74673 Nam Theun 2: Handing Over 10th Report of the International Advisory Group June 2011 Cover picture credit: Xaysongkham Induangchanty, Vientiane, 2011 Nam Theun 2: Handing Over Preface The International Advisory Group on the Nam Theun 2 hydropower project in Lao PDR (IAG) was appointed in 1997 as an independent source of advice for the World Bank President, James Wolfensohn, on potential issues and problems arising from the project. Its members were chosen for their reputation and expertise in fields relevant to the project. Actual membership and terms of reference have changed over the life of the IAG. In the construction and operating phases of the project, since 2006, the IAG has been tasked with advising on “environmental management and social impacts of the Project, civil society participation in Project implementation, progress in building institutional capacity within relevant GOL agencies, management of revenues originating from the sales of electricity generated by the Project, and other issues of governance�. The IAG’s first five reports were during the project preparation phase which was focused on project planning. The 6th to 9th mission reports were from construction to commissioning and looked mainly at poverty alleviation, national and local development, capacity building, and environmental and social objectives. Now that the project is fully operational, the World Bank has advised us that the IAG’s role as an independent advisor will come to an end, so this report, our 10th, will be our last. In the preparation of this report, we visited Lao PDR from 27 March to 8 April, where we interviewed World Bank, government and NTPC officials and talked to women and men of the villages affected by the project. We were assisted in the field by Ms. Kesone Sayasane (facilitator) and Mr. Xaysongkham Induangchanty (interpreter) and wish to thank them for their invaluable support. We also reviewed many documents. A full list of all those we met or who otherwise assisted us is attached as Section V. We are grateful for the cooperation we received from all those we contacted and for the logistic support we received from the World Bank Country Office in Vientiane. Rob Laking Jacques Gérin Mary Racelis Lennie Santos-Borja June 2011 i|Page IAG Report No 10 ii | P a g e Nam Theun 2: Handing Over Table of Contents I. Acronyms ........................................................................................................................................ 1 II. Executive Summary ..................................................................................................................... 3 III. Main Report................................................................................................................................. 9 1. Introduction ................................................................................................................................ 9 2. Project governance and management ..........................................................................................11 3. Creating sustainable institutions...................................................................................................17 4. Village institutions and capacity ...................................................................................................23 5. Government administrative capacity.............................................................................................28 6. Planning and delivering future hydro projects ...............................................................................30 7. Monitoring and evaluation ...........................................................................................................39 8. Future role of the World Bank and IFIs ........................................................................................42 9. Conclusion: projects, people and institutions ................................................................................44 IV. Annexes .....................................................................................................................................46 1. Sustainability Rests In The People: Socio-Cultural Concerns ..........................................................48 2. Estimated Environmental and Social Component Costs ..................................................................68 3. Organization of the Lao state.......................................................................................................69 4. Lao PDR village level organisation................................................................................................70 V. The people we met .....................................................................................................................71 VI. References .................................................................................................................................73 iii | P a g e Nam Theun 2: Handing Over I. Acronyms BOOT Build, Own, Operate, Transfer CA Concession Agreement COD Commercial Operation Date DAFO District Agriculture and Forestry Office DOF Department of Forestry DOFI Department of Forestry Inspection DSP Downstream Program DWG District Working Group E&S Environmental and Social ESIA Environment and Social Impact Assessment FSC Forest Stewardship Council GOL Government of Laos IAG International Advisory Group IMA Independent Monitoring Agency IRN International Rivers Network KDP Khammouane Development Project KII Key Informant Interview LFH Leuan Fat Hong MAF Ministry of Agriculture and Forestry MIC Ministry of Industry and Commerce MIWRDP Mekong Integrated Water Resources Development Project MOU Memorandum of Understanding MPI Ministry of Planning and Investment MRC Mekong River Commission NBCA National Biodiversity Conservation Area NESDP National Economic and Social Development Plan NGO Non-Governmental Organization NPA Nam Theun National Protected Area NT2 Nam Theun 2 Hydropower Project NTFP Non Timber Forest Product NTPC Nam Theun 2 Power Company O&M Operations and Maintenance PAH Project Affected Household PER Public Expenditure Review PFMSP Public Financial Management Strengthening Program PIM Participatory Irrigation Management PLUP Participatory Land Use Planning POE Panel of Experts PPP Public Private Partnership 1|Page IAG Report No 10 PSFM Participatory Sustainable Forest Management RC Resettlement Committee RFA Reservoir Fisheries Association RfP Request for Proposal RMC Reservoir Management Committee RMU Resettlement Management Unit SCST Socio-cultural Survey Team SOE State Owned Enterprise SUFORD Sustainable Forestry for Rural Development VDC Village Development Committee VFA Village Forestry Association VFG Village Fishing Group VIRF Village Income Restoration Fund WASH Water and Sanitation Health (project) WB World Bank WMPA Watershed Management Protection Authority WREA Water Resources Environment Authority WRMC Water Reservoir Management Committee WUG Water Users Group XBF Xe Bang Fai 2|Page Nam Theun 2: Handing Over II. Executive Summary Introduction This tenth and final report of the International Advisory Group on the Nam Theun 2 power project focuses on the lessons learned from the project concerning project management, the institutional requirements of development and the basis for future planning of natural resource use, particularly taking account of its environmental and social impacts. Since our last mission in November 2009, the project has begun commercial operations and the full effects of changed water flows are being experienced downstream. Major institutional issues include effective protection of natural resources including forestry and fishing, how to continue the development initiatives started by the project, building the capabilities of government and villages to assume responsibility for these activities and the appropriate allocation of the revenues received by the government from the project. Project governance and management The NT2 Resettlement Management Unit (RMU) represents a good model for coordinating the roles of government agencies in major projects particularly involving partnerships between private and public sector, provided that such a body is clearly accountable to the senior government official carrying the government’s mandate for its involvement and operates as far as possible on the assumption that line agencies will carry out executing functions. Recommendation: The GOL should retain the RMU in Khammouane as a basis for coordinating the contributions of partners to major development projects in the Province, reporting directly to the Provincial Governor. Adaptive management and stakeholder participation Adaptive management is an essential process in the implementation of all major projects and should be specifically designated in their founding agreements. The elements of adaptive management are: a clear statement of objectives; a flexible process, largely delegated to project management, for amending detailed means of implementation; a requirement for consultation on changes with t he stakeholder communities and households affected; and a process for ongoing monitoring and evaluation of achievement of objectives and regular discussions amongst the parties on adaptive management actions. Stakeholder participation should be built on the principles that:  Project-affected households and communities should be regarded as essential participants in the process of adaptive management of environmental and social plans. They should be regularly informed on project progress, consulted and involved in processes to amend plans and where possible be empowered to take necessary decisions themselves.  Officials and others involved, including the villagers themselves, need training in and experience of working in a participatory mode.  Community consultations should begin at the earliest stage of project planning. These principles of participatory development, already spelled out in government policy, should be written into specific agreements in future hydropower projects. Compensation and grievance process The NT2 compensation process and associated grievance procedures have been an important means for company and district officials to consult and collaborate with villagers on matters important to them. There is an ongoing requirement over the life of a project for a trustworthy process for resolving complaints relating to general project impacts as well as specific compensation. The process should be demonstrably independent of the project management including (in the case of government-sponsored projects), local government officials. 3|Page IAG Report No 10 Complex compensation schemes, while aiming at fairness, can be difficult to understand and costly to implement. Simpler formulae, comprehensible to both affected households and project staff, can be more effective and less costly even if they err on the side of generosity. Natural resource conservation and management A special purpose authority like the WMPA with its own dedicated revenue source may not be suitable as a more general model for protected areas in Lao PDR. The WMPA, however well-resourced, cannot manage the protection of the natural resources of the NPA on its own. Effective reduction of major natural resource threats is a wider problem for GOL policy. Recommendation: The GOL should investigate a national model for governance of NPAs including a national parks authority or conservation department or regional models based on river basins, and based on funding conservation activities from the general revenues of the national budget. Fishing The sustainability of the reservoir fishery requires adequate levels of enforcement by government authorities and commitment by villagers to protection of their common resource. That requires regular discussions in villages on results from monitoring of fish stocks and catching effort and on the effects of excessive catching. Forestry The Village Forestry Association, a model for community forest operations elsewhere with significant benefits for resettlers is under threat. Its continued viability requires the active participation of village communities in VFA governance and their recognition that continued income from the forest requires protection of the asset and investment in regeneration and replanting; professional management of the forest and its harvest; dealing effectively with theft of wood from VFA land; and above all the committed support of GOL officials both nationally and locally. Local policing of timber theft can be made more effective but on its own will not protect forests. The SUFORD project developed by the GOL and development partners, offers a systematic basis for controlling the harvesting of timber on a national basis. Recommendation: The GOL should commit to a definite date for full national implementation of the certification and chain of custody processes in its SUFORD project to ensure the legal provenance of timber from forest to local user or export. Law and custom in the use of natural resources The way to develop and sustain village or community institutions is to start by allowing villagers to engage informally in working together on specific matters of their choice, such as forest and fishery management and conservation, in a problem-solving, learning mode. Formal organisations, such as the Village Forestry Association or Village Fisheries Groups, are more likely to receive support and be responsive to household interests and environmental imperatives as the outcome of such a process. Villagers also need tangible evidence that their ownership of the forest and fishery is being protected by the state. Recommendation: The GOL should re-convene meetings of the resettlers, in each village and as representatives to the general meeting of the VFA, together with social scientists, NGOs and spiritual leaders, to explore the settlers’ traditional concepts of forest rights and their responsibilities and use the findings to develop a new covenant on a culturally appropriate forest sustainability scheme. 4|Page Nam Theun 2: Handing Over Strengthening village institutions and capacity A participatory approach to village-level development implies strengthening village capacity for self- development and self-management and inevitably a stronger sense of autonomy. The GOL government needs to define village authority functions and powers to set the boundaries of self management; ensure that members of the village governing body and its committees are properly trained in their responsibilities in village management; and promulgate and enforce the necessary rules for transparent conduct of village business, independent supervision and audit of village committees and rights of appeal against their decisions. Village Funds In order for Village Funds to play a useful role in village development, their governance and management will need to be strengthened.. There needs to be greater accountability and transparency in decision- making, a vehicle for independent audit of VIRFs and other funds and a process for complaints. A further attempt should be made to place the funds under management of the banking system. There is a tension between individual ownership of shares and the use of the Funds as a principal vehicle of village development which will ultimately only be resolved by permitting individual shareholders to cash in their shares. Water User Groups There are significant doubts about the sustainability of local irrigation schemes largely because of a history of failed arrangements to allocate water fairly and to collect money and assign labor for proper operations and maintenance. The sustainability of water user groups to carry out these functions requires strong processes for collective decision-making about allocation of water, finance and labor for O&M work and fee structures. These processes should be managed mostly by communities themselves rather than by government agencies. Dealing with transformative change The resettler communities of Nakai are managing a fundamental change in their livelihoods that needs the following elements:  Targeting programs more specifically to the three different levels of acceptors (active, cautious, and marginal) among settler families in Nakai.  Supporting household decisions to prioritize rice growing through improved rice technology, with technical assistance in cash cropping and other income generation activities alongside rice.  Focusing planning on full use of land now available for rice cultivation; by speeding up the allocation of cultivation rights on reservoir drawdown areas, perhaps by redistributing 0.66 hectare plots left idle, and by improving technologies for rice cultivation sought by settlers, like expanded irrigation systems, new seed varieties and organic fertilisers. Building women’s capacities for development leadership Measures that assist women to lead development change include:  Strengthening women’s capacities by enabling them to gain access to the technical knowledge, leadership skills, confidence-building mechanisms and outside exposure needed for them to handle livelihood innovations, whether in agriculture, forestry, fishing, craft production or entrepreneurial ventures.  Offering literacy and numeracy programs for interested women to enhance their confidence about going into business. When organizing village training programs, building in regular follow-up sessions and sufficient time for women participants to absorb these skills and new knowledge with ease and develop self-confidence.  In promoting promising activities for women, e.g. techniques of irrigated rice cultivation, vegetable growing or frog raising, discussing with the women the added amounts of labor and time that will be required of them, and how they might find ways of adjusting their prospective workloads. 5|Page IAG Report No 10  Gearing programs to the different levels of poverty and well-being of women—those somewhat well off and already engaged in innovative activities, those focusing on rice-growing but cautiously interested in exploring new alternatives, and those living in dire poverty.  Offering literacy and numeracy programs for interested women not only for their own utilization but as part of confidence-building mechanisms that encourage women to go into business or other productive ventures. Assisting young people to take on future leadership roles Measures to assist young people to take on future leadership roles include:  Ensuring that all village children complete elementary school and insofar as possible, secondary school. Establish secondary schools in or near the larger settlement villages to encourage broader attendance.  Enabling the most talented youth – female and male – to compete for scholarships allowing them to pursue their studies at secondary school, technical colleges and university levels; expand their knowledge through work internships. To assure their return to serve the community for a specified period of time, have the recipients sign contracts as conditions for the scholarship award.  Organizing short-term on-the-job training in farming and off-farm work for out of school adolescent girls and boys. Leadership development in villages can also include:  Developing training programs for nascent young male and female leaders, including cross-village visits and exposure to the outside world.  Encouraging village leadership among qualified young adult men and women in governance, economic activities, and basic services provision by offering them priority access to management, technical and leadership training programs. Government administrative capacity Building local government administrative capacity to take over project responsibilities requires institutional change over a time period well beyond the project horizon. For the current NT2 project, if activity is to be successfully handed over to the GOL there may be a requirement for a new development organization that is able to recruit and retain existing qualified staff. For future development projects there is a need to identify immediate requirements and to plan for short-term actions (“training�) as soon as the project is approved and for the GOL and its partners to develop longer term plans for a broader strategy of administrative reform. Recommendation: The GOL should explore the possibility of a new development organisation at least as a transitional measure to retain qualified staff able to continue NT2 programs. Asset handover and budgetary capacity As with any development project, development of a major hydro-project on a BOOT (Build, Own, Operate and Transfer) basis requires early planning on how the handover of assets will be financed and the assets maintained. Water management policies and future hydro development The main enhancements to the existing official policy on hydropower and river basin developments should be:  An energy resources plan which ranks projects not only for net economic benefits but also for environmental and social impacts;  Providing detailed site information and a preliminary assessment of likely social and environmental impacts, possibly with both financial support and technical assistance from the IFIs, to be made available to potential developers; 6|Page Nam Theun 2: Handing Over  Development of individual projects within an overall standard, published taxation and regulatory regime;  As far as possible within existing commitments, competitive tendering for the right to develop specific projects;  Publication of the taxation and regulatory provisions applying to all projects, the specific environmental and social safeguards on individual projects, and the results of monitoring the implementation of those safeguards. Recommendation: The GOL should  review and revise its power system plan to take account of developments since the original plan in 2004;  consider inviting competitive tenders for the projects in the plan which are not covered by current MOUs or other legal commitments to specific developers, on the basis discussed in this report. Private sector development and the public-private partnership Public-private partnerships in major projects have many advantages for a developing country government. Selection of the project developer must consider the environmental and social objectives as well as achievement of the financial and commercial objectives. Different models of roles of developer and government The arrangements for mitigation and restoration of E&S impacts for major resource projects need to be based on the principle of developer pays, either by assuming direct responsibility for E&S activities or funding government E&S projects. Governments need to take advantage of the development opportunities that major projects present for the communities within the project footprint. Mitigation and restoration of E&S impacts on the one hand, and development of sustainable livelihoods on the other, should therefore be jointly planned and agreed between developer and government at the time the CA is negotiated. Viewing a major energy project as a development opportunity also leaves open the possibility that a developer with competence to deliver E&S activities could also be funded to undertake development work beyond that required to meet E&S safeguards. Compensation or development? A baseline for assistance to project-affected people is compensation or restoration for affected livelihoods and impacts on environment, society and culture. Joint planning of compensation and development activities is required, but the bottom line is that compensation is an entitlement and should not be hedged about with restrictions on how it is taken up, even with the best of development motives. If developers offer assistance with livelihoods to affected households as part of compensation, it should be underpinned by a guarantee that the households will be at least no worse off than if they had accepted full financial compensation or restoration of assets. Use of revenues from NT2 and other hydro projects A government’s commitment to the beneficial use of proceeds from major development projects can only be assessed by an overall examination of the outcomes from the public budget. The best means of achieving this is for the government to publish its intentions in the form of a medium-term expenditure plan, showing the contribution of natural resource revenues on the one hand and the increased priority given to pro-poor and pro-environment programs on the other. Public funding for operation and maintenance of assets developed by a project must take its place with all other uses of public revenues but there is a general principle that no development project should proceed without a clear commitment to sustainable funding of its recurrent costs. 7|Page IAG Report No 10 Project monitoring and evaluation Independent high-level monitoring of major projects, together with the participation of affected communities, can add value by providing assurance and advice on project management and helping to draw lessons for future projects. The arrangements for monitoring and evaluation for NT2 have generally covered most of the important requirements for the project to date. External monitoring should be simplified and streamlined to ensure that each monitoring agency has a clearly distinctive role and is not duplicating the work of others. Future monitoring and evaluation also needs to focus on drawing lessons from the project for the different roles of project managers, government and development partners; and how well the regulatory framework and organisations supporting the project are working, including how village institutions are supporting the sustainable livelihoods and well-being of villagers. Monitoring and evaluation particularly needs to include good communication with and feedback from the people affected by the project. It is a means for local communities to be heard about – and have some influence over - project impacts independently of the “official� channels of project developers and government officials. The accountability of both should include direct, public reporting in a suitable fashion of the perspectives and experiences of individual villagers. Social scientists, mass organisations and NGOs can play a valuable role in assisting with this reporting. To be reliable, the consultation with villagers on which this reporting is based needs to be conducted at regular intervals during the year; directly in the language of the villagers themselves; in a way that enables the voices of groups such as women, young people, people with disabilities and those otherwise disadvantaged to be separately heard; in a form that villagers themselves believe carries no risk of retribution for them if they give their opinions honestly; and with the commitment to report back to the villages what was said to authority and what was the response. The World Bank can benefit from independent monitoring as a supplement to its own internal resources in managing its risk in major projects, provided it is clear on the role that the monitoring agency will play in relation to other agencies. Future role of the World Bank and IFIs The World Bank must continue to play an active role in support of energy projects. That role will increasingly be based on a strategic relationship that recognizes mutual interests of the parties. The Bank has a strong interest to ensure the preservation of the high standards of NT2 to demonstrate the benefits of its involvement in the project. The GOL development strategy will also gain much domestic and international support if those standards become the norm for future projects. 8|Page Nam Theun 2: Handing Over III. Main Report 1. In t r od uc t io n 1.1 C on t e n t o f t hi s r ep o rt World Bank management asked us specifically for this report to advise on lessons from NT2 which might be relevant for future major projects with a specific focus on the management of the project and the institutional context in which it operates. In particular we have been asked to comment on:  The extent to which project and program related institutions (local structures, agreements, and regulations) and implementation arrangements have been effective arrangements for managing such a large and complex public-private partnership,  The extent to which project arrangements are properly balancing the demands of short-term delivery with medium and longer-term sustainability, and any recommendations for strengthening this,  How the Revenue Management Arrangements for the project are working now that project revenues are flowing, and what sustainability issues need to be dealt with for the long-term,  Whether the project or Government need to be considering any additional financial flows to local government to improve the sustainability of project related infrastructure (e.g. roads) and new institutions (e.g. reservoir management committee).  The extent to which project arrangements are encouraging effective adaptive management as project realities and community preferences evolve,  The strategic role and adequacy of the grievance process in project implementation, including in shaping the way that local government think about the project, and the extent to which it could or should be sustainably integrated into local governance processes,  Any lessons about the Bank’s and Development Partners’ own engagement in the project during the supervision phase. The report is organized somewhat differently from the sequence of issues above but covers all of them. Where we are drawing lessons for future projects, we mostly summarize these findings as conclusions. For issues relevant to future NT2 operations, we have made a small number of specific recommendations for action . However our main purpose is to highlight features that are useful lessons for future similar projects1. It has been a concern of the IAG throughout its existence to ensure that, in addition to discussions with the major organizational stakeholders such as NTPC, GOL and IFIs, it listens to the people most affected by NT2, who live in the villages in the footprint of the project and in many cases have had their lives dramatically transformed by it. This time once more we spent time visiting and meeting villagers particularly in Nakai, Project Lands and the Xe Bang Fai. Annex 1 features a report by Professor Mary Racelis of our visits to the villages. We have taken the key points from this report into our conclusions and recommendations in the main report. We hope that the readers will turn to the Annex to discover what ordinary Lao women and men themselves have to say about the effect of this major project on their lives. 1.2 Th e s ta t e o f t h e p r o je c t Since the IAG’s last visit in November 2009, the project has achieved some significant milestones, which set the context for our 2011 mission. The project achieved its Commercial Operating Date (COD) in April 2010 but the Panel of Experts (POE) reported that a number of issues remained outstanding before it could recommend a Project Completion Certificate signifying the company’s compliance with the Environmental and Social conditions in Schedule 4 1 We acknowledge two recent and useful World Bank publications that cover some of the same ground as this report: the case studies of NT2 in “Doing a Dam Better� (Porter and Shivakumar (2011)), and the analysis of hydropower and mining policy in the Lao PDR development report for 2010 (World Bank (2010)). 