November 20, 2002

The Asian Development Bank (ADB) will promote optimal use of water resources in the Lao People’s Democratic Republic (Lao PDR) through a loan approved today for US$15 million equivalent for the management of the Nam Ngum River Basin.

The Nam Ngum River Basin Development Sector Project will foster integrated water resources management among central, provincial, and district levels of government. It will also support livelihood opportunities for poor and ethnic groups in some of the most degraded parts of the Nam Ngum River Basin.
Covering a large area in the north-central region, the Basin has great potential for hydropower generation. However, the existing Nam Ngum-1 reservoir with 150-megawatt
installed capacity, is not operating at full efficiency, resulting  in hydropower generation falling short of potential and affecting the downstream ecosystem. In addition, subwatersheds in the upper basin, that contain important biodiversity and are home to ethnic groups, are under pressure from agriculture, based on shifting cultivation,
and unsustainable exploitation of forest resources.

“To ensure optimal use and long-term sustainability of water resources and livelihood opportunities in the river basin, an integrated water resources management is needed to
coordinate efforts among farming communities and line agencies,” says Akmal Siddiq, ADB Project Economist. The project’s three main components will:

• Strengthen the capacity of key central and Basin level water coordinating bodies

• Develop a river basin model for the Nam Ngum-1 reservoir to optimize power generation, mitigate floods, and improve water use efficiency in the Basin

• Improve watershed management by strengthening capacity of rural communities and relevant government departments; increasing crop productivity and irrigation efficiency; improving livestock and fishery management; and preserving and restoring forests. The project will yield a wide range of benefits ranging from an additional 2% or 20 gigawatt hours of hydropower (worth US$ 600,000) per year, to improved water conservation and flood mitigation. More efficient use of water for agriculture will also boost productivity and household incomes in the upper basin where poverty levels are as high as 50-65%.

By completion, scheduled for September 2008, the project will directly benefit some 10,000 households, one quarter of whom currently live below the poverty line.

ADB’s loan accounts for 65% of the total project cost of US$23 million. The loan comes from its concessional Asian Development Fund and has a term of 32 years, including a grace period of eight years.

The Agence Francaise de Developpement will finance US$3.8 million, with the remaining US$4.2 million provided by the government. The executing agency for the project is
the Ministry of Agriculture and Forestry.