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History Repeats Itself in Laos:ADB’s Flagship Hydro ProjectGoes AwryAviva Imhof, International Rivers Network

When the Asian Development Bank approved financing for the controversial Nam Theun 2 HydropowerProject in Lao PDR in April 2005, President Kuroda confidently announced that the project “will improvethe living standards of one of the poorest countries in the region” and that the risks will be “bettermanaged by our involvement.”

Two years later, Kuroda’s bold proclamations ring hollow.Nam Theun 2’s environmental and social programs arebehind schedule, and it seems increasingly unlikely that theproject will deliver what was promised to the one in 50Laotians who will be negatively affected. Downstreamimpacts are likely to be far more severe than predicted,and the Lao government is backtracking on commitmentsit has made prior to project approval.

Roughly 6,200 indigenous people living on the NakaiPlateau in central Laos are being displaced to make wayfor the dam. The voluminous social development plan,prepared prior to approval, promises the project will tripleresettlers’ income within seven years. The plan includeselaborate livelihood models comprised of agriculture andlivestock, reservoir fisheries, community forestry and

handicrafts. However, many of the livelihood programshave proven unworkable, and the plans are beingredrafted midstream. As a result, villagers are becomingguinea pigs in a vast and risky resettlement experiment.

Take the agriculture and livestock program. Villagers werepromised 0.66 ha of irrigated land per family. Thecompany now admits that this will not be sufficient becausethe land is of poor quality. Villagers will be able to cultivateonly a small amount of rice on these plots, if any. Instead,they will focus on cash crops to sell at a market that hasnot yet been identified. The company has proposedallocating additional agricultural land in the parts of thereservoir that will be exposed during the dry season, butthe viability of this area for agriculture is unknown. Asfor livestock, the shortage of land in the resettlement area

Nam Theun 2 Dam Site. Proposed Nam Theun 2dam site on Theun River.

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frequent flooding, massive drops in fisheries, and floodedriverbank gardens beginning in late 2009. Because thereare no plans to clear the reservoir vegetation, the qualityof the water being diverted into the Xe Bang Fai couldbe extremely poor, resulting in the decimation of fisheriesand the destruction of the riverine ecology. Solid plans tocompensate Xe Bang Fai villagers and replace these criticalsources of food and income have yet to materialize.

The amount of funds available for downstreamcompensation may prove to be the largest stumblingblock. The latest Panel of Experts report states that thereis less than US$8 million available for the Xe Bang Failivelihood restoration work, and over US$1 million ofthat will be devoted to consultants. Even if we were toassume that only 75,000 people will be affecteddownstream as the company claims, the compensationand mitigation allocation for each individual would beless than US$100. This is hardly sufficient to replace lostlivelihoods, yet alone to improve living standards aspromised by the ADB.

Nam Theun 2’s failures should come as no surprise toobservers familiar with ADB-supported hydropowerdevelopment in Laos. Indeed, Lao hydropower projectshave left a legacy of destroyed livelihoods, decimatedfisheries and environmental destruction. The ADB hasbeen Laos’ most loyal dam-project funder over the pastdecade, supporting three projects in addition to NamTheun 2. These projects have negatively affected around

40,000 people, many of whom are still waiting forcompensation years after the dams were built.

The ADB claims that by financing hydropower projectsit can help ensure that the project’s environmental andsocial impacts are adequately addressed. However, theADB has failed to consistently monitor these projects post-construction, and promised mitigation and compensationmeasures have never arrived. The ADB’s failure has leftaffected people worse off after the project than before itwas built.

For example, when the Theun-Hinboun dam wascompleted in 1998, the ADB called it a “winner” with“little for the environment lobby to criticize.” But IRN’sfield investigations soon uncovered a different story.Today, the Theun-Hinboun Power Company and theADB admit that 25,000 people in 61 villages – mostlysubsistence farmers – have lost fish, rice, vegetables andfresh drinking water as a result of the dam. Some assistancewas provided, but villagers still have not been compensatedfor fish losses of up to 90 percent of their pre-projectcatch.