9|Page IAG Report No 10 of the CA. In late 2010 the POE, Dam Safety Review Panel and GOL said that they had no objection to the company’s certificate that it had met or was meeting these conditions. An official opening ceremony took place in December 2010. From April 2008, when the dam was sealed and the reservoir began to fill, the project has been through three full annual cycles of wet and dry seasons. Each time the reservoir itself has filled to nearly its full extent during the rainy season, but has not yet been drawn down to its minimum operating level in the dry season. Thus the full extent of the land available in the drawdown zone has not yet been uncovered, limiting village-level planning on its future use. In the Project Lands, water is flowing through the downstream channel. The company is providing a siphon under the channel for water for a local irrigation scheme, and there are off-take points on the channel as well for further irrigation schemes, yet to be developed by GOL. The company has assisted with refurbishment of older irrigation and flood control facilities along the Xe Bang Fai. Villagers along the Xe Bang Fai have now experienced one partial and one full dry season of higher water flows, with the consequent impacts on river fishing and riverbank gardens and, in the hinterland, some additional backwater effects in tributaries. The project is entering a period, over the next three years, when the responsibility for implementation of most E&S activities will pass to the GOL. This handover will make additional demands particularly on GOL district staff and on the villagers themselves for environmental regulation and enforcement and development of sustainable livelihoods in the project areas. These issues are a major focus of this report. The major governance issues in the watershed and on the plateau continue to be the adequate enforcement of measures protecting the forests, reservoir fishery and other natural resources. The WMPA has been able to increase its patrolling effort in the watershed protection area but illegal logging and poaching continues. Similarly the RMC and the WMPA are cooperating in fisheries patrols on the reservoir, and zones have been established to protect fish spawning. Village Fishing Groups are responsible for supervising fishing on the reservoir and fish trading at the landing points. However illegal fishing remains a significant problem. The Village Forestry Association is being restructured as a company to conform with GOL requirements and has negotiated a multi-year contract with a processing company to mill VFA wood. The GOL has moved to shut down the other mills operating on the plateau, which were suspected of sourcing their supplies from illegally-acquired timber on watershed and VFA land. Land pressure remains important to the Nakai resettlers, with increased land for rice farming a priority. Participatory Land Use Planning (PLUP) may have eased some of this pressure by agreeing with villagers on the reallocation of some degraded VFA forest land for agriculture. The PLUP process is in its final phase in the resettlement villages and now awaits formal ratification of the plans by the district. In the meantime villagers were moving onto the land to prepare it for rainy season planting. Support for livelihood development on the plateau is being strengthened with additional district government staff being allocated to village extension work and the establishment (still just getting underway) of water user groups to operate the many small irrigation schemes being created by the company. Under a government national policy, Village Development Committees are being created to organize development activities in each village, both on the plateau and in other project areas. In Project Lands the program of compensation for loss of land and community assets is nearly complete. Individual losses have been recalculated and adjusted in some cases, and most grievances having been resolved through the district grievance process. Livelihood support continues through the Na Hao program covering irrigation, gardening and rice trials. The grievance process is gearing up downstream, mainly in response to the company’s decisions on compensation for loss of riverbank gardens, both on the Xe Bang Fai and affected tributaries. The Water and Sanitation Health (WASH) program is complete as is the refurbishment of flood control and irrigation facilities. The DSP livelihood program is operational in 83 villages and was being extended to a further 12-15 villages at the time of our mission. During 2011-12 period, the $16m allocated by the CA for compensation and restoration was expected to run out. The IFIs undertook a mid-term review of the Downstream Program in February 2011, with the expectation that responsibility for the livelihood activities of the DSP could be taken over by the GOL, but that the NTPC board may consider a one-year extension of support for these activities to assist with the transition. The GOL’s Khammouane Development Project and the Mekong Integrated Water Resource 10 | P a g e Nam Theun 2: Handing Over Management program, which also has projects in Khammouane, will be the major vehicles for further development, with the IFIs indicating their continued support. The Revenue Management Arrangements (RMA) are made under an agreement between the GOL and the IFIs to ensure that project revenues result in increased government expenditure on programs of social and environmental importance. The RMA are being implemented with allocations to the national budget and accounting reports of actual expenditures. The GOL national budget for 2010-11 specifically allocated sums under several priority headings: rural roads, education, health and environmental management. The total net revenues accruing to the government are relatively small at present but will increase significantly once project debt is paid down. The Ministry of Finance issued the first accounting reports on actual RMA-related expenditures in December 2010. The State Audit Office is currently auditing the GOL’s receipt and use of revenue from the project. Measures of the impacts of the expenditures are not yet available. 2. P ro j ec t go v er na nc e an d ma na g e m en t Project management in the implementation phase has its own complexities. There are two major dynamics: adapting the project plan to the realities on the ground; and managing the transfer of assets and ongoing responsibilities from NTPC to GOL and local communities. How these are both being handled in NT2 carries lessons for future projects. 2.1 C o or di na t io n b e tw e en NTP C a n d GOL Relationships between the company and government at the national and provincial level have generally been excellent. GOL officials we spoke to were clear that company and government had the same objectives. At the local level, company and government are sometimes driven by different shorter-term imperatives – particularly NTPC’s financial and engineering milestones - and that can sometimes produce tensions. But we also heard from district officials that there has been generally open and regular dialogue with NTPC and it appears that the issues that have come up could generally be managed locally. The Resettlement Management Unit (RMU) has played a large part in ensuring good communication and cooperation between the company and provincial and district officials. Despite its name, the RMU has in fact been the main GOL-NTPC interface, on the ground, for the project as a whole, covering Project Lands and Downstream as well as Nakai. After a shaky start its role has been positively acknowledged by both company and local government. The current leadership has made it effective. Company officials described the RMU leadership as “competent, intelligent, respected, practical and undogmatic [and with] system knowledge.� The Nakai District Governor said that the RMU has a very important role as link to coordinate between government and district. A major advantage is that it is responsible to the Resettlement Committee (RC) chaired by the Provincial Governor; and the head of the RMU acts as secretary to the RC. The Provincial Governor has personally played a large role in the development of NT2) and therefore implicitly carries the Governor’s authority. Some argue accordingly that the RMU has become a valuable resource that should be retained for similar project coordination and developer-government interface in future projects. NTPC officials believed that when responsibility for its Downstream Program (DSP) was handed over to the Province, the RMU was the only candidate for providing the necessary coordinating function amongst provincial and district agencies. But opinion on this question is not unanimous and reflects some of the risks of a special-purpose project unit sitting outside established lines of authority. There are indeed tensions in the current relationship. The RMU funds District Working Groups (DWGs) of district line staff specifically designated to contribute to project activities. Some district administrators may resent their staff being diverted from their line duties and there may be day to day conflicts in time use. Conversely, company management observed that district staff have sometimes lacked commitment to the tasks to which they have been assigned and may resent working with sometimes younger and better- qualified RMU and company staff. The Provincial Governor also implied that the RMU was exceeding its authority. He made it clear that mobilization and political education of villagers should rest with line officials. The Governor wanted the RMU confined to technical inputs and District Governors made clearly responsible for results. 11 | P a g e IAG Report No 10 Nevertheless, a coordinating function like that performed by the RMU seems essential for any major project where inputs are required from several entities. In particular, collaboration between project managers and government has to be organized like a project itself, with an interface unit bringing together the necessary government inputs to work with the project. The formal structure whereby the RMU is accountable to the Resettlement Committee chaired by the Provincial Governor, who clearly leads the government’s response, is a good model. But the RMU’s role differs somewhat from a typical Program Management Unit in that it is not solely accountable for delivering the government’s contribution to the NT2 project. The project is designed with a view to maximizing use of the line agencies that will eventually take over full responsibility for many activities. We agree with the Provincial Governor that local officials should be clearly responsible for these activities. Accordingly the RMU should be seen primarily as a coordinating, not an executing, agency. As in all such coordinating models there needs to be clarity about the following:  Who is in charge: the leadership for the government’s role in the project must be clear – there have been examples in the past where the responsibilities of provincial and national government authorities have overlapped or conflicted;  Who does what: the relative responsibilities of coordinating bodies like the RC and RMU and line agencies such as district offices must be clear and agreed by all the senior officials involved. These preconditions require strong leadership from the authorities responsible for delivering the government’s contribution to the project. Ensuring this singleness of purpose is made easier in the NT2 case because most of the project lies within the province of Khammouane, but the principles will be the same for other projects where provincial leadership is shared. Conclusion: The NT2 Resettlement Management Unit (RMU) represents a good model for coordinating the roles of government agencies in major projects particularly involving partnerships between private and public sector, provided that such a body is clearly accountable to the senior government official carrying the government’s mandate for its involvement and operates as far as possible on the assumption that line agencies will carry out executing functions. Recommendation: The GOL should retain the RMU in Khammouane as a basis for coordinating the contributions of partners to major development projects in the Province, reporting directly to the Provincial Governor. 2.2 Ada p t iv e man ag e m e n t an d s ta k eh o ld e r par t ic ip a ti o n 2.2 .1 Ada p t iv e man ag e m e n t The company has adopted “adaptive management� as a principle of implementation 2. The term crops up quite a lot in company language and seems to be used in different ways – ranging from changing a company organization chart, through monitoring fish stocks, to changing the number of fishing boats supplied to households. The most useful definition however is probably a more general one: modifying the Concession Agreement (CA) to achieve its objectives more effectively or efficiently. For example, in the DSP, managing adaptively can mean modifying or discontinuing specific livelihood activities, with the same objective of restoring or improving household livelihoods, or amending the governance and management of the Village Income Restoration Funds (VIRFs), to better support the need for households to borrow for productive purposes. Sometimes managing adaptively has proved to be difficult given the constraints of the decision processes involved. One official we spoke to said that it was hard to assess NTPC management style, that it could 2 Although the actual term does not appear in CA, the principle of adaptive management does. S.16.7 of the E&S Schedule 4 to the CA for “non-DSP� on “Adaptive Implementation� says that “Both the GOL and the Company acknowledge that due flexibility is needed when implementing the Resettlement Works described in this Part, and acknowledge that, upon agreement between the GOL and the Company, the budgets for those items included in this Part identified as ‘Limited by Scope’ may be reallocated to purchase other materials or equipment as needed." 12 | P a g e Nam Theun 2: Handing Over come across as inflexible: “no means no� (which we took it was not the Lao way), they were “in and out of villages�, and appeared to this official to be slow to respond on meeting specific commitments. NTPC staff would go to a village to work with groups, get things done and just leave. Then the district had to work with the same group and villagers “get confused�. The Nakai Governor said that the “compensation� program (in- kind commitments to rice mills, animals, hand tractors) was not yet complete because NTPC was still “thinking� about it. He was happy if other things are substituted to the same effect but wanted an answer to give to villagers, who remembered specific commitments. The principle of “adaptive management� is essential for any large, complex contract like NT2 with significant environmental and social impacts. A lot is learned from implementation that should be cycled back during the project life to improve the implementation itself. It is hard to imagine the specific provisions of the CA terms surviving unchanged for a quarter of a century. Therefore there need to be mechanisms for altering the letter of the contract to everybody's benefit. There are three issues here: how to define the “constants� in the CA, the process for agreeing on amendments and who is at the table when amendments are agreed. They are closely linked, because in the end the parties to the CA have to agree that everybody will gain from a change in its terms. The “constants� in a contract are its essential terms – its objectives and its limits: a CA requires clear statements of its purpose which are by their nature fairly general – such as "restore sustainable livelihoods" – but can be referred to when amendments are proposed; as well as its bounds such as budget ceilings or legal authorities. But there also needs to be a default position to give the parties contractual certainty if they cannot reach agreement on change: the schedules of specific activities and expenditures are a necessary, if amendable, part of the CA. The process can be seen legally as a provision in the contract for proposing, discussing or negotiating, and agreeing on specific amendments. There is formal provision in the CA for amending the E&S plan on the basis of agreement amongst the project partners and monitoring agencies. But the formal provisions will not be as important as the ongoing learning amongst the stakeholders which will in turn depend on regular dialogue about progress and results. Officials may have been impatient sometimes with the apparent slowness of NTPC to make up its mind about changes to the E&S activities but because of the level of trust that has built up between the company and the government it has been possible for both to be more flexible in implementation. In the villages we heard “of ‘promises’ allegedly made by project personnel and raised several times by indignant villagers, the complaint being either that these were commitments not fulfilled or only partially carried out�3. Organizations do of course go back on promises made but in these cases (given the close scrutiny by several authorities of the specific commitments in the CA) it seems possible that the company was reviewing commitments to find something that the stakeholders can agree will achieve the same end more effectively. In a large organization with several key stakeholders, this process takes time. In such cases there is no substitute for the normal rules of consultation, which include repeatedly checking understanding and ensuring that the affected people understand how the company operates and taking them fully into confidence on the process being followed to reach a decision. Conclusion: adaptive management is an essential process in the implementation of all major projects and should be specifically designated in their founding agreements. The elements of adaptive management are: a clear statement of objectives; a flexible process, largely delegated to project management, for amending detailed means of implementation; a requirement for consultation on changes with the stakeholder communities and households affected; and a process for ongoing monitoring and evaluation of achievement of objectives and regular discussions amongst the parties on adaptive management actions. 2.2 .2 S ta k eh o ld e r pa r ti ci p at io n – r o l e of lo cal co m mu n it i es The third issue is who will participate in the decisions to change. The roles of the legal partners to the CA are clearly defined, as is the process for them to discuss and agree on changes. What is less clear is how the ultimate stakeholders in the project, the affected households, will participate. But it is clear that they should, 3 See Annex 0 13 | P a g e IAG Report No 10 given that one of the “constants� of the project is the restoration or improvement of their livelihoods on a sustainable basis. The GOL’s strategy for governance includes “people-centered development� as a basic pillar, including “ensuring that the Lao people are closely consulted in all areas of decision-making and that they are able to participate fully in all areas of the socio-economic development of the country� 4. The GOL’s national policy on environment and social aspects of hydropower projects recognizes project-affected people as participants in environmental and social assessment and plans for resettlement and social development. The CA for NT2 has specific provisions for stakeholder participation, including PAHs, in the planning and development of the project, following the World Bank’s Safeguard Policies on Environmental Assessment, Involuntary Resettlement and Indigenous Peoples. For example, Schedule 4 to the CA provides for “Project Affected Persons [to] participate in the consultation, planning and design process of their new settlement and production areas� and that "(i) appropriate consultation and participation methods are to be used, utilizing local knowledge in developing production systems that suit the Resettlers' needs and environment and which results in a self-sustained livelihood...". The NTPC Social Development Plan also provides a detailed account of the village-level consultation processes and their results in terms of changes to resettlement plans and engineering works5. In short, the principles and practices of consultation followed in NT2 project development are exemplary for any future CA. The main question now for NT2 is how stakeholders participate during the remaining operational life of the project and particularly how participation moves towards empowerment as villages move towards self-reliance for their future development. A report for the United Nations (Twyford and Baldwin (2006)) sets out principles for stakeholder participation in decision-making about large dams. In essence all parties need to be clear on the role and influence stakeholders will have at each stage in the proce ss. The report defines five levels of stakeholder involvement - Inform, Consult, Involve, Collaborate, Empower. Box 1: Stakeholder Practices for Large Dams - Some Principles Four principles for planning stakeholder participation processes 1. The stage of the dam project is clearly identified. The stage of the project, from project planning through construction to decommissioning, will define the other elements of the stakeholder participation process. These will include the decision being made or issues being explored that the public can participate in, the project time frame, information needs, impact on stakeholders etc. Being clear on these elements allows the participation process to be planned appropriately. 2. The decision to be made is clearly identified and scoped. All parties need to be clear on the decision or decisions yet to be made so that the participation process can be designed to best support that decision. Different decisions will have different impacts on stakeholders, and this will define an appropriate role stakeholders can have in influencing those decisions. Clarity of decision scope helps all parties to understand what is a given and what is negotiable, in other words, what the limits of the decision are. 3. All stakeholders are identified. Good stakeholder participation processes require that all stakeholders are identified. Their role can then be decided, along with their information needs and the techniques that might best be used. 4. The impact stakeholders can have on that decision is clearly identified. … the impact stakeholders have on decisions can vary. It is essential that the stakeholders’ role is resolved at the outset and stakeholders and project proponents agree on that role. Five levels of stakeholder involvement The Report starts with a “base case� of “Decide, Announce, Defend� where stakeholders (beyond developer, government and lenders) have no real role in relation to the project. Beyond that it talks about five levels of involvement:  Inform: stakeholders have influence as observers of a transparent decision-making process which allows them to hold decision-makers accountable for their decisions 4 Government of Lao PDR (2006b) 5 See NTPC (2005). 14 | P a g e Nam Theun 2: Handing Over  Consult: decision-makers seek feedback from stakeholders so the information gathered, the criteria generated and the alternatives considered can be reviewed and commented on by stakeholders during the process  Involve: decision-makers seek information and ideas from stakeholders while making the actual decisions themselves  Collaborate: decision-makers seek to share decision-making power and responsibility with stakeholders  Empower: unlikely to be appropriate in national and international dam projects where government will be the ultimate decision-maker Adapted from Twyford and Baldwin (2006) It is important to be realistic about how stakeholders will participate and what influence they will have over actual decision-making. Chapter 4 in Porter and Shivakumar (2011) is on Working with Stakeholders and has some good things to say about participation of affected communities but it is mainly about relationships during project design and detailed planning and not much about what happens after Commercial Operation Date (COD). The company clearly incorporated principles of consultation and involvement into its operations, including developing livelihood programs on the basis of a survey of needs and adapting them according to feedback from villages to offerings on the livelihood “menu�. But there are limits during the construction phase. Once the legal, technical and financial arrangements for a large hydropower project have been agreed amongst the contracting parties, a process has been set in train to which all the parties are bound. In NT2, in engineering terms, the villagers in Nakai had to be resettled before the reservoir was filled, and the WASH program had to be completed before water was released into the Xe Bang Fai. Consultation and joint planning had to meet these deadlines; this created strong incentives for the company to take charge of the whole process to ensure that the deadlines were met. Now, however, the government and local communities are assuming progressively greater responsibility for management of assets and institutions created by the project. Taken together with the GOL’s strategy for public participation and for strengthening village capacity for self-management, this implies that the village role moves from being informed and consulted and sometimes involved in decision-making towards full collaboration in planning and eventual “empowerment� - assumption of full decision responsibility. NTPC’s planning for the handover of responsibility recognizes that greater attention should and can be given to these aspects of the transfer of ownership . There are some good examples of continuing use of participatory processes. The governance options for the VFA were developed in consultation with village representatives. The project lands compensation and associated grievance process discussed below have given villagers the sense of a fair process in which they participate as equals. So too does Participatory Land Use Planning (PLUP) which, although having the relatively limited objective of firming up on village boundaries including community land, has resulted in significant reallocation of community land in accordance with villagers’ preferences. In many of the discussions and meetings involved in these processes, NTPC staff working together with the RMU and district government staff, were able to model how to generate true collaboration in decision-making. If however participation is to mean more than “inform and consult� it will require changes in the mindset of some officials, particularly at the provincial and district levels. As Annex 1 notes, it is common for officials to believe that villages are at the bottom end of an authority chain in which decisions and commands flow downwards and problems and complaints flow up. If, as one official said, villagers need to “mobilize for self- reliance�, then this hierarchical relationship, and the attitudes that go with it, need to change. To bring about such change requires cultural change in public institutions at all levels (central, provincial and district). People have to learn about how to work together in a participatory mode, which is based on mutual understanding of roles, values and interests and knowing how to communicate effectively. The Lao mass organisations, particularly the Lao Front and the Women’s Union, assisted and advised by international NGOs, can help villagers themselves develop self-reliance and the ability to represent the interests of the village and its members to company and government officials. Measures that would assist participatory development include:  Continuing the Participatory Land Use Planning scheme and expanding it to include other areas of village decision-making; 15 | P a g e IAG Report No 10  Engaging district and provincial officials in training programs on participatory governance, mixing classroom learning with practical exercises in villages that incorporate a range of residents as part of the learning activities;  Continuing to engage with the mass organizations (Lao Women’s Union, youth, farmers, Lao Patriotic Front) to link their activities with participatory processes  Commissioning international NGOs, mass organizations, religious leaders6 and the men and women of the villages themselves to facilitate participatory decision-making at a village level.  Developing participatory monitoring schemes at community level in close consultation with project affected households and local leaders Conclusions:  Project-affected households and communities should be regarded as essential participants in the process of adaptive management of environmental and social plans. They should be regularly informed on project progress, consulted and involved in processes to amend plans and where possible be empowered to take necessary decisions themselves.  Officials and others involved, including the villagers themselves, need training in and experience of working in a participatory mode.  Community consultations should begin at the earliest stage of project planning.  These principles of participatory development, already spelled out in government policy, should be written into specific agreements in future hydropower projects. 2.2 .3 C o mp e nsa t io n a n d g ri ev an ce pr oc es s The process for deciding and reviewing NTPC’s decisions on compensation for project impacts on individual households is a necessary specific contractual commitment in the CA. But more generally it is an important example of stakeholder participation and important learning experience for villagers of a means of making complaints to authority, having them properly considered and obtaining a fair resolution. Grievances were heard and adjudicated through the local government disputes resolution process, which seems to have handled the complaints pretty well if occasionally slowly. In Project Lands it has been slow and fogged by misunderstanding (sometimes of staff as well as villagers) of the complex compensation formula; but seems to have brought most complaints to final resolution. Enough grievances were upheld (20-25%) probably to satisfy most complainants that they at least got a fair hearing if not a satisfactory outcome. As Annex 1 notes, this result “gives a glimpse into more equitably balanced power relations in the project that are much appreciated by the villagers�. A similar process is gearing up Downstream, particularly regarding compensation for loss of riverbank gardens where about 1100 grievances have been registered. Company officials said that process to resolution on downstream grievances was operating quite effectively and should be completed by June. By January 2011, NTPC had received 188 grievances for paddy field and fruit trees compensation, or a rate of about one grievance for every five cases. The need for a grievance procedure will continue beyond the final resolution of specific claims for compensation because of the ongoing possibility of future complaints regarding breaches of the CA water right by NTPC – e.g. mishandling flows downstream and other more general impacts. An important part of the whole process was the thorough approach taken by NTPC to defining losses and then checking and revalidating them. Managing the whole compensation and grievance process has been 6 In some Southeast Asian countries Buddhist monks and nuns have played a role in the social institutions of villages, for example, in developing community based forestry in Thailand and Cambodia. We note that Buddhism plays a large part in the life of the Lao villages we have visited. We have occasionally encountered monks who do express views on the social requirements of the village. More generally, although religious elements do not normally fit into governance or institutional thinking, the integration of the sacred and the profane contribute immensely to the sense of well-being that fosters sustainability. As part of people’s participation in planning, implementation and monitoring, it makes sense therefore to include their concepts of cause and effect as defined in their religious traditions in these formulations. 16 | P a g e Nam Theun 2: Handing Over very expensive for NTPC. The process of defining and validating claims was very detailed and costly and further expense was incurred in some cases by a requirement to re-estimate entitlements. There was a heavy involvement of NTPC in facilitating meetings, helping with documentation, etc. An unofficial estimate is that the expense of the compensation process associated with the taking of narrow strips of land to widen two roads was ten times the value of the compensation. NTPC also provided a lot of help to PAHs on how to manage their money by assisting them to set up bank accounts (since 2008) and to define business plans and by assisting them to prepare and lodge their claims through the grievance process. Arguably, the overall expense might have been reduced by having a simpler if perhaps more generous formula. But more importantly the careful attention given to every aspect of compensation and redress has given villagers experience of having their complaints taken seriously by higher authorities. From the IAG’s own observation it has at least occasionally required district officials to be accountable directly to villagers for their management of the process itself. Has it however created a situation where villagers expect their complaints about other matters to be escalated? What role can the grievance process play in future in enabling villagers to air their concerns about the project and more generally about their relationships with higher authority? The process could be important if it enabled government officials and villagers to learn how to better manage conflicts between them. On the other hand, the use of the local government grievance process for handling compensation claims against NTPC is something of a special case. The process was mainly designed for handling intra- village grievances with occasional appeals to the District Office. The current grievance process regarding compensation will be more difficult if government is both party to a dispute and adjudicator. If villagers are seeking redress against district officials or (say) against a state enterprise wholly owned by the government, how confident can they be that they will get a fair hearing from a district tribunal? This is a much larger issue for the GOL than just one of continuing the current process for future compensation claims or other complaints against the company; it may be an opportunity for the government to consider the advantages of an independent Ombudsman-like process for channelling citizen complaints more generally7. Conclusions:  The NT2 compensation process and associated grievance procedures have been an important means for company and district officials to consult and collaborate with villagers on matters important to them.  There is an ongoing requirement over the life of a project for a trustworthy process for resolving complaints relating to general project impacts as well as specific compensation. The process should be demonstrably independent of the project management including (in the case of government-sponsored projects), local government officials.  Complex compensation schemes, while aiming at fairness, can be difficult to understand and costly to implement. Simpler formulae, comprehensible to both affected households and project staff, can be more effective and less costly even if they err on the side of generosity. 3. Cr ea t i ng s us ta i na bl e i ns ti t u ti o ns The CA created several regional and community institutions that are unique in Lao PDR. As the government enters into a long period of investment in major resource-based projects with significant environmental and social impacts, some thought needs to be given to the lessons these new institutions bring for other large- scale projects. The main lesson from NT2 is that creating new laws and organisations is probably the easy part. Changing customary practice and belief is equally necessary but much harder. 