Multinational Monitor

JUNE 2000
VOL 21 No. 6


The World Bank's Revolving Door: Share Program Exchanges World Bank and Corporate Employees
by Charlie Cray

Warning: World Bank Policies Destroy Forests. Internal Report Documents Bank Contribution to Deforestation
by Korinna Horta

Death by Overwork: Corporate Pressure on Employees Takes a Fatal Toll in Japan
by Darius Mehri


The Fight for Water and Democracy
an interview with
Oscar Olivera

Damming Laos, Damning the Poor
an interview with Witoon Permpongsacharoen

Unhealthy Policies from the World Bank
an interview with Dr. Vineeta Gupta


Behind the Lines

Close Down the Masters of Reinvention: The Case for a World Bank Shut Down

The Front
Radiation: Children at Risk

The Lawrence Summers Memorial Award

Names In the News


Damming Laos, Damning the Poor

An Interview with Witoon Permpongsacharoen

Witoon Permpongsacharoen is the director of Towards Ecological Recovery and Regional Alliance (TERRA), a Bangkok-based mainland Southeast Asia regional network which works on land, forest, water and energy issues. He is also editor of TERRA's magazine, Watershed.

Multinational Monitor: Why did you start TERRA?

Witoon Permpongsacharoen: Working on environment issues, we found we could not work in isolation in just one country. If you get rid of the problem in one country it goes elsewhere. The environmental movement in Thailand had forced a logging ban, and the public had also made it difficult to build dams in Thailand. Since the 1990s, a lot of Thai logging and dam industry companies have gone out to neighboring countries in Indochina, as they opened up to the market economy. So we started TERRA. TERRA has the same philosophy as its founder, the sister organization Project for Ecological Recovery, but on a regional level. We focus on the Mekong River region.

The United Nations set up the Mekong Committee to determine a plan for how to utilize the water of the Mekong River. They have blueprints for over 200 dams planned in the Mekong Basin. We first started TERRA by monitoring the plan for dams in the Mekong River region. We monitored the World Bank, Asian Development Bank and even UN agencies, as well as the consulting companies that work for them. They mainly promote private investment for dams in Laos, so we monitor that. We also try to help facilitate campaigns on some issues.

One of the issues that we have focused on is the Nam Theun 2 dam in Laos. The World Bank has been working on this dam since 1991. But the dam hasn't started construction yet.

We also focus on development projects that create conflicts between local communities and the state on natural resource management issues, like national parks and resettlement programs, where ethnic tribes would be moved out of the highland region.

We also found that if you want to stop the dams, you have to look at water and energy policy. After the economic crisis in Thailand, we looked at the problems of the centralized energy system that has been promoted in Thailand. The development agencies and government want to increase the supply of electricity. They promote the regional grid system, so that they can build a dam anywhere in the region and send electricity to Bangkok to serve demand there.

The main energy demand for the whole region comes from Thailand. Nearly all of the dams in the Mekong region would export electricity to Thailand. That's why TERRA tries to facilitate information sharing within the region. On the other hand, we work to inform the Thai public about the regional problems these projects cause.

MM: Why are you concerned about the Nam Theun 2 dam?

Witoon: The dam itself will create a reservoir that floods 450 square kilometers. The dam is in the Nakai plateau, one of the most biologically diverse areas in the region. Two new mammal species and new fish species were recently discovered in the area. So this area is quite important ecologically.

The people who live there are Lao ethnic minorities. The reservoir would displace about 880 families. Two of the groups speak a language never before recognized by linguists. So this area also has a rich cultural diversity.

The dam would also have downstream impacts. It would block the migratory path of fish. The Mekong River is the second richest fish habitat in the world behind the Amazon. Most of the fish migrate to the tributaries, but the dam would block their path. From the other dams already built we have seen that the downstream impacts, especially on fishing communities, would be massive.

We also question the economics of the project. At the beginning, the project's backers said it would export 680 megawatts to Thailand. They increased this to 900 megawatts. Originally, they said the dam would cost about $800 million, but now it's increased to $1.1 billion. They just recently tried to conclude the price negotiations with the Electricity Generating Authority of Thailand (EGAT). They ended up with a price of 4.2 cents per kilowatt hour. But if you look at the cost-benefit analysis that they did before, it's based on a price of 5.7 cents per kilowatt. They said that at 5.7 cents the project would be economically viable. We question how it will be viable with the new, lower price.

What happens if the project is implemented and doesn't perform as promised? The investors -- the banks -- get a risk guarantee from the World Bank. If something doesn't go right, the guarantee will become a debt of the Lao government. Dealing with the social and environmental impacts will also be the responsibility of the Lao government.

On the Thai side, after the economic crisis, the demand for electricity dropped, but this didn't stop the plan. There is currently a 40 to 60 percent electricity oversupply in Thailand. They have had to put 2,000 megawatts from power plants in Thailand on stand-by. But the Nam Theun 2 project is still going forward. Why? It will cost the Thai consumer more. EGAT has guaranteed that they will buy electricity at a set price and with a fixed demand. If there is no need for electricity, they have agreed to pay for a certain amount of generating capacity in order to ensure that the creditors will still get their repayments and that the private companies would receive the financial returns they demand. So Thai consumers will be burdened with increased electricity prices. Looked at from the Lao side with all the destruction and from the Thai side with this lack of need, we have to ask, why build it?

MM: Who's building the dam?

Witoon: The Nam Theun 2 dam is being developed as a build-own-operate-transfer (BOOT) project by the Nam Theun 2 Electricity Consortium (NTEC) and the government of Laos. NTEC would own the dam for 25 years, after which the ownership is passed on to the government of Laos.

