New Hydroelectric Project to Provide Laos With Huge Cash Influx (News Brief)

(HN, December 13, 2010) -- The landlocked Southeast Asian country of Laos - one of the poorest in the world - is celebrating the arrival of a new revenue stream in the form of the Nam Theun 2 hydropower facility.

Operating since April, the controversial 1,070 megawatt plant was officially inaugurated late last week. Over 90% of the electricity generated is being sold to neighbouring Thailand, providing Laos with a $2 billion revenue stream over the next 25 years.Will the fresh income from hydro projects trickle down to this family in Vientiane? CREDIT: Michael Bociurkiw/HUMNEWS

Officials say the funds are earmarked for the nationwide improvement of health and education services, and other poverty alleviation programs.

The influx of revenue could not have come at a better time. Laos, like many other developing countries, has taken a huge economic blow from the global economic downturn: foreign remittances from overseas workers has slumped and so have orders for textile products. Tourists have also been in short supply, despite the hosting of the Asian Games in Vientiane in December 2009. Aid agencies feared that the Communist government may be tempted to institute budget cuts to education and health.

But officials behind the project put forth a positive spin, suggesting it will go a long way in eradicating poverty - especially in the country's backward northern provinces.

"This project is a testament to the fact that when hydropower projects are done right, in a socially and environmentally responsible manner, the benefits are considerable," said Kunio Senga, Director General of the Asian Development Bank's Southeast Asia Department.

Before the Nam Theun 2 - located on a river of the same name, which is a tributary of the Mekong - more than half of the families in the nearby Nakai Plateau villages lived in poverty. Child mortality rates were high, clean drinking water was scarce, and sanitation was almost non-existent.

"Today, the vast majority of residents say they are better off than ever before," said Senga.

The ADB said displaced families have been provided with new hardwood homes complete with electricity, clean water and sanitation facilities.

CREDIT: International RiversThese improvements, coupled with improved healthcare services, have resulted in a measurable decline in child and infant mortality rates, with parasitic infections falling by 90 percent, according to the ADB.

"This is an incredibly complex project, and numerous challenges have arisen along the way," said Senga. "By working closely with communities we strive to address their concerns - from compensation to the need for more land - and to introduce programs tailored to their specific needs. We will continue to closely monitor the situation."

The project has also placed great emphasis on environmental management. Over $60 million has been invested in downstream water quality management, with better than expected results, says the ADB.

However environmental groups still have reservations about the overall benefit of the project.

US-based watchdog International Rivers says there are still questions about the sustainability of livelihoods for the more than 6,000 villagers relocated for the dam, and tens of thousands more downstream.

"It's way too early to call this project a success," Ikuko Matsumoto, Lao programme director for the group was quoted as saying.

Laos is highly dependent on outside assistance. The ADB provided $120 million in support of the $1.43 billion project. Twenty-seven different financing institutions also supported it, including the World Bank, the European Investment Bank, and Agence Francaise du Developpement.

The Nam Theun 2 Power Company is jointly owned by Electricite de France International, Electricity Generating Public Company (Thailand), and the Government of Laos.

The World Bank estimates the project will account for almost 40% of Laos's economic growth this year.

"The idea of the Laotian government is to become the 'battery' of Southeast Asia, because they've got tremendous hydropower potential, so what we're trying to emphasize is, please take the model and the lessons," World Bank President Robert Zoellick said after a visit to the project with The Associated Press in October.

- HUMNEWS staff, ADB, files