Mekong Utility Watch

Controversial Laotian Dam Gets Underway

September 7, 2005

World Bank-led hydro venture gets Canada’s backing, fails to meet US standards

Global construction industry journal, DesignBuild, reports this month that work has begun on the controversial Nam Theun 2 hydro dam in the Southeast Asian republic of Laos.

The World Bank and Asian Development Bank approved financing for the US$1.2 billion project earlier this year despite opposition from environmental groups, including Probe International.

Like most Bank-donor countries Canada supported the project, while the United States abstained from the vote.

A review by the U.S. Treasury Department found “too many outstanding risks related to environmental and social issues, the Lao PDR’s macroeconomic conditions, and recourse measures if [the] NT2 project is not implemented as planned.”

It also noted “defects in the [dam’s] environmental assessment process which ran afoul of U.S. legislation regarding [multilateral development bank] projects that have a significant environmental impact.”

In accordance with U.S. law, the Treasury then instructed the U.S. executive directors not to vote in favour of Nam Theun 2.

Canada had no such reservations. According to the Canadian International Development Agency, which is responsible for overseeing Canada’s contributions to the multilateral development banks, CIDA, Finance, and Foreign Affairs conducted a thorough review and found Nam Theun 2 has “established a high level of compliance with regard to social and environmental safeguards.”

DesignBuild, meanwhile, announced that Canadian engineering firm, Klohn Crippen Consultants Ltd., has been awarded the final design contract for the 1070-MW dam, which will flood a vast 450 square kilometres of Laos’ Nakai Plateau and divert a large Mekong tributary, generating power for neighbouring Thailand.

The Banks’ decision to support Nam Theun 2 followed an unprecedented public relations campaign to persuade skeptical donor governments that Nam Theun 2 was Laos’ best hope for poverty alleviation and not another environmental and economic disaster in the making, as citizens’ groups have predicted.

Unlike earlier Bank-funded dam fiascos, Nam Theun 2 is supposed to generate up to US$2 billion for the Lao government over 25 years – money the World Bank insists will go toward poverty reduction and biodiversity conservation.

At least six-thousand Laotians will have to be resettled and as many as 100,000 people living downstream will be adversely affected by the dam’s operations.

Export Development Canada has been approached by several Canadian firms about providing financing for Nam Theun 2, according to CIDA, but under Canadian law, EDC is not obliged to disclose any details at this stage.

France, Sweden, and Norway are providing $200 million worth of export credit financing. Nine international and seven Thai commercial banks are providing loans.

For more information, CONTACT: Greinne Ryder
Policy Director, Probe International
Toronto, CANADA
Phone: (416) 964-9223, ext. 228
or visit Probe International’s web site at

Probe International is an independent citizens’ group investigating the economic and environmental effects of Canada’s aid and companies overseas.

Categories: Mekong Utility Watch

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