7 There is a suggestion that the RMU to some extent played an independent role in the grievance process, encouraged by the IFIs. 17 | P a g e IAG Report No 10 3.1 Na tu ra l r es ou rc e c o ns er va ti o n a nd ma n ag e me n t i n N aka i The project and the GOL face two major questions on the plateau both connected to illegal exploitation of natural resources. The first is how to protect the wilderness above the reservoir from the continued assault on its natural wealth; the second is how to ensure that the forests and fish of the plateau are protected and fairly shared amongst the resettler communities. In the watershed, on the reservoir and in the plateau forests, illegal exploitation continues. In the NPA, as extensively reported by the NT2 Panel of Experts (POE), there are continued threats from logging, mining, poaching wildlife and uncontrolled harvesting of non- timber forest products (NTFPs). On the reservoir, one estimate has it that illegal (unrecorded) fishing may well exceed the recorded catch. Small-scale theft of timber on the plateau is continuous and blatant, and there is evidence of organised industrial-scale operations as well. In all three cases, enforcement depends both on using the power of the state and on the support of the local communities. 3.1 .1 P ro t ec t i ng t h e wa t e rsh e d The responsibility for watershed protection is vested in the Watershed Management Protection Authority (WMPA) working in cooperation with district officials and local communities. There are two major issues with the WMPA. The first is whether it represents a model for protecting conservation values in other parts of Laos; the second is whether it is in fact able on its own to carry out the mission assigned to it. The WMPA is in one sense an expedient of the NT2 project. It was a vehicle for payment by NTPC of the annual $1,000,000 fee paid for the life of the CA (another 24 years); and it also has symbolic value as a means of protecting a uniquely valuable natural resource in the catchment area of the reservoir. The new decree for the Authority brings it fully under the Khammouane Provincial government where other enforcement is managed. Services for the people of the area and enforcement activities will be provided by provincial and district government offices but the Authority continues as a budget-holder and is responsible for planning and coordination. The WMPA is currently the only such authority in Laos. In other cases, similar services for management of a conservation area are provided through the normal line agencies of the government at provincial and district levels. So there are real questions as to whether a cross-cutting agency like the WMPA is an appropriate general model for future conservation area management. Other models would be a national parks service, like the US or New Zealand; or a system of regional environmental planning authorities, based on catchment areas, like the river basin model endorsed by the Mekong River Commission (MRC) and the GOL. The second issue is whether the WMPA as presently constituted and resourced is up to the task. It seems to have the cooperation of relevant provincial departments in policing, environmental and social programs. Currently it is patrolling with its own staff, police, army and village militia, paying per diems to patrol members; and it has no trouble getting staff for these enforcement activities or for its programs for the inhabitants of the Nam Theun National Protected Area (NPA) 8. Apprehension can be dangerous – DOFI officials are armed but said they needed a squad of 3-4 men. Given the size of the area it covers and the resources available the effort is inadequate in the face of the pressures to exploit the NPA. The consensus seems to be that without a major uplift in the effectiveness of policing, continued degradation can be expected. There are wider issues of how the GOL responds effectively to continued predation on its natural resources, going well beyond the NT2 project, which we discuss further below. Conclusions:  A special purpose authority like the WMPA with its own dedicated revenue source may not be suitable as a more general model for protected areas in Lao PDR.  The WMPA, however well-resourced, cannot manage the protection of the natural resources of the NPA on its own. Effective reduction of major natural resource threats is a wider problem for GOL policy. 8 A National Protected Area is the Lao PDR equivalent of a national park. There are others besides the Nam Theun NPA, but in this report NPA refers to the Nam Theun NPA, broadly speaking the Nam Theun catchment to the north and east of the reservoir. 18 | P a g e Nam Theun 2: Handing Over Recommendation: The GOL should investigate a national model for governance of NPAs including a national parks authority or conservation department or regional models based on river basins, and based on funding conservation activities from the general revenues of the national budget. 3.1 .2 R es er vo ir f is h ery The main issue for the Reservoir Management Committee (RMC) and the Reservoir Fishing Association (RFA) at present is how to ensure a sustainable fishery in the reservoir. Sustainability depends on being able to control catching effort in general and specifically to protect breeding sites in and near the rivers that issue into the reservoir. Protection is now entirely out of the company’s hands and depends on the effectiveness of the fisheries co-management regime. Effective co-management of the fishery requires a lot of people to play their part. Overall organization of monitoring and enforcement rests with the RMC and RFA (together with WMPA who need to cooperate in joint patrolling to protect spawning grounds). The RFA uses police, army and militias who receive per diems when on patrol. DAFO officials are supposed to take over fish stocks monitoring from the company. Villages assist with patrolling and, through the Village Fishing Groups (VFGs) regulate the fish trade at official landing points. Gauging the effectiveness of these efforts in protecting the reservoir fishery is complicated by the changing ecology of the reservoir, which was always expected to show significant changes in fish breeding and migration patterns in its early years, independent of catching effort9. But the evidence is that catching effort is having a significant impact in its own right on fish stocks. Records of reservoir fish catches up to August 2010 show a downward trend in the fish catch since the peak in early 2009. These records are unlikely to give an accurate picture of fish supply. The decline in the recorded catch is variously attributed to reduced fishing effort and restrictions on fishing in reserved areas, but also to the growth in the illegal fish catch 10. Some of the catch by unlicensed fishers may be recorded because it is purchased on the water by fishers with licenses but according to the RFA a lot is landed clandestinely at various unauthorized points easily accessible from the main reservoir road. Enforcement relies on the joint efforts of the authorities and villagers. Official enforcement activities are largely ineffective. NTPC budget support ended last budget year and the RMC/RFA is paying for operations now by use of fee and license money and a district budget allocation. The RFA is limited by this funding to patrolling only 2-3 days a week, using police, army and militias who, similarly to their work in the NPA, receive per diems. The patrols rarely catch anybody (in 2010, there were 26 fines and 17 warnings). According to the RFA, even though the patrols use small boats, people know they are coming. Surveillance by villagers is largely ineffective as well. Very few villagers report illegal fishing (or report it in a timely fashion). Regulation of fish trading at landing points is in the hands of the VFG members. What we saw of the official regulation was on a fairly light day at the Thalang landing and seemed well-organized. VFG members were issuing day fishing licenses and collecting the fishing levy. Traders got to deal with fishers on a first-come, first-served basis. The traders we spoke to said the system was fair. The role of the VFGs has however evolved from the original conception of small fishing cooperatives both catching and selling fish and distributing the proceeds amongst themselves. The RFA estimates that less than 10% of authorized resettler fishers actually catch fish for sale. VFGs are essentially “ticket-clippers�: collecting license fees and levies from official fishers and traders for their own expenses, village activities and as a contribution to the RFA’s enforcement costs. But, as indicated above, the real question seemed to be how much of the catch was passing through these authorized landing points and therefore being recorded and assessed for these charges. 9 NTPC has been supporting both fish catch monitoring and fish biometric sampling. Direct biometric sampling of fish populations gives information about fish stocks, migration and spawning. Biometric monitoring has provided information to back up the recent measures to close off spawning areas during the breeding season. Biometric sampling should also over time provide a direct measure of increase or decline in species stocks. We were not however able to find any analysis comparing the results from fish catch monitoring with the biometric studies. 10 An off the cuff comment by one Lao official was that “most� fish caught in the reservoir were caught by outsiders. 19 | P a g e IAG Report No 10 In sum, the “club� concept of a co-management regime – where the owners of the common resource, the villagers, have an incentive to help the authorities protect it from incursions – is not yet working as intended. More budget for policing might help, but to the extent that some at least of the illegal fishing requires the complicity of resettler households, community attitudes to protecting the fishery have to change. This requires first a widespread understanding that, although resettlers retain the right to catch fish for daily consumption, fishing on the reservoir has largely changed from a subsistence to a commercial activity that requires regulation of access. There are no silver bullets for this problem: as with other common property issues resulting from the changing landscape on the reservoir, it represents a conflict between long- established community beliefs on the one hand and the formal law on the other. We discuss this further in a later section. Conclusion: the sustainability of the reservoir fishery requires adequate levels of enforcement by government authorities and commitment by villagers to protection of their common resource. That requires regular discussions in villages on results from monitoring of fish stocks and catching effort and on the effects of excessive catching. 3.2 P la t ea u F or es t ry Forestry on the plateau continues to be under threat both from widespread illegal taking of timber and the continued uncertainty about the viability of the Village Forestry Association. The Village Forestry Association (VFA) is an experiment in an area of public policy, community management of forests, where there are few examples of success 11. The VFA was founded on a principle of community ownership and control of the forest resource, with resettlers contributing labor in kind to forest patrolling and identification of trees for harvest and with all resettler households owning a share and drawing a dividend. The main institutional issues are the related ones of the continued viability of the VFA as a community organization owned and supported by the resettler households; and the effective interdiction of illegal logging in the VFA land and protected areas. The original model depended on active community support but it is not clear that there is a widespread community commitment to protecting the forest and investing in its future regeneration and replanting. The new governance model which converts the VFA into a limited liability company 12 provides for village representation through shareholders’ meetings and representation on the Board. A test of commitment to maintaining the asset will come when shareholders have to consider foregoing some of their dividend – an important safety net for all villagers rich and poor – to enable the VFA to engage in new planting. To do so requires not only that villagers as shareholders can connect the receipt of dividends to the need for maintenance and protection of the asset but also that they have a sense of community ownership of the VFA. Several people commented to us that this sense of ownership, which is at the heart of community forestry, was not strong in the villages of the plateau. A number of factors corrode the collective principle: widespread taking of wood by the villagers themselves for resale rather than legitimate household use, or connivance at theft by outsiders, both largely unchecked by the Village Authority; pressures to move onto forest land for other purposes such as swidden cultivation13; an uneven distribution of responsibility for direct labour on forestry land; the professionalisation of management through the contract with Leuan Fat Hong (LFH) 14; and (perhaps) the incorporation of the 11 An Economist special supplement on forestry last year observed that, while there were some examples (e.g. the Ocampo project in Mexico) of successful community-based forestry, all too often such projects provide only token benefits for local communities and sometimes encountered the active hostility and sabotage of government officials, reflecting the wish of other more powerful people to capture the benefits that theoretically should accrue to local people. (See “Keeping it in the community�, from The Economist, 23 September 2010, http://www.economist.com/node/17062703). 12 Introduced apparently mainly to meet GOL requirements for commercial licensing. 13 The Participatory Land Use Planning process recently provisionally allocated villages an additional 20,000 ha of VFA land with no significant timber resources to use for agriculture. This redesignation may have eased the pressures on land for agriculture on the plateau. The District has still to confirm this allocation although it appears that resettlers are already moving onto the land to clear it in preparation for new season planting. 14 The Chinese company that processes VFA timber through its own mill and the VFA mill. The stakeholders in the VFA generally agree that the contract has been beneficial for the efficient harvesting and marketing of timber. 20 | P a g e Nam Theun 2: Handing Over Association as a company which could distance villagers further by casting them as passive, dividend taking shareholders. Added to this is the hostility of some government officials to the bottom-up, cooperative concept of the VFA15 and the presence of well-connected interests in the wings who would like continued access to its timber. The latter was clearly an uncomfortable topic for officials when we asked about sources of demand for illegal timber: indeed one VFA official we spoke to denied that there was any illegal logging on VFA land, even after we pointed out a statement to the contrary in last year’s VFA workshop. Three non-VFA sawmills and a charcoal operation have recently been closed down, at least officially. However, both the Department of Forests (DOF) and the new Department of Forest Inspection (DOFI) told us that some government officials wanted the plateau sawmills to expand operations, apparently in ignorance of the commitments to the VFA. It remains to be seen whether the illegal use of VFA wood will in fact stop. Conclusion: The Village Forestry Association, a model for community forest operations elsewhere with significant benefits for resettlers is under threat. Its continued viability requires the active participation of village communities in VFA governance and their recognition that continued income from the forest requires protection of the asset and investment in regeneration and replanting; professional management of the forest and its harvest; dealing effectively with theft of wood from VFA land; and above all the committed support of GOL officials both nationally and locally. 3.3 Enf o rc e me n t of f or e st pr o t ec ti o n Villagers cannot protect their collective property without the active support of the GOL at all levels. Illegal harvesting of timber is continuing, largely unchecked, in the protected areas and on village forestry land. Sources seem to run the gamut from small-scale pilfering by locals for supply direct to end users or to intermediaries; to (on the plateau) fairly large-scale operations employing forest machinery and trucks. We were told that a lot of the theft is with the connivance of both villagers and government authorities. The village patrols on VFA land see signs of illegal harvesting but rarely if ever catch anybody in the act. The VFA workshop in October last year agreed that [the] “current lack of enforcement has [a] negative impact to villagers’ livelihood participation and long term forestry outlook.� 16 Protecting the forest resource of the plateau and catchment area certainly depends in part on the resources that the GOL is able to devote to policing. This is in itself not just a matter of manpower. It depends on the incentives of villagers to report illegal activity, the quality of investigation and the willingness of the authorities to prosecute offenders. A concerted local attack on the problem of illegal logging clearly requires a continued focus on the organized end of the trade: concentrating on the larger-scale operations and accepting that “small scale� (motorcycle loads) are less destructive and largely uncontrollable. This means effective policing of road transport, shutting down any industrial-size milling, intelligence on what happens to the wood after it leaves the protected area and publicly exposing such operations. Given the continued steady loss of the nation’s timber resource and associated degradation of forests in many parts of Laos, stemming the illegal log trade is however a much larger issue than the adequacy of local policing and enforcement. It requires a national strategy to which the government is clearly and steadily committed at all levels. The GOL has such a strategy, based on establishing Production Forest Areas (PFAs) with timber harvesting based on management plans for each PFA, certifying forest management systems based in these areas through the Forest Stewardship Council (FSC); establishing a “chain of custody� from the forest to local factory or export to ensure the legal provenance of timber; and policing enforcement through a new Department of Forest Inspection. The strategy has been developed under the umbrella of SUFORD (Sustainable Forestry for Rural Development), a joint project of GOL, World Bank and the Government of Finland. A feature of SUFORD is the concept of Participatory Sustainable Forest Management (PSFM), to ensure that villagers share in the revenues from forestry and that there are rules in place for harvesting of NTFPs. 15 We were assured by a VFA official that the problem of tax officials “overgrading� VFA logs for tax was now corrected and VFA would be paying lower tax this year. 16 Nakai Village Forestry Association (2010) 21 | P a g e IAG Report No 10 The jury is still out on how successful this strategy has been in the face of the continued loss of forest habitat. In late 2010 only one forest company had been able to meet FSC certification requirements. DOFI, established in 2007 out of the Department of Forests, now has about 380 staff and has had some recent success in a large-scale seizure of stolen timber but officials admitted that staff lack knowledge of investigation and law enforcement. DOFI was getting donor support for capacity building. But the strategy also requires political commitment at all levels, and there is a view 17 that despite the elaborate legal and institutional framework, well-connected interests continue to operate to harvest Lao’s forest resources illegally. The real test of a government’s commitment to transparency and accountability is when these interests can no longer operate with impunity. Conclusion: local policing of timber theft can be made more effective but on its own will not protect forests. The SUFORD project developed by the GOL and development partners, offers a systematic basis for controlling the harvesting of timber on a national basis. Recommendation: The GOL should commit to a definite date for full national implementation of the certification and chain of custody processes in its SUFORD project to ensure the legal provenance of timber from forest to local user or export. 3.4 L aw an d c us t o m i n t he us e o f na t ur al r e so urc es In both forestry and fishing, customary use has been suddenly altered by the changing availability of a natural resource and new formal laws brought in to regulate it. We discuss this mainly in the context of community ownership of the VFA forest but some of the general conclusions apply to the reservoir fishery as well. A contributory factor to resettlers’ weak sense of common ownership of the VFA may be the belief amongst villagers that going into the forest to cut wood is something they have always done and it is unclear why it should suddenly be illegal. The same sense that customary rights are being abrogated may apply to clearing land for traditional methods of rice cultivation, allowing animals to graze freely or gathering NTFPs. Since villagers’ values about forest rights and use were formed in times when the forest was open terrain and nurtured their villages in its midst, the prospect of apprehending their relatives and neighbors for “illegal� activities is not strongly embedded in their moral code of right and wrong. Beliefs about the forest are a fusion of longstanding spiritual and community values, not easily overturned by a new law. It would be naïve to suggest that the only reason people gather wood is customary practice. Certainly new opportunities to make money are a strong incentive. There are plenty of other examples of indigenous people claiming a customary right in order to exploit natural resources for commercial gain. The sharp reduction in paid employment from the project and a decreasing fish catch have led to a decline in sources of livelihood, in particular for men. The new rules that have closed the forest to logging and animal trapping have further deprived them of traditional sources of income. Why put effort into risky new livelihood activities when these well-understood opportunities remain on your doorstep? Therefore, attacking the demand side of the continuing pillage of the forests is an essential element of the protection strategy. But it does suggest that building a sense of ownership of community forestry and other common property resources like fish requires turning round some longstanding beliefs about the commons. Change requires two major shifts in thinking: one is a new common understanding of what is right and wrong about using natural resources; the other is that the people of the plateau have to see themselves as bound together by a common interest in the land. It is tempting, but not particularly helpful, to say simply that these new understandings just have to evolve in the new resettler communities over time. But in the case of the forests and fisheries on the plateau, time, particularly in terms of forest protection, is running out. Somebody has to push the discussion along. The VFA Workshop of last October was a useful start but 17 “The whole process of FSC certification – and indeed the development of PSFM and its enabling legislation – does not enjoy widespread support among central and provincial-level government officials. The PSFM system is openly opposed by much of the forestry bureaucracy – including some of the most powerful individuals in the country – because it represents a threat to a major source of personal income for government officials, and because it runs counter to the dominant political philosophy in Laos.� (Hodgdon (2007)) 22 | P a g e Nam Theun 2: Handing Over was focused mainly on engineering a formal change in the governance of the VFA. We suggest that it could be reconvened, facilitated by the GOL and supplemented by discussions in each resettler village to consider these questions and attempt to agree on a forest covenant that extends beyond the formal governance arrangements for the VFA. Because of the spiritual dimension of beliefs about the forest, it may be valuable to include Buddhist and traditional leaders. The covenant needs to be backed by tangible action from the GOL to show that it will end the visible predation of the forest by large commercial interests. The approach taken to this process is important. Experience from other NGO-organized community institutions in Lao PDR and other parts of Southeast Asia show that when smaller groups work on solving problems they identify, their organizational experience carries over to more formal associations. The informal organizing engenders self-confidence at being able to tackle new challenges successfully and develops trust relations within the community. The NTPC and GOL have developed experience with this form of participatory problem-solving in the project planning phase, and these lessons can be applied now to this task of building a new form of social capital in forestry. Conclusions:  The way to develop and sustain village or community institutions is to start by encouraging villagers to engage informally in working together on specific matters of their choice, such as forest and fishery management and conservation, in a problem- solving, learning mode. Formal organisations, such as the Village Forestry Association or Village Fisheries Groups, are more likely to receive support and be responsive to household interests and environmental imperatives as the outcome of such a process.  Villagers also need tangible evidence that their ownership of the forest and fishery is being protected by the state. Recommendation: The GOL should re-convene meetings of the resettlers, in each village and as representatives to the general meeting of the VFA, together with social scientists, NGOs and spiritual leaders, to explore the settlers’ traditional concepts of forest rights and their responsibilities and use the findings to develop a new covenant on a culturally appropriate forest sustainability scheme. 4. Vi lla g e i ns ti t u t io ns an d ca pac i ty 4.1 S t re n g th e ni n g v il la g e i ns ti t u ti o ns a n d c apa ci ty The change that is going on in village life as a result of the NT2 project is making new demands on the village as an organization. A number of issues discussed so far point to a need to strengthen village-level institutions. These issues include loss of land on the plateau for traditional forms of subsistence living and the associated attempt to introduce new livelihoods; the introduction of new social institutions like community forestry, co-management of fishing, and water user groups; new community processes like village development and village funds; and the need for the village to participate in joint activities with company and government. A big hydro project like NT2 brings inevitable change including to some basic assumptions about ordinary life. People can no longer live the way they used to; it is the village as well as the individual household that has to adapt. Will the adaptation be engineered by outside authorities like the company and the government, or will it emerge from the smaller-scale, purely local responses of households and villages to their new circumstances? So far, company and government have played a large part planning how villages manage change. But from the company’s point of view this parenting phase is coming to an end. As the company hands over responsibility for many of its E&S programs to the GOL, villages and individual households have to take a greater responsibility for livelihood activities and maintenance of community assets. All of these changes place new requirements on the village as an entity, on its leadership and management and on the accountability of its leaders to the village as a whole. We commend the efforts of the company to involve the villagers in many aspects of the project, particularly in the resettlement phase. But as we observed earlier, many activities have been driven by the project timetable. Livelihood activities have been pushed along by NTPC, RMU and district staff. In addition the 23 | P a g e IAG Report No 10 company has supplied households with everything from building materials and fertilizer to free electricity and sometimes food aid to meet its obligations. There is a concern indeed that villagers on the plateau have become too dependent on the company (some villagers have refused to paint their houses unless the company supplied the paint, others worry about having to pay for their own electricity). All this has increased a sense of dependency on the part of villagers particularly on the plateau. The challenge now, as one villager put it to us, is that “the project won’t be here forever and we need to look after ourselves�. So there is a need for government and villages together to pay attention to the strengthening of village institutions. We believe this should be done on the basis of three principles: self-management, leadership and accountability. Each requires some changes in habits of thinking about the role of villages in Lao PDR. Self-management: Villages can’t do it all by themselves. They need larger institutions for supply of services such as education, health, and district infrastructure; access to technical assistance and advice on livelihood activities; and a framework of property rights and their enforcement. But some degree of village autonomy is essential. The village itself has to organize many activities important for daily life: coming together for ceremonies, supporting temples and monks, sharing information about farming practice or health and sanitation, policing access to common land, supplying labour for forestry and fishing, managing village development funds, or representing the village in community institutions 18. NGOs working with the mass organizations can facilitate village learning and problem-solving. As with participatory governance, increased self-reliance in villages will require a change in attitude on the part of officials. The same person who told us “we need to look after ourselves� also said “we will need to ask our parent (District Office)�. Despite the evident impossibility of local officials managing all aspects of village life, there is a reluctance to see the villages as semi-autonomous entities, particularly if they might have interests that may diverge from the higher levels of government Leadership: The Lao village is both the traditional way that people live and work together in the countryside and the bottom level of the government’s administrative structure 19. The naiban, or village mayor, is the official government representative in the village, advised by the local Party secretary. Naibans vary in quality and commitment. As pointed out in Annex 1, in last year’s naiban selection process there may have been a slight movement towards younger naiban and deputy naiban who see themselves as having stronger management skills, but others complain of being poorly paid and untrained for their management responsibilities. Leadership also requires fostering leaders in innovation, particularly women, and developing a younger generation that will have these responsibilities handed on to them. We discuss these topics in a later section of this report and in Annex 1. Accountability occurs at several levels. The objective of accountability is to ensure that those who hold power are exercising it in the interests of those on whose behalf they hold it. Within the village the important principles are basically the same as at higher levels of government: village leadership, in the form of the Village Authority and its committees, needs to report regularly to the village as a whole on its activities and be open to questioning; villagers need some recourse to appeal, preferably to an independent monitor as well as the next level up of the district office; and there will need to be provision for independent audit of the financial accounts of the village. Conclusion: a participatory approach to village-level development implies strengthening village capacity for self-development and self-management and inevitably a stronger sense of autonomy. The GOL government needs to define village authority functions and powers to set the boundaries of self management; ensure that members of the village governing body and its committees are properly trained in their responsibilities in village management; and promulgate and enforce the necessary rules for transparent conduct of village business, 18 Or just picking up rubbish. The ubiquitous plastic bag is a scourge in many resettlement villages we visited. When we asked in one village about the level of rubbish around houses, our hosts looked embarrassed and said that they organized the occasional clean-up, but had not yet implemented a District Health Office recommendation to dig a landfill. 19 The State in Lao PDR is organised in parallel hierarchies for Government and Party organisations. At the village level, there is a government-appointed naiban, or mayor, a village Party Secretary, and representatives of the Party-controlled mass organisations such as the Lao Patriotic Front and Lao Women’s Union. See Annexes 3 and 4 for the official organisation charts, from Party down to village committees. 