Dams back in fashion

But have the right lessons been learned?

Ten years after the World Bank last helped build a big dam, and five years after the World Commission on Dams cast doubt on the benefits of such projects, the bank is back in the dam business. Last week, it agreed to lend the government of Laos $270m to build a dam on the Nam Theun river, a tributary of the Mekong. The Asian Development Bank followed suit on April 4 with a loan of $ 120m. The developers expect the remaining financing for the $ 1.25 billion project to fall into place quickly. Construction should begin in June.
Thailand’s state-owned power company has already signed an agreement to buy most of the electricity generated by the dam. That should bring Lao’s cash strapped government, which currently depends on foreign aid to fund its budget deficit, up to $ 2 billion over the dam’s first 25 years of operation. Much of that money, in turn, could be used to fund additional development schemes for ordinary Laotians.
The World Bank claims to have learned the lessons of equally worthy sounding schemes that went badly awry, including a dam on the Mun river in neighboring Thailand, which left many fishermen destitute as their catch disappeared. Locals have been consulted until they are blue in the face. The developers are setting aside money to resettle displaced villagers, restock the two affected rivers with fish, and manage a new wildlife reserve no less than nine times bigger than the area to be flooded by the dam. The government has also agreed to channel much of its revenue from the dam towards health, education and rural development.
But Laos’s inscrutable communist regime will still be managing the money, policing the wildlife reserve and implementing any schemes to improve the lot of local people—not the sort of tasks at which it has excelled in the past. What is more, many economists say Thailand could buy power more cheaply elsewhere. Laos, on the other hand, could certainly find less demanding financiers. It is currently planning three more dams, which it will build not with the help of the bank, but of fellow communists from neighboring Vietnam.