UPDATE: Asia ; World Bank approves controversial
giant dam in Laos:
3 Hour,13 minutes Ago
[Asia News] WASHINGTON : The World Bank decided to support
and guarantee a US$1.2 billion hydro-electric project in Laos after 10 years
of deliberations on the controversial venture, officials said.
The Washington-based bank's 24-member executive board gave the
landmark decision despite warnings by environmental and other groups about
various risks associated with the 1,070-megawatt project.
It is the first major hydro power project approved by the bank
in a decade and the first venture following a 2000 watershed report by the
independent World Commission on Dams setting criteria for big energy and water
projects.
"We have spent the best part of a decade studying the project
and evaluating the risks," said bank president James Wolfensohn, making
probably his last major decision before handing over the helm to Paul Wolfowitz,
the deputy US defence secretary.
"Our decision, after a lot of deliberation, is that the risks can be managed;
in fact, one major reason we are involved is to help manage those risks,"
Wolfensohn said.
Known as the Nam Theun 2 hydroelectric project, it is the biggest
single project undertaken in Laos.
*NAM THEUN DAM: The World Bank's
Watershed Decision*
03.30.05
by David F. Hales
(Note: This article will be featured in the May/June 2005 issue
of World Watch magazine, to be released next month.)
For
the last thousand years, as kingdoms and countries have fought for sovereignty
over Laos' Nakai Plateau, the people there have learned the lessons of the
grasses--to bend before the wind. Life has been relatively predictable, marked
by continuity from one generation to the next. But the winds of change are
blowing again, and this time the strategy of the grasses may not work. By April,
the countries on the governing board of the World Bank will consider a proposed
high dam on the Nam Theun River. Their decision will not only affect those
who live here, but will also set a pattern for decisions regarding hydroelectric
dams around the world for years to come.
The
Nam Theun 2 dam (NT2) (click for background
on the NT2 ) is a project of the Lao People's Democratic Republic (PDR),
in partnership with Électricité de France, the Electricity Generating
Company of Thailand, and Ital-Thai Development Public Company (jointly, the
Nam Theun 2 Power Company Limited, or NTPC). The US$1.3 billion, 1,070-megawatt
project would divert 93 percent of the Nam Theun's flow into the adjacent Xe
Bang Fai River basin, generating power for Thailand's electrical grid. It would
also submerge nearly 40 percent of the Nakai Plateau beneath a 450-square-kilometer
reservoir, drastically alter the character of two rivers, displace thousands
of desperately poor residents, and disrupt the livelihoods of tens of thousands
more, among the other transformations typical of such hydropower projects.
The initial concept was promising. Laos is painfully poor, with
few development options. Early estimates understated the number of displaced
people and ignored the impacts on those who live downstream, especially on
the Xe Bang Fai, so compensation and resettlement seemed manageable. Thailand
seemed to need the power, the engineering is not difficult, and the plan included
an attractive conservation component.
What has emerged, however, is much less promising. As documents
have been made available and proponents have made their case in public, the
inadequacy of the preparation and the lack of response to fundamental questions
is surprising, especially after the heavy investments of staff at the World
Bank to assist the Lao PDR and its partners to develop a coherent proposal.
Proponents admit that no comprehensive analysis of alternatives to the project
has been done. They have refused to disclose NT2's financial framework (the
Concession and Power Purchase Agreements), despite the urging of Bank officials.
They are unprepared to document the overall cost of the project, or even the
cost of construction. After 15 years of preparation, NTPC calls the proposal
"not a fixed package" and insists that it will be responsible "no
matter what the cost is."
All parties agree on the need for development in Laos. Yet Laos
and NTPC provide few specifics on how NT2 will contribute to this goal. The
"strategy" for managing project revenues to alleviate poverty and
protect the environment is said to be still "emerging." No revenue
management plan has been finalized, nor are there specific measures to ensure
good project management and oversight, transparency of finances, or accountability.
At best, the World Bank estimates, the revenue to Laos from this
project will not exceed $250 million (net present value) over the 25-year life
of the Concession. These revenues are largely deferred and will not exceed
5 percent of Lao governmental revenue until at least 2020. If revenue sags,
if expenses increase, if implementation is as poorly managed as development,
if funds are diverted--then benefits to the poor become diminishingly small
and risks intolerably large.
