Report l Nam Theun 2: World Bank Withdrawal Leaves Major Concerns Over Project Outcomes

Tuesday, June 19, 2018
Local port nearby Nam Thuen 2 resettlement site
Local port close to Nam Thuen 2 resettlement site
International Rivers

In January, the World Bank announced in a statement that the Nam Theun 2 Environmental and Social and Project (ESP) had closed on 31 December 2017. The ESP, a component of the USD 1.3 billion Nam Theun 2 Hydropower Project (NT2) in central Laos, was established in 2005 to manage the environmental and social impacts of the NT2 dam.

In closing the ESP, the World Bank has formally handed over responsibilities for managing the project’s impacts to the Government of Laos, the Nam Theun 2 Power Company (NTPC) and a livelihoods project financed by the Agence Française de Développement (AFD). In sharing the news of the closure, the World Bank’s statement details achievements of NT2 and lauds it as a “modern, environmentally and socially sustainable hydropower project aimed at generating power and opportunities for the people of the country.”

The celebratory tone of the statement glosses over major and ongoing misgivings regarding the NT2 project’s persistent failures to reach sustainability targets.

ESP Closure: a Contested Process
The closure of the ESP has been a fraught and contested process. NT2 led to the involuntary resettlement of 6200 indigenous peoples, and to widespread impacts to downstream communities – especially in the Xai Bang Fai river system. Livelihood restitution and downstream programs were established to manage impact mitigation in addition to the resettlement plans. In 2015 the scheduled closure of the ESP, ten years after it was initiated, was delayed an additional two years due to inability to achieve its objectives. The NT2 dam’s international environmental and social Panel of Experts (POE) has published a series of reports documenting a laundry list of concerns over challenges and failures that have prevented the livelihoods programs from producing intended outcomes. In 2014 a member of the POE, Professor Thayer Scudder, stated in a New York Times article that, "Nam Theun 2 confirmed my longstanding suspicion that the task of building a large dam is just too complex and too damaging to priceless natural resources".

The POE's approval should have been obtained before concluding the ESP. However, the December 2017 closure took place before publication of the final POE report. To date, the POE’s 27th and final report is yet to be publicly released.

The World Bank statement asserts: "this public-private partnership supplies clean energy and generates revenues for the Lao government to invest in poverty reduction and environmental programs.” However, the World Bank has not been able to ensure timely monitoring of the project’s revenue management. Documents that are critical for understanding how the project contributes to poverty reduction and environmental management - such as annual revenue reports, public expenditure tracking surveys and reviews, and audit peer reviews - have not been made public.

Findings from Project-affected Villages
Many of the assertions in the World Bank statement are also at odds with the findings of recent fieldwork conducted by Mekong Watch and International Rivers in project-affected villages following the project’s closure. In February 2018, we interviewed 18 households and groups across 8 villages relocated from the NT2 reservoir area on the Nakai Plateau and one village in the downstream area on the Xe Bang Fai River. Building on earlier research and site visits, the interviews identified multiple ongoing issues for resettled communities and those downstream.

Communities on the Nakai Plateau reported problems across each of the livelihoods pillars of the Resettlement Implementation Period (RIP), a component of the ESP. These included issues related to land, agricultural programs including cash cropping and livestock, fisheries, and off-farm and tourism related livelihoods. The villagers we interviewed also reported a lack of information transparency and knowledge about the closure of the RIP and its implications for ongoing livelihoods support. Given that many people are experiencing considerable uncertainty with respect to the long term sustainability of current livelihoods and income sources, the lack of transparency has contributed to feelings of fear and anxiety about the future for villagers we spoke to.

According to a Mekong Watch staff member who joined the research team, “While overall incomes have increased for displaced communities in the short term, our research indicates that these benefits have not been equitably distributed, and that major questions remain regarding the sustainability of income sources.

