Nam Theun 2 Hydropower Project Update: Nakai Nam Theun Watershed December 2017 This note explains recent updates on the Project’s environmental offset, the Nakai Nam Theun Watershed, one of the five key areas of the Nam Theun 2 Social and Environment Project. Notes about the Resettlement Implementation Period, Revenue Management Program, and Downstream Program were previously posted here. The notes provide additional detail to the World Bank’s Implementation Status and Results Report that can be found here. Questions may be posted to laos@worldbank.org. The Nakai Nam Theun Watershed, including the Nakai-Nam Theun National Protected Area (NNT-NPA) is a key environmental offset for the Nam Theun 2 Hydropower Project (NT2), and is one of the most important biodiversity areas in the region. At over 4,000 km2 (400,000 ha), it is a refuge for a wide variety of endangered and protected animal and plant species. Some species, such as the Giant Muntjac (Muntiacus vuquangensis), a type of deer, and Chinese Swamp Cypress (Glyptostrobus pensilis) are critically endangered species known in few other areas outside the watershed. Human pressures, including illegal poaching over the years, have led to a drop in large wildlife populations, with some such as the Sumatran Rhinoceros and Indochinese Tiger extirpated across all of Lao PDR, including in the watershed. To prevent future degradation of the forest and wildlife resources of the NNT-NPA around the NT2 project area, the project company (NTPC) has contributed US$6.5 million in funding during construction and an additional US$1 million annually from the start of operations in 2010 to the end of the Concession period (2035) to the Watershed Management and Protection Authority (WMPA) - the Government agency responsible for conservation and socio-economic development in the Project’s watershed. Management of the NNT-NPA aims to conserve the rich forest and wildlife resources, as well as support village livelihoods through community development in a manner that supports conservation. There are around 7,000 people in 11 villages completely contained within the NNT-NPA, and another 25,000 villagers living in close proximity to the watershed and who use the watershed’s natural resources. The watershed is rich in ethnic diversity, with 28 languages identified from four major linguistic groups. The WMPA’s management is guided by a 5-Year Plan and a Social and Environmental Management Framework and Operational Plan (SEMFOP). The most recent SEMFOP III utilizes a Community Engagement Framework that emphasizes participatory planning with villages, and is sensitive to the different ethnic groups and natural resources in the area. The latest 5-Year Plan and SEMFOP III were approved by the WMPA Board in September 2017. The WMPA is responsible for patrolling the protected area to monitor wildlife and timber trade, and for educating local communities on these issues. For patrolling, the WMPA has trained local community members as rangers and has formally partnered with the military on international border areas. Some areas of the NNT-NPA are zoned as total protection zones with no natural resource extraction allowed, while others provide controlled use for non-timber forest products, subsistence logging for new house construction, or other low-impact needs of the villages. Since 2010, forest cover in the watershed has largely been maintained; however, pressure on wildlife populations and high-value timber remains. These pressures, particularly wildlife threats from poaching, have been pervasive in all protected areas across Lao PDR during this time. Physical infrastructure for enclave villages within the protected area has improved. As a result of the reservoir, transportation is reportedly easier for watershed communities and they have more access to protein and income diversification through better fishing opportunities. The needs of communities remain large as they aspire to improved food and nutrition, education, health care, electricity, and other basic needs. Regular reviews by independent monitors concluded in 2014 that significant improvements and institutional reforms were needed to ensure increased environmental protection. As a result, restructuring of the WMPA was accelerated. An action plan to complete the institutional reform of the WMPA was agreed among key stakeholders in October 2016, and endorsed in principle by the Prime Minister on January 26, 2017. A key action in the plan—a revised WMPA Decree—includes two important decisions: (1) transfer of leadership from the Provincial Government to the central Ministry of Agriculture and Forestry (MAF); and (2) initiation of the process to transform NNT-NPA into Lao PDR’s first national park. The WMPA Decree was approved by the Prime Minister on April 22, 2017. The new WMPA Board of Directors, now chaired by MAF, met for the first time on September 25, 2017. In addition to the approval of the 5-Year Plan and SEMFOP III, the WMPA Board also approved a 5-year contract to engage a Consortium of Technical Experts (COTE) for technical assistance and expertise on WMPA management. This innovative model will utilize the specialized expertise of four different NGOs, combined under one Consortium through a Memorandum of Understanding. The COTE is led by the Lao Wildlife Conservation Association (LWCA), and includes three international NGOs that bring specialized expertise on key required technical capacities for protected areas: Anoulak (biodiversity research and monitoring), Agrisud International (sustainable agriculture and rural livelihoods), and Creative Literacy Laos (environmental awareness raising). The COTE was established to strengthen the capacity of the WMPA for effective conservation and protection of biodiversity of the NNT-NPA. It also provides fiduciary services, including co-signing funding for activities with the WMPA, to ensure transparency of WMPA finances. The COTE has the mandate to report poor performance of WMPA staff to the Director or Board of the WMPA. Much progress has been made, but work remains to be done to bring the NNT-NPA up to international management standards. Managing a 4,000 km2 protected area with 32,000 rural residents, 28 languages, a long international border, and many highly-valued wildlife and tree species is a very difficult task anywhere in the world. The combination of financing through 2035, technical support provided by the COTE, and the Government’s leadership in recent reforms together offer a solid foundation. However, it is a long-term development objective to sustain the first example of comprehensive, effective conservation area management in Lao PDR and to progress to the next stage of conservation -- the further strengthening of the area’s long-term protection by upgrading its status to Lao PDR’s first well-managed protected area or national park.