Since the late 1980s, the
Lao People's Democratic Republic (Lao PDR) has been instructed by
advisors from the World Bank, Asian Development Bank, United
Nations Development Program and bilateral western donors that it
has no option but to develop its hydropower resources and sell the
power to Thailand. These advisors, coupled with hydropower
industry consultants, have promised huge influxes of foreign
exchange that will help fuel economic development in the country.
Many people are concerned
that the dependence of Lao people on their rivers for all aspects
of their lives � including for fish, fresh water, irrigation and
fertilization of crops, transportation, and recreation � renders
them highly vulnerable to the very substantial changes in the
river systems brought about by large dams, and that these costs
may outweigh any economic benefits.
In February 1998, during a
dialogue with Lao government officials, International Rivers
Network was encouraged to visit the Lao countryside and some dam
sites. As a result, IRN visited six project sites at various
stages of implementation and talked to many observers within the
country. The sites visited included Nam Theun-Hinboun, Nam Leuk,
Nam Theun 2, Houay Ho, Xe Pian-Xe Namnoi, and Xe Kaman 1. These
field studies form the basis of this report, which aims to provide
an overview of hydropower development in Lao PDR, informing the
debate at the local, national and international levels.
The study revealed some
similar and very fundamental problems with all of the projects,
including:
- Poor financial viability
- Inadequate resettlement
practices
- Inadequate compensation
- Uncontrolled logging
- Problematic
environmental impact assessments
- Lack of appropriate
regulation
These problems are
illustrated below and discussed in greater detail in the case
studies.
Poor financial
viability
While the Lao government has invested millions of dollars in
encouraging private sector investment in hydropower development,
there are already signs that this strategy is not working. Out of
the five projects that have been built in Lao PDR to date, four
involved concessionary financing from a public source, and one was
financed entirely from a company's own resources. No other private
consortium has managed to raise commercial financing, nor
successfully negotiate a power purchase agreement with Thailand,
nor are they likely to until at least 2006, when Thailand may
negotiate additional power purchases from Lao PDR.
Those projects that have
proceeded are already running into financial difficulties. As a
result of the economic crisis, revenues for Houay Ho and
Theun-Hinboun hydropower projects - the first two public/private
projects to be built in Laos - have been affected due to the low
tariff and the drop in the baht exchange rate. In 1998, in its
first year of operation, Theun-Hinboun lost around $10 million in
revenue due to the devaluation of the baht. The 150 MW Houay Ho
Hydropower Project was funded entirely from Korean conglomerate
Daewoo's balance sheet, and was completed at the end of 1998. The
financial viability of Houay Ho is so poor that Daewoo has been
looking to sell its stake for the past year but has had trouble
finding a buyer. The 60 MW Nam Leuk hydropower project, owned
entirely by the Lao government and due to be completed in 1999, is
expected to incur a $15-20 million cost overrun which will affect
the economic viability of the project. The government may be
forced to sell a part of the project to a private power company.
Inadequate
resettlement practices
Hydropower is increasingly being used as a pretext to resettle
ethnic minorities from upland areas to lowland areas in keeping
with the government's policy of resettling shifting cultivators by
the year 2000. Anticipatory resettlement is occurring in some
watersheds and inundation zones long before it is certain that a
dam will actually be built. At Houay Ho, Xe Pian-Xe Namnoi, and Xe
Kaman 1, resettlement is taking place under very poor conditions,
causing hardship and suffering for the ethnic minority groups who
have been forced to move. A lack of arable land and fresh water
supplies, coupled with an unfamiliarity with wet rice cultivation
and separation from ancestral lands, has resulted in food
shortages and increased rates of morbidity and mortality for those
resettled.
Inadequate
compensation
Hydropower projects in Lao PDR are proceeding without adequate
efforts to document the livelihoods of people living downstream
and upstream from the dam site prior to construction, nor to
provide for sufficient compensation for livelihoods losses
occurring as a result of the dam. These impacts have been best
documented in the Nam Theun-Hinboun case study, where villagers in
three different areas reported substantial declines in fish
catches, flooding of vegetable gardens, transportation
difficulties and fresh water shortages. As with resettlement
costs, private developers must be held responsible for paying
their fair share of the compensation costs of a project. It is
also important to recognize that compensation will never
substitute for an unobstructed riverine ecosystem.
Uncontrolled logging
and access to protected areas
Hydropower projects are being used as a pretext for
logging of reservoir areas, long before a decision to build a dam
has actually been made. The construction of roads and bridges has
opened up more land for logging and hunting and has led to
increased environmental degradation. As many hydropower projects
are situated in protected areas, the impacts on biological
diversity are especially serious. In the case of Nam Theun 2, the
military-run logging company, the BPKP, has logged more than one
million cubic meters of timber on the Nakai Plateau to clear the
reservoir area even though the dam may never be built. Dam
proponents now justify building the project on the basis that the
Nakai Plateau is so degraded from logging that it is not worth
saving. At Xe Kaman 1, all indications are that the dam may never
be built, and that the project is in fact an elaborate logging
scheme in disguise. In this case, the Lao government is foregoing
lucrative logging revenues in anticipation of future proceeds from
electricity sales that may never eventuate. Meanwhile, some of
mainland southeast Asia's last remaining tropical rainforest,
together with an array of rare and endangered species, may be
sacrificed.
Problematic
environmental impact assessments
Rather than being used to ensure that all of the social and
environmental costs of a project are known and accounted for, the
environmental impact assessment (EIA) process is being manipulated
to protect hydro and logging interests. EIAs in Lao PDR are
carried out by hydropower consultancy companies with vested
interests in ensuring that the project proceeds, mainly because
they stand to gain further lucrative contracts once the project
goes ahead. EIAs for Theun-Hinboun, Nam Leuk, and Xe Pian-Xe
Namnoi were heavily criticized for omitting crucial information
and ignoring or downplaying concerns about the potential negative
impacts of the projects. Other problems with how EIAs are carried
out in Lao PDR include preparation late in the process of project
approval, insufficient capacity within the government to
critically review highly complex documents in English, lack of
public consultation, and the lack of monitoring and enforcement of
recommendations.
Lack of appropriate
regulation
The financial interest that the Lao electricity utility,
Electricit� du Laos, has in maximizing profits from projects in
which they are joint venture partners creates a conflict of
interest with their role as regulator. This places a constraint on
EdL's ability to negotiate a risk allocation which is in the best
interests of the Government and Lao PDR. In Northern � and
increasingly in developing � countries, an independent regulatory
body establishes and enforces licensing and environmental
assessment procedures. These licensing procedures allow for early
and effective public notification, access to information,
consideration of the "no-go" option, the right to review
decisions, and the right to legal remedies if damages occur. It is
clear that more work needs to go into developing a regulatory
regime for Lao PDR that is fair, efficient and ensures the
greatest possible benefits for the Lao people. Continued
unregulated development will only cause further problems along the
way.
These issues are discussed
in greater detail below. Chapter 1 of the report documents the
history of dam plans for Lao PDR and looks at the macroeconomic
impacts of the proposed hydropower strategy. Chapters 2 through 7
provide case studies of individual projects at various stages of
implementation. The concluding chapter points to some similar and
fundamental problems with all of the projects examined in the
report.
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