Dammed to oblivion

Some of the world's most endangered species live on the Nakai plateau in southern Laos. For generations, this remote part of a landlocked country, ignored by much of the outside world, has provided a refuge to tigers, Asian elephants, clouded leopards and gibbons.

It has also been home to indigenous peoples who have survived by subsistence farming, hunting and fishing on the Nam Theun river, a tributary of the Mekong.

But the plateau is to be destroyed in a $1.8 billion hydroelectric project, underwritten by the World Bank, that will build a 50m-high dam on the Nam Theun and flood an area the size of Singapore.

The project - likely to be one of the most controversial yet to involve the World Bank - has been sought by Laos to boost the economy by selling most of the electricity to neighbouring Thailand.

Opponents believe the dam, known as NT2, will cause irreparable environmental damage and social disruption. And they say there is no guarantee that the repressive Laos Government will honour its promise to fully compensate the many thousands of indigenous people whose homes will be destroyed and livelihoods threatened. There is also evidence that some of the tribes have not been fully consulted.

What is certain is that the decision to build the dam, after a period in the which the World Bank moved away from backing such projects, has again focused attention on the feasibility for developing countries to build their economies while safeguarding their national environments.

The outcome of the NT2 project in Laos could have global implications.

"We fear that this dam, rather than reducing poverty will only increase human misery and environmental degradation," says Ute Collier of the World Wide Fund (WWF), the Swiss-based global environmental group.

The origins of the project - approved by the World Bank on the same day that former United States Deputy Defence Secretary Paul Wolfowitz became the organisation's president - date back decades and coincide with the transformation of one of the world's last officially communist nations to a more market-based economy in the mid-1980s.

Laos, a former French colony, which gained independence in 1949, is one of Asia's poorest countries with a per capita GDP of as little as $450. About 80 per cent of the working population is employed in small-scale agriculture and large areas have not been cleared of landmines deployed by the United States in the Vietnam War.

The Laos authorities hit on the idea of using one of the country's few abundant resources - rainfall - and developing a hydroelectricity scheme to produce energy for export.

It is envisaged that more than 90 per cent of the 1070 megawatts (MW) of electricity from NT2 will be exported to Thailand in a deal with the Government in Bangkok. The scheme will also produce around 75MW for Electricite du Laos, the domestic power company.

In compensation, the deal's backers believe Laos will earn up to $2.8 billion over the next 25 years, a percentage of which has officially been set aside for helping the poorest of the country's 5.6 million people.

"We have spent the best part of a decade studying the project and evaluating the risks," says James Wolfensohn, the World Bank's outgoing president. "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.

"Laos has an average income of less than a [US] dollar a day and children still suffer malnutrition and too many young people receive little or no formal education.

"But to get out of this poverty trap, the country has few options for generating income. Essentially it relies on mining, timber and hydroelectricity. We believe that a sound approach to selling hydroelectricity is the best way for it to increase the amount of money it can invest in health, education and basic infrastructure."

Peter Stephens, a bank official who has been working on the project for the past decade, says a series of safeguards had been included. The approximately 6200 people who are being relocated have been given written guarantees that they will receive new homes and compensation, an environmental protection area has been established, and a separate finance line has been worked out with the authorities to ensure transparency and allow officials to check that a percentage of the money from the dam is used on education and health projects promised by the Government.

"This is the most public advertisement of the country's investability - whether they are marketable," Stephens says. "The net outcome of not meeting its undertakings would be very much more serious for them than the short-term benefits."

Officials say the threat to the Asian elephant population has been recognised and that a leading conservation group, the Wildlife Conservation Society, has been asked to draw up plans to lessen the negative effects.

But many others who have been studying the project for a long time remain opposed to it. The World Bank received a petition signed by 153 non-governmental organisations from 42 countries urging the bank not to back the scheme. They said: "The negative track record of other dam projects in Laos and the Government's failure to transparently manage revenues and respect the rights of its people provide a strong indication that the costs of NT2 will dramatically outweigh any potential benefits." 

Shannon Lawrence, a spokesman for the United States-based group Environmental Defence, one of the signatories to the petition, says there are many fallacies concerning the dam, a joint venture by two Thai companies and the French power corporation Electricite de France.

Environmental Defence questions the degree of financial benefit the scheme will provide and says that between 2009, when project revenues come online, and 2020, net revenue for the Government will be only $36 to $44 million a year - about 3 per cent of total projected government revenue. Lawrence says that is not enough to "kickstart the economy".

In Thailand, environmental activists have been staging rallies outside the regional World Bank office, saying that evidence from local projects suggest the scheme in Laos will create huge problems. They say the World Bank-funded Pak Mun dam cost the Thai fishing industry $22 million in unanticipated damages.

With regard to wildlife, Surapon Dongkhae, secretary-general of WWF Thailand, says his country has seen its elephant population depleted because of the effects of two large dams west of Bangkok and construction of the Thai-Burma gas pipeline. "In Laos, it will be worse than we experienced in Thailand with elephants." The World Bank says there has been full consultation and that the views of indigenous peoples have been sought. But there is some evidence of bribery.

A report carried out for the bank by independent consultant James Chamberlain reveals that in the village of Sop Hia, officials won over the 80-year-old female chief, Nang Hay, by holding a ceremony - it included chicken and whisky - to honour her dead husband. She had been angrily opposed to the dam but after the ceremony was prepared to listen to officials about resettlement.

However, any doubts that Nang Hay or anyone else may have will be of no importance now. With the backing of the 24-member panel of the World Bank and an announcement from the Asian Development Bank that it will help, the plan to flood the Nakai Plateau is all but under way.

Government official Viyaketh Nam says that exporting energy to Thailand, and perhaps China, could be Laos's salvation. "We can be like Kuwait," he says. "Kuwait pumps oil from the ground. In Laos, we are selling power made of the water from the heavens. We will be the battery of Asia."

- INDEPENDENT