24 | P a g e Nam Theun 2: Handing Over independent supervision and audit of village committees and rights of appeal against their decisions. 4.2 S p eci fic in s ti t u ti o na l i ss u es 4.2 .1 Vi lla g e F u n ds Village Income Restoration Funds (VIRFs) are a particular form of village fund established to manage lending under NTPC's Livelihood Restoration Activities program, a form of community-level compensation for the project’s downstream impacts. A 2008 evaluation of the VIRFs posed a basic question: were they intended to be a temporary mechanism or were they a “sustainable, member owned, controlled and managed structure providing access to savings and credit services�? Village funds generally have government support and have a useful role in village development. But accountability and management will have to be significantly strengthened if the funds are to be viable in the longer term. VIRFs are facing significant issues of viability. On the one hand, as the discussion in Annex 1 illustrates, many villagers, particularly women, with no previous experience of banking and credit have learned how to make use of these facilities, both by depositing their cash compensation in the bank accounts created for them and by taking out VIRF loans. Access to VIRF credit continues to grow. Between March 2009 and March 2010, participation rates in the VIRFs increased in all categories (rich, middle, poor), although rates are still significantly lower in the poor group than others. We heard from village women that some are still fearful of repayment penalties. The main issues are with repayment rates. Recorded arrears rose sharply when rescheduling was stopped in 200920. Recently there has been some improvement in repayment rates in some areas but it is still dismally low in some villages in Gnommalat and Upper Xe Bang Fai. Poor repayment records are attributed to a variety of reasons: poor education of the actual and potential borrowers; business failures or inability to service loans obtained for social purposes like medical needs or education; and weak enforcement of the regulations21. In addition, the VIRF differs from other village funds in Lao PDR in being based on individual entitlements rather than being a community fund. Borrowers may think: “It's our money; why should we pay it back?� NTPC are in fact preparing an instrument to formalize the individual capitalization of the Fund. Villagers would therefore have “shares� in the VIRF but would be prevented from exercising rights of withdrawal of capital for a period. The VIRF is therefore not like a normal credit union where membership is voluntary. However, issuing individual share certificates may strengthen the idea that “it’s our money�. Ultimately, householders ought to be free to withdraw their capital, although this could unravel the current mechanism for compensation via cheap credit for investing in livelihood options. The 2008 review made a number of recommendations, now being implemented, for improving accountability and management in the funds. In the official organization for villages, they are under the supervision of a Village Development Committee, which is itself appointed from the Village Authority. The official governance of the funds is thus clear, but there are still desirable improvements in their management, which could include bringing village micro-credit under more professional management. This might reduce the risk of embezzlement because of low management capacity The banking system is an obvious vehicle for handling deposits and accounting for loans. Decision-making on loans could still rest with the Village Fund committee. There is still a risk of misappropriation or preferential decision-making because those villagers with a decision-making role may have a sense of "ownership" of the fund. Professional management should ensure that decisions on loans are transparent and properly recorded which should help reduce this risk. Past attempts to engage Lao banks were unsuccessful but should be pursued again. Conclusion: In order for Village Funds to play a useful role in village development, their governance and management will need to be strengthened. There needs to be greater accountability and transparency in decision-making, a vehicle for independent audit of VIRFs 20 Repayment rates fell over 2009 to 11% in Gnommalat, 26% in Mahaxay and 26% in XBF (Nov improvement to 43% in December) by end 2009. Much better in Nongbok and Xaibouli. 21 Borrowers from the VIRF were supposed to have a “business plan� but very few borrowers stuck totally to the plan. 25 | P a g e IAG Report No 10 and other funds and a process for complaints. A further attempt should be made to place the funds under management of the banking system. There is a tension between individual ownership of shares and the use of the Funds as a principal vehicle of village development which will ultimately only be resolved by permitting individual shareholders to cash in their shares. 4.2 .2 Wa t er Us e r Gr o u ps In considering the development opportunities downstream of the powerhouse, clearly access to water for irrigation is one. In Project Lands, villagers commented to us that they could see the water flowing by, and wondered when it would be available for their crops. But we were impressed by the continuing high level of skepticism amongst planners and advisors on the ground about the viability of irrigation projects. The main issues are not technical but social, and centre on the effectiveness of management of irrigation by small local farmer cooperatives, commonly called Water User Groups (WUGs). In Nakai, where NTPC is developing small local irrigation schemes, WUGs will be a new venture and are not really going yet, so it is not possible to evaluate their viability. There has been longer experience with them, most of it discouraging, in the XBF. Here, the company is supporting irrigation works by providing off-take points from the canal, retrofitting raft pumps and restoring operability of some floodgates; but further development of irrigation will be a purely Lao responsibility. The Khammouane Development Project (KDP), funded with IFI support, has a major irrigation component in the XBF region and will rely on WUGs for local scheme management. We talked to KDP planners whose main worries were how to strengthen WUGs to operate and maintain the irrigation facilities properly. WUGs in the XBF were first set up in 1996 and were very weak. The groups are required to operate pumps, distribute water and collect water fees. Each task has its problems: equipment and channels are not properly maintained; water is not fairly allocated; and fees are not collected. Historically there are ample cases of these failures of cooperation. In the XBF, WUGs are assumed to have failed because the government gave them full responsibility for O&M before they were ready for it. But “being ready for it� means being clear on who does what and each side being committed to meeting its obligations and being able to secure performance from the other parties. Along with the KDP staff, we have looked at the Philippines PIM (Participatory Irrigation Management) as a model. To summarize the lessons in relation to Lao water users: (1) Water user groups need community organizers or facilitators (preferably NGOs, not government) who will help them sort out the issues they need to confront, understand the dimensions and reach decisions on how to address them, in particular decisions about taking action and doing exactly that; (2) Government implementers should be encouraged to recognize the value of people's participation as most efficient and leading to project sustainability, with themselves assisting even if it means the people challenging their views from time to time. (3) All stakeholders have to be involved at various points, not just the immediate group of water users, e.g. upstream and downstream affected but non-member households, government officials, etc (4) There must be a recognized grievance procedure when government doesn't deliver. The Project Lands one worked well, so it can be done in Laos. Conclusion: there are significant doubts about the sustainability of local irrigation schemes largely because of a history of failed arrangements to allocate water fairly and to collect money and assign labor for proper operations and maintenance. The sustainability of water user groups to carry out these functions requires strong processes for collective decision-making about allocation of water, finance and labor for O&M work and fee structures. These processes should be managed mostly by communities themselves rather than by government agencies. 4.3 S t re n g th e ni n g ca pac it i es w i th in t h e vi ll a g e The discussion and conclusions in this section largely reflect the analysis in Annex 1 of our meetings with villagers in the project area. 26 | P a g e Nam Theun 2: Handing Over 4.3 .1 Dea li n g w i th tr an sf o rm at i ve c ha n g e Nakai Plateau resettlers face the challenges of a transformative mode in their new settlements that call for a dramatic reorientation of their lives in the shift from a fairly isolated subsistence life to a developing market economy setting. This transformation thrust necessitates different strategies from the incremental development approach appropriate to lowland farm communities. Affected households, especially those on the Nakai Plateau, fall into a range of adapters to project innovations. A number of increasingly prosperous families are moving rapidly into the new market economy, while at the other extreme are vulnerable labor-poor households who need continuing special assistance for the foreseeable future. Many of the settlers falling in between continue to place great importance on increasing their rice cultivation to establish their food security while feeling the loss of other traditional sources of livelihood and taking a cautious attitude to exploring and testing new alternatives promoted by the project. Project personnel have tried to wean settlers from their priority to rice growing, advocating instead a shift to cash crops from whose profits rice can be bought. Some settlers have resisted that pressure, defending their concept of food security first through growing rice. Even though advisors may see additional rice cultivation as a technically inferior option, there are good reasons for supporting settlers in it to give them a stronger base in rice before they experiment with new livelihoods. The principle is to build on what people already know and want to improve, highlighting people’s capacities and ideas rather than focusing on what they lack or need; and to add on new ideas once they have the self-confidence and sense of security derived from expanding on knowledge they already had so as to help them venture more comfortably into uncharted territory. Lack of land for rice cultivation on the plateau does not seem to be the major constraint on increased rice production, since the land that is available is not being fully used at present, and more has recently been allocated from degraded VFA forest land. Conclusion: The resettler communities of Nakai are managing a fundamental change in their livelihoods that needs the following elements:  Targeting programs more specifically to the three different levels of acceptors (active, cautious and marginal) among settler families in Nakai.  Supporting household decisions to prioritize rice growing through improved rice technology, with technical assistance in cash cropping and other income generation activities alongside rice.  Focusing planning on full use of land now available for rice cultivation; by speeding up the allocation of cultivation rights on reservoir drawdown areas, perhaps by redistributing 0.66 hectare plots left idle, and by improving technologies for rice cultivation sought by settlers, like expanded irrigation systems, new seed varieties and organic fertilisers. 4.3 .2 Bu il di n g w o m en’ s ca pac i ti es f or d ev e lo p m en t l e ad e rs hi p Women’s capacities and roles have expanded greatly as a result of the project, moving them into the forefront of innovation. The livelihood activities in NTPC’s Social Development Plan have a substantial component for activities directed specifically at women, which we commend. Lao women have the greatest flexibility culturally to venture into new areas of experimentation – once their food security goals generally through rice availability are fulfilled. Their multi-tasking roles in society encourage this kind of compatibility between traditional cultivation and modern experimentation in the household and farm, where they are actually the chief cultivators. The poorest women are usually those in labor-scarce households with several young children, elderly or disabled members and no male member. Conclusion: Measures that assist women to lead development change include:  Strengthening women’s capacities by enabling them to gain access to the technical knowledge, leadership skills, confidence-building mechanisms and outside exposure needed for them to handle livelihood innovations, whether in agriculture, forestry, fishing, craft production or entrepreneurial ventures. 27 | P a g e IAG Report No 10  Offering literacy and numeracy programs for interested women to enhance their confidence about going into business. When organizing village training programs, building in regular follow-up sessions and sufficient time for women participants to absorb these skills and new knowledge with ease and develop self-confidence.  In promoting promising activities for women, e.g. techniques of irrigated rice cultivation, vegetable growing or frog raising, discussing with the women the added amounts of labor and time that will be required of them, and how they might find ways of adjusting their prospective workloads.  Gearing programs to the different levels of poverty and well-being of women—those somewhat well off and already engaged in innovative activities, those focusing on rice- growing but cautiously interested in exploring new alternatives, and those living in dire poverty.  Offering literacy and numeracy programs for interested women not only for their own utilization but as part of confidence-building mechanisms that encourage women to go into business or other productive ventures. 4.3 .3 Assi s ti ng yo u ng p e o pl e t o t ak e o n f u tu r e l ea d ers h ip ro l es Young people have the greatest interest in accommodating to and mastering the new economic set-up. Many more are attending school than previously and a number have higher educational aspirations. No longer familiar with how life operated in the former forest environment, they can most easily adapt to and create new ideas, technologies and opportunities. Sustainability lies especially in them, and institutions and governance mechanisms need to be formulated with this in mind. Conclusions: Measures to assist young people to take on future leadership roles include:  Ensuring that all village children complete elementary school and insofar as possible, secondary school. Establish secondary schools in or near the larger settlement villages to encourage broader attendance.  Enabling the most talented youth – female and male – to compete for scholarships allowing them to pursue their studies at secondary school, technical colleges and university levels; expand their knowledge through work internships. To assure their return to serve the community for a specified period of time, have the recipients sign contracts as conditions for the scholarship award.  Organizing short-term on-the-job training in farming and off-farm work for out of school adolescent girls and boys. As noted above, a faintly emerging trend finds younger naiban and village council leaders in the early 30s and 40s, including some women not necessarily representing the Lao Woman’s Union, being selected for village positions. This apparently stems from positive perceptions of their ability to deal with local development issues as well as with outside people of influence, greater drive, and more formal schooling than the older leaders. Conclusions: leadership development in villages can also include:  Developing training programs for nascent young male and female leaders, including cross- village visits and exposure to the outside world.  Encouraging village leadership among qualified young adult men and women in governance, economic activities, and basic services provision by offering them priority access to management, technical and leadership training programs. 5. Go v er n me n t a d mi nis tr a ti ve ca pac it y In the next three years, most of the company’s responsibility for planning and implementing environmental and social programs will end. Most roads, community buildings and other assets developed by the company have already been handed over to the GOL or to local communities. The transfer of ongoing programs and 28 | P a g e Nam Theun 2: Handing Over assets will make increased demands on the budget and staff capabilities of provincial and district government. On the plateau particularly, although the company went to considerable lengths to involve resettlers and government officials in planning, it largely drove the resettlement phase itself to meet its obligations under the CA. The resettlers and local officials took a passive role which naturally increased villagers’ sense of dependence on the company and reduced district officials’ commitment to the change process. The challenge now will be to equip local officials and communities to take full charge of further development. District staff have been making an increasing contribution. On the plateau, district officials said that the handover of responsibilities would be “challenging� but they were preparing by sending staff to work closely with villagers. DAFO and project staff work together on extension work in resettlement villages. Staff now sleep over in cluster villages. DAFO advisors have been able to apply lessons learned in other regions of Lao PDR to the issues of upland cultivation on poor soils, where foreign experts have been less successful. In the DSP, NTPC staff have been designated to train RMU and DWG staff. But most stakeholders, including the government officials we spoke to, agree that the government is currently not fully equipped to meet the requirements of this transfer. A senior provincial official referred to the low capacity of staff in districts. The most commonly proposed solution for strengthening capacity is more staff and more training. With regard to staffing, district offices have relied a lot on “volunteers� (contract workers without career rights who receive per diems but no salaries) to do extension work that should be done by district staff. The DAFO official we spoke to said that out of 80 Nakai staff, only 36 were permanent. Some volunteers had been working 4-6 years still under contract, and had lost hope. The district office was seeking to convert contract “volunteers� to permanent staff. The office realized that the handover would increase the load on existing staff and was seeking staff increases of 5% or so per year to 2015. But staff increases, the official said, depended on allocations made by the parent Ministries and he didn’t seem optimistic about that. Additional permanent staffing is under tight quota control nationally as a consequence of a policy to contain overall wage growth in the public sector. Effort is also going into training of local staff to do the work by attendance at training courses and working with counterparts. According to company staff a pressing need is to increase the capacity of these staff to plan and execute livelihood and environmental projects. Both adequate staffing and training are important components of capacity building. But the World Bank’s experience in many developing countries 22 indicates that problems with administrative effectiveness often run much deeper than simply increasing staff budgets and running more courses. There are other important aspects of capacity building in public sector organizations which leads to the wider question of civil service reform and organizational development. Issues that may need attention include the pay and performance management of civil servants; authority structures in public organizations 23; and perhaps structural problems with deconcentration in the GOL such as the relationship between district staff, the Provincial government and parent Ministries in Vientiane. Over the years public management advisors have proposed many different solutions to these problems. One is organizational enclaving – creating a Program Management Unit (PMU) or a Development Corporation, funded from GOL plus developer levies, to take over livelihood responsibilities and filtering in qualified staff to run the projects. The functions of such an organisation could range from advice and liaison, quite similar to the present RMU; to full-fledged responsibility for the management of development programs in a region. Enclaves essentially are designed for high-priority projects or functions to sidestep the problems of root and branch administrative reform; but they are only viable with high-level political support and protection from the jealousies of line agencies. They may be worth further examination in the case of major development initiatives like that associated with NT2, but only in recognition of the conditions required for their continued viability. The basic message is that a major development project like NT2, which requires government participation, has to take into account the real requirements of that participation in terms of the demands it will make on 22 See for example World Bank (Independent Evaluation Group) (2008). 23 Performance issues are often closely connected to cultural attitudes. For example it seems that Lao civil servants share the same basic attitudes to consensus and seniority as their equivalents in other Southeast Asian countries. An expatriate staff member commented to us that many younger Lao staff are certainly competent and committed; some older staff are less competent but “sure of their power� and young people “have to respect their elders�. 29 | P a g e IAG Report No 10 local officials. The institutional changes required to the civil service to assure that they can take over the projects initiated by the company will take much longer than the three years available for the handover, may require significant shifts in civil service culture and political-administrative relationships, and have a low prospect of success. Conclusions: Building local government administrative capacity to take over project responsibilities requires institutional change over a time period well beyond the project horizon. For the current NT2 project, if activity is to be successfully handed over to the GOL there may be a requirement for a new development organization that is able to recruit and retain existing qualified staff. For future development projects there is a need to identify immediate requirements and to plan for short-term actions (“training�) as soon as the project is approved and for the GOL and its partners to develop longer term plans for a broader strategy of administrative reform. Recommendation: The GOL should explore the possibility of a new development organisation at least as a transitional measure to retain qualified staff able to continue NT2 programs. 5.1 Ass e t ha n d ov er a n d b ud g e ta ry ca pa ci ty Under the arrangements in the CA the company has now handed over community assets valued at US$101m to the GOL at national, provincial and district levels. These assets include schools, clinics, roads and bridges, and irrigation infrastructure such as pumps and water gates. All require substantial ongoing expenditure on operations and maintenance. Some – such as unsealed plateau roads – can be expected to deteriorate rapidly. There were signs already of the reservoir road breaking down under the continuing heavy load of trucks. There has been some planning for the handover with workshops for District Working Groups organized by the RMU. District staff have discussed what they want to take over and have then prepared a work plan for next fiscal year 2011/12. The product of this planning will be an official budget request to government to allocate funds for operations and maintenance of the assets. But the time available for planning was short and it is not clear that the full implications of the handover have been worked through. There will be continuing funding of development projects in Khammouane after the company’s responsibilities terminate. The GOL will continue funding of the DSP, and other development initiatives such as the Khammouane Development Project, and IFIs will continue to support broader development programs that will help the GOL to manage the DSP, including a proposed Mekong Integrated Water Resources Development Project (MIWRDP)24 will continue. But the operation and maintenance of the infrastructure handed over, as well as requirements for staffing of technical assistance, regulatory and enforcement activities depends largely on the limited budgetary capacity of the government 25. It is unclear whether the government will commit the resources to meet these requirements, which compete with other needs in Lao PDR. This is discussed further below. Conclusion: as with any development project, development of a major hydro-project on a BOOT (Build, Own, Operate and Transfer) basis requires early planning on how the handover of assets will be financed and the assets maintained. 6. P lan n in g a n d d el iv e ri ng f u t ur e h y dr o p r oj ec t s 6.1 Wa t er ma na g e me n t p ol ici es a n d fu t u re hy dr o de v el o p me n t Over the next two decades, the GOL has a further 65 hydro projects either at the planning stage or being investigated under a MOU. This section of the report looks at application of the lessons learned from NT2 for 24 Yet to go to the World Bank Board. 25 The Social and Environmental Remediation Fund (SERF) established by the CA will provide ongoing funding for the maintenance of the GOL Resettlement Assets and the operation and maintenance of the community water and irrigation systems for the Resettlement area, but will not fund maintenance of public assets such as roads and bridges handed over by NTPC to GOL. 30 | P a g e Nam Theun 2: Handing Over future hydropower developments in Lao PDR and elsewhere. The focus on the sustainability of policies and institutions arising from the experience of NT2 invites an examination of whether current policies and practices concerning hydro developments are leading or can lead to sustainable outcomes and how they might be applied to other developments. Table 1: Lao PDR - current state of hydro projects Installed Number of Stage Capacity (GW) Projects Operating 1.9 12 Construction* 2.6 8 Planning** 7.4 27 Feasibility*** 7.4 38 TOTALS 21.2 86 Source: Government of Lao PDR (2011c) * Excludes Hongsa Lignite project (1.9 GW capacity) ** Exclusive rights to develop project subject to final grant in Concession Agreement. *** Specific developer investigations under MOU. The majority of these MOUs appear to have lapsed. There are some basic principles for the government’s role in the management of a country’s energy resources in the best interests of its people:  development of a country’s energy resources is planned on the basis of overall national net benefits;  there is an open, competitive process for project and developer selection;  a standard, uniform regime for taxation and regulation applies to all projects;  the government’s policy for major projects includes setting and enforcing environmental and social standards and internalizing the costs of environmental and social mitigation and restoration to the developer;  populations directly affected by a project are no worse off, and preferably better off, than before the project;  overall economic and social development in the impact zone of each major project is planned co- extensively with the project itself;  the specific and general commitments on environmental and social impacts made by the project company in the CA are publicly available; and  monitoring is independent of all parties and its results made publicly available. Formally the GOL has a well-developed and publicly advertised process for planning and developing hydro projects, including provision for the social and environmental sustainability of projects26, and many of the principles above are already GOL policy. Others – particularly related to the competitiveness and openness of project planning; selection and development of projects; and the integration of social, environmental and developmental objectives with resource efficiency – may need further attention27. We discuss some of these issues below. The attention to the environmental and social impacts of large projects and the planning principles and selection processes described here will also serve the economic and financial objectives of the Government. 26 The relevant policy and planning documents are all on the GOL website (Government of Lao PDR (2011c)) and include the list of energy projects at various stages cited in the table (Government of Lao PDR (2011b)), a detailed planning analysis of the energy sector ca. 2004 (Maunsell Limited (2004)), national policy on environmental and social sustainability (Government of Lao PDR (2006a), and a process for approval of major energy projects (Government of Lao PDR (2011a)). 27 There is a useful discussion of the governance of natural resource management, including energy and mining projects, in a supporting paper (Barma, et al. (2010)) for the Lao Development Report 2010. 31 | P a g e IAG Report No 10 Accordingly, we would amplify the principles set out above as follows: 1. Follow a plan based on optimizing use of the national water resource in economic, environmental and social terms. Hydro projects should be considered within an overall power system development plan (covering energy both from hydro and other resources) on the basis of optimizing the use of the national water resource for energy and other purposes, both within each river basin and across the country as a whole. The GOL has both a power system development plan and a comprehensive water resource management policy. The government website cited above contains a comprehensive and detailed desk-based analysis by a consulting firm of a candidate list of projects including estimates of social and environmental costs (Maunsell Limited (2004)). The water policy is based on developing plans for each major river basin in Lao PDR but is clearly based on exports as the main source of growth in demand. The analysis takes into account the consequences for optimal use and development of the grid of different export scenarios. Application of this policy should lead to optimizing the value of water resource use, including the development of hydropower. The consultant study investigates the major interactions in water use between candidate projects and the economics of building a Lao national grid but was desk-based and focused on use of water for electricity rather than its complementary uses. A broader study would need to look at these uses as well. 2. Implement and publish a standard, public regime for taxation and regulation (including that related to environmental and social impacts) of major natural resource projects . The World Bank has commented elsewhere that it is very unclear exactly what tax and royalties provisions or government contributions apply in the case of individual projects in the energy sector in Lao PDR. A lot of the detail seems to be negotiated in the context of the final negotiations on the CA, and this leaves room for special concessions for particular projects. The GOL has a commendably clear policy on environmental and social safeguards in hydropower projects (Government of Lao PDR (2006a)), and for establishing the developer’s responsibility for carrying out preliminary and final Environmental and Social Impact Assessments (ESIAs)28. It is a matter of applying these principles, again in a uniform and transparent manner, to individual projects in a manner which enables their application to be independently monitored. 3. Select candidate hydro projects on a synoptic basis taking into account the demand price and cost of generation including the cost of mitigating social and environmental impacts to an acceptable international standard. The Maunsell study undertook a detailed analysis of both domestic and export markets for energy and a detailed project by project analysis, social and environmental as well as financial and economic. The resulting recommended priority projects now appear to have a less than exact correspondence to actual projects in the list on the same website. It is understandable that, over the 7-8 years since the study, ideas about the nature and priority of projects would have evolved but it appears that projects have been considered one by one, driven mainly by individual promoters' proposals rather than on the systematic basis required to optimize benefits to Lao PDR and called for by Lao PDR policy. 