Nam Theun could diminish corruption in Laos
Building the Nam Theun 2 dam could become a very beneficial project for Laos. Not in the way you would expect. The highest expectations of Nam Theun 2 are direct financial gains for the Lao government. That remains to be seen. The investment in the Nam Theun might not be a very profitable one.
Hans Luther is a German economist who has worked since the early 1990s at the National School of Administration in Vientiane. Before he returned to Germany in 2003, the Lao government awarded him the prestigious Labour Medal.
In an interview published in the Bangkok Post Luther said “I believe hydro-electricity will not help. Firstly, there is the matter of demand; there is only one customer, Thailand. Also, once the investment is done there are ongoing costs for repair and maintenance and these costs are high, so I don’t think this is a sustainable solution.”
According to Luther, the sunk costs of the dam could become hard to swallow. Nevertheless, more positive effects are to be expected, however, in an entirely different area.
The dam is build with borrowed money from the World Bank. And the world bank wants something in return apart from the usual interest payments:
Monitoring and Evaluation
Regular supervision by staff of the World Bank, other international financial institutions and bilateral agencies – in the form of site visits and management missions. For revenue management, teams will join regular Bank missions, but will also hold separate missions carried out by the public financial management experts of the World Bank and ADB
Source: Worldbank.org
In return for the huge amount of money to build the dam, Laos’ public financial management is under heavy scrutiny of the World Bank. The effects of World Bank supervision are already noticable.
Recently, the government of Laos announced it would improve transparancy. Increasing transparancy is a first step in battling corruption in Laos. Corruption harms the already weak Lao economy and prevents a more honest dissemnination of wealth.
Through inspections, aimed to ensure that administration processes are transparent and to prevent officials from using their power for personal gain, Laos attempts to boost its public transparancy.
These are the first small steps towards a more transparant public administration. Still, much needs to be done such as the publication and monitoring of inspection reports for “real” transparance. Nevertheless, transparancy is now (enforced) on the agenda of the Lao government and that is truly a positive effect of the Nam Theun 2. Let’s hope they will go to greener pastures in the corruption index.
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Dr Luther is correct in saying that initial investment in hydropower is high, however, ongoing costs are much smaller than for alternative sources of generating power (e.g. coal fired power plant). For hydropower generally the ongoing annual costs are 1-2% onf intial investment, while for thermal power plants it is more in the range of 3-5%. Hydropower has no fuel costs, once the project has been fully built in 4-5 years, there are no more significant uncertainity on the cost of operation of the hydropower plants. Thermal power plants are dependent on the vagaries of the market and continuous increase in the cost of oil. That is why, if you can control the construction costs, hydropower becomes very attractive. Future costs are minimal.
I can't agree with the statement that future cost are minimal to Laos for Nam Theun. These costs simply cannot be minimal for a 1.4 bln dollar dam in context of a weak Lao economy. The Lao economy cannot support such huge amounts and will become increasingly dependent on institutes like the World Bank and other financers.
Apart from that skilled labour, (IT) infrastructure and technology knowledge is scarcely available in Laos and will have to be outsourced. Outsourcing is also costly.
We have not even touched the issue of environmental damages….
In theory, I would agree with Magnus, inexpensive and clean source of energy.
for sale. However, many Laotians will sadly be displaced by the reservoir.
Padek, don’t worry about the finances.
Japan(builder of Nam Ngum Dam) has forgiven the debt of that project.
Not sure if World Bank will be the same with NT2.
That’s alot of zeros behind 1.4!
I highly doubt that future costs are minimal and if they supposely are, that's only talk, or hope. Besides the upkeep costs, are people going to be displaced because of this dam? How is it going to affect the wildlife around it? How is it going to affect food supply? Those few questions alone are enough to say that the future costs are not going to be minimal.
Sid, I disagree with you on your perspective of financial responsibility, and I’ve seen this in many young Laotians here as well, going into debt, ‘don’t worry about it, we can file for bankruptcy.’ Each time that someone forgives you on your debt, you loose something, if nothing else, your pride. So what are you really saying?
Ginger, my intent was not to advoacate any financial irresposibility.
What I meant to say was:
1.I feel sad for the ones being uprooted. I hope we can focus on that.
2. Magnus’s concept only works well in an ideal world, ie no population no endangered spicies no biomass in the flood area. If hydroelectric is really clean and inexpensive, then every river in the world would be dammed by now.
3. I agree with Padek about the financial logistics.
If my statement about previous debt is accurate,
then I hope history won’t repeat itself.
As for going into debt in general, some are made by choice some not.
For those with choices out there please choose to HAVE PRIDE.