Poverty-stricken Laos looks to dam for salvation

NAKAI PLATEAU, Laos, Dec 1, 2002 - As barefooted, half-naked children and foraging pigs run circles around him, Siphouan Syphachanh, the headman of Sop Phene village in central Laos, yearns for an end to his hand-to-mouth existence.

"Our annual household income is not even one million kip (95 dollars). We have no electricity, no medical care and our rice fields are only good for three months a year because we have no water pump," the 48-year-old said.

Living high on the Nakai Plateau, some 250 kilometres (155 miles) east of the capital Vientiane, he says his hopes for a more prosperous future rest with the construction of the long-delayed and controversial Nam Theun 2 hydro-electric power project.

At an estimated cost of 1.3 billion dollars, the scheme is billed by its French-led consortium of investors as an opportunity for Laos to kick-start its economy and reduce widespread poverty.

But opponents of the project, mobilised by the International Rivers Network (IRN), a US-based non-governmental organisation (NGO), contend it could have a disastrous impact on local communities and the environment.

"Despite claims that Nam Theun 2 will alleviate poverty, it will instead impoverish thousands, saddle the Lao government with more debt and devastate tropical river eco-systems upon which so many depend for their livelihoods," said Aviva Imhof, director of the IRN's Southeast Asia programme.

Around 5,700 people, mainly ethnic Bor whose villages lie on the proposed site of the 450 square-kilometre (174 square-mile) reservoir, will have to be relocated elsewhere on the heavily-logged plateau if the project goes ahead.

Siphouan says most villagers are undaunted by moving as far as five kilometres away from their existing settlements.

"We don't mind shifting because we have been promised pumped water, new houses with gardens, training in growing new crops, schools and most importantly better access to public health facilities."

The compensation commitments were made by the Nam Theun 2 Power Company (NTPC), set up in August to build and operate the dam under a 25-year concession, after which it will be turned over to the Lao government.

It has also pledged to provide one million dollars annually over the same period to fund the management of a 4,000 square-kilometre area of pristine rainforest, home to endangered elephants and tigers, along the eastern edge of the reservoir.

Preceded by a 6.5 million-dollar contribution to preserving this mountainous region bordering Vietnam, the fund will be managed by the government-run Watershed Management and Protection Authority.

Vientiane-based development experts have applauded the commitments, but stress implementation is the key.

"There is no guarantee they will be carried out properly, but the preparation has been very thorough," said Latsamay Sylavong of the World Conservation Union, a global grouping of NGOs and government agencies.

Given its poor track record, attention will be most heavily focused on the secretive, communist Lao government to ensure it does not squander the estimated two billion dollars in revenues the state will accrue from the project over 25 years.

"There are strong elements of corruption and a general unwillingness to take strong decisions on political governance in the regime," said one western diplomat on condition of anonymity.

"The international community would like to see this be a major boom for development in this country," he said. "What it doesn't want to see is this money being diverted into people's pockets. That would be a travesty."

Faced with continual delays since a consortium was formed in the mid-1990s, initial plans for the Nam Theun 2 project were shelved due to funding problems triggered by the 1997 Asian financial crisis.

New partners were brought in and today Electricite de France International, an arm of the French state-owned utility, holds the majority 35-percent stake in the operating company.

Electricite de Laos and Thailand's Electricity Generating Public Company each have a 25-percent share, with the Italian-Thai Development Public Company holding the remainder.

Under a Thai-Lao power purchasing agreement, which could be finalised later this month, the plant will deliver up to 995 megawatts of electricity to Thailand each year to meet rising industrial and consumer demand.

A further 75 megawatts will be channelled annually to power the Lao national grid.

The scheme is being financed by a combination of equity by the shareholders (30 percent) and international loans (70 percent).

Construction is expected to begin in early 2004 and the plant slated to be fully operational in the second half of 2008.

But nothing can move forward without the green light from the World Bank in the form of a partial risk guarantee for international lenders, covering more than 100 million dollars should anything go wrong.

"Quite simply, the bottom line is that without their backing it will not go ahead," said NTPC spokesman Ludovic Deplanque.

Under intense pressure from international conservation groups, the World Bank has laid down a series of social and environmental obligations and safeguards that must be met before it accedes.

No decision is expected until after the bilateral purchasing agreement is signed, but industry experts believe the project is likely to win the bank's seal of approval, a fact acknowledged by the IRN.

"The World Bank, with its long history of supporting destructive dams, is poised to support yet another disaster," said Imhof.

The project will dam the Nam Theun River, which flows across the plateau before merging into the Mekong River, Southeast Asia's largest river.

Water from the resulting reservoir will then be channelled to a power station, equipped with four 250-megawatt turbines, at the foot of the plateau.

From there it will be diverted into the Xe Ban Fei River before it joins the Mekong further downstream.

The NTPC admits the water flow from the plant will widen the riverbanks of the Xe Ban Fei by around 10 metres and boost water levels by as much as four metres, swamping gardens and depleting fish stocks.

But it has pledged to stop releases from the power station during peak flood periods to avoid increased downstream flooding.

"The entire project is ringed by checks and balances," said Deplanque.

Conservationists concede Nam Theun 2 could be a blueprint for other hydro-electric power schemes both in Laos and around the world.

"If the mandate and promises are properly implemented it may well be a model hydro-power plant. If they aren't, it will be another dam disaster," said one Vientiane-based aid worker.

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