4. Before calling for proposals for any specific project, undertake or commission preliminary detailed site investigations including an initial social and environmental impact appraisal as well as baseline engineering information. The GOL may be receiving relatively expensive proposals from developers because they include the assumed risk from a lack of detailed site-specific information (on geology, hydrology, etc). Better base information would put the GOL in a stronger position in negotiation with preferred developers. Information on the specific social and environmental impacts should also be available so that safeguards and their costs will inform negotiations and complementary GOL planning for associated development. The government’s policy stipulates a comprehensive Environmental Impact Assessment and both Environmental Management Plans and Resettlement and Social Development Plans to be prepared for large hydropower projects. A concern expressed to the IAG on previous missions is that these assessments are being undertaken after the GOL is in effect committed to a specific proposal, which weakens leverage on the developer to give proper attention to managing these impacts. The GOL needs this information to establish a baseline for project selection and assessment of competitive proposals, so a preliminary assessment must be available before a 28 The process for independent power plants is set out in detail in Government of Lao PDR (2011a). 32 | P a g e Nam Theun 2: Handing Over developer is selected. There is a strong case for the IFIs to assist with these assessments, both with finance and technical assistance. 5. Before inviting project proposals, publish baseline information and plans and consult with stakeholders. The government should share the baseline information not only with prospective proposers but also with communities likely to be affected by the project; should inform and consult these communities on the likely impacts of the proposals on their livelihoods; and should take stakeholder representations into account in preparation of the project Request for Proposal (RfP). As indicated earlier, GOL policy is a clear commitment to a transparent project selection process and also to consultation with project affected people: these two criteria go together. 6. Use competitive tendering processes for projects. At the appropriate time, projects should be publicly tendered on the basis of a detailed RfP in order to solicit competitive proposals. Unsolicited proposals based on developers’ interest should not be entertained. A major concern with the GOL’s current process is that it appears driven by individual proposals, denying the government the leverage of a competitive process that would secure the best possible deal for the people of Lao PDR, including on the environmental and social sustainability of developments. While the government’s existing contractual commitments must of course be taken into account, there appears to be scope within the present context for employing a more competitive process for those projects at the feasibility stage or where existing MOUs have lapsed. 7. Select a developer on the basis of the specific proposal but also on the proposer’s track record in other major projects, covering ability to deliver a project on time and on cost, to meet and implement environmental and social safeguards and to manage project implementation adaptively in participation with major stakeholders. A lesson from NT2 is that choice of developer matters not only on the basis of engineering competence and financial backing but also on its ability and commitment to integrating management of environmental and social management plans into its overall project planning and implementation. The senior management of NTPC has demonstrated its ability to do this which has been a major factor in the quality of the environmental and social programs in the project. 8. Internalize all costs of social and environmental impacts to the project. GOL policy is clearly “user pays�: that the developer meets all costs of implementing environmental and social safeguards. There should be a clear distinction between this principle and payment of a resource rental for a water right. A resource rental reflects the opportunity cost to the people of Lao PDR of conferring the water right; the costs of environmental and social impacts are specific to the project and additional to the water right. Costs can be internalized by some combination of a negotiated developer levy and specific undertakings to implement safeguards. 9. Base the Concession Agreement on the principles of transparency, clear objectives and specified roles, adaptive management and stakeholder participation. These principles are clearly spelled out in the GOL policy on environmental and social sustainability. The Concession Agreement should: 1. Be precise and explicit as to results that must be obtained in technical and financial, environmental and social terms but also provide for flexibility and adaptability at the level of means. There should be a simplified mechanism for adopting alternative courses of action as circumstances evolve without requiring reopening of the CA as long as the specified results are not affected. 2. Include a clear delineation of the respective roles and commitments of developer and government in terms of implementation of social and environmental safeguards and integrated development projects such as irrigation. In particular, the project timetable should be married with a timetable for associated development projects, such as for irrigation, that are planned and implemented by the government. 3. Include specific provisions for stakeholder participation in project planning, construction and implementation. As part of this the Concession Agreement should be published and its provisions explained to stakeholders in appropriate fora. 4. Spell out the provisions for independent monitoring of compliance with the CA terms, including regular stakeholder feedback and for publishing the results of such monitoring. Monitoring of project 33 | P a g e IAG Report No 10 implementation, which in the case of NT2 has been complex and onerous, can be streamlined. Monitoring includes review of the management and governance systems, those of the developer as well as institutions of the host country. Conclusion: The systematic approach that is proposed mostly corresponds to current GOL policy on hydropower and river basin developments. Its purpose is to allow the Lao Government, or that of any other country, to retain leadership and control over the development of its natural resources. The main enhancements to the existing official policy should be:  An energy resources plan which ranks projects not only for net economic benefits but also for environmental and social impacts;  Providing detailed site information and a preliminary assessment of likely social and environmental impacts, possibly with both financial support and technical assistance from the IFIs, to be made available to potential developers;  development of individual projects within an overall standard, published taxation and regulatory regime;  as far as possible within existing commitments, competitive tendering for the right to develop specific projects;  publication of the taxation and regulatory provisions applying to all projects, the specific environmental and social safeguards on individual projects, and the results of monitoring the implementation of those safeguards. Recommendation: The GOL should  review and revise its power system plan to take account of developments since the original plan in 2004;  consider inviting competitive tenders for the projects in the plan which are not covered by current MOUs or other legal commitments to specific developers, on the basis discussed in this report. 6.2 P ri va t e se c to r d e v el o pm e n t an d t he p u b lic -p ri va t e p ar t n ers hi p The benefits and costs of private sector development of natural resources in developing countries, either through concessions to private developers or public-private partnerships, are extensively discussed elsewhere29. Private (in Lao PDR’s case, usually foreign) developers can bring in finance, assets and skills not available to the government or local companies; there is potential for conflicted objectives in construction and operation if a project is undertaken by a state company; a private developer may have a stronger drive to manage costs; and the arm’s length relationship between the government and a private company may make it politically easier for government to enforce regulations and contract provisions and to resist granting concessions to the project company beyond standard policy. To the GOL, partnership arrangements are a way of securing the benefits of both public and private ownership. Government participation with a private developer can have both benefits and risks. Government ownership or participation should in theory bring a greater concern in project governance with the wider environmental and social objectives of development and of course (if there are no Lao private companies able to participate) increase the share of the state and the nation in the revenues from the project. In addition, the private partner may view a government stake in a project as a way of binding the government into using its sovereign authority to safeguard the development. The availability of foreign capital for major projects is obviously of major strategic importance for GOL. However just as important is how to acquire the best project managers, be they public or private. The 29 For example Savas (2000) is an exhaustive cataloguing of all the variants of public and private ownership and their strengths and weaknesses. 34 | P a g e Nam Theun 2: Handing Over participation of Electricité de France (EDF) as shareholder and project manager, and the personal skills that came with the company have demonstrated the benefits of having a project manager with a proven international reputation in both construction and operation of major projects, but also of having a hydropower company with an interest in the project extending well into its operating life cycle and not just in making a profit from its construction. NTPC management has brought the skills of EDF at planning, organizing and bringing many different activities together at the right time but specifically the skills and incentives associated with not only building but also operating NT2. The discipline of controlling schedules and budgets has also been of benefit for the social and environmental projects as well as the construction activities. But beyond that, the company’s senior managers have also shown an impressive commitment to the well-being of the people affected by the project and a participative approach to planning the development; they have hired the right sort of people for environmental and social work and recruited and trained local staff to work with the expatriates. It seems likely that Lao working on the NT2 project will be in demand on other similar projects as well so the human capital created by this close working relationship continues as a benefit for Lao PDR. Not all developers have these softer skills. Negotiations for a major project emphasize specific solutions delivered to specification, an imperative to meet financial and technical deadlines and that commitments be specific and time-limited to limit risk and exposure. A project company will want a firm date for termination of each of its contractual obligations. These imperatives of business and engineering may tend to cut across the sometimes longer, slower less certain and more negotiated approaches of human development at the local level. Having a developer who can respond to these aspects is important. The positive attributes we have listed – ability to manage the environmental and social aspects of a project effectively and with flexibility and sensitivity; to develop the skills of local staff; to work participatively with project affected people; and to build trust with the government partner – should all be included in the criteria by which future developers are selected. Conclusion: public-private partnerships in major projects have many advantages for a developing country government. Selection of the project developer must consider the environmental and social objectives as well as achievement of the financial and commercial objectives. 6.3 Diff e re n t mo d el s of ro l es of d ev e lo p e r a nd g ov e rn m e n t The CA for Nam Theun 2 is unusual perhaps in the scope and duration of the commitments that the company entered into for managing the project’s environmental and social impacts. Did NT2 set a higher standard for mitigation that was in fact “unaffordable� for future projects? We continue to hear conflicting messages from officials about that. On the one hand some senior figures express support for NT2 as a “model�, which we assume means a model for future projects. On the other a persistent refrain from some officials is that other developers simply would not accept the stringent demands of the CA because they would push up the supply price of electricity beyond its market value. The obvious question is whether this means that the GOL will not expect the same environmental and social standards in the future as it stipulated in this project. But there are really two questions: what standards does the government intend? And who pays to achieve these standards? Wha t s ta ndar ds ? Is there in fact an “NT2 standard� that can be applied to other major projects in Lao PDR? Bank staff have tried to dispel the notion that NT2 represented a specific standard that should be applied to all hydro projects that follow it. In practice, they argue, this was nonsensical: every project is different, and E&S programs needed to be customized to each project. But in a larger sense there clearly are standards for hydropower projects, in the form of principles on which the Bank’s safeguard policies are founded; and NT2 has a lot to teach us about their application. These principles include that the people directly affected by a major project will be properly consulted and should have a free choice on the options that best suit them for their future livelihoods; that they should be left no worse off as a result of the project’s impacts and will receive a priority share in its benefits; and that the project will minimise major impacts on the natural environment. We would argue that a much greater threat is that NT2 is represented as a unique application of these larger principles and therefore that there are no lessons to be learned from the project about how 35 | P a g e IAG Report No 10 to apply the principles to the many other energy projects queuing for the attention of the Government of Lao PDR. Of course the particular set of programs for compensation, restoration and development that will meet these tests of principle will vary from project to project. But we see no reason why these principles cannot be applied to all major projects, regardless of their unique circumstances. A further issue is whether the general standard of safeguards that should apply to a project are different depending on the relative poverty of the people affected. The principle of restoration of entitlements and of a first share in project benefits indeed leaves plenty of room for a lower standard in a poor country. The principle for natural habitats of “first, do no harm� is perhaps much the same in the rain forests of Lao PDR as in the national parks of New Zealand. Applying the principle say to a long-settled river valley may be more complicated but not impossible provided the principles of free consultation and restoration of entitlements are respected. These principles seem to us to be of universal application to all projects in Lao PDR. Box 2: The cost of environmental and social safeguards in NT2 The GOL’s power planning consultants reported in 2004 that costs of [environmental and social] mitigation are "generally a relatively minor part of most projects' overall cost" [and] "in Lao PDR have generally been found to lie between 0.5% and 12% for forecasts and 3% to 6% for projects actually built." 30 Specifically, the report estimated in 2004 that for NT2 (at 1,074MW capacity) the addition to lifetime generating costs from E&S impact valuations was between 0.07c and 0.15c/kwh, compared with a total lifetime generating cost of 1.6c/kwh, or between 4% and 9% of total generating costs. The range reflects different assumptions about what standards should apply to environmental and social mitigation. The higher figure reflects the application of widely accepted international standards. As is argued in the main text, the assumption of what standards apply is – at least in the case of NT2 – important for judging the additional cost of E&S. In the case of NT2, it depends very much on what construction costs can fairly be attributed to mitigation of E&SD impacts. Annex 2 is a summary of an estimate made by NTPC of the total E&S costs for NT2 over the full life of the CA (i.e., including some projection of costs for the remaining two decades or so of the CA) 31. The NTPC estimate for the CA lifetime including construction works is US$395m32 or 28% of total project costs. Table 2: NT2 - estimated costs of E&S as a share of total project costs Including Excluding construction construction Period works works To COD 23% 7% CA lifetime 28% 12% However about $200m of this figure is the cost of managing water flows downstream from the powerhouse, including the regulating pond, downstream channel and oxygenation weir, plus roading required for access to construction sites for these works. In the case of NT2, this “additional� cost was compared in the Social Plan for the project with a base case of channelling the downstream flow into an existing river, the Nam Kathang, and (we assume) compensating the people who lived along its banks for their loss, probably a much cheaper option than the final project design. We assume that the environmental impacts of this option would not have been acceptable to the GOL or to the IFIs seeking the implementation of Operational Safeguards. We would argue therefore that what emerged as the final design was simply the acceptable standard in any developed country. Once the “extra� costs of these construction works are taken out, E&S lifetime costs represent 12% of total project costs. This estimate is certainly higher than the original power plan range but doesn’t appear to impose a crippling addition on the likely supply price of energy. 30 Maunsell Limited (2004) 31 There may be additional costs unique to NT2 arising from the delays in project preparation and the complex monitoring and supervisory arrangements, but these are arguably costs that can be reduced in future projects at least partly because of what was learned from NT2. 32 See Annex 2 for details. 36 | P a g e Nam Theun 2: Handing Over Who pa ys? We are not convinced as some officials we spoke to that the additional costs of environmental and social safeguards in the NT2 case are as big as they estimated (see Annex 2). But the costs, whatever they are, will lie somewhere, and if not reflected in the price of electricity they will fall on the people of Lao PDR and their environment, to the benefit largely of the profits of developers and the lower prices paid by foreign consumers for Lao energy. The principle adopted in NT2 is that the developer meets the costs of implementing the E&S safeguards. Making the developer bear these costs gives it the necessary incentives to manage and minimize them. In the case of NT2, the CA says that either NTPC meets the cost directly by implementing the activities of the E&S program itself, or the GOL can assume responsibility for the activity, to be funded by NTPC. By and large, the GOL has not exercised this latter option and NTPC has proved itself well able to carry out responsibilities which would almost certainly been beyond the limited local capacity of the GOL without the creation – and external financing – of a special purpose development organisation. In the longer term, sticking to the principle that the developer manages E&S programs itself makes sense, but there are two important provisos. One is that the E&S requirements of NT2 continue beyond NTPC’s responsibility for them, so that the government has to be ready to take them on – in this case mostly in the next three years. The other is that other developers currently in the pipeline may not be either willing or able to do what NTPC has done. In both cases, the GOL becomes responsible by default, either eventually or at the outset. In these circumstances there are other ways of distributing the responsibility for actual delivery of the safeguards while ensuring that the developer pays for the costs of implementing them. One is that the developer must meet standards for construction impacts and clean-up but the government delivers resettlement, compensation, and livelihoods programs. To ensure that the user pays, costs falling on government should be recovered from the resource rental or a specific developer levy related to the forecast impacts of the project. These are of course variations in between “developer delivers� and “government delivers but developer pays�. The developer may prefer to manage activities directly that are time-critical and could slow up construction, like a resettlement program; or it may wish to handle compensation directly, adjudicated by government. But all agreements should adhere to the principles of safeguards and developer pays. Any departure from these principles will simply hide the true cost to the people of Lao PDR of a major project. The other important conclusion is that, when a project has as big an impact as NT2, planning for project construction and operation must be integrated with development planning. This has implications for project governance. There is no clear boundary between mitigation or restoration on the one hand and sustainable development on the other. The need will exist for close ongoing relationships between developer and government whatever the allocation of roles for delivering environmental and social safeguards during the project. An interesting possibility is that a project company with a strong “development� presence like NTPC might well, if it were willing, be funded to take on additional development work beyond its developer’s requirements to meet the E&S safeguards. Conclusions: The arrangements for mitigation and restoration of E&S impacts for major resource projects need to be based on the principle of developer pays, either by assuming direct responsibility for E&S activities or funding government E&S projects. Governments need to take advantage of the development opportunities that major projects present for the communities within the project footprint. Mitigation and restoration of E&S impacts on the one hand, and development of sustainable livelihoods on the other, should therefore be jointly planned and agreed between developer and government at the time the CA is negotiated. Viewing a major energy project as a development opportunity also leaves open the possibility that a developer with competence to deliver E&S activities could also be funded to undertake development work beyond that required to meet E&S safeguards. 37 | P a g e IAG Report No 10 6.4 C o mp e nsa t io n or d e ve l op m e n t? The CA for NT2 is perhaps unusual in combining a principle of compensation at both household and community level for costs borne by project-affected people together with explicit developmental objectives, such as the raising of the living standards of the people of the plateau above the national poverty line. The POE has also consistently urged that a development approach similar to that for the people of Nakai and the conservation area be adopted for the much larger number of people downstream of the project. A major water use project like NT2 creates opportunities as well as negative impacts and therefore needs to dovetail with development planning. Over most of the company's E&S work there has in fact been an explicit focus, as a principle of compensation, on increasing the options for villagers' sustainable livelihoods. It is most apparent on the plateau, where there have been the biggest changes from extensive, subsistence livelihood to more intensive methods of farming and a greater integration into the market economy particularly for fishing and forestry. But in project lands and downstream the company, although it had a principle of compensation in cash and in kind, has employed development methods including improving water and sanitation, refurbishing flood management systems, technical assistance with alternative livelihoods and establishing village funds. So it can be argued that there is a large development component to the project, even if it is in some places “compensation using development methods�. We agree with the POE that NT2 presents a significant development opportunity for the people between the powerhouse and the Mekong. Both the Khammouane Development Project and the proposed Mekong Integrated Water Resource management scheme focus on village development and irrigation in the XBF basin. But it needs to be borne in mind that development and compensation are two different principles. In NT2 the fact that compensation for expected losses has been met through development mechanisms has certainly created some confusion. Compensation and development can take place at the same time - in fact it is very difficult to argue that they are not complementary, particularly such as on the Nakai plateau where a major change in livelihoods was required - but it must be clear that they are parallel processes. There is a principle at stake that, at the very least, households and communities affected by a project should be entitled to be fully compensated for the adverse impacts of a project; and it is certainly debatable whether this compensation should come with strings attached. It is perhaps not surprising that borrowers from the VIRF have felt less obliged to repay their loans, on the grounds that the money they were borrowing was theirs in the first place. Compensation at a community level was explained by the diffuse nature of some of the negative changes in the XBF, which made direct compensation to individuals problematic. Yet, in the future means should be sought to keep the distinction clear between compensation for loss and development programs. Conclusion: a baseline for assistance to project-affected people is compensation or restoration for affected livelihoods and impacts on environment, society and culture. Joint planning of compensation and development activities is required, but the bottom line is that compensation is an entitlement and should not be hedged about with restrictions on how it is taken up, even with the best of development motives. If developers offer assistance with livelihoods to affected households as part of compensation, it should be underpinned by a guarantee that the households will be at least no worse off than if they had accepted full financial compensation or restoration of assets. 6.5 Us e o f r ev e nu es f r o m NT 2 a nd o th e r h y dr o pr oj ec t s The need to account for NT2 revenues and their use has been a helpful catalyst for the larger program of financial management improvement and there now seems to be a good basis for accounting for the revenue flows and expenditures made for the RMA eligible programs. Reports are now being produced on the expenditures specifically tagged to these programs. The Lao PDR State Audit Office is currently working on an audit of the NT2 project, with the assistance of an international consultant. This will be an important report from which the Ministry of Finance can review and refine the financial statements required by the RMA. So far these statements do not appear to be matched by project reports on outputs or impacts of the expenditures – such as for example kilometers of roads constructed. There are defensible reasons for identifying specific budget items as RMA eligible programs to comply with the agreement between the GOL and IFIs. Tagging items as RMA-eligible expenditures demonstrates that 38 | P a g e Nam Theun 2: Handing Over the GOL has explicitly addressed the requirements of the RMA in its budget allocation processes. The main issue is what this accounting actually tells us about how the RMA expenditures actually benefit the poor or protect the environment. Tagging specific expenditures will not in itself demonstrate that – as a result of receiving revenues from the project - the government has actually increased its total expenditures in the relevant sectors by this amount. The main issue here is the problem of additionality: how do we know that the RMA expenditures are adding to total value of the qualifying programs in health, education, roads and so on, compared with what the government would have spent in those sectors without the proceeds from NT2? The identification of specific qualifying expenditures in isolation proves nothing. It is much more important to assess the overall quantity and quality of expenditures in the relevant sectors. It seems also that GOL and maybe IFIs are starting to see the NT2 revenues as a revenue source for other uses directly or indirectly related to the project. These uses include funding additional enforcement activities in the NPA and the reservoir, assuming responsibility for livelihood activities currently funded by the company, providing operating budget for future development projects and paying to maintain the $102m of community assets handed over by the company. On the last point we heard that the GOL had agreed to divert some of the NT2 revenues to repair the rapidly degrading road alongside the reservoir and also to fund some increased patrolling on the reservoir under the authority of the RMC. The basic point is that any budget allocation comes with a cost because every use denies another use. Budgets are subject to the basic principles of efficient allocation of scarce resources. These principles include making sure that all government revenues are available for all purposes so as to ensure that they are spent on activities of the highest priority. Tagging revenues for specific purposes runs against this principle. If maintaining the reservoir road is indeed a high enough priority related to other uses (are other rural roads in more need of repair, for example?) then it should be funded out of the general budget. Otherwise there is always the suspicion that the NT2 revenues are being used here at the expense of other more pressing demands elsewhere. If it is considered that a developer's contribution should include not only assets but the cost of maintaining them then this principle can be reflected in a general policy on development levies. This will become much more of an issue as similar projects start generating their own revenues and costs for the government. However if the government wants to spend money on maintaining assets in the project area, the simplest method of doing this within the RMA would be to budget for the expenses in the NT2 eligible programs, assuming they qualify as pro-poor or environment expenditures. Conclusions: A government’s commitment to the beneficial use of proceeds from major development projects can only be assessed by an overall examination of the outcomes from the public budget. The best means of achieving this is for the government to publish its intentions in the form of a medium-term expenditure plan, showing the contribution of natural resource revenues on the one hand and the increased priority given to pro-poor and pro-environment programs on the other. Public funding for operation and maintenance of assets developed by a project must take its place with all other uses of public revenues but there is a general principle that no development project should proceed without a clear commitment to sustainable funding of its recurrent costs. 7. M on i to ri n g a nd ev al ua ti o n The IAG has been one element of a multilayered system established by the parties to the CA for monitoring33 the NT2 project. The base level has been the regular internal monitoring undertaken by the company itself. Beyond that, external monitoring has been undertaken by the LTA, the IFIs, the POE, the Independent Monitoring Agency (IMA) and the IAG itself 34. 33 Monitoring is defined as “the ongoing process by which stakeholders obtain regular feedback on the progress being made towards achieving their goals and objectives� (UNDP (2009), 8). 