World Bank Wary of Further Development of Nam Theun 2 Project by Phairath Khampha 6 July 2002 The World Bank will not consider extending a partial-risk guarantee to Laos' controversial Nam Theun 2 hydropower project, claiming it needs to receive wider support among the international donor community and from social and environmental groups, a senior official of the bank said on July 3, 2002. The International Monetary Fund, which is providing the monies to the World Bank, has indicated to the Lao government that it did not want the funds provided to the Nam Theun 2 project unless the government was willing to not implement the Nam Mang 3 project. However, the Lao government had already made contractual and credit obligations with a huge Chinese construction consortium led by the China International Water & Electric Corporation (CWE) to go ahead with Nam Mang 3, hence it was considering delaying Nam Theun 2, particularly as the Electricity Generating Authority of Thailand thinks it would not need the power from Nam Theun 2 after it determined that Thailand was suffering from a glut of electricity. An impasse appears to have developed requiring further political consideration and delays in the Nam Theun 2 project. The issue, rather, is actually political, surrounding whether the Lao government or the IMF will control Laos' social and economic development, something the government sees as a form of economic neo-colonisation. In 1995, the Lao government and investors asked the World Bank to support the programme with a risk guarantee to cover the US$100-million investment cost. The World Bank, a major donor to Laos, required the project be incorporated in a development framework aimed at poverty reduction and environmental protection, said World Bank project director Jayasankar Shivakumar. The IMF is indirectly controlling development of Laos' infrastructure. It has strongly indicated in early July to the Lao government not to implement the Nam Mang 3 project as a condition for the release of the partial-risk guarantee monies to be put up by the World Bank for the Nam Theun 2 project. However, the Nam Mang 3 project credit loan was provided by the CWE and these monies are already entrenched in the development of the project and further disbursed elsewhere, in a manner difficult to fully ascertain. As a result, the Lao government can no longer halt the project without damaging the CWE or incurring horrendous costs on the credit. The interest and damage costs on this credit provided by the CWE are considerably higher than the costs of the partial-risk guarantee monies to be provided by the IMF vai the World Bank. The IMF apparently has indicated it wants to control the pace and direction of Laos' infrastructure. The government sees this as a form of neo-colonialism and the use of two major and important development projects as a leverage to bring this about. A political impasse has therefore developed with the two projects' development caught in the middle. Vientiane and foreign investors in the Nam Theun 2 Electricity Consortium planned to build a 1,070-megawatt hydropower dam on the Nakai Plateau, 250 kilometres east of Vientiane, and to sell 995 megawatts of electricity to Thailand. The Electricity Generating Authority of Thailand, Electricity de France and Italian-Thai Development Plc. and other minor investors signed an initial power purchase agreement in February 2002. Design-build bid submissions were due at the head contractor on June 27. Evaluation of these bids is now delayed until this issue and other matters related to the bidding process can be resolved. The new bid submission date was set for November 18, 2002.