“Fish catch and income from reservoir fisheries appear to be decreasing and fishers report having to travel much further for a reduced yield. Other livelihood options are still very far from producing a sustainable living for many people. Cash crop cultivation, particularly cassava, has resulted in significant soil degradation, confirming earlier findings on the failure of the livelihood restoration program through agriculture. Insufficient and low quality land has forced some families to purchase rather than cultivate rice and may force other families to disperse.”

Villagers also reported that promised allocations of additional agricultural land have not been made and land titles for affected communities were not secured prior to the closure of the ESP. These were priority items listed in the Comprehensive Action Plan (CAP) towards the closure of the RIP. Our findings show that these and other priority items have not been achieved prior to the World Bank withdrawal. The priority items have been pointed out repeatedly by civil society observers and were highlighted in the 26th POE Report.

World Bank Withdrawal Premature and ‘Irresponsible’
“Our field research indicates that it was highly irresponsible of the World Bank and NTPC to decide on the closure of the RIP even though identified priority actions were not completed and long-term livelihood restoration has not been achieved”, says a Mekong Watch director, who has been monitoring the project. “The World Bank must evaluate the project in terms of what has not been achieved and show how these outcomes will be delivered, in order to fulfill its promise of accountability to affected communities, civil society and the public.”

The World Bank statement fails to mention any lessons or ongoing challenges with the project, raising questions over accountability and transparency, as well as the validity of the ESP closure. At the same time, the statement describes the way in which the project is being used to inform policy and capacity for the development of other large-scale projects. While the World Bank and Asian Development Bank (ADB) used NT2 to help the Lao government develop new policies and procedures for protecting people and the environment; far from being implemented, some of the policies have since been overridden or nullified. Further, our research in affected villages shows that while resettled families have better infrastructure, including access to electricity, roads, and schools, they continue to struggle due to loss of livelihoods and the means to provide for themselves. Infrastructure alone does not guarantee a sustainable future.

“The Nam Theun 2 dam is promoted as a model for ‘sustainable hydropower’ by the World Bank and others, within Laos and more widely in the region”, says Maureen Harris, Southeast Asia Program Director at International Rivers. “Given the project’s legacy of failures to achieve livelihood restoration, address and compensate downstream impacts, or ensure transparency and accountability, it is highly misleading to point to Nam Theun 2 as a replicable development model while failing to acknowledge its serious shortcomings.”

About the Nam Theun 2 Dam
The Nam Theun 2 Hydropower Project (NT2) in central Laos is a $1.3 billion project that was inaugurated in 2005 and commenced full operations in March 2010. Approximately 6,200 indigenous people living on the Nakai Plateau were resettled to make way for the reservoir. More than 110,000 people downstream, who depend on the Xe Bang Fai and Nam Theun rivers for their livelihoods, have also been directly affected by the project, due to destruction of fisheries, flooding of riverbank gardens and water quality impacts.

The Social and Environmental Project (ESP), a component of the NT2 project, was financed by the World Bank’s concessional lending arm, the International Development Association. The overall NT2 project was financed by 27 development partners and financiers, which include the World Bank Group and the Asian Development Bank. 

Media contacts: 

Maureen Harris, Southeast Asia Program Director, International Rivers +66 618902602

Toshiyuki Doi, Senior Advisor, Mekong Watch +66 869742941

More information: 

Download and read our field report: "Nam Theun 2 Hydropower Project Lao P.D.R.: Field Report, February 2018". 

Our field research also confirms the findings of USAid’s Post Approval Field Review, published in January 2018. 

A new peer reviewed book on NT2, ‘Dead in the Water: Global Lessons from the World Bank’s Model Hydropower Project in Laos’, will be released this month by the University of Wisconsin Press. The book includes contributions from 17 people who have long engaged with, and in some cases worked for, the project. The book documents a broad failure of NT2's social and environmental objectives and calls for the World Bank to acknowledge and address these problems.

Please also see Mekong Watch’s information kit on the Nam Theun 2 Project, published in April 2017, and International River’s Nam Theun 2 campaign page for additional resources and analysis of the project.