Nam Theun 2 Maintains Momentum

June 5, 2007

WASHINGTON, June 5, 2007 ― Two years after its approval, the Nam Theun 2 (NT2) Hydroelectric Project in Lao People’s Democratic Republic (PDR) continues to make satisfactory progress according to the latest annual update by the World Bank (WB) and Asian Development Bank (ADB). The two development banks state that the next 12 months will be a vital phase ahead of the reservoir being filled, anticipated for June 2008.

 Nam Theun 2 is a 1,070 megawatt hydropower project in Lao PDR that aims to generate revenues — an average of about US$30 million per year in the first ten years, and about US$110 million per year from 2020 to 2034 — for poverty reduction efforts and environmental protection in the country. The project has been designed with a suite of environmental and social mitigation measures to ensure that living standards of people affected by the project improve and that the largest biodiversity area in mainland South-East Asia is better protected and preserved.

 “Important progress has been made in various areas since our last update in October of 2006, including having in place stronger government institutions and mechanisms, strengthening capacity in the company and government, and ensuring better alignment of the pace of construction with environmental and social mitigation measures,” remarked Ian Porter, World Bank Country Director for Lao PDR“There has also been progress on salvage logging activities, resettlement of villages, implementation of pilot activities, and management of the protected area,” he added.

 According to the report, completing village relocation and implementing livelihood activities are among actions needed to ensure social and environmental programs continue in tandem with project construction.

 In the Nakai Plateau, 742 of the 1,216 affected households have already moved to their permanent resettlement sites and are benefiting from improved basic infrastructure (including roads, drinking water and schools), regular health checkups, and transitional packages (including rice allowance, protein supplements and payment for labor contribution). Delays in completing the building of permanent houses are being addressed. Another 19 households will complete their move by the end of June 2007 and the remaining 455 households will move in the 2007-2008 dry season, as planned.

 In all project areas, livelihood development programs continue to receive attention and are beginning to make good progress. These programs include activities ranging from agriculture to weaving and village forestry. The report notes that concerted efforts are needed to accelerate these programs in the coming months, so that income begins to be generated from these livelihood activities.

 Areas of concern include issues with erosion and drainage in some project roads, payments of compensation in project lands, finalization of resettlement preferences and entitlement packages for some households in two villages, and strengthening coordination, management and implementation of the livelihood programs. John Cooney, Director of Infrastructure for Southeast Asia at the Asian Development Bank, explained that “while these kinds of challenges are not unexpected in complex infrastructure projects such as this, the key is the ability that the Government, company and financing institutions are demonstrating to deal rapidly and effectively with problems that arise, complemented by the effective monitoring processes that have been put in place to ensure that such challenges are identified and rectified quickly.”

 In this context, the report highlights refinements in oversight and monitoring arrangements, which include continued regular visits by independent experts, the financing institutions, government and company engineers and independent monitoring agencies. It also notes the continued openness and participation from various stakeholders, including ongoing consultations with villagers. The Government of Lao PDR will organize the second Annual Stakeholder Forum at the end of June 2007.

 The International Advisory Group (IAG), an independent advisory committee that reports to the World Bank President has also published its report. The IAG notes the significant progress being made and highlights actions needed to strengthen the implementation of resettlement programs; especially livelihood development; downstream programs; the timely payment of compensation; and strengthening capacity for environmental and public financial management.

 Main highlights from the Update include:

 ·                     The Lao PDR economy has performed particularly well in recent years, with 7 percent annual growth in the last two years. The Government of Lao PDR is implementing a comprehensive five-year plan that builds on recent reform achievements, aimed at reducing poverty.

 ·                     Implementation of the Public Expenditure Management Program is progressing well. A revised Budget Law has been promulgated which will strengthen public financial management and capacity to deliver public services.

 ·                     NT2 Revenue Management Arrangements have also been progressing well, strengthening Government’s readiness to manage income generated by the project.

·                     The Nam Theun 2 Power Company (NTPC) continues to strengthen its capacity, and it has now in place more staff to manage environmental and social impact mitigation actions. The Government has also made significant efforts to strengthen its implementation capacity under the leadership of the Deputy Prime Minister and Standing Member of the Government.

·                     Construction activities are increasingly better synchronized with environmental and social mitigation measures, and the current status of physical implementation of the project does not signal major slippages or cost over-runs.

·                     Construction of project roads is progressing satisfactorily, but concerns remain on issues of erosion, spoil management, slope stabilization and dust, design of culverts and drainage.

·                     Overall resettlement of villages on the Plateau is progressing well, with 742 of the total 1,216 households that will be resettled having already moved. Relocation of the remaining families will be completed by June 2008, when impoundment of the reservoir is scheduled to start.

 ·                     The livelihood programs on the Plateau, along the downstream channel, and in the downstream area need to be better coordinated and accelerated.

·                     Issues with compensation in the project lands – where at times interim compensation was mistakenly deducted from final compensation – is quickly being rectified.

 ·                     Consultations with local communities continue in all project areas, but increased efforts are needed in the Project Lands, particularly to address compensation issues.

 ·                     Reservoir salvage logging commenced in October 2006, and is largely on track.

 ·                     The Watershed Management Protection Authority (WMPA) continues to make commendable progress in the management of the Nakai Nam Theun Protected Area.

 ·                     Implementation progress in the 21 pilot villages in the downstream area is giving encouraging results and providing important lessons for scale-up of the programs.


Media Contacts
In Washington, DC
Elisabeth Mealey
Tel : (202) 458-4475
In Lao PDR
Viengsamay Srithirath
Tel : (856) 21-414209