Probe International Mekong Press Backgrounder #13

October 1, 1999

“Model” Laotian dam in economic and environmental failure

Although its proponents consider the Theun Hinboun dam a model public-private partnership, the $260-million project has failed to generate its expected revenue and has damaged fisheries and water supplies, inflicting incalculable costs in lost resources and livelihoods.

A just-released report by Gráinne Ryder, director of Probe International’s Mekong Program, details the economic costs and environmental damage caused by the dam, as well as the policies that ignored the rights of local people and shifted the dam’s financial risks from its proponents to the public.

The 25-metre high dam, which was completed in April 1998, is jointly owned by Nordic Hydropower (a company formed by the Norwegian and Swedish state utilities), Electricité du Laos (the Lao state utility), and GMS Power (formerly MDX of Thailand). All electricity produced by the dam’s 210-megawatt power station is bought by the Electricity Generating Authority of Thailand.

In addition to financing from Nordic export credit agencies and the Asian Development Bank (ADB), private investors were brought in too. Although initially wary of the political and economic risks involved in building a large hydro dam in Laos, the dam’s proponents introduced various price contracts and guarantees to eliminate the risks for the private sector. This “socialization” of risk onto citizens in Laos, Thailand, Sweden, and Norway, is described in Ms. Ryder’s report.

Also, says Ms. Ryder, Nordic proponents, including part-owner Nordic Hydropower, the company that supervised the dam’s construction and won the contract for operation and maintenance, are exercising a double standard when it comes to environmental regulations. Lao citizens are forced to internalize the Theun Hinboun dam’s environmental costs and risks, whereas in Norway and Sweden, citizens are protected by tough environmental regulations, strong property rights, and mechanisms for citizen participation in decision making.

Ms. Ryder condemns this double standard and argues that by recognizing the property rights of Lao citizens, dam proponents would have to seek approval from all potentially affected individuals and communities and internalize all costs, economic and environmental.

September 17, 1998

World Bank Report Says Pak Mun Villagers Complain Too Much

Four years after the World Bank-financed Pak Mun dam in Thailand began operating, the World Bank has released a report admitting that compensation for lost fishing income and resettlement planning was poorly handled and inadequate. But the report, prepared by Warren Van Wicklin III of the World Bank’s operations evaluation department, also says that the people who were compensated complain too much.

“There is such a culture of complaint, of trying to win sympathy for even greater compensation claims and assistance, that it is difficult to get affected people to be balanced about their resettlement experience,” writes Wicklin.

Meanwhile, only half the claims for fisheries compensation have been settled. About 3,000 households received US$1,200 each, the cash equivalent of one year’s fishing income, regardless of whether they fished part time for their own consumption or earned most of their living from fishing. Twice that amount for each household was deposited in government-run cooperatives, even though villagers had demanded the entire payment in cash.

Mekong Backgrounder #11

For more information, e-mail GrainneRyder@nextcity.com or phone (416) 964-9223 ext. 228.

September 15, 1998

Crisis, What Crisis?

Not even the economic crisis sweeping Asia can shake the World Bank’s commitment to the Nam Theun 2 hydro dam in Lao PDR. The dam’s developers have no customers for the power and no commercial lenders willing to risk their capital on the US$1.3-billion venture.

The World Bank claims that the 681-megawatt dam will generate US$250 million annually from electricity exports but the only prospective buyer, Thailand’s Electricity Generating Authority (EGAT), has a glut of generating capacity, no money to buy power from Lao PDR, and a lineup of private power producers at home ready to meet demand into the next century.

To cajole private investment in Nam Theun 2, World Bank officials reportedly want to lend EGAT the money to buy the power it can’t afford and doesn’t need. The World Bank is also prepared to guarantee loans from commercial lenders who otherwise reject Nam Theun 2 as “unbankable.”

Last November, the World Bank’s vice-president of its East Asia and Pacific department, Jean-Michel Severino, visited Lao PDR to grant the Nam Theun 2 developers nearly US$1 million for resettlement and environmental planning.

If completed, the dam would flood more than 450 square kilometres of the country’s largest biodiversity conservation area, forcing more than 5,000 people into state-run settlements.

Nam Theun 2 developers include Electricité de France (30 %), the government of Lao PDR (25 %), construction companies Ital-Thai Development (15 %) and Transfield (10 %), Thai financing company Phatra Thanakit (10 %), and Thai telecommunications company, Jasmine International (10 %).