Martin Petty
Thai Day
December 1, 2005

Opponents argue that little money generated by the dam will reach the poor and much will be pocketed by communist party chiefs. Corruption is rife in Laos and the country’s legal system is renowned for being underfunded with limited powers.

With the capacity to power 17 provinces across Thailand, Prime Minister Thaksin Shinawatra called it the “battery of Asia,” but for social advocates and conservationists, the Nam Theun 2 hydroelectric dam threatens the environment and the livelihoods of tens of thousands of local people.

Construction of the controversial 1,070-megawatt power plant began at the Nakai Plateau in eastern Laos Sunday, marking a rare victory for the impoverished country after 153 nongovernmental organizations from 42 countries lobbied for over a decade to see the project scrapped.

Thailand is a key investor in the dam and has signed a 25-year contract to buy 924 megawatts annually, accounting for 95 percent of the plant’s output.

The state-run Electricity Generating Authority of Thailand owns a 25-percent stake in Nam Theun 2 Power Co, a consortium led by French giant Electricité de France.

Laos’s communist government, which depends heavily on foreign aid to run the country, says the project will be a huge success and many of its 5.7 million predominantly rural people will have access to electricity for the first time when the plant begins operating in 2010.

But social and environmental groups say the dam will harm the environment, endanger rare wildlife and force more than 6,000 people to relocate.

The 48-meter-high dam will be built across the Nam Theun River, creating a reservoir that will flood a 450-square-kilometer patch of forest.

In a report issued last week, the World Wildlife Fund warned that the livelihoods of 50,000 people will suffer when water is diverted from the river to run the huge hydroelectric plant. It said increased water flow into the Xe Bang Fai River will have a devastating effect on fisheries and will consume large swathes of agricultural land, making it the latest dam project to “cause excessive social and environmental damage.”

Despite a hail of criticism, the World Bank approved the project in April, insisting that the environmental risks could be managed and that the dam – expected to earn US$200 million a year – would benefit the Lao people, who are among the world’s poorest.

“Children still suffer malnutrition in many parts of the country,” the World Bank said when it agreed to guarantee loans for the project. “To get out of this poverty trap, the country has few options to generate income.”

Opponents argue that little money will reach the poor and much will be pocketed by communist party chiefs. Corruption is rife in Laos and the country’s legal system is renowned for being underfunded with limited powers.

Economists have said that the sudden surge in foreign currency when the Nam Theun 2 begins generating electricity for millions of Thai consumers risks pushing up the value of Laos’s fragile kip. Heightened costs could limit future foreign investment in other industries in Laos, such as mining and timber.

Analysts have also suggested that a sudden increase in income could further stall reform of the county’s mismanaged economy.

More than 300 investors and diplomats watched the Thai prime minister fly in to Khammouane province by helicopter Sunday to join Lao counterpart Bounnhang Vorachit in laying the first stone at a low-key ceremony that initially went unannounced in the local and international media.

Afterward, Thai government spokesman Surapong Suebwonglee said the project would benefit Thai consumers in the long term, because prices would remain lower than with other energy sources. He made no mention of the environmental or social impact of the project.

“The cost of electricity for Thai consumers will be much lower,” he said Sunday. “The rate will remain the same for 25 years, unlike gas and oil, the price of which is always rising.”

Surapong said Thailand supported renewable energy and would be investing in other hydroelectric projects in neighboring countries. “We believe we will have good opportunities to cooperate with Myanmar and Laos with future projects like the Nam Theun 2,” he said. Lao Foreign Ministry spokesman Yong Chanthalangsy said yesterday that construction was now underway and it was time for opponents of the project to accept defeat.

“We have won this battle,” Yong said in an interview. “We are among the least developed countries in the world. It’s now time for us to develop our own country.” He insisted that the project was no longer under scrutiny and that foreign jitters had been eased.

“Many were against this because we are one of the world’s least developed countries,” Yong said. “We are weak and vulnerable and have little funding, but what they cannot take away from us is our sincerity, our openness and our transparency.”

He said claims by conservationists were exaggerated, and Laos had a wealth of natural resources that it was able to manage.

Yong said the lives of the 6,200 indigenous people – from some 28 ethnic groups – forced to leave their homes will dramatically improve.

“We will move them to the best location and improve their standard of living. Everyone is satisfied. This is of great benefit to the Lao people.”