Time Running Out on Nam Theun 2 Dam

With a capacity of 1,070 megawatts and a price tag of $1.45 billion, the Nam Theun 2 Dam in Laos is the biggest hydropower project that the World Bank has approved in more than ten years. A large reservoir and the diversion of the Theun River into another major river will affect more than 100,000 people, and the project’s benefits are unlikely to reach the country’s rural poor.

Ever since Nam Theun 2 was approved in March 2005, Shannon Lawrence, our brave Lao Program Director, has closely monitored implementation of the project. She has visited the project region on a half-yearly basis, met with affected people, dam builders, government officials and financiers, and brought back stories of repeated World Bank policy violations and broken promises.

In late February, Shannon Lawrence published her latest trip report about the Nam Theun 2 Project. She found that dam construction is going ahead on schedule, but the social and environmental mitigation programs are not. All the people living in the reservoir area, which is due to be flooded in June, have been moved, but many still don’t have permanent housing. Those who do have new houses have no means of earning a sustainable income in the years to come. And the measures to address the serious impacts on the people living downstream of the dam are completely inadequate. “Villagers, particularly those living downstream, are not ready to face Nam Theun 2’s impacts,” Shannon concluded after her visit.

In the past, the World Bank and the Lao government have repeatedly dismissed the warnings of International Rivers. The Bank has painted Nam Theun 2 as a socially and environmentally beneficial project, and has entitled its forthcoming book about the project, “Doing Dams Right”. In its response to our latest trip report, the Bank adopted a more somber tone. “It is important to understand that this project is enormously complex”, its country manager Patchamuthu Illangovan said on February 27. “There have been challenges in making sure the social and environmental aspects progressed at the same rate as the construction.” And the Bank’s latest Interim Progress Report on the project of February 28 states: “The challenges of implementing the unprecedented range of commitments associated with the NT2 project are formidable, particularly in a capacity constrained environment.”

The World Bank’s new modesty regarding Nam Theun 2 is welcome. Yet time is running out on the project. If the project developers go ahead with their plan to close the dam gates by the middle of this year, the people living downstream will face serious impacts in 2009. Shannon’s trip report lists 14 specific measures that need to be taken before the dam gates are closed. The Bank’s Interim Progress Report also puts forward three “benchmarks” and three other “measures of performance” which “have to be met for reservoir impoundment to commence”.

At this critical stage, the independent Panel of Experts which regularly monitors project implementation has an important role to play. According to the project’s Concession Agreement, the Panel of Experts – consisting of David McDowell, Thayer Scudder and Lee Talbot – must certify that resettlement infrastructure is in place before giving the green light to the company to close the dam gates.

In its latest report of September 2007, the Panel of Experts expressed concern “about ongoing delays in implementing the necessary livelihood activities and the risk that resettler living standards will drop following reservoir impoundment” (pp. 9f). Its report puts forward 27 specific recommendations and a timetable. A long list of measures, including livelihood programs for the affected people, is to be undertaken by February 2008. Shannon Lawrence’s report shows that these measures continue to be delayed, and that mitigation programs continue to lag behind dam construction.

Under public pressure, the World Bank has established an unprecedented monitoring program for the Nam Theun 2 Project. The Panel of Experts just returned from its latest field visit, and is expected to report back about the current status of implementation soon. According to the Bank, the Lao government and the private project developer are currently “continuing to consult with the POE on the findings of its visit”. The Panel is under a lot of pressure from the government and other interested parties right now. Will it insist on compliance with the social and environmental provisions of the project’s Concession Agreement, or will it give the green light to reservoir filling? At this critical juncture, the Panel's credibility is on the line.

Peter Bosshard is the Policy Director of International Rivers. His blog appears at www.internationalrivers.org/en/blog/peter-bosshard