34 Although primarily concerned with safety issues relating to the NT2 facility’s physical construction and operation in line with the World Bank’s Dam Safety policy, the Dam Safety Review Panel also has a mandate to report on “minimization of adverse impacts on the 39 | P a g e IAG Report No 10 The arrangements for M&E for NT2 have generally covered most of the important requirements for the project including providing evidence of compliance with legal and contractual obligations; assessing the wider impacts on the environment and people within the project footprint; reporting on the national benefits and costs of the project; supporting adaptive management of project implementation by NTPC and GOL; and enabling the development partners to take decisions about associated development plans and projects. On all these aspects the independent monitoring has performed three important roles. It has been essential to provide assurance to the stakeholders and the wider international public that the project is delivering the results expected of it – including meeting its environmental and social obligations; it has provided valuable learning for improving project operations; and it has (by no means least) hopefully provided the communities affected by the project with some comfort that their interests are being heeded and attended to. As the project matures in its operating phase, external monitoring will also include drawing lessons from the project for the different roles of project managers, government and development partners; and how well the regulatory framework and organisations supporting the project are working, including how village institutions are supporting the sustainable livelihoods of villagers. The World Bank publication “Doing a Dam Better� 35 draws some lessons from experience with monitoring as follows:  Monitoring and evaluation should be long-term; we agree: so that the monitoring agencies build their understanding of how the project operates and its complexities;  Monitoring can’t be entirely independent of the stakeholders, because they will have to pay for it; with respect to monitoring commissioned by the stakeholders this is obvious but somewhat academic: the IAG has never felt constrained by its mandate from the Bank and the reports of the POE and LTA also certainly show that they don’t pull their punches on environmental and social issues; independence of reporting is assured both by a clear mandate to act independently and appointment of members of these groups who have wider reputations in their fields; however (see below) information about the project – particularly about its impacts on people - doesn’t have to come entirely from agents of the stakeholders;  In the case of NT2, external monitoring has been complex, layered, sometimes overlapping and costly for the project manager to support;  If monitoring roles had been allocated by function (“regular data collection, data verification, oversight, and advisory�) rather than by lines of reporting, there could have been less overlap. On the last two points: we agree that the stakeholder-commissioned monitoring has been expensive and time-consuming. We don’t have recent figures, but in 2007 an NTPC presentation to the IAG estimated that there had been 354 cumulative days of external monitoring in the preceding 639 calendar days since financial close in June 200536. (We assume that this didn’t add in the numerous visits to the project by various dignitaries and delegations from other countries, all of which take time to organise and support). A functional division of roles for monitoring agencies could reduce the overlap although, given the different interests of the stakeholders, is unlikely to eliminate it. The principles would be for the external agencies to ensure that they are fully up to date with internal monitoring results before they go on mission; that they collaborate with each other as much as possible to time their missions and share responsibilities for primary evidence gathering; and that they share and discuss their findings with each other as soon as possible after their missions. Most E&S monitoring in NT2 is undertaken by project staff as a normal management function to ensure that the project remains on track with its objectives and to take corrective action as required. Independent monitoring agencies should be able to rely on this information for much of their basic evidence. Their main interest should be in assurance of its reliability by periodic independent verification, including by spot checks physical and social environment� (Dam Safety Review Panel (2010)) and periodically works with other agencies such as the POE on common issues. 35 Porter and Shivakumar (2011), particularly Chapter 3, pp 71-72. 36 We should add that NTPC management and staff, and GOL officials, have always been very helpful with logistic support for, briefing of and discussions with IAG missions. 40 | P a g e Nam Theun 2: Handing Over of actual conditions on the ground. Part of adaptive management for the company is to adjust its monitoring regime to take account of issues identified by external agencies. The discussion so far has been confined to the stakeholder-commissioned monitoring of the various agencies discussed above. It is important however for the stakeholders to see “monitoring� not just as something these agencies do, and particularly to address the role of NGOs and the communities affected by the project. Chapter 4 of “Doing a Dam Better� on “Working with Stakeholders� discusses how to achieve “constructive engagement� with international NGOs. Many NGOs start from an ideological position of opposition to hydropower and are not likely to be swayed by opposing argument. A few NGOs like the International Rivers Network (IRN) have however gone into the field to collect evidence themselves about the impacts of NT2. They deserve to be listened to and (as has generally been the World Bank’s practice) responded to point by point based on their findings. The book specifically mentions the importance of having “a system in place to catalogue and evaluate criticisms, incorporate legitimate concerns into project design, and communicate the World Bank’s response and commitments with evidence and milestones.�37 This strategy is unlikely to win ideologically committed NGOs to a different world view, but it will ensure that the evidence they provide is properly evaluated and, where relevant, acted upon. A second important source of monitoring and feedback outside the circle of the stakeholder organisations is the people in the affected communities themselves. As elsewhere indicated in this report, NT2 has achieved a good reputation for ongoing consultation with the women and men of the villages on their perspectives on project impacts. Project and RMU staff are regularly in villages, as are GOL district officials. The mass organisations, particularly the Lao Women’s Union and the Lao Front, play a significant role. There have also been opportunities for social scientists to contribute 38, and there could be more. We have covered this topic in more detail elsewhere in this report in discussing a participatory approach to project management. If the relationship between villagers on the one hand and project managers and government staff on the other is at least dialled up to “Consult� on the UN “Ladder� then the job of the outside evaluators will be much more to triangulate what messages are getting through to those in power and testing villagers’ satisfaction with these feedback arrangements. Ideally, outside monitors should not be needed to tell project managers what they should be hearing for themselves – and doing something about. Our main concern for the future is that the village authority, has to be able to give an independent view to the GOL officials and has to be accountable to the people of the village for the representativeness of that view. But the presence of other channels – independent monitors, the mass organisations, international NGOs – provides comfort for the international stakeholders like the World Bank that the views of ordinary women and men are actually getting through. We don’t underplay the difficulty of this communication (see Box 3) but it is an essential element of monitoring. Box 3: Four sources of distortion in collecting village-level information about poverty A Respondents who do not actually represent the poor, either in the sense that they are not poor, or that they represent only some of the poor. B The wide range of potential interpretations of the terms ‘poverty’, ‘ill-being’, ‘deprivation’ etc., and the consequent difficulties in interpreting responses. C The filtering effect of researchers’ own views and agendas. D The biases introduced by respondents’ understandings of the situation in which the data were gathered and by the fact that they have an agenda of their own in relation to researchers. Moore, et al. (2000), p 13 Finally, we comment specifically on our own role reporting to the President of the World Bank on NT2. The IAG was originally formed because the Bank had an issue of managing a high risk – high pay off project where its reputation was at stake. In the case of NT2, the Bank invested liberally in quality people for all 37 Op. cit. p 111. 38 Dr Jim Chamberlain, Dr Stephen Sparkes and Dr Nick Enfield have all made significant contributions as have regional social scientists such as from Kon Khaen University. 41 | P a g e IAG Report No 10 aspects of its participation: technical, policy and managerial. There is a need for ongoing testing of the Bank’s operations against its wider interests both in development in the country in question and its general approach to its operations everywhere. Bank staff are in our experience good at thinking strategically beyond specific projects like NT2 and the Bank also has central departments like its Independent Evaluation Group (IEG) that can conduct ex post evaluations of major topics like hydropower investments. A view on these strategic questions from beyond the Bank’s own resources can however provide additional expertise and oversight valuable to the Bank and other stakeholders, with two caveats. First, they do not replace the Bank’s internal mechanisms for monitoring and evaluation. Second, they are useful to the extent their advice is sought and considered. The IAG, we believe, has played a part in ensuring that the implications of NT2 for the Bank’s broader interests are brought to its attention in real time, but future advisory inputs such as ours – which as we discuss above are expensive and time-consuming for all concerned – need to be carefully considered for what they add to overall monitoring. Conclusions: Independent high-level monitoring of major projects, together with the participation of affected communities, can add value by providing assurance and advice on project management and helping to draw lessons for future projects. The arrangements for monitoring and evaluation for NT2 have generally covered most of the important requirements for the project to date. External monitoring should be simplified and streamlined to ensure that each monitoring agency has a clearly distinctive role and is not duplicating the work of others. Future monitoring and evaluation also needs to focus on drawing lessons from the project for the different roles of project managers, government and development partners; and how well the regulatory framework and organisations supporting the project are working, including how village institutions are supporting the sustainable livelihoods and well-being of villagers. Monitoring and evaluation particularly needs to include good communication with and feedback from the people affected by the project. It is a means for local communities to be heard about – and have some influence over - project impacts independently of the “official� channels of project developers and government officials. The accountability of both should include direct, public reporting in a suitable fashion of the perspectives and experiences of individual villagers. Social scientists, mass organisations and NGOs can play a valuable role in assisting with this reporting. To be reliable, the consultation with villagers on which this reporting is based needs to be conducted at regular intervals during the year; directly in the language of the villagers themselves; in a way that enables the voices of groups such as women, young people, people with disabilities and those otherwise disadvantaged to be separately heard; in a form that villagers themselves believe carries no risk of retribution for them if they give their opinions honestly; and with the commitment to report back to the villages what was said to authority and what was the response. The World Bank can benefit from independent monitoring as a supplement to its own internal resources in managing its risk in major projects, provided it is clear on the role that the monitoring agency will play in relation to other agencies. 8. Fu t u re ro l e of t h e W or l d Ba nk a n d I FI s The World Bank has played a critical role in support of this project throughout the long gestation period. Although its direct financial participation in terms of lending and guarantees has been a relatively minor part of the total financial package, its participation helped to bring in other investors. Its advice and technical support has been significant in structuring the commercial and financial agreements, designing the forms of livelihood support and complementary development projects and developing the institutions and organizations associated with the project. The Bank’s poverty reduction focus, and its capacity both to locate staff with relevant experience in Vientiane and to call in staff and consultants from all over the world as required, assisted it greatly to perform these roles. NT2 has also been a catalyst for the GOL to design its 42 | P a g e Nam Theun 2: Handing Over natural resources strategy and policy, again with assistance from the World Bank and other development agencies. The conditions of the Bank’s participation included the implementation in the CA of its Operational Safeguards. Those Safeguards have been instrumental in ensuring the quality of the project and in shaping some of the innovative aspects of its Social and Environmental components. The Safeguards also contribute to technical quality, commercial viability and bankability of a project and are of strategic value for national development. Ironically, the standards actually implemented in NT2, Bank staff argue, actually went well beyond what was required in terms of the Safeguards, but the popular perception is that what was put in place was the price for Bank participation. The specific commitments made in NT2 are often viewed as raising the bar too high for replication in a poor country like Lao PDR. The IAG has heard from several government officials that the high standards add excessive cost to a project and are not sustainable in a purely commercial venture and that they require an implementation capacity beyond the reach of a country like Lao PDR.39 Circumstances have changed greatly since the World Bank was originally approached to participate in the financing of NT2 in 1994. There are more options available to countries in term of financing and even in terms of expert advice. Lao PDR and other resource-rich countries have much less difficulty attracting private capital for investment in major projects. It is therefore unlikely that the International Financial Institutions (IFIs) would in the future have the leverage that the Bank had at the time that the GOL sought its involvement in NT2. But that does not preclude the Bank from a role in future similar projects in Lao PDR and elsewhere. First and foremost, the WB must determine that it will remain engaged in infrastructure and energy projects and not just in Lao PDR. It has much to contribute to quality development of these critical sectors and must not shy away from it. The WB retains an enormous capacity to provide advice and expertise, as well as some degree of financing, with the potential of providing substantial assistance to countries and projects in a number of ways. Even if it is not a primary investor it can help governments with national strategies for energy and water, with the financial and regulatory frameworks for implementing strategies and designing regulatory and tax regimes for natural resources, valuing and managing environmental and social impacts, integrating resource strategies with other development policies and at a project level the legal and financial issues associated with the commercial agreements. To be sought and welcomed, that support will need to be based on a different relationship than in the past. The Bank’s representations to the GOL aimed at protecting the safeguards built into the CA have occasionally been regarded by the GOL as infringing on its sovereignty. Although senior GOL officials may well accept that the Bank’s participation in NT2 has pushed government policy in the right direction in major projects, acceptance of Bank involvement in future projects has yet to be put to the test. The Bank cannot assume that it has the same leverage as it did in the development of NT2 and the “donor-recipient� relationship will have to be replaced by a strategic partnership based on the recognition of the interests of both parties. An engagement in a project such as NT2 will need to be preceded by a broader agreement on the role of the Bank in a particular country and explicit statement of the expectations and contributions of both parties. In terms of future engagement in Lao PDR, the Bank's prime interest would be to see that lessons learned from NT2 are not lost and that the same high standards apply to other projects. The parallel interest for a government could be that the Bank is still, directly and indirectly, an important source of access to private and public capital, but also that it can be an important source of advice and assistance on project governance and management and the wider development implication of major natural resource projects. We hope also that the high standards of NT2 and the extraordinary (in terms of precedents) attention paid to the wellbeing of affected populations come to be seen as a plus and a key to domestic and international 39 The recently published review of the NT2 project from its early planning up to its commissioning in 2010, (Doing a Dam Better - Porter and Shivakumar (2011)), gives a very helpful historical account of the World Bank’s participation in NT2 and a quite frank appraisal of the international politics for the Bank of investing once again in big dams, taking into account the criticism of some previous projects in which it participated, and the determination of President Wolfensohn and the Board that the Bank would only participate in NT2 if the Safeguards were implemented. Bank staff have said elsewhere that in fact what the CA implemented for NT2 went well beyond what was required by the Operational Safeguards. 43 | P a g e IAG Report No 10 support of the GOL’s key development strategy, the harnessing of its hydro power potential for the wellbeing of its people through domestic electrification and export earnings; and that there are similar gains in terms of quality to be had in other similar projects both in Lao PDR and elsewhere. The Bank can also play a role in retaining and diffusing knowledge arising from the projects it supports. “Doing a Dam Better� is an example of what can be done. There is also a need to record the nitty-gritty experience of the “dam builders�, the persons in the developer’s team, the government and the financial contributors that are the ones who know of the practical lessons learned, such as the evolution in the dialog with the PAHs. That evolution over the lifetime of project planning and construction has lead to significant improvement in the relationships with the developer and in the satisfaction of the villagers. The view from the ground up, the view of the practitioners, should be recorded for the benefit of future projects. Conclusion: The World Bank must continue to play an active role in support of energy projects. That role will increasingly be based on a strategic relationship that recognizes mutual interests of the parties. The Bank has a strong interest to ensure the preservation of the high standards of NT2 to demonstrate the benefits of its involvement in the project. The GOL development strategy will also gain much domestic and international support if those standards become the norm for future projects. 9. C on cl us io n : p ro j ec ts , p e op l e an d i ns t i tu t io ns The Nam Theun 2 hydroproject is a commercially viable project built to the highest engineering standards that will return substantial dividends to the people of Lao PDR; the GOL has followed a principled and carefully planned approach to implementing the safeguards required for the environment and people of its region; and the management of NTPC have been thoughtful, participative and flexible in their relations with the affected communities and local officials. These achievements will, however, ultimately be judged on two criteria: the successful adaptation of affected persons to their new, dramatically changed surroundings; and the quality of future hydro projects in Lao PDR, building on the principles which have been successful in NT2. The full effects of NT2 will play out over two or more generations. It is not possible therefore to declare victory on the objective of the improved and sustainable well being of the resettled communities of Nakai or of the established villages in the project’s wider footprint. The Project's wide-ranging developmental activities and participatory approaches have brought new opportunities which many have successfully seized. But these innovations have also given rise to anxieties among those households still unsure about their capacity to tackle the risks present in a rapidly changing situation. The transformation needs time and a continuing enabling environment to minimize emerging disparities. On the basis of progress so far, however, there are already important lessons both for the GOL and for other governments in how to give effect to the principles of the Bank’s safeguards in other major natural resource projects. The World Bank should, as it has done in its recent book “Doing a Dam Better�, continue to draw out the lessons to be learned from NT2 for its future work in Lao PDR and other developing countries. While the IFIs may not have the financial leverage of 20 years ago when NT2 was first being developed as a project, they have a duty to continue to promote, by whatever means possible, the good practice in natural resource development of which NT2 is so far a valuable case study. We hope that the GOL will continue, in its approval of projects to come, the principled approach it took in the development of NT2. This final report from the IAG has taken a different perspective from its predecessors in focusing on the governance and management of the Nam Theun 2 project. In doing so, we hope to have brought a broader perspective to the meaning of sustainability as it is applied to major projects by considering the context of the laws, organisations, customs and communities in which development occurs. The time is long since past, of course, when development agencies like the World Bank saw development as a set of greenfield projects, independent of their political and institutional context. A point made forcefully by the POE is that a major project significantly affects other development opportunities. Those interrelationships require that the project and the wider development have to be planned together. As far as the government is concerned, this in turn implies that the government's capabilities are a very important factor in any major project because all projects exist in a context of government regulation, enforcement and services. 44 | P a g e Nam Theun 2: Handing Over But it also takes a project like NT2 to demonstrate that the significant institutions are not just those of the big stakeholders, like private developers, governments and IFIs. Just as important in the success or failure of the wider development project, of which hydropower construction is a part, are the beliefs, values, traditions and interests of the people directly affected by the project. The lessons to be learned from NT2 range from how a woman in an upland village gains the confidence to borrow money to buy a handloom, to how the people of that village collectively learn to manage their own affairs, to how they represent their interests to government officials and participate as a village in wider projects like community forestry or fishing. Ultimately it is the confidence of the women and men of the villages in adapting to these changes that will be the measure of the success of NT2. 45 | P a g e IAG Report No 10 IV. Annexes 46 | P a g e Nam Theun 2: Handing Over 47 | P a g e IAG Report No 10 1. S us ta in a bi li ty R es ts I n T h e P e o pl e : S o ci o- C ul t ur al Co nc e rn s A report on the IAG’s visits to Lao villages, March-April 2011 1.1 In t r od uc t io n Sustainability exists in many dimensions. Some aspects, such as use of natural resources for energy production, maintenance of public assets like roads or protection of biodiversity in the natural environment, require the support of institutions that governments and civil society provide. Genuine long-term sustainability of livelihoods and communities depends however on the affected villagers. If these community stakeholders value the project-initiated results that have affected their lives, if they have integrated the changes into their everyday activities and welcomed them as their new reality, that is a victory for sustainability. It happens when the affected households and communities feel they “own� the process as stakeholders in it, and want to continue their engagement for the foreseeable future. Events over the past year suggest that the transition from NTPC supervision over project activities to full government takeover offers grounds for optimism. In support of this shift, certain policies and procedures of government and the NTPC need to be highlighted. This report explores the sustainability of new institutions and responsive governance approaches. It explores the likelihood that the changes promoted by the project will in fact continue after the departure of the NTPC. Accordingly, the focus rests on the ways in which affected persons, households and communities perceive and react to the institutional and governance changes initiated by the project. How are these options mediated through people’s ensuing behavior and linked cultural values, their experience and aspirations? Conclusions imply future actions by villagers in striving to face the future with confidence. They also highlight the kinds of supportive policies that can be generated by the Government (GOL), the NTPC, World Bank and other external stakeholders. Most of the issues raised here arise largely from conversations in March and April 2011 with villagers, NTPC and local officials involved in NT2. While the information is place-specific, it nonetheless underlines important socio-cultural lessons that apply more generally to forthcoming hydropower projects in Lao PDR. 1.2 S oc io - Cu l tu ra l D ev e l o pm e n ts i n N T2 Af fe ct e d Ar ea s Affected communities, particularly those on the Plateau, are still struggling to come to terms with their transformed lives and what they foresee for their future. Some Plateau households, still the minority, appear to be moving forward rapidly with confidence and optimism. They represent an important cohort in demonstrating it can be done. The majority continues to focus on growing rice as their way to reach food security. However, they are also cautiously testing a range of new economic activities introduced by the project. The remainder of households represent the vulnerable sector with limited choices. These labor-poor families usually have many small children, elderly or chronically sick members, and lack a male presence. The project continues to give them special assistance through extended rice rations, along with special programs aimed at giving them the boost needed to catch up with the rest of the community. For external entities introducing a range of innovations into traditional communities, it is important to recognize, on the one hand, that villagers differ in their capacity and interest in incorporating new activities into their daily lives; on the other, they embody a common cultural heritage that influences how change is addressed. Hence, whether on the Nakai Plateau, Project Lands and Downstream, affected villagers mediate engineered institutional change with the countervailing force of custom. Meaningful integration is best achieved through participatory processes that meld the internal and external systems. 1.3 P ar ti ci pa t or y P r oc es ses i n G o v er na nc e Sometime in 1996, 6,200 swidden, mainly indigenous, ethnic farmer/forest-gatherers in 17 villages of the Nakai Plateau learned that they would have to leave their current homes to move to resettlement villages. This was necessary because of the impending flooding of their domain upon the construction of the dam and its accompanying 450 sq. km reservoir. Although consultation with affected villagers was built into the project from the start, its earliest version reflected the minimal “Inform� mode then used by NTPC and GOL 48 | P a g e Nam Theun 2: Handing Over personnel. This approach typically convened the villagers, announced to them what the investors and the GOL were planning for them with the advent of the Nam Theun 2 project, and suggested how they were expected to react. Partly in reaction to protests from international NGOs and some academics at the unacceptably limited participation of the affected persons, the World Bank urged a more iterative mode of consultation between the project officials and the resettlers. The subsequently prepared document on Social Development and Community Strengthening laid out an overall plan with strong inputs on community participation. Accordingly an enhanced consultative process emerged in the numerous meetings underway . There villagers gave the planners feedback on the options presented to them. They participated, in the design of their houses, in land allocation, and in discussions of the basic services to be made available, like water, electricity, elementary schools and more. Considerable attention was given to their religious and spiritual beliefs in dealing with the respectful removal and relocation with the compensatory ceremonies of important cultural assets like spirit shrines and Buddhist temples. The importance of the religious dimension surfaced in the people’s decision to reject more fertile land offered them on lower slopes in favor of resettlement on the plateau so as to remain close to their spirit benefactors. Despite these commitments to eliciting the people’s views, always hanging over the stakeholders was the engineering timetable for the dam construction: at some point, residents would have to leave –- to avoid the inundation of their forest terrain. After numerous consultations. most households agreed to relocate to the resettlement sites, with only a very few opting to remain higher up on the slopes. Indeed, once affected families made the decision to leave, they expressed some frustration at transfer delays linked to the construction timetable. Some households at the bottom of the escarpment (Project Lands) would experience parts or all of their land being taken for a regulating pond, diversion channel and related infrastructure. Farther downstream along the Xe Bang Fai, farmers initially estimated at anywhere from 40,000 to 150,000 people, would likewise be affected. They learned that the new fluctuating currents and heights of the river might have serious effects on their livelihoods. Implicated would be their continuing ability to enhance their income through fishing, riverbank gardens during the dry season, and reliance on the annual overflow of the river in the rainy season to reinvigorate the soil. Some NTPC staff believe the driving momentum of the engineering mandate generated enduring dependency among the people in the three affected sites. The time needed to promote informed decisions among villagers was reduced by the inexorable engineering timetable. NTPC and GOL officials engaged in consultative processes had little choice but to step back and accommodate the construction imperative. Ultimately, given the reality of nationally centered decision-making, it was the investors, developers and GOL who took the early decisions reflected in the CA. Socio-cultural and environmental considerations took a back seat. Some milestone points during the construction process did, however, furnish opportunities for aligning engineering and socio-economic timetables more closely. The closing of the diversion tunnel in 2008 offered such an opportunity in that final approval could come only upon the completion of environmental and social requirements specified by the POE. With the completion of construction and the start of dam operations, full attention has shifted to the institutional framework and governance processes needed to sustain livelihoods and villagers’ orientation to change. Perhaps the most deliberate approach to rectifying this timetable and dependency imbalance has been the Participatory Land Use Planning (PLUP) process. Although the aim was to reach joint decisions specifically about village boundaries and related land matters, the process offered a new experience to affected households in their dealings with outside “experts� and officials. Together villagers walked along the outlying portions of the village with project personnel, identifying boundaries and articulating the criteria they had used for determining once amorphous dividing lines. As a process, one World Bank staff member observed, it helped people make sense of their new surroundings. They reached the resulting decisions together in the context of joint learning and mutual respect. The trust built up can be expected to generate a commitment on both sides to affirm and if necessary defend these frontiers. PLUP was designed for a specific purpose – land allocation - and could take place only once other decisions had been made. But it has established a precedent that could well extend in principle to broader purposes in village decision-making, especially where institutions are being re-examined to foster greater compatibility with people’s lives and expectations. PLUP officials actively “walked the talk,� sought the villagers’ views, 49 | P a g e IAG Report No 10 discussed their comments or counter-suggestions with them, all the while showing respect for their indigenous knowledge about land. One should realize, however, that the participatory process does not “just happen.