Can We Make Hydropower Work for All in Laos?

May 14, 2015

Ulrich Zachau Vientiane Times

A decade ago, the international community came together with a commitment to help Lao PDR – one of the world’s poorest countries – develop a better kind of hydropower project, one that generates power and also helps reduce poverty and improve health and education.

As a small, landlocked and historically poor country in Southeast Asia, Lao PDR needed investment and revenue to finance growth and poverty reduction efforts. Next door, Thailand’s rapidly growing middle-income economy urgently required additional sources of electricity.  

After careful analysis of the technical, economic, environmental and social dimensions following years of extensive and broad-based consultations, 27 development partners and financing parties, including the World Bank Group and Asian Development Bank, endorsed Lao PDR’s Nam Theun 2 (NT2) hydropower project in March 2005.   

Done properly, hydropower offers affordable and reliable access to electricity, which is essential for economic growth, poverty reduction and sustainable development; and as hydropower is renewable energy, unlike fossil fuel based energy, it is clean and green.

The NT2 project, which is jointly implemented by the Nam Theun 2 Power Company and the Government of Lao PDR, supplies reliable and clean energy to neighboring Thailand and generates revenues for the government of Lao PDR to finance poverty reduction and environmental management projects.

The results from NT2 show encouraging progress. Since the start of commercial operations in 2010, NT2 has consistently exceeded its energy production targets. Over the 25-year concession for the project, electricity sales from NT2 are expected to generate $2 billion for the government to invest in priority development needs, including health and education to open up opportunities for the Lao people.

In planning the project, the Lao authorities and the Nam Theun 2 Power Company, along with their development partners, took a proactive approach to anticipating the environmental and social impact of the dam. They focused on local development and livelihoods, putting in place mechanisms for compensating impacted people and communities.

More than $65 million has been spent so far to help resettle 6,300 people on the Nakai Plateau, providing 1,330 new houses with bathrooms and toilets, electricity and rainwater collection tanks; 330 water pumps; 120 kilometers of all-weather access roads; 32 schools and two health centers, as well as village meeting centers, warehouses and roofed markets.

Household surveys show that most resettled families are better off now than before they moved. In 2013, their median consumption was three times the national poverty line, and 90 percent of children aged five to nine now attend schools, compared to 31 percent before resettlement. Child mortality has dropped to 50 per 1,000 from 120 per 1,000, with 90 percent of resettled children under five years old now immunized.

Downstream of the dam, NT2 took an inclusive approach to community-based local development, providing compensation not only for “project-affected households” but to a larger number of people in the affected communities.  The NT2 Downstream Program installed more than 500 water pumps and delivered more than 3,000 household latrines and 56 community toilets. More than 1,500 households learned how to farm fish and aquatic plants to feed their families and earn an income.

The NT2 project also helped establish the Watershed Management and Protection Authority (WMPA) for the Nakai-Nam Theun National Protected Area, the largest in Lao PDR, and provides it with $1.3 million a year to combat wildlife poaching and illegal logging.

Despite this progress, challenges remain. Improved management of natural resources, agriculture and livestock will be vital to sustaining the livelihoods of the resettled people.  It will also be important that support for the downstream areas continues into the future, financed and implemented by the government.  While the WMPA has contributed to preserving forest cover and water quality, results have yet to meet expectations. We welcome recent improvements in patrolling and the willingness of the Lao government to strengthen the institution.

Overall, natural resource development has helped Lao PDR achieve average annual economic growth of almost eight percent since 2005. The percentage of the population categorized as impoverished fell from 33.5 percent in 2003 to 23.2 percent in 2012, while life expectancy rose from 62 years to 68 years between 2000 and 2012. Household access to electricity has increased from only 16 percent in 1995 to almost 90 percent today.

The achievements of NT2 demonstrate the potential of hydropower development to reduce poverty and achieve shared prosperity. We support the NT2 project as part of Lao PDR’s strategy to develop its natural resources for the benefit of all its people.