International Young Scholar Workshop
Kyoto University
The Social & Economic Development Policy and
Its Changes to the Livelihoods:
A Case of Nam Theun 2 Hydropower Project
3rd August 2011
Bounpheng Duangmala
bounphengd@gmail.com
National University of Laos
Country Overview

Lao People’s Democratic Republic (PDR) is a small,
landlocked nation of less than six million people at the
center of the dynamic Mekong region. The country is
facing numerous development challenges but has been
undertaking reforms that are helping to embark it on an
increasingly sustainable development path. With strong
economic performance and structural reforms in trade,
private sector development, and public financial
management - among others, Lao PDR is fighting
poverty, addressing social inequities, and building
stronger capacity to manage its rich natural resources.
Introduction (cont);
The economic transition in Lao PDR
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From 1986, the New Economic Mechanism (NEM)
was introduced with opening up the country,
focusing on market oriented economy,
competitiveness, less government intervention;
promoting all economic agents to participate in the
economic development process of the country.
A foreign investment code was officially declared in
1988, The Foreign Investment Law 1994, Amended
in 2004 and re-amended in 2010.
Poverty issues has been seen as a priority task for
the government in development agenda.
Government policy & its driven-force
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The World Bank and Asian Development Bank had
been also active in pushing Lao PDR to the hydropower
project
To ensure economic growth, hydropower is an income
generating factor and important element in development
strategy.
In Laos, the exploitable hydropower potential is
estimated to be around 18,000 MW in total installed
capacity of power plants.
To become the ‘battery of South-East Asia’.
Government policy & its driven-force (cont)
The development strategy from 2000-2020.
- To sustain economic growth with security and stability
and maintain the GDP growth rate of about 8 %
annually.
- To achieve the Millennium Development Goals by
2015.
- To leave Lao PDR from the least developed countries
by 2020
- Ensure sustainability of development between the
socio-economic development and natural resource
preservation
Hydropower and GDP Growth
Resource contribution to GDP growth
20
15
7.8
7.7
7.5
4.2
4.1
4.8
4
1.6
2.8
3.7
3
3.5
2003-08
2009
2010
10
7.2
7
5
5.7
0
Electricity and mining
2011-2015 2016-2020
Other sectors
Source: World Bank Staff estimates and projections
GDP growth (%)
Hydropower and GDP Growth by sector
(2009)
29.8%
38.5%
Agriculthure
Industry
Services
31.7%
Source: www.worldbank.org/lao/trade
Electricity demand in ASEAN
countries
The NT2 Hydroelectric Project
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Project Cost: $1.45 B (= a half of Laos’ 2005
GDP)
Installed Capacity：1,070 MW
Reservoir size: 450km2 (= 2/3 of Singapore)
Generating revenues to “reduce poverty” by
exporting electricity to Thailand *
BOOT project (build-own-operate-transfer )
“A model of sustainable development”
Vietnam
Nam Theun River
Nam Theun
2 Dam
Thailand
Mekong River
Xe Bang Fai River
Laos
Source：International Rivers
Power House
Source：Mekong Watch
Foreign Direct Investment
Nam Theun 2 Power
Company ($1.45 B)
Contract
$350 Million
35
25
Italian-Thai:
% ( %)
25
EGCO: %
( %)
35
Lao Holding
State Enterprise:
% ( %)
Electricité de
France: %
( %)
40
25
15
0
Lao Government
(Concession Agreement)
EGAT (PPA)
Electricité de Lao（PPA）
(International
Financers)
・World Bank
・ADB
・European
Investment Bank
・COFACE (France)
・Private Investors*
History of the project
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International arguments for more than 10
years
March - April 2005: World Bank and ADB
decided to support the NT2
June 2005: Construction started
April 2008: Village resettlement completed
/impoundment of the reservoir started
March 2010: Full operation started
Major Social and Environmental Impacts
of the NT2
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About 6,200 indigenous peoples on Nakai
Plateau have resettled to make way for a
reservoir
More than 120,000 people downstream are
affected (e.g., fisheries, flooded riverbank
gardens, deteriorated water quality)
Wildlife habitats, including endangered
species, were negatively affected.
Endangered species in the Nakai
Plateau
Livelihoods Assets
Human
Capital
Social
Capital
Natural
Capital
The Poor
Physical
Capital
Financial
Capital
Sustainable Livelihoods Framework
Hydropower development in Laos after the
NT2
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70 projects in Laos’ Power Development
Plan till 2020
Only 10* out of 70 projects implemented
before NT2
The Lao government signed MOUs to
implement/research the other projects
NT2 as a turning point for Laos’ power
sector development
Questions about the long-term livelihood
restoration in Nakai Plateu
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Main livelihood has been changed from subsistence
rice cultivation to cash crop cultivation.  There are
no stable markets for cash crops.
Upland rice cultivation on 0.66 ha of compensation
land  not enough space for fallow lands =
unsustainable
Most resettlement villagers depend on reservoir
fisheries  It is possible that fish catch declines in
several years
Grazing land for livestock and forests with rich NTFPs
(e.g. Bamboo shoots, mushrooms and etc…) were
flooded  loss of safety net
Conclusion
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The history of hydropower development in Laos is
general and the development of NT 2 in particular. It
looked at the major driving forces behind the
development of the dam such as economic growth, the
state policy to become the ‘Battery of Asia’ and also
respond to the energy demand of the neighboring
countries, especially Thailand.
More work still needs to be done by the project to
develop the asset base of the poor especially the human,
financial and physical capital in order to create a
sustainable livelihood for the resettled communities
affected by the NT2 project.
Thank you!