� Project personnel recruited for this venture either already had experience of grassroots interaction, a number of them having come from NGO backgrounds, or received it from NGO trainers. Promoting grassroots participation embodies technical knowledge of its own. Through PLUP and other such emergent village efforts, the impetus for effective interaction between project staff and villagers is at hand, albeit with many fits and starts. Policy underpinnings for participation appear in a wide-ranging 2003 GOL statement on governance issues (Government of Lao PDR (2003): People’s participation is the basis of our system of governance and our democratic approach to decision-making, through which we ensure the most direct involvement of the Lao people in the management of our country, thereby constantly submitting our policies and actions to the opinion of the people and legitimizing our actions, plans and programs. Therefore, our overarching goal in this priority area of the governance reform program is: to ensure that all Lao people are given the opportunity to be associated in all areas of decision-making, that they can fully enjoy their constitutional rights and that they are educated and well-informed so that they can express their opinion on government policy, on how our government is servicing them and participate fully in all areas of cultural, social and economic development. In the Lao context, civil society is represented by the mass organizations, the social and professional organizations, the Buddhist society and other religious organizations, the parents organizations, student organizations, the sports organizations in the villages, youth organizations, etc. No reference is made in the policy paper specifically to NGOs, international or national, but listed are “social and professional organizations�, into which international NGOs working in the country might fall. National or Lao-initiated NGOs are not encouraged. Instead, the mass organizations have the mandate to foster village development activities. The possible intersection between NGOs and the mass organizations could conceivably take place under the rubric of “social organizations.� A section on Challenges elaborates: The emergence of new social and professional organizations will create new dynamics in society. This will provide an impetus for the existing mass organizations to improve their efficiency and adapt to the changing environment. Partnerships between the mass organizations and the new social and professional organizations will require a more open climate for dialogue and participation. Given the need for skilled and experienced organizer-facilitators to foster participatory processes among villagers, civil society social organizations and government might well explore mechanisms for tapping their expertise while connecting with the activities of mass organizations. 1.4 L ev e ls o f P ar t ici pa t i on Assessing the trajectory of participation efforts through the project can benefit from the continuum established by the United Nations Environment Program’s Ladder of Participation: Inform, Consult, Involve, Collaborate, Empower. NTPC together with the Resettlement Management Unit (RMU) and especially the technical staff of Department of Agriculture and Forestry (DAFO), have regularly connected with villagers. The multi- disciplinary teams assist with technological improvements in farming, fishing, animal raising, forestry, cattle, livelihood, crafts and credit programs. Levels of interaction vary by village, by program, and by the personalities of the outside technical person(s). Some of the interaction has shifted from the Inform mode into the Consult stage. Here, according to UNEP, villagers – men and women – voice their reactions to the information received and feel safe from retaliation if in speaking out they contradict the views of the external innovators. As Lao villagers gain confidence and take on some of the new technology, as in planting new rice varieties with the advent of irrigation or borrowing from the Village Development Fund, they reach the Involve point. Still others, like those going through the grievance process over compensation have reached the Involve point. One finds village men 50 | P a g e Nam Theun 2: Handing Over and women discussing, even arguing, with project staff regarding their compensation claims, and eventually negotiating mutually agreed solutions. Different aspects of the project can operate simultaneously at various stages in the participation ladder. Thus, the compensation discussions in Project Lands fall somewhere between the Consult and Collaborate phase. This implies a more egalitarian approach to decision making evident in the active negotiations that took part between the affected villagers and the project staff. Much more difficult to attain is Empower, which envisages villagers initiating, managing and controlling project activities. As the process moves from Inform toward Empower, power relations change toward more shared decision-making. The relation between the State and its people thus comes into play. If villages are regarded as institutions of development in their own right, as the project implies, then there is a contradiction in thinking of them simply as “recipients�, or “clients� or at best “agents� incorporated into the bottom level of a state hierarchy. Queries on how they are faring thus become largely irrelevant because the State decides. If, however, they are viewed as actors with a range of interests and capable of taking initiatives on their own, other concerns come into play: how people in villages make collective decisions, the representativeness and legitimacy of leadership, the contested relationship that the villagers may have with other institutions like government or Party, for example, and how these can be resolved to mutual satisfaction. Differential progress in the project’s reaching more advanced levels of participation stems in part from district and provincial officials’ lack of experience interacting with people as equals, much less deferring to them as more knowledgeable and even capable of taking charge in certain domains. Despite the pioneering 2003 policy paper, participatory planning does not come easily to officials accustomed to traditionally hierarchical decision-making modes. Moreover, some project officers, already in the Consult mode, continue nonetheless, perhaps unwittingly, to nurture dependency. In one poor recently visited downstream community visited, village leaders recounted their contact experience. Project staff had explained the compensation process, then gave people choices as to which kind of returns they preferred – money through the village fund; cattle, clothes, or blankets distributed to households. The consensus was cattle. “If we chose money, it would go to the village fund, but we have no experience in handling that. Cattle are a more secure resource for us.� Recognizing that villagers in this newly contacted community did get a choice, one also notes that to move away from dependency into collaboration, development agents need to provide more information and enhance the villagers’ managerial skills through participatory planning and implementation. Although the ultimate norm of Empower remains a distant goal in most parts of the world, certain examples show that movement along the continuum, which is the criterion to consider, is slowly gaining momentum. Actual points on a ladder scale are perhaps less important than evidence of forward momentum from any earlier point. Evidence of this emerges again in the successful compensation process, where affected villagers have learned to interact as peers with project officers over their individual cases. NTPC staff discuss the issues with them, with outcomes not infrequently resulting in recalculated compensation packages. This interactive process has thus legitimized the right of villagers to engage in a healthy debate with a public figure over their interests, and disagree or contest decisions made by the latter. In reaching mutually acceptable solutions, they are in effect engaging in democratic decision-making. The possibility of initiating a grievance case as well suggests a measure of empowerment. Villagers engaged in the process have appreciated its transparency. They praise the willingness and patience of the project staff in taking the time to explain again and again the rationale and implications of settling claims. Trust in an institutional bureaucracy has thus been generated, an important mark in societal evolution. One Project Lands householder remarked that although his family was not entirely happy with the final decision, since they had not gotten everything they wanted, nonetheless they accepted the outcome “because we saw that the process was fair.� This kind of achievement gives a glimpse into more equitably balanced power relations in the project that are much appreciated by the villagers. How the process will play out once it is taken over by government officials remains to be seen. In terms of interest and eagerness, the strongest advocates of development worldwide are women and youth – women because they are always looking for ways to improve the lives of their families and communities, youth because they hope for a more promising future for themselves than their parents have had. Both are thus motivated to pursue opportunities that arise. 51 | P a g e IAG Report No 10 When women take on leadership positions in the community, worldwide development literature affirms that they generally bring increased honesty to governance along with a corresponding decline in corruption. Likewise notable are their greater attention to social issues and disadvantaged groups, and a more personalized approach to community service. Used to multi-tasking and less actively immersed in the power dynamics of community interaction, women readily learn to handle the multiple and diverse requirements of governance in an efficient manner. Given their long-subordinated status in society, however, they would benefit further from management training and exposure to the broader experience needed for effective leadership. Programs to increase their self-confidence related to operating in the public domain also help. Lao women are no different from their global village sisters in their potential governance orientations. Yet, except for the mandatory Lao Women’s Union member, still rarely are they included in formal decision- making bodies set up to plan and carry out development programs in their villages. Participatory processes will thus be greatly enhanced if Lao women and youth are both represented in formal governance structures in proportions akin to their actual numbers in the community. This genuine representativeness calls for an enabling environment supportive of women as well as youth in leadership positions. 1.5 Go v er na nc e an d Y o u ng e r V il la ge L ea d ers hi p Villagers went through a process in 2010 of choosing their naiban village chief) and other members of the village council, with the results reviewed and approved by higher authorities. In a number of affected villages, younger naiban and deputy naiban appear to have emerged. When asked about this faint but growing trend, the young officials and other present explained that village officials now deal with many complex issues requiring development knowledge and management skills. Moreover, they need the capacity to interact effectively with outsiders. One naiban wished he could get some training in management skills to be able to tackle the current and more complex world of village governance. Young, energetic and leaders with more years of formal education are increasingly seen as better geared toward building village leadership capacities. Whether they are more geared to participatory processes still needs verification. One young naiban interviewed had clearer visions of the future community he would like to bring about than did older, more traditionally oriented naiban or deputy naiban. Yet the latter remain present in the governance structure to provide guidance as council members, like the representative of the Lao Patriotic Front. While the vast majority of village leaders are male, here and there one finds a woman on the village council, chosen in addition to the mandated female representative of the Lao Women’s Union. 1.6 In t e gr a ti ng I nt e rn al ly an d Ex t e rna ll y G e ne ra t e d I ns ti t u t io ns For communities accustomed to operating largely in personalized face-to-face interaction, as in village societies, the ability to trust and engage in new, impersonal institutions marks an important step toward learning, adaptation and sustainability. An excellent example of this appears yet again in the innovative compensation process in Project Lands. In an effort to address a series of emergent problems, project staff in consultation with the affected households created a new banking scheme with multiple aims: to undermine corruption in the compensation payment process, protect the often large sums of money received by compensated households, and increase the efficiency of payment. Traditional practices that hid large amounts of cash under the bedding or in the rafters of their homes posed dangers. All too often, fire or thieves, including a son in one case, claimed the paper money. Moreover, with the cash right there, householders had difficulty resisting loan requests from relatives, friends, or neighbors if they wanted to do so. Accordingly, in consultation with recipients NTPC worked out a system to send the agreed allocations to the RMU, which in turn deposited the appropriate amounts to each recipient’s newly created account in the only bank in the area. Project personnel held numerous sessions with affected householders to explain the rationale and related procedures, and even accompanied many of them to the unfamiliar and intimidating bank office to explain how to deposit and withdraw using their bankbooks. Some account holders withdrew the bulk of their deposits immediately, as anticipated by project personnel since, as they pointed out, it was the household client’s money. To mitigate the expected windfall spending, however, the project issued payments in three installments over a period of time. They knew that inevitably the first tranche would go to a long-coveted consumer item – a cell phone, motorbike, television set or 52 | P a g e Nam Theun 2: Handing Over household appliance. The second and third installments stood a better chance of being withdrawn for investments in farm or house improvements, a small business or other economically productive enterprise. These may have been part of an earlier investment plan worked out between the recipient and the project staff. The latter built on their understanding of people’s spending patterns and were able to sustain the original aims of the scheme by authorizing separate releases over time. Once the depositors got used to being welcomed into the bank as customers to be served, carrying a passbook and saving or withdrawing at will, they came to accept the bank as a useful institution. In this sense, they have moved into the market mainstream and affirmed that people normally hesitant to venture into uncharted territory can learn to do so when carefully and convincingly taught how to operate in the new system. It is to the credit of project personnel and local leaders that they formulated this institutional innovation in ways that people found beneficial and were willing to adopt. The experience augurs well for sustainable development . One is tempted to compare the successful evolution of this banking scheme with other attempted institutional innovations, like the Village Forestry Association or later, Village Fisheries Groups. The last two have proven more difficult to get underway as envisioned. Space does not permit extensive discussion here, so one may simply highlight some points. First, the banking scheme came out of a problem that was already felt in very specific terms by households seeking compensation – threats to money hidden at home. Second, the innovation was extensively discussed with recipients before it was put into place. They confirmed again and again that since the money belonged to the compensation recipients, it was their prerogative to withdraw it anytime they wished. Third, staff helped them to see the banking scheme as an experiment with virtually no risks beyond a trip to town; the risk of keeping the money at home was clearly greater. Fourth, nor was there any complex organizational component requiring village-wide cooperation. These were individual banking transactions between the RMU, the local bank and the account-holders. Fifth, significant also was the added incentive of holding an interest-generating bank book in one’s name and being treated as a dignified customer like the bank’s higher-status patrons. This fostered a commitment to the payment- with-savings scheme, thereby reinforcing its sustainability in their lives. 1.7 Th e V il la ge F or es t ry As so cia t i on Contrast this with the VFA and the fisheries groups, where despite consultations with the villagers, formal structures and associated tasks were set up in keeping with the business model defined by external groups. Villager members were seen as a corporate body with common interests but the framework for their acting together in a unified manner did not come out of problems they identified as needing solution. This became apparent in the case of the Village Forestry Association. Although both men and women report for forest patrol activities, their interest in apprehending marauders is lukewarm at best. Protecting the forest this way does not appear to fit with their own notions as to how that should done, nor whether it is as necessary as they are told. The fishery group case was different in that large-scale reservoir fishing was a new experience for the Nakai villagers with no traditionally established parameters. This would have been an ideal subject for participatory planning to create the kind of institutional arrangements that would have catered to both social and legal-environmental concerns. Indeed, from the villagers’ perspectives, “the problem� in forestry had been created by the government even before the Project, in turning their former resource bank into a restricted zone. In the traditional perspective, long before open watersheds became Protected Areas, economic security stemmed from a division of labor that saw both men and women engaging in swidden farming , rotating through the forest every few years to a new and more fertile site. Men carried out hunting and small-scale logging, while women gathered NTFPs and cared for the children and the household. This long-established mindset was challenged by the new concept of the forest, in which access to the remaining resources now brought a threat of punishment from the authorities. Moreover, villagers were expected to apprehend marauding outsiders and even their own kin and neighbors if they found them “trespassing.� For some resettled families, the boundaries drawn by outside authorities in creating the VFA did not conform to their traditional understandings of land use rights and responsibilities. Despite the financial incentive of dividend payments from authorized forestry activities, the artificial social networks created in support of an externally generated VFA have not worked well. The motivation to act 53 | P a g e IAG Report No 10 does not emerge from the villagers’ own ways of formulating the problem or its solutions. As one woman member asserted, “If they don’t pay me, I won’t go on patrol.� Her primary responsibility lay in supporting her family, not to the forest as a whole. These are some of the discontinuities that arise when customary use of resources is suddenly altered by new formal institutions. The modern paradigm symbolized by the VFA and encompassing the entire nation’s well-being in a time of rapid change comes into conflict with traditional prerogatives that have sustained villagers for centuries. In considering the moral codes underpinning people’s values and their concepts of rights, the role of religious institutions among villagers must also be raised. Forest residence and protection have traditionally been an important prerogative of the spirit world. People using the forest were expected to nurture, respect and propitiate them. Abuse of the forest environment might well bring out the ire of affected spirits with dire consequences for the abuser. Add to this Buddhist concepts of the man-nature relationship and one begins to understand the settlers’ insistence that the project incorporate the well-being of the forest spirits into the resettlement process One wonders, therefore, where the spirit domain so deeply ingrained in the villagers moral codes figures in relation to the VFA’s abstract and impersonal notions of community ownership and responsibility for a vast forest terrain. How is this paper institution compatible with deeply ingrained animist and Buddhist traditions concerning spirit responsibility for the forest and how human beings respond? At the same time, forest degradation is real, as is the tragedy of the commons. What can be done? One approach would be intensive community organizing and learning carried out by NGOs composed primarily of Lao facilitators with environmental and socio-cultural organizing experience in villages. Such an organizer- facilitator would help villagers redefine forest protection issues in terms of their socio-economic interests and cultural heritage. Next would come the identification of feasible alternatives plus the actions needed – who would take them, when and how. The planned activities would then take place, followed by collective assessments of gains, losses and next steps to take. The same principles would apply to the formation of Village Fisheries Groups, water user groups, savings associations or other attempts at setting up institutions to serve village needs . 1.8 Il le ga l L o g g in g Linked to the concept of the forest as intrinsic to their lives is the subject of illegal logging. The situation should be understood in the broader context of multi-faceted issues and resulting trade-offs. With the decline of male income opportunities through construction and the once abundant fish supply, men have once again turned to the forest as their primary resource base. Legions of men are emerging from the undergrowth with log sections strapped to their motorbikes, presumably for sale or limited household use. The operation is openly carried but seemingly ignored by the authorities. Yet local residents are not patrolling the forests and apprehending illegal loggers. “Why not?� ask the project staff. Informal conversations with villagers on this clearly sensitive topic, suggest the hypothesis that former forest dwellers still living on the edge of the forest do not consider harvesting a few small logs at a time “illegal.� Doing so had been a lifelong activity among forest dwellers until the government declared the forest a protected area now inaccessible to men’s traditional pursuits there. Men, who formerly gathered logs or sections of them for household use, sale or both, could no longer do so under threat of punishment. Apprehending one’s neighbors and turning them over to the authorities for doing what they have always done is presumably seen as inappropriate, especially if the men in question have few other alternatives for generating income. There are clearly growing economic incentives to do so, given the rising demand for wood and shrinking supply from other forests. The recent closure by the provincial government of sawmills and furniture shops in the area for failure to ascertain whether they were buying illegal logs, further exacerbates the employment problem for the men who once worked there. On the other hand, cutting down extended stands of primary or secondary growth timber on an industrial scale of extensive chain-saw operations and trucking full-length logs off for sale or use elsewhere probably does fall into the category of “illegal� in people’s minds. However, any attempt to catch the perpetrators, often said to be Chinese or Vietnamese perpetrators, would be fraught with danger. They might well be linked to powerful syndicates or political figures with retaliatory powers. It would thus be important to 54 | P a g e Nam Theun 2: Handing Over ascertain whether this legal-illegal distinction exists in people’s minds and what punitive efforts, if any, they attribute to it. Do they distinguish between small-scale logging efforts which affirm traditional livelihoods or at best petty thievery and not merit punishment, in contrast to the large-scale chain-saw commercial ventures? Or are there intermediate variations in which men receive payments for assisting industrial logging. If so, the application of sanctions across the board might well be re-examined in terms of what village forestry association members feel is culturally appropriate behavior and what not. Variations on the practice can be discussed with villagers to assess where the line is crossed. When asked whether traditional beliefs still apply that spirits residing in the forest protect it, one Lao official wryly observed, “Now even the spirits are afraid of the chain saw!� A basic concern which project personnel need to consider then is how settlers set their moral compass in regard to forest-based activities that were once valid components of their livelihood and food security (even if some traditional activities in the forests of the plateau are now sadly diminished) but are now somewhat suddenly dubbed “illegal.� In effect, this process of “illegalizing livelihoods.� as anthropologist James Chamberlain has put it condemns a way of life that had sustained people for decades if not centuries. This shift, done at the expense of forest dwellers as they see it, also applies to the crackdown on small-scale logging, to cattle and buffaloes foraging freely in the forest, and to cultivating swidden farm plots. While the environmental consequences of excessive forest use certainly merit serious consideration, from the human point of view the appropriate balance can only happen when people who once depended on the forest find other means of livelihood to which they can accommodate comfortably with a sense of control over the process. Apparently, a long growing period for cultivating unfamiliar cash crops with uncertain market outcomes does not fulfill the criterion for a suitable livelihood. 1.9 Bu il di n g Tr us t Of some interest are the “promises� allegedly made by project personnel and raised several times by indignant villagers, the complaint being either that these were unfulfilled commitments or only partially carried out. Project personnel insist that they did not make the promises identified by the community. At best they may have mentioned them as prospects to be studied. Apparently, however, the listeners interpreted their tentativeness as a commitment or an increasing sense of claim-making. This may stem from miscommunication or poor translations where a non-Lao language was used. Or it may reflect the people’s heightened eagerness to have the item, so much so that they ignored the nuances in the conversation and heard what they wanted to hear Possibly also “adaptive management� meant that project staff were systematically revising previous commitments to find something that would achieve the same purpose more effectively. In any case, villagers cited as examples food subsidies “promised� for certain time periods but later reduced to accommodate only the most vulnerable. Included in the “promises� were tractors and rice mills which either did not materialize at all or sometimes only in part. Eliciting a lively discussion in one village was the “promise� to construct a wat or temple. Villagers pointed out how important it was for them to have a temple in the village as then the monks would be more likely to come and live in the community. This would restore the people’s sense of imbalance at the lack of Buddhist monks to minister to their daily spiritual needs. Women particularly remarked how the temple was normally the place where they would go after working in the fields to rest and pray. They recounted how project personnel took many pictures of their old temple but still there was no sign of a new one. “Maybe,� quipped one man to much laughter, “They think the pictures are as good as the real wat!� One may assess this clamor for a village wat as an expression of the community’s support for local institutions that respond to their needs and in which they themselves play important roles as worshippers. Another case of “unmet promises� surfaced in Project Lands. Farmers bewailed the apparent reluctance of the project to set up an irrigation system, since NTIPC had been persuaded during the construction to install the outlets in the downstream channel infrastructure. Doing so raised expectations that irrigation was on the Project horizon. How frustrating, they lamented, to see massive amounts of water flowing by every day yet not be able to draw on any of it for their nearby farms. Again the naiban and others insisted that project personnel had promised; the program officer countered this by pointing out that NTPC had not promised to construct the additional irrigation system but only to 55 | P a g e IAG Report No 10 explore the possibility with the district and provincial governments. As the latter would be responsible for the costs, since the scheme had not been included in the CA, NTPC could not carry the matter further on its own. It was in the provincial government’s hands. Some way of clarifying to villagers what is confirmed, what is only a possibility, and what is not in the offing is necessary for building trust. 1.1 0 W o me n a n d Y o u t h a s P ri ma ry A g en ts of De v el o pm e n t a nd S us ta in a bi li ty 1.1 0.1 W o me n Because women manage their households, feed and nurture the children and engage in community networks with other women striving toward better lives for their families, they demonstrate the strongest drive to make changes toward that end. Little wonder that in the institutional area of micro-enterprise and credit, women’s performance has been outstanding. In order to fashion institutions and governance in support of women’s talent and drive, project and GOL personnel would do well to understand what they have already accomplished, what their aspirations are, and what this means for the formation of responsive institutions. There is no question that equity for women in all three sites has greatly enhanced their roles in society. This appears in community meetings now regularly attended by women, in addition to the mandated representative of the Lao Women’s Union. Women are thus about as well-informed as men on issues like land allocation, livelihood, cattle or buffalo management policies, and fishing regulations. In matters of credit and crafts, women are often better informed than men, since the former are the users of women’s credit funds and with their husbands, village development funds. Where women seem hesitant to speak up, project staff often arrange separate women-only consultations to help them overcome inhibitions arising in mixed- gender settings. Women’s names appear alongside their husband’s on the titles of newly acquired land. They constitute the dominant part of the labor force engaged in agriculture, while the men go fishing or to the forest. In the new reservoir fishing environment, men command the boats and nets, but women and older children often go along to assist. Many comment that they know how to run the boat, even if their husband will not let them. The domain of selling fish belongs nearly exclusively to women. A number have learned how to make padek, a favorite fish sauce largely for family use but sometimes for sale. They extol the new benefits gained in selling fish and acquiring ready cash. Trading also extends to peddling clothing, setting up grocery stores or small roadside stands, and marketing produce from the land, like vegetables or surplus rice in some of the now irrigated downstream areas. One energetic and affluent woman grocery owner reported she had bought a rice mill with money borrowed from the village fund. Another told us proudly as a measure of their modernization, “We even have a beauty salon in our village now!� Nakai settlements are virtually deserted in the daytime, except for children, older persons, and domesticated animals. The men are in the forest or fishing, while the women attend to their plots or forage for non-timber forest products in the nearby wooded area. These forays yield bamboo shoots, mushrooms, edible or medicinal plants, frogs, insects, and tree branches for charcoal-making. The women complain that the forest resources are scarcer than before and that they now have to spend more time searching deeper in the forest. In that sense they are well aware of the environmental degradation underway. A good community organizer would seize upon this breakthrough and build on it as a subject for group discussion and action. Cr edit a nd sa vi ngs The availability of money for loans to women is noteworthy and many have taken advantage of this opportunity to improve their house and invest in land or other assets for business. They are also learning the importance of saving. So long as they trust the women managers of local savings associations and receive good interest on their savings deposits, they feel comfortable about both depositing and taking out loans. However, many women, especially the poorer among them, remain hesitant to engage in credit activities, fearful that they will not be able to repay the loan and not sure what dire consequences this might bring upon them. Not only would default be shameful, despite the willingness of village credit institutions to 56 | P a g e Nam Theun 2: Handing Over restructure loans; it could place them in the situation widely disseminated by word-of-mouth of the three women and four men already jailed several months in Oudomsouk allegedly for fraudulently mismanaging credit association finances. It is widely known that the accused continue to languish in jail with no apparent date set for their trial or release. (We could not get the official version of this story but it was held with conviction by the villagers we spoke to). From the project staff point of view the punishment was entirely justified as they believed these association leaders had manipulated the funds to serve their own interests. The community rumor mill, however, interprets the situation differently. While the offending parties clearly faltered in their managerial responsibilities, commentators did not believe the jailed group stole the money outright. The explanation rather is that they lent credit association funds to their friends and relatives, who assumed they could get away with not having to repay even the interest, let alone the principal. Since preferential lending to relatives and friends in the informal sphere falls within community values, the loans were not condemned outright. Opinions on the case were ambivalent in that it was after all the members’ funds entrusted to the managers. The organization now ran the risk that no villagers would ever want to do business with it again. Moreover, this reluctance might extend by default to other even well-managed financial associations. As several community members saw it, the erring managers had run afoul of a formal system that gave them no leeway to make amends and had them arrested with no quarter given. While some form of chastisement was appropriate, condemning them to the shame of an extended jail stay, with severe consequences for their household survival, was viewed by community women as too severe a punishment. For potential borrowers unaccustomed to investing loan funds in economic ventures or to accessing other financial sources to pay back, institutional borrowing with its perceived stringent repayment rules appears risky. As one woman remarked, “I’d rather go to the forest and search for food or other resources that bring income than get a loan I may not be able to repay. What will happen to me then – jail?