Laos dam controversy

5 April 2001

World Bank Asia region staff are currently considering whether to move the Nam Theun 2 dam, Laos, to “pre-appraisal stage”. As this is a very controversial project, this decision would have to be taken by the World Bank’s Board.

The Bank has been asked to provide a partial risk guarantee for commercial banks to lend support to a private dam-building consortium. But a number of independent organisations have raised concerns about the project’s viability, particularly in view of the continuing lack of reliable forecasting of demand for the project’s electricity which is supposed to be sold to Thailand.

Thai electricity reserves currently stand at more than 40 per cent of demand and the effects of the introduction of the power pool system into Thailand are uncertain.

Projections of economic benefits for an earlier Asian Development Bank-funded dam project in Laos proved false due to changes in the timing and price of electricity sales and the depreciation of the Thai currency, the baht.

Given the environmental damage which Laos would sustain as a result of Nam Theun 2 the NGOs, including TERRA, based in Thailand, called on the Bank to incorporate the recommendations of the World Commission on Dams into its decision-making. These include genuine negotiations with all stakeholders and the release of all project-related studies. NGOs are planning to release a review of the contradictions between the Dams Commission guidelines and Nam Theun 2.