Even more devastating has been the additional floodingcaused by the project’s diversion of water to the HinbounRiver. Last June, villagers living along the Hinboun Rivertold IRN that they would prefer to move away ratherthan endure the severe flooding and erosion caused byTheun-Hinboun. Many villagers have abandoned wetseason rice fields because the floods have made rice

cultivation untenable. For example, priorto 1998, villagers at Ban Pak Veng alongthe Hinboun River had rice surpluses thatthey would trade for roofing, clothing,household goods and fuel. Today, not asingle family produces a surplus of ricein the village.

The ADB, under pressure from NGOs,persuaded the power company to adopta mitigation and compensation programin 2000, but as the project’s impacts haveescalated and the company’s effortsdiminished, the ADB has essentiallywashed its hands of the project.

At Nam Leuk and Nam Song, twosmaller projects that have affected

Downstream Channel. The downstream channel thatwill carry water from the powerhouse to the Xe Bang Fai

river. The channel cuts through a large swathe of ricefields and people have been inadequately compensated

for this loss of land.

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approximately 15,000 people living downstream of thedams, the ADB has promised for years to work with theLao electricity utility, Electricité du Laos, to resolve theproblems for villagers. Nam Leuk and Nam Song villagershave experienced fisheries declines and losses ofagricultural land through erosion and still suffer from alack of clean water for drinking, bathing and cooking.Finally last year, after pressure from NGOs, the ADBannounced it was allocating $250,000 to fund anEnvironmental Implementation Mitigation Plan. Whilewelcoming the ADB’s belated initiative, NGOs soondiscovered that the plan itself was flawed and the allocatedfunding was inadequate. NGOs are now working toconvince the ADB to reevaluate the plan and find additionalsources of funding for its implementation.

If the ADB is really concerned about improving thelivelihoods of some of Asia’s poorest people, it needs tore-evaluate its support for big hydropower projects inLaos and consider alternative approaches that do notundermine rural livelihoods. In the meantime, the ADBmust also strengthen its monitoring and enforcementcapabilities. Post-project monitoring is one of the weakestlinks in the ADB project cycle, and regular missions mustbe made to project sites to ensure that promised mitigationand compensation measures are implemented. The ADBmust also be prepared to put its money where its mouthis. If a borrowing country or dam company refuses tocomply with commitments made at the time of projectapproval, or refuses to ensure that affected people areadequately compensated for their losses, the ADB mustbe prepared to halt funding to that government orcompany until the problems are rectified. Only with thesemeasures can the ADB start to call itself a povertyreduction institution.

ADB Orchestrates HydropowerDevelopment in the MekongRegionBy Carl Middleton

The ADB’s support for hydropowerdevelopment in Laos has been a centralcomponent of its vision for economicintegration in the Mekong region since theearly 1990s. The ADB is promoting a regionalpower grid and electricity trading systemthrough which power from some of the mostcontroversial hydropower projects planned forLaos, China, and Burma would be transmittedto the increasingly energy-hungry cities ofThailand and Vietnam. Whilst much of thefinance for Laos’ future hydropower schemeswill come from the private sector, behind-the-scenes the ADB continues to busily promotethe Mekong Power Grid concept. It organizesregular meetings of the regional governments- to which civil society has not been invited –and offers grants and technical advice thatsupport the plan. Furthermore, the ADB is alsoplanning to support a key transmission lineproject linking Thailand to Vietnam throughSouthern Laos that, although economicallyunattractive to the private sector, constitutesan essential link in the grid and will makeviable numerous hydropower schemes inSouthern Laos.

The Mekong Power Grid plan will result inserious and wide-ranging environmentalimpacts in the Mekong basin and on the 60million people dependent on its rich naturalresources. Better solutions that areenvironmentally sustainable and sociallyresponsible do exist to meet the region’senergy needs. Demand side management andenergy efficiency measures could beintroduced to significantly reduce the need forenergy in Thailand and Vietnam. Economicallyfeasible, sustainable options to meet newdemand include renewable decentralizedenergy, co-generation, and repoweringexisting power plants. Civil society groupshave called on the ADB to promote sustainableenergy plans for the Mekong Region ratherthan continue to support the flawed and out-dated Mekong Power Grid plan. A first stepshould be to conduct a Comprehensive EnergyOptions Assessment for the region in-line withthe recommendations of the WorldCommission on Dams.

Aviva Im

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etwork Construction on NT2 dam, June 2006