development of water resources, also questioned the project’s economic benefits. They said the estimates of project income were based on highly uncertain assumptions of the availability of water to flow through the dam’s turbines.

Acknowledging the criticism, Mitchell said most of the project’s critics were not NGOs inside Laos, although he also admitted there were not many NGOs in Laos. The bank’s main concern is people on the ground who will be affected by the project, he said.

”Some NGOs are ideologically opposed to any dam. The bank will not drop the project because of their opposition,” he said.

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