February 22, 2000

The World Bank said yesterday it would not give its endorsement to a billion-dollar dam in Laos until the government commits itself to significant political and economic reforms, reports AFP. World Bank Vice President for East Asia and the Pacific Jean-Michel Severino said the Bank was waiting for “clear signals” from the Lao government before granting the political risk guarantee necessary for the project to go ahead.

“It is important that the government has a good understanding of the conditions which will make the project technically, economically, politically, and ecologically sustainable,” Severino is quoted as saying. “We can’t commit ourselves on global risk without acceptable macroeconomic conditions being in place.”

It was hoped that the huge Nam Theun 2 dam in Laos, one of Southeast Asia’s most impoverished nations, would act as a catalyst in modernizing its traditional agrarian economy which is starved of foreign exchange, the story notes. But the Bank is concerned about the economic situation in Laos which is struggling under massive inflation rates estimated at 155 percent as of mid-last year. “It’s clear to us that Laos must deepen its macroeconomic reforms if it wants to stabilize the situation and create conditions which make the project sustainable,” Severino said.

On the dam’s environmental impact, for which the World Bank has set strict criteria, Severino allowed that “progress has been made on this count but we are keeping a close eye on the situation.” The institution is particularly concerned about illegal logging, not only near the dam site but in the rest of the country as well.

“We still believe in this project, we are still working on it despite the delay,” Severino said. Development experts say the project is crucial to Laos, a poor, mountainous and landlocked country whose only sources of major foreign exchange earnings are forestry and hydropower, the story notes, adding that the World Bank’s insistence on environmental and social impact standards has been lauded by conservationists who say that hydro projects elsewhere in the world have a poor environmental record.

World Bank approval is not the only stumbling block the project has encountered, the story notes. Nam Theun 2 has already been held up by a wrangle over a power purchasing agreement between the developers and their only potential client, the Electricity Generating Authority of Thailand (EGAT).