Mekong Utility Watch

Laos dam resettlement plan approved

Business Day
January 22, 1999

VIENTIANE – A (USDollar) 1.2 billion hydropower project seen as crucial for one of Asia’s poorest countries cleared a major hurdle yesterday when affected communities in Laos supported a resettlement plan. Local officials expressed satisfaction during a public consultation exercise by the developers of Nam Theun 2, who plan to spend millions of dollars relocating about 4,500 people whose homes will be flooded for a dam. “We are very happy with the project, which will help our lives improve,” said Phensy Damkhamdy, president of the Lao Women’s Union in the Nakhai Plateau, site of the proposed dam. Development experts say the project is crucial to the development of Laos, a poor, mountainous and landlocked country whose only two potential sources of foreign exchange are forestry and hydropower.

“Where is the revenue going to come from? Nam Theun 2 is the best bet,” said Thayer Scudder, professor of anthropology at the California Institute of Technology.

His is not a universally shared view. International Rivers Network, a California-based environmental, group opposes the dam and boycotted the two days of consultations.  The exercise is part of a comprehensive study into the economic, social and environmental impact of the dam undertaken at the behest of the World Bank. The World Bank has agreed to provide a political risk guarantee worth about (USDollar) 140 million provided developers meet its requirements. The 900 megawatt power plant would sell electricity to Thailand and is expected to generate about (USDollar) 250 million in revenues annually. But the entire project hinges on a crucial power purchase agreement being reached with the Electricity Generating Authority of Thailand (EGAT), which was forced to revise its position after the financial crisis depressed power demand. If a deal with EGAT is reached, a pilot relocation plan could start next year with the plant up and running by 2006, said Jean-Christophe Delvallet, project director of Nam Theun Two 2 Electricity Consortium (NTEC).

Experts say the Nam Theun 2 project could change the way hydropower projects are developed worldwide, tranforming a sector in which conservationists have traditionally been pitted against developers. “Our record on large dams worldwide has been mixed at best,” said Kathryn McPhail, from the World Bank’s social policy and resettlement division. She said Nam Theun 2 planning was designed to assess the environmental and social impact of the dam to avoid the development debacles which surrounded the Arun dam project in Nepal and Narmada in India. Yesterday developers promised a comprehensive resettlement plan for 800 households displaced by flooding that involves spending more than (USDollar) 20,000 per family, a fortune in an area where per capita income is about (USDollar) 100 a year. Conservationists who say hydroprojects elsewhere have a poor environmental record have praised the developers’ efforts in Laos. “This is one dam that looks as though it could be really successful in terms of benefits to the people and for environmental conservation,” said Lee Talbot, an expert on power projects and the environment. A previous power purchase deal was shelved in late 1997 after the regional economic crisis caused major cost-cutting at EGAT and a fall in electricity demand in Thailand. Electricit1/2 de France owns 30 percent of the NTEC project, Italian-Thai Development 15 percent, Jasmine International10 percent, Merrill Lynch-Phatra 10 percent, Transfield of Australia 10 percent and the Laotian government 25 percent.

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