Revenues From Nam Theun 2 Hydro Project Now Working For People Of Laos As Communities In Project Area See Benefits

July 15, 2010

Washington - July 15, 2010 – The first revenues from the Nam Theun 2 hydropower project in Laos have started to flow into the country, with the money being spent on education, health, rural roads and  electrification and environmental programs, an annual joint report to the boards of the World Bank and the Asian Development Bank has found.  The report also notes that the project’s environment protection and social development program in Nakai Plateau, Nam Theun and Xe Bang Fai Downstream  Areas and the NT2 Watershed are overcoming several implementation challenges and making good progress.

With the commencement of commercial operations of the Nam Theun 2 (NT2) hydropower facility in April, Laos received the first revenues of US$600,000 in June from the sale of electricity to Thailand. By late September 2010, this is expected to go up to  around $US6.5 million in additional revenues from the project to finance poverty reduction and development programs in Laos – the central tenet of the World Bank’s involvement in NT2. Over the 25-year concession period, the country will receive nearly US$ 2billion in revenues from the project.

“With close to three quarters of the population of Laos still living on less than $2 a day, the money generated by NT2 is providing a significant boost to the country’s economy and helping improve people’s lives,” said John Roome, World Bank Director for Sustainable Development in the East Asia & Pacific Region.

The World Bank’s recently released Economic Monitor for Lao PDR showed that over 3 percentage points of the expected 7.8 percent growth rate expected in 2010 comes from NT2.

In its Update on progress with the NT2 project, the World Bank and ADB report that on the Nakai Plateau – where resettlement of around 6,200 people was completed in 2008 – villagers greatly appreciate their new surroundings, with the majority (over 80 percent) reporting they are now “much better off”.

The report says people’s yearly incomes have almost doubled, rising from a baseline of about US$140 a year in 1998 to about US$260 a year. It says villagers in the resettled area are taking advantage of improved education, health and transportation facilities. Many are investing in improving their homes and buying new assets such as televisions and motorbikes.  The median value of household assets increased from $US120 in August 2006 to $480 by May 2009.

Along with the successes however, a number of challenges remain, the Update says. Chief among them is safeguarding the area’s natural resources for the benefit of resettlers. The report warns that pressure on natural resources has been growing as a result of local population growth and extraction of timber, mineral and fish resources by outside commercial interests. These issues are receiving the careful attention of the Government of Lao PDR, the report says.  

Over the past year, the Government stepped up action  to stop mining and logging in the national protected area – a conservation area on the Nakai Plateau, nearly seven  times the size of Singapore –which was set aside as a requirement for NT2’s approval. But, the report says, close attention to outside encroachment will need to continue.

In the downstream area on the Xe Bang Fai river, the report says most of the impacts from increased water flow (such as erosion, changes in water quality and loss of some riverbank gardens) had been anticipated well in advance and mitigation measures put in place. A downstream program which started several years ago with strong community participation was accelerated in 2008 and 2009. This has resulted in good progress with funding for villages, compensation for lost riverbank gardens, and water sanitation and hygiene programs.  The monitoring program continues to watch for unanticipated impacts downstream.

 “The World Bank remains committed to ensuring the ongoing scrutiny of all aspects of this project - from helping ensure local people can continue to earn a living to protecting the area’s natural resources for future generations,”  said Patchamuthu Ilangovan, World Bank Country Manager for Lao PDR.  

The report says the project has helped Laos put in place tools for transparent and accountable management of public resources. It has also helped build the capacity of the government to manage large infrastructure projects and has helped to strengthen the country’s investment climate.

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