Nam Theun 2: The World Bank’s narrative of success falls apart

Bruce Shoemaker, Ian G. Baird and Kanokwan Manorom

Nam Theun 2 confirmed my longstanding suspicion that the task of building a large dam is just too complex and too damaging.”

-- Dr. Thayer Scudder, New York Times, 24 August, 2014.

This past August, Dr. Thayer Scudder, a renowned expert on the social and environmental impacts of dams and a prominent member of the Panel of Experts that monitored the Nam Theun 2 hydropower project, openly critiqued this World Bank showcase project. He described Nam Theun 2 as having failed to meet its social and environmental goals, and called it his “final disappointment” in a long career of trying to make large dam projects work better. His words resonated with environmental, social rights and indigenous peoples’ rights groups that have been monitoring the dam’s development in Laos for nearly two decades. 

The World Bank approved support for the dam in 2005, which made it possible for other agencies, including the Asian Development Bank, to come forward with financial backing for the dam. Completed in 2010, the US$1.45 billion project is owned by the Nam Theun Power Company (NTPC), which is a consortium jointly owned by French and Thai companies and the Lao government. Almost all of the electricity generated is exported to Thailand.

World Bank’s Model Project

The World Bank has tirelessly promoted Nam Theun 2 as its flagship large-scale hydropower project. The Bank’s strategy features an attempt to re-package lending for controversial hydropower dams by labeling them “poverty alleviation” and “green energy” projects. The Lao government’s portion of revenues from the sale of hydropower is supposed to be used for nationwide poverty alleviation programs. In addition, one million dollars annually is specifically allocated for conservation programs. However, the concerns raised by social justice and environmental advocates – including the involuntary resettlement of more than 6,300 mainly indigenous peoples to make way for the dam reservoir, biodiversity conservation in the an adjacent National Protected Area, and downstream impacts in the Xe Bang Fai River basin, where more than 150,000 people have livelihood links to the river – are compounded by the fact that Laos is one of the most politically intolerant and corrupt countries in the world. 

In early 2011 the World Bank published a book titled Doing a Dam Better, about its involvement in the development of Nam Theun 2. Written shortly after commercial operations had commenced, the book’s publication was connected to an extensive public relations campaign. This included blogs and websites, promotional films, press releases, and the employment of full-time public information officers. Critical inquiries were dismissed as misinformed. Meanwhile, the lack of independent media and strict limits on civil society in Laos have made it challenging to refute these arguments, conduct detailed independent research, or begin community organizing efforts. Thus, Nam Theun 2 proceeded without the type of close in-country public scrutiny – or open opposition – that may have accompanied the development of such a large-scale project in neighboring Thailand. This has worked in the World Bank’s favor, allowing the storyline that the dam represents a new model capable of overcoming the social and environmental challenges, while helping to bring in essential revenues to alleviate poverty. 

Nearly ten years later, the World Bank has continued to showcase the project. In 2013, the dam’s purported success was referenced as justifying the Bank’s further re-engagement in large-scale hydropower projects in Africa and Asia.

In justifying its support for NT2, the World Bank claimed its involvement would lead to improvements in local livelihoods and biodiversity conservation in the area. It lauded what it claimed was an unprecedented participatory and transparent consultation and monitoring process. Key to project monitoring was the International Social and Environmental Panel of Experts (POE). The POE’s monitoring role, and issuing of annual public reports, was considered by many to be an important and innovative aspect of the project and particularly important in Laos, which lacks independent local civil society, media or other monitoring mechanisms. 

Narrative of Success Collapses

Families living downstream of NT2 have experienced a severe decline in food security
Families living downstream of NT2 have experienced a severe decline in food security
Tanya Lee

Four years after NT2 commenced operation, an increasing body of evidence has developed that directly challenges the purported successes of this project. The POE’s most recent report, published in May 2014, reveals that it is not just Dr. Scudder but the entire POE (other members include Dr. David McDowell and Dr. Lee Talbot) have developed substantial criticisms of multiple aspects of the project.  

