Nakai plateau: Dammed to Oblivion

A verdant plateau in Laos is home to some of the world's rarest animal species. Now, thanks to World Bank backing, it will disappear as part of a huge scheme to export hydroelectricity. Jan McGirk and Andrew Buncombe report

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The Nakai plateau in southern Laos is home to some of the world's most endangered animal species. For generations, this remote part of a landlocked country, ignored by much of the outside world, has provided a refuge to tigers, Asian elephants, clouded leopards and gibbons. It has also been home to many indigenous peoples who have survived by subsistence farming, hunting and fishing on the Nam Theun river, a tributary of the Mekong.

The Nakai plateau in southern Laos is home to some of the world's most endangered animal species. For generations, this remote part of a landlocked country, ignored by much of the outside world, has provided a refuge to tigers, Asian elephants, clouded leopards and gibbons. It has also been home to many indigenous peoples who have survived by subsistence farming, hunting and fishing on the Nam Theun river, a tributary of the Mekong.

But now the plateau is to be destroyed in a $1.3bn (£700m) hydroelectric project, underwritten by the World Bank, that will build a 50-metre high dam on the Nam Theun and flood an area the size of Singapore. The project - likely to be one of the most controversial yet to involve the World Bank - has been sought by the Laos government in order to boost the economy by selling most of the electricity to neighbouring Thailand.

But opponents believe the dam, known as NT2, will result in irreparable environmental damage and social disruption. Furthermore, they say, there is no guarantee that the repressive Laos government will honour its promise to fully compensate the many thousands of indigenous people whose homes will be destroyed and livelihoods threatened. There is also evidence that some of the tribes have not been fully consulted. What is certain is that the decision to build the dam after a period in the which the World Bank moved away from backing such projects has again focused attention on the feasibility for developing countries to build their economies while safeguarding their national environments. The outcome of the NT2 project in Laos could have global implications.

"We fear that this dam, rather than reducing poverty will only increase human misery and environmental degradation," said Ute Collier of the World Wide Fund (WWF), the Swiss-based global environmental group.

The origins of the project, which was approved by the World Bank last Thursday on the same day that the former US Deputy Defence Secretary, Paul Wolfowitz, was confirmed as the organisation's new president, date back decades and coincide with the transformation of one of the world's last officially communist nations to a more market-based economy in the mid-Eighties.

Laos, a former French colony which gained independence in 1949, is one of Asia's poorest countries with a per capita GDP of as little as $320 (£170). Around 80 per cent of the working population is employed in small-scale agriculture while large areas of the country have not been cleared of landmines dropped by the US during the Vietnam War. The Laos authorities hit on the idea of using one of the country's few abundant resources - rainfall - and developing a hydroelectricity scheme to produce energy for export.

It is envisaged that more than 90 per cent of the 1,070 megawatts (MW) of electricity produced by NT2 will be exported to Thailand in a deal that the government in Bangkok has already agreed. The scheme will also produce around 75MW for Electricité du Laos, the domestic power company.

In compensation, the deal's backers believe that Laos will earn up to $2bn over the next 25 years, a percentage of which has officially been set aside for helping the poorest of the country's 5.6 million people.

"We have spent the best part of a decade studying the project and evaluating the risks," said James Wolfensohn, the World Bank's outgoing president. "Our decision, after a lot of deliberation, is that the risks can be managed - in fact, one major reason we are involved is to help manage those risks." He added: "Laos has an average income level of less than a dollar a day. Children still suffer malnutrition and too many young people receive little or no formal education.

"But to get out of this poverty trap, the country has few options to generate income. Essentially it relies on mining, timber and hydroelectricity. We believe that a sound approach to selling hydroelectricity is the best way for it to increase the amount of money it can invest in health, education and basic infrastructure."

Peter Stephens, a bank official who has been working on the project for the past decade, told The Independent that a series of safeguards had been included. The approximately 6,200 people who are being relocated have been given written guarantees that they will receive new homes and compensation, a new environmental protection area has been established and a separate finance line has been worked out with the authorities to ensure transparency and allow officials to check that a percentage of the money from the dam is used on education and health projects promised by government.

"This is the most public advertisement of the country's investability - whether they are marketable," he said. "The net outcome [of not meeting its undertakings] would be very much more serious for them than the [short-term] benefits."

Officials claim that the threat to the Asian elephant population has been recognised and that a leading conservation group, the Wildlife Conservation Society, has been recruited to assess the potential damage and draw up plans to minimise the negative effects.

But many others who have been studying the project for a long time remain opposed to it. The World Bank received a petition signed by 153 non-governmental organisations from 42 countries urging the bank not to back the scheme. "The negative track record of other dam projects in Laos and the government's failure to transparently manage revenues and respect the rights of its people provide a strong indication that the costs of NT2 will dramatically outweigh any potential benefits," it said.

Shannon Lawrence, a spokesman for the US-based group Environmental Defence, one of the signatories to the petition, said many fallacies surrounded the dam, which will be built in a joint venture involving two Thai companies and the French power corporation Electricité de France. The group has questioned the degree of financial benefit the scheme will provide, claiming that between 2009, when project revenues come online, and 2020, net revenues for the government will total only $20-$29m per year - around three per cent of total projected government revenue. It is not enough, she said, to "kickstart the economy".

In Thailand, environmental activists have for months been staging rallies outside the regional World Bank office, claiming that evidence from local projects suggest the scheme in Laos will create huge problems. They said the World Bank-funded Pak Mun dam cost the Thai fishing industry $15.8m in unanticipated damages.

With regard to the endangered wildlife, Surapon Dongkhae, secretary-general of WWF Thailand, said his country had seen its elephant population depleted by two large dams in Kanchanaburi, a province west of Bangkok and construction of the Thai-Burma gas pipeline. "In Laos, it will be worse than what we experienced in Thailand with elephants," he said.

The World Bank said that a full consultation process had been carried out and that the views of indigenous peoples had been sought. There is some evidence, however, that locals have been open to gentle bribery.

A report carried out for the bank by an independent consultant, James Chamberlain, reveals that in the village of Sop Hia, officials won over the 80-year-old female chief, Nang Hay, by holding a ceremony, that involved eating chicken and drinking whiskey, to honour her dead husband. The report notes that, while she had previously been angrily opposed to the dam, after the ceremony she was prepared to listen to what officials had to say about resettlement.

But any doubts that Nang Hay or anyone else may have will be of no importance now. With the backing of the 24-member panel of the World Bank and yesterday's announcement from the Asian Development Bank that it too will help finance the project, the plan to flood the Nakai Plateau is all but under way.

A government official, Viyaketh Nam, told reporters that exporting energy to Thailand and perhaps even China, could be Laos's salvation. "We can be like Kuwait," he said. "Kuwait pumps oil from the ground. In Laos, we are selling power made of the water from the heavens. We will be the battery of Asia."

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