Unfortunately, in its involvement in the proposed 1,000 MW Nam Theun 2
dam, the Bank seems to have forgotten its fight against corruption. The
Bank has funded a series of studies on the US$1.5 billion project and
without a US$100 million partial risk guarantee from the World Bank,
commercial financiers will not risk lending money on the Nam Theun 2
project. The Bank has postponed its decision on whether to give the
guarantee for many years.

Despite the fact that the dam may never be built, the forests in the
reservoir area have been clearcut. Since the early 1990s, the Lao
military-run Bolisat Phathana Khet Phoudoi (BPKP – Mountainous Region
Development Corporation) has benefited from the concession to log the
project’s 450 square kilometre reservoir area on the Nakai Plateau.

With the forests gone, the Lao government revoked BPKP’s logging
concession and the company crashed. On 14 January 2003, the government
appointed a new acting director of BPKP, Sisaleuay Khounbathao, who was
previously the Deputy Head of Business Improvement at the Prime
Minister’s Office. Sisaleuay replaced Bounmy Chithphanya, BPKP’s
director for the last five years. Although the company faces huge
debts, Bounmy told the Vientiane Times, “It is not bankrupt yet because
we have the Party and State supporting us.”

The forests of the Nakai Plateau have been sold off to the highest
bidder and the company that sold the logs is heavily in debt and can
only survive through government support.

BPKP’s collapse, however, should not come as a surprise to anyone in the World Bank.

In 1997, International Rivers Network (IRN) wrote to the World Bank
questioning the Bank’s involvement in the Nam Theun 2 project. In the
letter, IRN quoted from a World Bank-funded Economic Impact Study by
the consulting firm Louis Berger. The report pointed out that BPKP
operates largely outside of the control of the central government and
recommended, “As an autonomous state enterprise, BPKP should have a
Board of Directors and fiduciary accountability to the Ministry of
Finance to facilitate oversight of its activities.”

None of Louis Berger’s recommendations were acted on, until this year.
Under Sisaleuay Khounbathao, the newly appointed director, plans are
afoot for BPKP to establish a council board, a board of directors,
departments, and BPKP company groups and branches.

Louis Berger’s 1997 report also stated, “BPKP’s commercial interests
will continue to lie in the direction of maintaining higher logging
quotas than are commensurate with a sustainable harvesting regime, and
of opening access to previously untouched areas.”

This is precisely what BPKP has done. A 2001 report on forestry in Laos
by the World Bank, Sweden and Finland stated, “Recent World Bank
missions have assessed the extent of unauthorized, illegal, unplanned
and illicit logging in selected NBCAs [National Biodiversity
Conservation Areas] and in the Nam Theun 2 watershed area where logging
is prohibited.” The report also noted, “serious logging infractions in
the Nakai Nam Theun NBCA, and other areas which the GOL [government of
Laos] had designated as off limits to logging.”

In addition to logging the reservoir area, BPKP has carried out
resettlement related to the project and built houses for resettled
villagers. Louis Berger’s 1997 report noted that BPKP was bidding for
contracts relating to the dam project, while it was also a member of
the Lao government’s committee that decides on those bids. In November
1997, the Bank’s then country director for Laos, Ngo Zi Okanjo Iwella
told Power in Asia, “BPKP will have to compete with other private
companies in public bids associated with the project.” The question of
BPKP’s conflict of interest remained unaddressed.

Iwella confirmed to Power in Asia that she was aware of “governance
issues” relating to the Nam Theun 2 project. However, regarding BPKP
Iwella said, “From past experience in regional rural activities, we
have had a constructive engagement with BPKP. But we also know there
are issues associated with BPKP in the past and we have to make sure
they will not be repeated in the future.”

The Bank’s “constructive engagement” with BPKP has done little to
prevent BPKP from running up huge debts while clearcutting a vast area
of forest. A detailed and public audit of BPKP’s operations, focussing
especially its operations related to the World Bank and the Nam Theun 2
project, is long overdue.

The state-run Vientiane Times reported recently, “The World Bank and
the Government of the Lao PDR are working hand in hand to establish
that the Project revenues to the Government of the Lao PDR will
effectively serve the long-term development of the country.”

The income from logging the reservoir area is project revenue. If the
plans for the Nam Theun 2 dam did not exist, neither would BPKP’s
concession to clearcut the forests on the Nakai Plateau. The people
living on the Nakai Plateau who have seen BPKP steal their forests have
a right to know where the money went.