In regards to indigenous communities resettled from the reservoir area, their status falls far short of minimum expectations outlined by the World Bank. According to the most recent POE report, while much infrastructure (roads, schools, clinics, etc.) has been built in association with NT2, “important problems remain” with each of the five “livelihood pillars” that were to be the basis of improved sustainable livelihoods for resettlers. The village forestry component, originally expected to generate a third of villager income, is particularly problematic and “the sustainability sought in the Concession Agreement is a remote prospect.” While the POE makes a number of recommendations in regards to improving these livelihoods programs, it also notes that these programs are to be handed over to the Lao government in early 2015. Without further support from NTPC, it is very likely many of these programs will not be continued, much less be improved upon.

The POE is scathing in its description of the failure of the agency meant to implement the conservation work in the national protected area adjacent to NT2, the Watershed Management and Protection Agency (WMPA), noting its “manifest failure in its present form to carry out the fundamental task of protecting the watershed’s biodiversity.” Planned foot or motorcycle paths in the protected area, meant to facilitate patrols, instead turned into wide roads that allow trucks to pass and facilitate illegal logging and wildlife poaching. Recent audits of the WMPA found extensive financial and operational irregularities. The POE notes that a main exchange point for illegally cut lumber is located only 200 meters from an NTPC guard post at the main gate to the dam. The level of corruption and poor governance is so high that the POE is calling for the WMPA’s complete dismantling and restructuring.

Significant negative impacts to local livelihoods have also occurred in downstream areas. A downstream program for 150 impacted communities in the Xe Bang Fai basin was quickly terminated and handed over to the Lao government at the beginning of 2013 when the allocated funds ran out prematurely. While the World Bank was supportive of this early handover, the POE was not and subsequently criticized the move. 

In January 2014, we conducted an independent study of communities in the Xe Bang Fai River basin, mainly downstream of where water is diverted from the Nam Theun River via a 27 km long canal from NT2’s reservoir into the Xe Bang Fai River. Our objective was to revisit the areas where, before NT2 was built, two of us had helped conduct an in-depth rivers-based livelihoods study that documented the essential livelihood links local people had to their river. We visited many of the same communities and met some of the same people we had first interviewed 13 years earlier, allowing us to assess how the project has changed the lives of the people and the environment in the area. 

Our extensive interviews with villagers and observations of the river confirmed many of the POE’s concerns, and also revealed some additional problems. Many of those impacted by the dam reported that they have been left worse off by the project. Villagers have suffered a dramatic drop in wild fish catches, excessive flooding of low lying rice fields during the rainy season, a loss of riverbank gardens, and other impacts associated with major hydrological and water quality changes. Compensation programs were rushed, and many initiatives were either inadequate or inappropriate. In the view of most villagers, the compensation provided by the dam developers has not come close to making up for the livelihood losses they have suffered. Women, indigenous and poor communities have been particularly impacted, as they often lack the resources to shift to other livelihoods. Key aspects of the now-terminated compensation program, such as dry-season irrigated rice cultivation, have fundamental environmental and economic problems, and have certainly not made up for the livelihood losses of impacted communities. Many villagers express a fear of openly criticizing the project or the compensation program. Almost nobody we spoke to was aware of a functioning grievance process, even though the World Bank and the project developers have boasted about such a system being in place.

The POE notes that the Lao government has been very reluctant to allocate revenues to assist those who have been negatively impacted by NT2. Evidently, the World Bank’s idea that there would be genuine benefit-sharing has not become a reality. 


As evidence mounts of the failure of Nam Theun 2 to achieve its social and environmental objectives, it is increasingly clear that the self-congratulatory tone of the World Bank’s public relations campaign was overly optimistic. It is time for the World Bank to examine how to best address the serious problems caused by the project, including restoring the negatively impacted livelihoods of well over 100,000 people, rather than blindly persisting in promoting NT2 as a positive model of success. 

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  • Bruce Shoemaker is an independent researcher focused on natural resource conflict issues in the Mekong region. Ian G. Baird is a professor of geography at the University of Wisconsin-Madison. Kanokwan Manorom is a professor of sociology at Ubon Ratchathani University, Thailand.