The future with the dam has been described to those who have been
contacted as one of new homes with electricity, new opportunities for irrigated
and mechanized agriculture, a diverse economy with reservoir fishing replacing
reliance on river fishing, aquaculture replacing capture fishing along the
Xe Bang Fai, and intensive livestock raising replacing the traditional extensive
grazing pattern. This vision may have been plausible--if the developers had
conducted good scientific studies, developed accurate information about resource
baselines, and objectively assessed investments necessary to compensate the
villagers. But the hard work and serious investment necessary to make the project
a success has mostly not been done.
Government professionals from more than a few countries who are
trying to assess the project are nonplussed by the lack of project documentation
in critical areas and the poor quality of what is available. There are literally
no hydrological data available from NTPC, for example. Claims that there are
adequate flows to generate enough power for the project to make money are only
slightly more believable than the assurances regarding the risks of downstream
flooding. The promises about aquaculture ignore inconvenient facts: only one
species of fish to be found naturally in either river basin has been cultivated
successfully, and there is a serious risk that introduction of non-native species
could have devastating impacts on native ecosystems. Even if the invasive-species
problems can be solved, there is no local source of nutrition for farmed fish.
The NTPC posters show tractors and irrigated land--but the company's
own Social Development Plan states that the use of tractors generally should
be avoided throughout the resettlement area due to "heavily leached and
infertile" soils, which are explicitly described as "poorly suited
to crop production." Without significant inputs of organic and inorganic
fertilizer, financially viable agriculture will be impossible. NTPC plans to
help pay for fertilizer for only three years.
New fishing opportunities are promised to replace lost ones, even
though the Nam Theun basin is so shallow that dam operations will shrink the
reservoir by as much as 80 percent during the dry seasons and many experts
predict that there will be no substantial reservoir fishery. The claim that
the loss of fisheries due to increased water flows in the Xe Bang Fai will
be replaced by increased fisheries in the river's tributaries is contradicted
by project documents that foresee a collapse in the aquatic food chain.
Although
detail can be piled upon detail, one conclusion is inescapable. This is exactly
the kind of project proposal that the safeguard procedures of the World Bank
and the Asian Development Bank are designed to prevent. The risk of further
impoverishment of the people, of corruption and mismanagement, and of financial
failure of the project is just too high. If Nam Theun is approved, with its
inadequate and incomplete documentation, it is hard to imagine a project that
would not be. The World Bank will have written a brand new definition of "blank
check."
The Bank seems to grasp what is at stake. It has announced a decision
framework for Nam Theun stating that the project must be embedded in a development
framework aimed at poverty reduction and environmental conservation; must be
technically, financially, managerially, and economically sound and adhere to
the Bank's environmental and social safeguard policies; and must have understanding
and support within the international donor community and civil society. In
a background paper for an informal Bank governing board meeting in November
2004, senior Bank staff identified in detail the serious flaws in the proposal
and concluded, "The project's ability to have a positive effect... cannot
be ensured without major reforms in governance, sufficient progress on human
development and natural resources management, and compliance with the Bank's
safeguards policies." The necessary changes should, of course, be agreed
upon before any decision is made. But even if they are, the Bank understands
that the risks are so significant that it is pursuing an unprecedented agreement
with Laos and key donor governments stipulating that any failure by Laos to
abide by its obligations would jeopardize all external support.
NTPC needs the financial backing of the World Bank and the Asian
Development Bank. But the dam is a critical test of the World Bank's own policies
(as well as a direct challenge to the recommendations of the World Commission
on Dams). Bank officials should release a detailed analysis of how the proposal
meets its fundamental standards, and the governments represented on the board,
which will make the final decision, should also be fully transparent with their
own assessments of compliance. Finally, legislatures should insist on hearing
the positions of their governments in public session, in advance of consideration
at the Bank.
It is time that the Bank board makes clear its position on massive
hydroelectric projects. NT2 will be the example others follow.
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