by Aviva Imhof, International Rivers Network

The World Commission on Dams (WCD), an independent body sponsored by the World Bank and IUCN, released their final report, Dams and Development: A New Framework for Decision-Making, in London in November 2000. In its report, the Commission proposes criteria and guidelines for future planning of energy and water projects. The World Bank has stated that it will use the report "as a valuable reference to inform its decision-making process when considering projects that involve dams." It is with this statement in mind that the following analysis has been prepared.

Nam Theun 2 is the largest and most controversial of all the hydropower projects planned for Laos. Situated in Khammouane Province in central Lao PDR, and only 50 km upstream from the already completed Nam Theun-Hinboun Hydropower Project, the $1.1 billion BOT (Build-Operate-Transfer) scheme is being developed by three companies in association with the Government of Laos (GoL). The project is currently stalled awaiting a power purchase agreement with the Electricity Generating Authority of Thailand (EGAT), a concession agreement with the government, and a decision from the World Bank on whether to grant guarantees and other financial assistance to the project.

In 1995, the Bank was formally approached for assistance from the Nam Theun Electricity Consortium (NTEC), the consortium formed to develop the project. Commercial lenders have said that they will not finance the project without a political risk guarantee from the World Bank. The World Bank is expected to make a decision in the coming year on whether or not to grant the guarantee and other assistance to the project.

An analysis of Nam Theun 2's compliance with the WCD's seven strategic priorities shows that the project fails to comply with six of the seven strategic priorities outlined in the WCD report. On this basis, it is recommended that the World Bank refuse guarantees and other assistance for Nam Theun 2, and immediately work on alternative plans for conserving the watershed area and ensuring that the 4,500 people living on the Nakai Plateau have adequate sources of livelihood.

Strategic Priority 1 - GAINING PUBLIC ACCEPTANCE

The overall thrust of the WCD's approach is that there needs to be a fair, informed and transparent decision-making process. For such a process to exist, there must a well-developed civil society, access to independent sources of information, and the ability for local people to have informed input into the process without fear of retribution. Unfortunately, such a political climate does not exist within Laos. There is no independent media within Laos, and no independent local NGOs, human rights or environmental groups. The legal system is at a rudimentary stage of development and there is no independent judiciary. In such a political climate, it is difficult to see how a truly open and participatory decision-making process could take place.

Three main groups of stakeholders are affected by the Nam Theun 2 dam. According to the WCD, all three groups must give their agreement to the project. Nearly 5,000 indigenous people living on the Nakai Plateau will be resettled to make way for the dam and must give their free, prior and informed consent to the project. Numerous public consultations have occurred with communities living on the Nakai Plateau. However, the processes that have taken place thus far cannot be considered to be compatible with the concept of free, prior and informed consent as defined by the WCD and international human rights conventions. The decision to build the dam was made and logging had commenced well before those affected were involved in any participation processes, affected communities had no access to independent legal or other professional support, and most of the consultations were in the context of improving resettlement outcomes, rather than on whether the project was appropriate or not.

More than 50,000 people living along the Xe Bang Fai will be affected by increased water flow in the river. Most of these people have not even been consulted about the project, let alone given their consent or agreement to it.

The Lao population as a whole is affected by the risks assumed by the government on the project, in terms of debts incurred and the environmental and social impacts of the project. There has been no meaningful public participation process or open and informed debate amongst Lao society as a whole.

Strategic Priority 2 - COMPREHENSIVE OPTIONS ASSESSMENT

The World Bank has been promoting the dam as an income generator for Laos since 1986. Yet no comprehensive assessment of alternatives to hydropower as a means for generating foreign exchange has ever been completed for Laos. Given the current oversupply of power in Thailand and changes in the energy market in Thailand, Nam Theun 2 could not be considered the best option for meeting Thailand's energy demands. It is also difficult to see how it could be the best option for generating foreign exchange for Laos, or for protecting the watershed area and the livelihoods of communities living on the Nakai Plateau. Better and cheaper alternatives for achieving these objectives have never been assessed.

Strategic Priority 3 - ADDRESSING EXISTING DAMS

WCD guidelines stipulate that outstanding issues with existing dams be rectified before additional dams are built in the same river basin. The Nam Theun-Hinboun dam, 50 km downstream of the proposed site of the Nam Theun 2, was funded by the Asian Development Bank and completed in 1998. Theun-Hinboun has had a severe impact on the livelihoods of more than 25,000 people living downstream and upstream of the dam, including decline in fish catches of between 30-90%, the destruction of vegetable gardens and dry-season drinking water sources, loss of fish nets and increased difficulties with transportation. However, despite sustained lobbying by NGOs and numerous promises from the ADB, adequate compensation has still not been provided to affected communities.

If the Government of Laos, the ADB and the Theun-Hinboun Power Company cannot ensure that Lao citizens negatively affected by Theun-Hinboun dam are adequately compensated for their losses, then it is difficult to see how the World Bank can ensure that the many thousands more people who will be affected by Nam Theun 2 will not be worse off as a result of the project.

Strategic Priority 4 - SUSTAINING RIVERS AND LIVELIHOODS

The WCD states clearly that there must be good baseline information gathered over several years before a decision to build the dam has been taken, and that dams should provide for environmental flow releases to help maintain downstream ecosystems.

One of the major concerns is the impact of Nam Theun 2 on the fisheries of the Theun, Mekong and Xe Bang Fai Rivers, which sustain the livelihoods of more than one million people in central Laos The paucity in data and research thus far makes it difficult to predict just how serious the impacts of the project on fisheries, and therefore on communities' livelihoods, are likely to be. Baseline information and scientific knowledge of the riverine ecosystem gathered over several years is lacking, and a cumulative impact assessment has never been completed.

Downstream of the dam, NTEC have guaranteed a minimum release of only 2 cubic meters per second, between one-tenth and one-hundredth of the water volume naturally available in the Nam Theun. This could not possibly be considered sufficient to maintain downstream ecosystem integrity as recommended by the WCD.

Strategic Priority 5 - RECOGNISING ENTITLEMENTS AND SHARING BENEFITS

The WCD states that the risks for all people affected by the project should be assessed prior to the project being approved. The risks for the thousands of people living along the Xe Bang Fai who are expected to lose their fisheries and other livelihoods has never been assessed as part of the project's risk assessment. These "involuntary risk takers" have been provided no opportunity to participate in decisions affecting their lives. The WCD also requires that all adversely affected people negotiate formal and legally enforceable agreements. This has never occurred at Nam Theun 2.

Strategic Priority 6 - ENSURING COMPLIANCE

In project preparation, the World Bank has had problems ensuring compliance from the Lao government on key issues such as logging. Despite World Bank stipulations to the contrary, the Nakai Plateau has been heavily logged and logging has occurred in the community forestry areas designated for the resettled communities. If the World Bank is unable to ensure compliance with conditionalities imposed prior to project approval, it is difficult to see how they will be able to ensure compliance once money and guarantees have been disbursed and the project is under construction.