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Completing its third year of operations, Laos’ largest dam is generating healthy revenues for its owners while thousands of villagers are left uncompensated for the destruction of their fisheries.

The Lao government can expect annual profits from the Theun-Hinboun dam of about US$25 million (Bt1.1 billion) over the next quarter-century.

Yet the dam’s operator, Theun-Hinboun Power Co. – 60-per-cent owned by the Lao government – has refused to pay villagers compensation, claiming it would create a “permanent dependency” and that there is a danger of “misappropriation by agents involved.”

(The remaining 40-per-cent of the company is shared equally between GMS Power of Thailand and Nordic Hydropower, a partnership between state-owned utilities, Statkraft of Norway and Vattenfall of Sweden.)

Upon the dam’s completion in 1998, the Asian Development Bank (ADB) and Nordic aid agencies hailed it as a model for the region – the first dam to be financed as a joint venture between a socialist government and the private sector, and one that would boost economic growth.

Instead, for thousands of families, the dam has generated only hardship. A report by the power company last September confirmed that its dam has caused “more or less permanent” damage to fisheries in two river systems. About 4,500 households have lost a critical source of food and income. More than 10,000 households are suffering in one way or another, it said.

In response, the company announced plans to spend up to $4.6 million over 10 years, mostly on environmental-impact studies, monitoring, and a team of international specialists to make “production-system improvements.”

Critics say the plan provides no relief for residents in the short-term and no guarantees for the future. Defending the plan, company general manager Edwin Hourihan insists that affected villagers prefer investments in boosting agricultural and fisheries productivity to cash settlements.

Critics, including Probe International, argue that Lao citizens are entitled to both. According to an agreement the company signed with the ADB in 1994, the company’s owners are obliged to conform to “sound administrative, financial, engineering, environmental and public utility practices.”

In Nordic countries, citizens affected by dams are legally entitled to at least three forms of compensation: cash to individuals for lost property and income – an amount decided by the courts; long-term funding for environmental and fisheries mitigation measures; and a share of the company’s earnings or electricity for dam-affected jurisdictions.

Citizens groups outside Laos are pressuring the ADB to ensure that its model meets Nordic standards by providing full compensation to affected residents. Situated in central Laos, the $280-million dam is being run on a 30-year build-operate-transfer basis.

Ryder is director of policy at the Toronto-based Probe International, a citizens’ group monitoring Canadian foreign aid.