The Nation
September 17, 2008

In June of this year, the World Bank-financed and French-led Nam Theun 2 Electricity Consortium began filling the Nam Theun 2 reservoir in central Laos despite its failure to produce feasible plans and the necessary budget for restoring displaced people’s livelihoods, Shannon Lawrence of US-based International Rivers reports.

Nam Theun 2 dam: Rising water, falling expectations
By Shannon Lawrence
The Nation June 25, 2008

A Lao man, his face and hands hardened by the sun after years of fishing and farming, tends his water buffalo by the Theun River and wonders what his life will be like “after the flood”.

That’s how he refers to the water that has started rising behind the Nam Theun 2 dam in central Laos.

Will he, and the thousands of others who have been displaced, be better off thanks to the hydropower project, as the Lao government, the dam developers and the World Bank contend? Or will he and his children face an uncertain future of rice shortages, reduced fish catches, and, ultimately, deeper poverty?

This month, Nam Theun 2’s developers – Electricit‡πâ de France, EGCO, Ital-Thai Development and the Lao government – will close the spillway gates on the largest investment ever in Laos. The company and its backers, including the World Bank and the Asian Development Bank, call Nam Theun 2 a “poverty-reduction project”. They promise that the 1 in 50 Laotians affected by the dam will at least have their incomes restored. They assert that the cash-strapped Lao government will use the revenues from Nam Theun 2’s electricity exports to Thailand solely to benefit the poor and the environment.

These promises have helped to bring in hundreds of millions of dollars from international and Thai banks and export credit agencies for the US$1.45 billion project.

As the 450-square kilometre reservoir starts to flood the Nakai Plateau, 6,200 people from a variety of ethnic groups are about to see their river become a lake. They’ve been moved from their old villages to what will be reservoir shores so they can remain on their ancestral lands. But here the soils are poor; land and forest resources are scarce.

The Nakai Plateau villagers do have electricity, water pumps, and better roads in their resettlement sites. Villagers welcome the sturdy wooden houses which have replaced the bamboo walls and palm-frond roofs of the old villages. Motorbikes and satellite TV dishes are popping up, labelled by some as signs of development.

But now that dam construction – and the short-term jobs and cash infusion it provided for villagers – is nearing an end, a foreboding question remains: how will villagers feed their families and earn a living once two-thirds of the land they used for fishing, farming and livestock grazing is under water?

The response from Nam Theun 2’s developers is that these lifelong river fishers and swidden rice farmers will become lake fishers, cooperative loggers and cash-crop growers. A fine idea in principle, but perhaps unrealistic in Laos where inputs, skills, markets and long-term training are in short supply.

The plans to restore villagers’ incomes are still filled with gaps – gaps that Nam Theun 2 critics first pointed out a decade ago. Where will the cash crops be sold in this remote area? Where will villagers’ water buffalo find food? What happens when the community forest is illegally logged? How will fish survive in a reservoir depleted of oxygen?

Even more questions arise downstream. When Nam Theun 2 starts generating electricity in 18 months, tens of thousands of people living near the Xe Bang Fai River can expect floods to come more frequently, and to remain longer. Such floods will destroy rice crops, further compromising food security for the villagers whose river fisheries will be decimated almost overnight. But the company has yet to define, adequately fund, and implement viable programmes to ensure that villagers are ready to face Nam Theun 2’s impacts and receive full compensation for losses.

Why have these problems occurred, and what lessons can already be learned?

While there are undoubtedly committed individuals behind Nam Theun 2, the project has suffered from a persistent lack of qualified staff and high-level support for its social and environmental objectives. Stacks of documents and millions in consulting fees have failed to produce feasible plans – with the necessary budget – to restore villagers’ livelihoods. As the project has progressed, legal agreements have been violated but Nam Theun 2’s donors and investors have kept the money flowing. Construction has proceeded on schedule, while environmental and social programmes have been allowed to fall woefully behind.

Experience with Nam Theun 2 shows that social and environmental obligations in big infrastructure projects must be accompanied by adequate resources and enforcement mechanisms. These components should be considered a core part of the project, not an afterthought. Failure to meet social and environmental commitments must carry the same penalties as failure to meet engineering deadlines, and project lenders should stop disbursements when covenants are violated.

Nam Theun 2’s supporters said it would help raise the bar and improve the sustainability of other hydropower projects in Laos. But while the Lao government has adopted important social and environmental policies, implementation of these requirements has not kept pace with new dam developments.

Even with all the funding and the best intentions in the world, if the host government is unable or unwilling to manage the impacts – or the revenue – from the project, a big dam will increase poverty, rather than reduce it, by destroying the natural resources on which rural populations depend.

Will Nam Theun 2 deliver on its promises to the Lao people? The outlook is worrying, though the answer may still be years away. Unfortunately, the people best placed to respond are the ones most rarely asked: the villagers watching the water rise behind the dam where their river used to be.