World Bank Moves Forward on Nam Theun 2: Project’s Ability to Reduce Poverty Still in Question

International Rivers
Friday, January 28, 2005

The World Bank announced today that it is beginning appraisal of the proposed US$1.3 billion Nam Theun 2 Hydropower Project in Lao PDR.

This decision marks an important milestone and indicates that World Bank Management intends to bring the project before the World Bank Board of Directors soon, likely by the end of March.

Technical reviews commissioned by International Rivers and Environmental Defense have revealed serious flaws in the project’s environmental impact assessment and social development plan which call into question the project’s viability and scale of impact.

"It is alarming that the World Bank is moving to appraise Nam Theun 2 when so many gaps in project analysis remain. Considering the project’s size and scope, it is shocking that a rigorous analysis of potential impacts and clear, feasible plans for compensating affected communities still do not exist," said Aviva Imhof, East and Southeast Asia Program Director for International Rivers Network.

The technical reviews reveal that project documents lack critical information and analysis, and the plans for compensating affected villagers have a high likelihood of failure. The project would forcibly displace 6,200 indigenous people and impact more than 100,000 villagers who depend on the Xe Bang Fai River for fish, agriculture and other aspects of their livelihood.

"The Lao government does not have the capacity or political will to effectively manage the revenue from the project or mitigate the impacts on tens of thousands of people’s lives. Even the IMF admits that Lao government capacity is a constraint to ensuring good revenue management in Laos. Past hydropower dams have left a trail of devastation in their wake. Yet instead of drawing lessons from these projects, the World Bank is relying on blind faith that Nam Theun 2 will be different," said Ms. Imhof.

"We hope that the members of the World Bank Board of Directors will recognize that Nam Theun 2 will not contribute to poverty alleviation in Laos, and therefore should not be considered for World Bank support at this time," Ms. Imhof concluded.