Mekong Watch

LAOS

To View the list of Japanese ODA to Laos in FY2002;

Mekong Watch: Japanese ODA to Laos, FY2001

Japanese ODA to Laos has been almost exclusively in the form of grants. There have been three exceptions to this.

Nam Ngum Dam, second phase of construction. Loans were given in 1974 and 1976 totaling 5.19 billion yen. This dam was Laos' first hydropower project.
Nam Leuk Hydropower Plant. Loan of 3.903 billion yen given in 1996.
Second Mekong International Bridge Construction Project. Loan of 4.011 billion yen in 2001. This is a cross-border project to build a bridge over the Mekong River connecting Thailand. This bridge is to become an important part of the East-West Corridor linking Vietnam, Laos, Thailand and Burma.

While new loans were given in 1996 and 2001, Laos is now a recipient of Debt Relief Grants from the Japanese government. It is unclear why the Japanese government agreed to provide new loans, when debt relief grants are required for loans accumulated for the Nam Ngum dam.

Multilateral Assistance has also been used for dam construction. The Asian Development Bank (ADB) and a consortium of private and public finances were used to construct the 210MW Theun-Hinboun dam, completed in 1998. The ADB insisted that as a run-of-the-river dam without a reservoir, this was an environmentally sound project. In actuality, the livelihoods of nearly 50,000 people have been negatively affected. This is especially true in regard to fisheries. There have been international campaigns and pressure put on the ADB by civil society to resolve issues of compensation, but problems remain. The involvement of the private sector in this project is large, so the actual leverage of the ADB is limited. The private sector does not want to allocate funds for compensation, and also does not want to increase the water flow from the dam to downstream fisheries, as that would reduce profits from hydroelectricity generation.

The role of Japanese aid constructing dams in Laos cannot be ignored. Of the 9 dams now under construction or already operational, 8 involve Japanese financing of some sort. There are an additional 23 plans for more dams, and Japanese aid is related to 13 of them. For example, the Japan International Cooperation Agency (JICA) is conducting a development study for the Nam Niep Dam (hydropower). This is a potential Japanese aid project and needs to be monitored carefully.

The most controversial of the planned dams is the Nam Theun 2, which is now being prepared in cooperation with the World Bank. It will be the largest hydropower project in the country, and construction is expected to cost around US$1.1 billion. To prepare for construction, much forest has already been logged in the areas expected to be inundated by the reservoir. Thousands of people who live in this area have thus been deprived of a critical resource for their livelihood. Because compensation will not begin until construction and relocation do, many local people are speaking in support of the project and want it completed quickly. However, it must be recognized that the reason for their support of the project is due not to the benefits the project will bring, but because it has already deprived them of a livelihood for which they do not expect to be compensated until it moves forward. Water from the Nam Theun reservoir is also to be discharged into the Se Bangfai river, and the downstream impacts on the Se Bangfai River have not yet been adequately examined.

There are also economic concerns regarding the Nam Theun 2 Dam project. It was originally expected that Laos could sell much of the electricity produced by this dam to Thailand, but demand for electricity in Thailand is now much less than calculated at the time. How much Thailand will actually want to purchase is unclear, but it is likely that the project is far from economically viable.

As for other natural resource concerns, the International Finance Corporation, the private sector arm of the World Bank Group, is providing a US$30 million loan for a gold mine in Savannakhet Province. Mining is expected to begin in December 2002. There are many concerns about the impacts of mining, both on forest and river resources.

Rural communities in Laos have lived harmoniously with their natural environment and depend on natural resources, both river and forest, for their livelihood. The increasing number of projects planned for Laos which are depleting forests and damaging rivers are destroying the foundation of rural Lao communities.