U.S. Water News Online
NAKAI PLATEAU, Laos -- In a clearing at the foot of a
limestone cliff, the Lao government and its French business partner
hope to lay the foundation for prosperity in one of the world's
If all goes according to plan, four electricity-generating
turbines will be set up in the clearing and become the heart of a
massive hydroelectric dam on the Nam Theun River, a tributary of the
The power generated in the wilderness of southern Laos would be
exported to neighboring Thailand, earning billions of dollars that
the government says could prove crucial to reducing the landlocked
country's chronic poverty and gradually reducing its dependence on
``We need this to eradicate poverty. This is the only way out,''
said Loy Chansavat, a Laotian adviser to Nam Theun 2 Electricity
Consortium, which is undertaking the $1.3 billion project.
But there is a long way to go before the dream can turn into
The main hurdle is a power purchase agreement that the consortium
must sign with the Thai government, which is expected to decide this
month whether to give approval. No date has been set for the
``That's the first key. Without a power purchase agreement there
is no project,'' said Ludovic Delplanque, spokesman for Nam Theun 2
Electricity Consortium, whose principal shareholder is Electricite de
France, one of the world's biggest power utility companies. The other
shareholders are the Laotian government and two Thai companies.
If the power purchase agreement is approved, a state-run Thai
company will be obliged to buy more than 90 percent of the power for
the next 25 years, providing $200 million annual revenues, about half
of which would go to the Laotian government.
However, a bigger hurdle is obtaining a World Bank guarantee
protecting international investors -- who would provide 70 percent of
funding -- against the political risk of investing money in a
communist country notorious for its woefully weak legal system and
The World Bank has been treating the project with extreme caution,
partly because of pressure from environmentalists and activists such
as the Canadian lobby group Probe International and the U.S.-based
International Rivers Network.
The groups warn that the project -- adjacent to one of the largest
remaining tropical forests in Southeast Asia -- would cause severe
environmental degradation, destroy fish habitats, lead to
uncontrolled logging and displace thousands of people.
They also fear that the revenue will never reach the poor, and
instead end up lining the pockets of the communist party bosses.
``Laos is an unknown quantity. In recent years, the World Bank
hasn't been able to get the Lao government to reform,'' said Grainne
Ryder of Probe International, who has been tracking the project for
Critics also claim Thailand has 44 percent surplus power and might
not be able to honor its purchase agreement commitment.
If the project takes off, it would be the biggest ever investment
in a country mired in grinding poverty and abysmal standards of
living. Life expectancy is only 53.7 years and adult illiteracy is as
high as 34 percent among men and 65 percent among women. The annual
per capital income is $290.
Ian Porter, the World Bank country director for Laos, said the Nam
Theun project ``is potentially an important opportunity for Laos to
obtain revenues to reduce poverty.''
``However, the project entails a number of risks,'' he said.
He said ``comprehensive reforms'' are needed in Laos, and the
World Bank has asked the government to show ``real progress in a
number of critical areas'' such as public expenditure management,
power sector reform and forestry.
Decades of communist rule have calcified Laos' economy and recent
attempts at free market reforms have yet to attract big foreign
investors -- foreign direct investment in 2000 was a mere $72
million. A small population of 5 million people means labor intensive
industries aren't viable, and exports are virtually nil.
The only natural resources Laos has are timber and an abundance of
rivers, which makes hydroelectricity its only viable export.
The Nam Theun 2 project envisages building a 158-foot-high dam
across the Nam Theun River, which flows atop the Nakai Plateau, a
massive flat-topped mountain.
The reservoir created by the dam would inundate a 174-square-mile
forest area that is home to about 4,500 indigenous people and about
60 species of birds and mammals.
The water in the reservoir would be channeled through a
2.5-mile-long tunnel to the edge of the plateau. From there the water
would cascade down a 1,142-foot-high vertical shaft bored through the
side of the mountain so that it falls on the turbines at the bottom.
The Nam Theun 2 Electricity Consortium says it has done extensive
studies and prepared safeguards to protect the environment, and is
prepared to generously compensate the people affected by the project.
Most of the people expected to be displaced by the reservoir are
subsistence farmers who are poor even by Laotian standards, living in
thatched huts with no running water or electricity. There are no
roads on the plateau and most transport is by foot. Even bicycles are
People survive on seasonal rice farming, vegetables grown in
riverbank gardens, forest products and fishing.
They would be moved to new wooden homes built by the consortium
and would be taught better ways of farming, as well as how to raise
pigs and poultry and grow different kinds of vegetables, said Loy,
the Laotian adviser.
The consortium would guarantee that the average household annual
income rises from $460 to $1,200 through improved farming techniques,
said Loy. He said the farmers would also have water for irrigation
year-round, unlike now when there is no farming during the dry
The consortium has set up an experimental farm on the plateau to
show that new forms of farming can be successful. Three families have
been invited to live on the farm in brand new houses.
But critics say the poor, illiterate people living on the plateau
have not been consulted and that the project is being thrust upon
them without warning them of the risks.
Several villagers seemed satisfied by the government's assurances
that their lives will improve with the dam.
``If I had a choice I would stay here, but I am happy to move
because the government says it is good for us,'' said Thouan, a
53-year-old farmer who lives in a thatch hut with his wife.
Return to the
U.S. Water News Archives page
Return to the U.S. Water
Use a comma to separate e-mail addresses:
Hi, I thought you might like to read this article.