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To build or not

STLL stinging following a series of dam-related embarrassments, the World Bank (WB) has set up an 'International Advisory Group on Bank Hydropower Projects' (IAG) to determine if the proposed Nam Theun 2 dam in Laos is too politically hot to handle.

The Laotian government wants to build the dam so it can sell some US $250 million worth of electricity to neighbouring Thailand each year - roughly one-fourth of Laos's gross national product. The government says it would use the proceeds to fund health and education programmes in one of the world's poorest countries. The dam's electricity would be a much-needed source of foreign exchange, observers note.

But environmental and other concerned social activists contend that the project is a disaster waiting to happen. They argue the dam will cost more to build and maintain, that it will produce less profit than its promoters say, and that it will cause the destruction of unique flora, fauna and local cultures.

The dam would submerge three national biodiversity conservation areas and force the relocation of 21 villages - home to 4,000 to 5,000 indigenous people. Another 7,000 people could be forced from their homes, so a 3,500-sq km water catchment and forest preservation area can be set up around what will be the Nam Theun 2 reservoir, a senior Bank official said.

The estimates for the likely cost of Nam Theun 2 are around US $1.2 billion, according to official estimates. The corporate backers see the WB as the key to unlocking the commercial financing needed to break ground. Although Bank-backed studies dating back to 1989 endorse the project as Laos' best option, officials say the agency remains nervous because Nam Theun 2 has drawn fire from the well-organised and highly motivated anti-dam lobby. The Bank, oft-bitten by scandals involving dams it helped build, is shy about this latest proposal.

The Bank is held by its own history. Over the years, communities around the world have issued a litany of complaints against the WB's dam- building efforts. The agency itself admits its handling of dams especially India's Sardar Sarovar - led to the creation, in 1993, of an independent inspection panel, to which communities harmed by Bank projects can complain.

Therefore, in addition to the economic, environmental, and social studies routinely required by the Bank, its new hydropower advisory group is to visit Laos late next month, and advise the Bank on its handling of environmental and social issues related to the project. The IAG will assess the risks to the WB posed by involvement in Nam Theun 2. If the IAG approves of the project, then the project would be submitted to the Bank's executive board late this year or early next year, WB staffers and observers here say.

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