Foreign Aid

PRESS RELEASE World Bank dam will generate debt burden for Laotians

April 1, 2005

Toronto, Canada: The World Bank’s decision to finance the US$1.2 billion Nam Theun 2 hydro project will become an intractable debt burden for Laotians in years to come, warns Probe International, a Canadian-based foreign aid watchdog.

“It is projects like Nam Theun 2 that eventually need debt forgiveness because they are not economically viable and they don’t generate the wealth needed to repay the loans,” said Patricia Adams, Probe’s executive director and an expert on odious Third World debt.

Yesterday the World Bank’s directors approved a $20 million grant and loan guarantees worth $250 million for the project, which backers say will generate much needed revenue for poverty reduction. Earlier in the week, Japan announced it was cancelling debt owed by Laos for construction of the Nam Ngum dam, the country’s largest hydro export scheme built in the 1970s.

“The experience is that big dams lead to bad debt,” said Grainne Ryder, a hydro expert and Probe International’s policy director. Large dams financed by the multilateral development banks, including the World Bank, have proven to be uneconomic, she said. Costs have been unrecoverable from ratepayers, she added.

Meanwhile, electricity output has been less than projected and less reliable because hydro reservoirs are extremely vulnerable to drought. Also, the environmental impacts of large dams have led to major agricultural and fisheries productivity losses. Nam Theun 2 will prove no exception, said Ryder.

The 1070-megawatt dam will flood 450 square-kilometers of land and disrupt the farming and fishing livelihoods of tens of thousands of people who are already poor. The Nam Theun 2 decision came despite the United States Treasury Department’s reservations about the project’s environmental risks, and the Lao government’s capacity to manage its revenue.

“By supporting Nam Theun 2, the World Bank has shown it will repeat the same mistakes until it is shut down once and for all,” said Ryder.

For more information, CONTACT:
Grainne Ryder, policy director
Probe International
Tel. (416) 964-9223, ext. 228

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