The government of Laos would have a 25 percent share. The four NTEC partners would hold 75 percent equity in the project during the concession period. They are: ElectricitŽ de France (EDF) -- 30 percent; Italian-Thai Development -- 15 percent; Transfield -- 10 percent; and EGAT's subsidiary company EGCP -- 20 percent.

MM: Who will take out the commercial loans?

Witoon: The whole consortium would take a loan from the commercial banks. They have tried to approach the Deutsche Bank, Barclays, SocietŽ Generale and the Anz Bank of Australia. If something goes wrong, the commercial banks say the risk is to be absorbed by the Lao government. The banks talk about the political risk, but actually the government will also cover the commercial risk.

MM: Do you want the project canceled or fixed?

Witoon: We do not take a position of yes or no but rather we try to facilitate the public debate. Those people who would be affected have to form their own position. We have heard a lot of negative opinions from people in Laos about this project, but our role is to try to facilitate the debate. We also want the Thai public, the Thai consumers to be involved with this.

The real problem is with the Bank's decision-making process. They have been involved with this project since the beginning in 1990.

After the Bank became involved, a Lao military company started logging in the reservoir area -- before a final decision on the project has been made. The logging contractors have also logged outside the reservoir area and the bank has done nothing about this. The Bank said that they are going to start the appraisal process once the agreements between the governments of Laos and Thailand has been signed. But now because of the delays in the project all of the the studies are outdated. The study on the economics of the dam was made prior to the Asian economic crisis. We question how the Bank appraisal process can be based on outdated information.

MM: What kind of opposition to the dam is there within Laos?

Witoon: There are a lot of constraints in Laos. For example, the people of Laos have less experience with dams, they have little public information about dams, and the people who would be affected by the project are ethnic minorities living in remote areas. In my view, the question that should be put to the Bank is, how do they implement their policy of popular consultation in a country which has a different political system?

In my experience, if the civil society in a country is not strong, the Bank does not aggressively implement its policy of consultation.

MM: Do you think that the World Bank has changed the way it has done business in the last 10 years or even two years?

Witoon: I have worked on projects funded by the Bank for nearly 20 years. I have to say, I don't see any change. Looking at a past project like the Pak Mun dam, Bank people will say, "If this dam had to abide by present policy, it would not be built." But if you go to Laos to Nam Theun 2, you don't see how it will be any less destructive.

The World Bank still puts too much emphasis on the construction of infrastructure. The role of the Bank now is to promote private investment, privatization and the market economy. In this way the Bank will build both physical infrastructure and political infrastructure for global capital funds and multinational corporations. That I think is the role of the Bank.

MM: When the Bank says its role is to eradicate poverty, do you think that is misleading?

Witoon: It's clear that many of their projects create poverty. It's hard for them to prove that their projects contribute to economic growth, and then that this economic growth will trickle down to the poor. That is hard for them to prove, especially in the Mekong Delta region. I would say that many Bank projects destroy people's lives. They can no longer live in their rural area. They have to move to the city to find a job. That is what is happening.

The Bank tries to expand the sphere of the cash economy, where if you earn more cash you're better off. But rural people are fed on other kinds of systems -- not just cash systems. If they produce enough rice to eat, if they have a lot of fresh resources -- such as fishing -- then the whole family is set. If they produce a surplus, they can sell that.

That is the system in Laos for many people. They might have very little cash to earn, but they don't need to spend money. They are not market consumers.

But when these types of projects go up, they are forced to enter the market economy. And when the people start to be a part of the market economy, they depend on how much they earn, and more and more they become consumers.

I think the criteria the Bank uses for addressing poverty is a big mistake. If you compare different people who live on a cash economy, you can say who earns more. But if you compare people who live in a cash economy with people who live in a different system, in a different type of economy, you can't just draw simple conclusions.

What people need are other types of support systems. To rural people, the rich environment and natural resources is the important support system. If their crops fail, they can take some other thing from the forest. Even the social support system in the community works differently -- if someone has a problem, the others help.

These kind of things will be destroyed by the Bank's policies to promote the market economy.

MM: The Bank now says that it is increasingly focusing on alleviating poverty. Many people who have been critical of the Bank have been encouraging it to do more on poverty alleviation. Do you think this is a good thing or a bad thing?

Witoon: I don't really see what they do to alleviate poverty. In Thailand, the Bank, together with the IMF [International Monetary Fund] and the Asian Development Bank, are setting conditions which caused the Thai government to charge the farmers a water fee. How can they say this is a policy to reduce poverty?

Or look at the policy to privatize and profitize universities and schools in Thailand. If you privatize or commercialize the university, students have to pay more to go to school. So how can the children of ordinary poor people go to the university? Already, only a few of the students come from ordinary families; the majority come from the elite class.

In Thailand, they want to privatize everything. They believe that is more efficient than the state. But the system shouldn't be one or the other. Why not have a more diverse system?

Why don't they talk about people's common interest? Why don't we have a more open system? If people are happier with a state-run or a collective system, why not let them do it? Why does everything have to be privatized? This is the problem we see.

And we have a political question with Bank and IMF conditionality. It violates sovereignty and democracy in the country. They should go to the parliament to find what the people want. Instead, the Bank has already drafted a law and handed it to the government and said, "You have to pass this." How can you say this is a democratic process?

Because the Bank only promotes the market economy model, which undermines the diversity of the local economies, this has made them the enemy of the people.

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