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LAOS: Doubts Hound World Bank-backed Dam as Its Turbines Start Up

Marwaan Macan-Markar

BANGKOK, Mar 25 2010 (IPS) - It has been just over a week since the turbines came to life at Laos’ largest hydropower project, but questions are already dogging this World Bank showpiece that marks the financial institution’s return to the business of big dams.

A leading environmental group has accused the Bank of failing to meet its obligations to help affected communities in the landlocked South-east Asian nation before the Nam Theun Two (NT2) project started supplying electricity to neighbouring Thailand on Mar. 15.

“Laos’ largest and most controversial hydropower project, Nam Theun 2, began full operation last week in violation of legal obligations to provide compensation and livelihood restoration to affected communities,” declared International Rivers, a global environmental organisation based in the U.S. city of Berkeley, in a statement this week.

“The irrigation system to help 6,200 resettled families in the uplands is not complete,” Ikuko Matsumoto, Laos programme director for International Rivers, said in an interview. “The soil is poor and the resettled farmers cannot grow their rice like they did before, when living close to the river.”

“This is a violation of the legal commitments made in the project’s compliance agreement,” she added. “There was an agreed time line that was legally binding to help the villages affected by the reservoir and the dam.”

Also affected are some 120,000 people living downstream from the reservoir, where the fish have died and vegetable gardens have “been flooded”, she added.

But the World Bank, which provided security guarantees for NT2, argues that its operations “have been consistent with the project’s legal agreements and operating plans.” The community irrigation systems for resettled people “are installed in a number of villages and the balance will be completed in the coming months,” the Bank added in a Mar. 24 statement.

“Electricity generation by Nam Theun 2 Project is vitally important to Laos because of the long-term revenue it brings to the country’s poverty reduction and environmental programmes,” Patchamutu Illangovan, the Bank’s Lao country manager, told IPS.

The Bank estimates that this hydropower scheme in Khammouane province in central Laos will bring an estimated two billion U.S. dollars in income over the next 25 years through the sale of power to the Electricity Generating Authority of Thailand (EGAT).

The Thai state utility has turned to dams in Laos to slake the growing domestic thirst for energy to keep the Thai economy humming. Starting this week, EGAT began purchasing some 93 percent of the electricity produced by NT2.

The NT2, with its 39-metre high dam and output of 1,000 megawatts of power, is only one among large dams that the Lao government plans to build in its quest to become the “battery of South-east Asia.” Currently, 12 more large dams are in various stages of planning.

Vientiane views its mountainous terrain and its abundant array of rivers as ideal for new dams. The sale of power to neighbouring Thailand and Vietnam is expected to help the country overcome its status as the poorest in the region and one where a third of its 5.8 million people live below the poverty line.

Assured by the Bank’s security guarantee to attract investors for the NT2 project, the Nam Theun Two Power Co, with Thai, French and Lao government shareholders, became the largest foreign investor in a hydropower scheme in Laos.

The Bank’s involvement in this 1.5 billion U.S. dollar project marked the end of its break from big dams. The hiatus stemmed from the criticism levelled at the Bank in the 2000 World Commission on Dams report.

The commission’s findings revealed that while the big dams previously funded by the Bank had “made an important and significant contribution to human development and benefits derived from them have been considerable,” equally glaring was that “in too many cases an unacceptable and often unnecessary price has been paid to secure those benefits, especially in social and environmental terms, by people displaced, by communities downstream, by taxpayers and by the natural environment.”

Such concerns appeared to have been incorporated when work commenced in 2005 for the NT2. Bank officials described the world’s largest hydropower project funded by the private sector as an example of “responsible hydropower development.”

The World Bank even hosted a delegation from Tajikistan in mid-2009 in order to show the Central Asian nation, which plans to expand its hydropower programme, what it called “NT2 project’s environmental, social and engineering performance”.

Yet the Bank’s claim that it has “amended its safeguard provisions” to deal with environmental and social concerns for the NT2 has not impressed activists outside Laos. After all, critics say, Laos in a one-party state under the communist government, which barely tolerates independent criticism by local non-government organisations (NGOs).

“If local NGOs criticise the dam project, they would be penalised and they would lose their licence to operate,” says Matsumoto, echoing a concern shared by Thai, regional and international campaigners since work on the dam commenced in 2005.

The Thai government, in fact, has taken on such concerns expressed by Bangkok-based NGOs. “I keep emphasising that Thai state enterprises doing business in Laos need to be sensitive to environmental and community concerns,” Foreign Minister Kasit Piromya said Thursday following a speech on corporate social responsibility.

“I reminded EGAT that they need to be sensitive to environment and community concerns and their corporate social responsibility in Laos,” he added. “We have expressed concerns about dams.”

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