� Whether these perceptions are justified is not really the point so much as the realization that if something is believed to be true, then it is a social fact and believers respond to it as real. The Oudomsouk case has frightened many Plateau women from taking loans. Against this, the statistics show that borrowing from VIRFs continues to grow, much of it in loans to women, so that these attitudes can change with experience. Cr af ts - w ea vi ng Women have traditionally woven cloth, baskets and other items largely for household use. The resulting items may have sale prospects but the weaving process is at least as important as the product. Women in a downstream site extolled the new irrigation system as generating additional rice for family consumption, even enabling some households to sell surplus rice for the first time ever. At the same time they lamented having to give up much of the time they formerly allocated to weaving in order to cultivate the second rice crop and interim vegetable plots made possible through irrigation. A number reported being exhausted at this no-respite regime, even as they appreciate the increased household earnings. Before irrigation, they would often get together with other women in a kind of social gathering around weaving in the afternoon or evening. Talking, laughter and relaxation helped them forget temporarily the day’s backbreaking work on the farm. s Social interaction tempered the soothing monotony of sliding the spindle back and forth hundreds of times as the cloth took shape following the designs they proudly created.. That chance to refresh one’s life was virtually gone now. Women were having to work harder and longer in cultivating the expanded plots. At the same time, the nostalgia for the weaving circle appears short-lived, given the fascination of watching television programs every evening on newly purchased sets. There are trade-offs. The issue of time and labor has impinged significantly into the new lifestyles brought by added incomes and benefits. In one village listed by the project as developed, woman weavers recounted how NTPC brought in a weaving program reminiscent of centuries old Lao crafts. It guaranteed better incomes for women by encouraging them to produce high-quality, high-priced cloth especially for the tourist market. Ironically, women weavers who were telling the story called the simpler weaving scheme they were engaged in “traditional,� since it is what they had been doing regularly for years. They buy ready-made thread from 57 | P a g e IAG Report No 10 nearby Thai sources, design the product, and wove it. One meter of cloth brings about 6000 kip, which she may decide to keep or sell to the traders who come by regularly. The NTPC proposal, however, sought a return to the centuries old system that started with women raising the cotton, picking it, removing the seeds from the bolls with a simple and laborious manual gin, spinning the resulting fluff into thread, dyeing the thread in the liquid drawn from indigo bark collected in the forest and boiled to extract the indigo dye, drying the thread and, finally, weaving the dark blue strands into the finished single-color cloth. The organic nature of the process and the agreeably distinct aroma the cloth exuded guaranteed a price of at least 60,000 kip, ten times the “traditional� piece. The weavers reported they had listened respectfully to the NTPC specialist and gone through the training process. No sooner had the specialist left the village, however, than with the exception of only two or three adopting households, the rest immediately returned to their “traditional� scheme. The reasons, they said, were that the NTPC process took too much time and involved too much work. While they recognized the higher price it posed, they doubted that except for a rare foreign tourist, they would be able to sell the organic piece easily. Nor would they likely use it themselves except on very special occasions. The cloth they were producing now in much simpler and less time-consuming fashion meant it could be used for the family or sold fairly easily to their neighbors or traders. Thus, the onerous process of producing the organic cloth could be avoided, while the pleasant part of actual weaving and socializing with others remained intact. Evidently, the affected households’ increased immersion in the market economy through the project’s developmental activities has raised for women important issues of work effort and time. Any institutions developed, therefore, to enhance the involvement of women in community life would have to recognize the trade-offs between additional earning and work involvement. Fostering women’s leadership in formal institutions call for alternatives that would allow continuing attention to the traditional activities women care about – child care, household management, immersion in kin and informal community circles, livelihood tasks – while simultaneously folding in their potential institutional or governance participation. There has to be some give somewhere in their traditionally heavy tasks. The day-care centers are a good starting point. Other similarly women-friendly support systems could be devised to draw women comfortably into institutional participation and governance. Fa mi ly a nd househol d ma na gement In addition to the challenges and new learning getting underway for many women, especially those in the Plateau, the basic commitment to home and family duties endures. Yet, the context has changed dramatically. She likely now has a large house, abundant clean water, a sanitary toilet, electricity, probably a television set, and may get around on a motorbike if she is one of the lucky ones. The health center is nearby for treatment of sick children, nutrition training and family planning services. Many of her children go to elementary and high school, while she leaves her infants and toddlers at the day-care center, enabling her to carry out added tasks for an entire morning or afternoon. While she may herself be illiterate, she encourages her older children’s learning to read project documents and village notices, fill out application forms and decipher signs when they travel. This implies a role switch in that her children know more than she does about coping with new technologies in the village and interacting with people in the outside world. Her self-confidence has grown through learning how to build roofs, run boats, sell fish, raise pigs and goats, start a small business, save and borrow money. One successful woman storekeeper with a newly decorated house explained her new sense of liberation: “Before when my husband was alive, I never went anywhere. Since his death I can go to different places and see things. Before I had no time for myself, I worked all the time, tended the cows, worked the field, and took care of the family. Now I run my store, my son and niece live with me, and I pay someone to farm my plot!� As for older women (and men) the dilemma of everyday survival is even greater as they rely on their adult children to deal with the new environment and provide for them, even as they continue working on the farm and performing household duties to the extent their health permits. The same applies to disabled members, who try to work and contribute to the household but have virtually no rehabilitation training options open to them. 58 | P a g e Nam Theun 2: Handing Over Befor e and now While the resettlement village offers an easier life physically when compared to the previous one, it also creates a more tension-ridden situation for a woman. Her perpetual fear prevails – that she will not have enough rice to feed the family for the entire year. Yet she does not command the knowledge, technology or resources necessary to offset the shortage of rice as she once did in her swidden environment. The vegetable cash crops promoted by project staff represent too uncertain a livelihood venture. What she knows best is how to grow rice, but the 0.6 hectare plot allocated to her household is too small and often of poor quality soil with insufficient water to guarantee the anticipated level of security. The prospect of irrigation gives room for optimism but before the women render a judgment, they want evidence that it will actually work. In their former village, the rice supply almost never lasted until the next harvest either. But in its place families could grow supplementary food crops like corn, sweet potatoes and other root crops. Then there was the forest which they could rely on as their resource base for edible leaves and insects, bamboo shoots, bananas and other fruit, frogs, river fish, as well as medicinal plants and an occasional small animal or bird to sell to local traders. Thus, although swidden farming demanded considerable physical effort from the entire household, when coupled with forest resources it did afford them a reasonably predictable and secure life. Although virtually no settlers would return to it after their exposure to modern living, nonetheless, the commitment to resettlement living provokes anxieties for many. This stems from their perceived lack of control over their future as they face the new and unfamiliar market economy. New and existing institutions and governance mechanisms need to cater quite specifically to the needs, capabilities, priorities and aspirations of village women, recognizing their differential strengths and helping them overcome perceived shortfalls. 1.1 1 Yo u th : Ch il d re n, Ad ol es ce n ts a n d Yo u n g A d ul ts 1.1 1.1 Ad ol es c en ts a n d y ou ng a d ul t s It is the Nakai youth who see the greatest advantages in the shift to resettlement villages. One informant recalled how when as forest dwellers they were first informed of the impending flood, the community was split on whether to go or stay. Youth and young adults generally argued in favor of moving, while many of the older adults remained reluctant or uncertain. Project personnel took the youth aside, urging them to advocate to their parents and grandparents the desirability of moving into mainstream society in the new settlements. At one point the naiban got so annoyed at the arguments within his community that he announced that only those who favored resettlement should come to the meeting next time. Then they could at least discuss future resettlement benefits calmly and resolve some of the problems at hand. In the end, the community moved. While nostalgia for their old life occasionally surfaces, as in memories of fishing and bathing in the river, catching frogs for supper easily and simply being together in a close-knit community, adolescent youth and children appeared more than comfortable with their new setting. Many go to school and ride motorbikes to get there. They no longer have to hike long distances through the forest to get water or spend the entire day in the highlands tending to buffaloes They enjoy watching TV, learning modern songs and dances and for a girl here and there, wearing make-up. They still work on the farm or go fishing but the kind of effort entailed is far from the arduous daily regime they formerly maintained, usually without schooling. One enterprising young daughter of a woman storekeeper and her ex-naiban husband managed her own mini- business after school preparing flavored crushed ice aided by a small electric ice crusher. Children in the neighborhood appeared to be her best customers, while the initial capital came from her proud parents. Clearly, these youngsters consider the settlement their home and the setting for their future lives. When high school girls discussed their future, their ambitions included studying to be a doctor, nurse or teacher and returning to the community. The boys listed a government job and becoming a policeman or truck driver. To paraphrase the interjection of one bystander woman who, listening to the interview and overhearing one adolescent girl’s wish to serve the village as a doctor or nurse, interjected, “That would be good – to have our own young people get the special training to run the health clinic! The ones here now do not understand our ways and get impatient with us. If they were from this village, they would better understand and serve us properly!� 59 | P a g e IAG Report No 10 The young people are hopeful of a better future and while their parents generally support the vision of their going on to tertiary level after high school, realism soon kicks in. Most young people know their parents cannot afford higher education for them. Although some scholarships are available through the district government, they doubt that they have the competitive edge or influence to get one. It would also require endorsements from the naiban and teachers as well as district and provincial officials in a laborious application process. Most parents have never even thought of the possibility. As for young male adults, they received windfall employment and construction knowledge during the setting up of resettlement villages. Many learned how to do forest logging with high-tech equipment, gained carpentry, plumbing and truck-driving skills, or simply contributed their labor to these activities. They valued having money in their pockets and contributing it to the family. But the job boom was short-lived. Once the resettlement sites were constructed, young adults reverted to farming, fishing and forestry. Some have left the village in search of work. 1.1 1.2 C hi ld r en Young children no longer have the memory of their former village except through stories told by their parents and grandparents. The very young can attend the day-care center, while older children walk to the local elementary school. Adolescents have farther to go, since the high school is usually located at some distance in the nearest town. For those whose families do not have vehicles or motorbikes, walking long distances along the traffic-heavy highway remains the only option. This is a dangerous prospect that deters many parents from sending their teenagers, especially girls, to get a high school education. Several parents wanted the project or the government to construct a high school in or closer to their village. 1.1 2 Th e fu t u re On the Plateau the transformation required to ensure sustainability of household wellbeing over the next decades will happen markedly in young people. The project has not yet, it appears, focused specific programs on them to jumpstart their integration into the mainstream economy. They are managing to do that on their own but with relatively little formal encouragement. Yet it is they who have left their former forest-farm lives both physically and emotionally. It is they who have the greatest stake in today’s resettlement environment and commercial economy. As with women, youth and young adults constitute the steady driving forces for adaptation. Internal and external institutions and governance mechanisms that recognize this and place them more systematically in leadership positions will go far toward inculcating sustainability into the process. 1.1 2.1 R es po ns iv e Ins t i t u ti on s an d G o ve r na nc e f or S us ta in a bl e L iv el i ho o ds a n d W e l l -B e in g Tra nsf or ma tiv e vers us I nc r ementa l D ev el opment It is important to recognize the dramatic differences in the situations of the resettled swidden farmer-forest foragers on the Nakai Plateau, on the one hand, and the lowland peasant rice farmers of Project Lands and Downstream, on the other. Each of the two sets assesses its options today in the larger context of their lives before and after the project; but their contexts differ enormously. For Nakai resettlers an almost total transformation is implied in the shift from a reasonably secure subsistence-oriented forest-dependent slash- and-burn economy into an unfamiliar cash-based agricultural market economy over which they have little control. Because that realization generates considerable anxiety and insecurity about their future, finding an effective way to set up villager-friendly institutions supported by appropriate governance processes will go a long way toward calming their fears and encouraging them to buy into the system. Tra nsf or ma tiv e D ev el opment: Na ka i P la tea u Settl ers Settlers recognize the trade-offs between their former life and today. They extol the benefits of settlement living – water, electricity, housing, roads, health, education, television, refrigerators and more. What gives many of them pause is the pressure from the project to use their 0.66 hectare plots for cash crops rather than to grow their preferred crop, rice. At the same time, there are households that do not cultivate their land at all, why? Perhaps they are the marginal ones with limited labor to tackle the job. The situation bears 60 | P a g e Nam Theun 2: Handing Over further investigation. For some, confronting an entirely new way of life based on a commercial and money economy appears daunting. Although they have the comfort of being close to former neighbors who resettled as an intact village group, few of these can help them with the new technology and understanding required to handle the modern economy successfully. Thus, unsure of how to manage food security concerns in a qualitatively transformed economic environment, many settlers remain uneasy about their uncertain future. Nowhere is this anxiety more pronounced than in the issue of rice. Ri ce a s the bas is for hous ehol d food s ec ur i ty The cultural ideal favors the safety of having enough rice for household consumption the entire year – from harvest to harvest. Rice and the land on which it is grown are the criteria for food and family security. As already discussed above, even though the settlers’ former swidden plots did not produce enough rice to cover their annual need, they had the indigenous knowledge necessary to make up the difference through supplementary activities that tided them over. They would plant tubers and other crops while drawing on their reliable resource bank, the forest. There was a balance in nature that they understood and knew how to manage. Access to modern living was outside their experience then and thus not missed. Project personnel try to convince them to raise vegetables and other high-value cash crops and with the profits, buy rice. But from the household perspective, the risks are too high. Anything can happen: these unfamiliar crops may not flourish, there may be a glut on the market at harvest time, or traders may take advantage of their market illiteracy. Then they will be stranded with neither money nor rice. How can we survive just eating vegetables they ask, which is what we would have to do if we can’t sell them! This is the logic that dominates their thinking. It sometimes appears that people’s values generated through time and experience are being suppressed to get them to accommodate too quickly to “modern� values espoused by outside “experts,� who may in fact be wrong in their assessments of what is needed. In their actions, villagers are implicitly pointing to the wisdom and reliability of their indigenous knowledge, cultural behavior and values imbedded in a holistic framework. Now immersed in the ebb and flow of modern living in the settlements, they affirm that they would not return to their former lives even if that option were possible. Some say they have occasionally visited relatives and friends still living on the slopes above the reservoir and even stopped nostalgically by their former sites. But one prosperous woman listening to these expressions of nostalgia scoffed, “Me? I would not go back there even to visit! I like it here!� The better off families who have integrated into the new economy feel a greater sense of mastery and optimism about their future. Their trucks, cars, motorbikes, satellite dishes, television sets, refrigerators, business enterprises and more all attest to their material success. Most of their children go to school. They have not relied on the 0.66 hectare plots to further their life chances but have gone into entrepreneurial activities as well, occasionally based on successful smaller ventures even before they arrived at the resettlement site. Whether their income comes from selling logs clandestinely harvested from the forest or from multiplying their fishing gains, they feel secure in the potential profits of a market economy they feel they can handle. Some ascribe their success to earlier exposure to the outside world, having been in the military, or a construction worker elsewhere in the country. Others belong to the ethnic group that has traditionally traveled around the country more than the rest and observed the lessons of development. These success- story or active adopters have seen how the cash economy works and can more easily find ways of getting into it. Even they, however, express concern at the prospect of NTPC’s leaving in 2014, fearing for example that electricity currently being provided free will become a paying proposition, along with the curtailment of other project benefits. Many other households, however, lack confidence about their ability to make it in the new economic environment. For these cautious adopters, the ideal world entails access to fertile land for the cultivation of rice. One commented, “It’s only from land and forest gathering that we know how to make a living.� Another added, “We used to grow rice. Rice growing and animal raising brought us enough to eat. Now we have only enough land to grow vegetables!� From another village, “We don’t really know business or trading. We only 61 | P a g e IAG Report No 10 know how to grow rice. There are not enough fish to sustain us or sufficient grazing land for even two to three buffaloes. The issue is to generate livelihood based on something we know.� Little wonder then that when in some settlements, officials informed the community a year or more ago as part of PLUP II that degraded land adjacent to their village had been reclassified from forest to agriculture uses and would soon be allocated to village residents for farming, the news boosted people’s morale enormously. If they gained access to one of those plots, they remarked, the goal of food security through rice might well be achieved. Moreover, those plots already allocated to settlers that were in fact lying idle and uncultivated should, some said, be re-allocated to those with greater need for additional land. Ironically, those same fields along the roadside are now charred, the product of typical slash-and-burn clearance in preparation for planting. After waiting fruitlessly for months to hear from district officials how this land would be subdivided into cultivable plots and which households would receive which plots, the eager tenants gave up waiting. In one village, the story circulated as to how their current 0.66 plots were allocated on the basis of a diagram with squares and numbers presented to them. Prospective settlers were told to select a number, with the plot sight unseen, and that became the basis for the land allocation. Given the slowness in land allocation, some residents simply invaded the area without explicit permission from the authorities and began to cultivate it quietly. With the rainy season about to start, getting the new land allocated takes high priority. People expressed anxiety at government delays which would negate the harvest. District and company officials appear to be condoning these stealthy “illegal� invasions in the wake of slow bureaucratic procedures since the land has already been designated for those villagers anyway. “People are deciding with their feet,� remarked a project officer. The prospect of irrigation generates cautious optimism. But again, villagers ask how many and whose plots will be reached. Beyond that some want to learn how to increase rice crop yields through improved technology. One woman told us she has just heard from a fellow farmer that turning the soil through plowing on irrigated plots significantly increased rice production. This method contrasted with her traditional upland swidden hoe culture in which she would poke a hole in the ground with her digging stick, drop rice seeds into it, cover he opening with soil, water it, weed now and then, and let nature do the rest . She expressed an interest in learning the new plow technology for growing rice as she felt she could master it for increased production, having heard that others like her had done so. What she did not realize, however, was that unlike the fertile soil of a new swidden plot, the thin soil of the Plateau made plow technology environmentally destructive. Although one could occasionally see hand tractors in the villages, they had not been supplied by the Project in order to protect the already fragile soils. This message would certainly be communicated by the project technical staff to the innovative woman rice farmer. The example illustrates, however, the communicative power of farmer-to-farmer messages. Another woman enthusiastic about her flourishing vegetable garden described excitedly how she would next acquire a multihole sprayer that when attached to a hose with a motor pumping water from the river, could water many plants simultaneously. Clearly, people will adopt new technologies if they are seen to be effective, reducing time and energy requirements as well. Downstream villages likewise view rice as their prime measure of household food security. The naiban of a “developed� village boasted with pride that with two irrigated rice-growing cycles producing more than the households’ annual rice consumption needs, his village can actually sell surplus rice. The loss of the riverbank gardens, for which they did not feel adequately compensated, has therefore in their view been offset by the double rice crop supplemented with cash crops planted between rice cycles. This case suggests that once rice self-sufficiency is achieved and household food security guaranteed, commercial rice transactions and cash cropping become attractive. Project personnel would do well to recognize the validity of indigenous knowledge that has long enabled people to assure insofar as possible their livelihood. Much of it still applies in the new setting and people will stick to that approach for security’s sake. Yet, there are always those active adopters who are more willing to take risks, especially because they interpret the resettlement package as support schemes to be utilized. Other more cautious adopters, however, will take a “wait and see� attitude until they are reasonably satisfied from actual examples that they can accommodate similar risks. The remainder, or marginal adopters, require support that goes beyond technological innovation to include basic welfare assistance. 62 | P a g e Nam Theun 2: Handing Over In line with empowerment aims, people in the midst of rapid change handle it best when they have the time to assess pros and cons in the context of their own household capabilities, community outlooks, and what external development agents have to offer. In effect, they are setting up frameworks that work for them. Mistakes and successes form part of the learning process that leads to confidence and sustainability. Low la nd Fa rmers : P roj ec t La nds and D owns tr ea m While the construction and operation of the project brought changes to lowland farm households, these did not require a wholesale transformation in their lives. Rather, they experienced incremental losses or gains in the livelihood they already had in the incipient market-oriented agricultural economy. These villagers were much more exposed to outside influences – the commercial world, officialdom and formal institutions . Those farm households living near the roads and rivers especially already had frequent dealings with traders and government officials. It was a familiar world which they had long adapted to, well or badly. Thus, while a few Project Land farmers had to move to make room for the project infrastructure, they were far less affected than their Nakai Plateau project counterparts. Their basic ways of life did not change dramatically . Those who lost over 10% of their property were eligible for the livelihood restoration program through land swaps or money to purchase land. Those who lost a part of their property but did not have to move likewise received financial compensation. Gains or losses were incremental, not transformational. The same is true for Downstream farmers. Although several lost the opportunity to cultivate riverbank gardens during the dry season or fish in the Xe Bang Fai, compensation and development benefits like irrigation, women’s crafts and credit programs, potable water and sanitation, river fish monitoring and fishponds enabled them to recoup their losses and invest in other livelihood possibilities to enjoy a more comfortable lifestyle. Their basic way of life was not disrupted. They were rice farmers then and rice farmers now, but often with higher production levels than before supplemented by cash crops. The double-crop rice production accompanying the new irrigation systems brought notable economic gains. The women may have felt added work pressures from the double-season cycle but valued the added income it brought the household. Although affected by the project, many lowland farmers’ lives have gradually improved; if they worsened because of the project, they could expect compensation. The challenge posed to the project was to enable the affected people to operate even better by earning more in an already familiar cash economy. Downstream farmers should thus be better able to sustain project innovations beyond 2014 because these build on what they already know. That is a far cry from the dilemmas experienced by the Nakai Resettlers. It is therefore justifiable that the bulk of the project’s attention has gone to the s latter group, whose lives have been almost completely transformed by the project. That makes the crafting of institutions and governance mechanisms differentially supportive of the types of affected households even more crucial for sustainability. 1.1 3 S u mm ary a n d I m pl ic at io ns Nakai Plateau resettlers face the challenges of a transformative mode in their new settlements. That calls for a dramatic reorientation of their lives in the shift from a fairly isolated subsistence life to a developing market economy setting. This transformational development on the Plateau implies different strategies from the incremental development applied to lowland villages. Affected households, especially those on the Nakai Plateau, fall into a range of adopters responding to project innovations. Some increasingly prosperous families are moving rapidly into the new market economy, while at the other extreme are vulnerable labour-poor households who need continuing special assistance for the foreseeable future. Those settlers falling in between concentrate primarily on rice cultivation to establish their food security while cautiously exploring and testing new alternatives promoted by the project. Project personnel have tried to wean settlers from their priority to rice growing, advocating instead a shift to cash crops from whose profits rice can be bought. Many settlers continue to resist that pressure, defending their concept of food security first through growing rice. 63 | P a g e IAG Report No 10 Implications Target programs more specifically to the three different adopter levels among settler families in Nakai – active, cautious or marginal. Also recognize specific sub-groups: women, children, adolescents, young adults, older persons and disabled persons. That orientation applies also to Project Lands and Downstream, where the change is less radical and the differences less pronounced. Support household decisions, especially through DAFO, to prioritize rice growing as the basis for villagers’ economic security, but offer technical assistance in cash cropping and other income generation activities alongside rice. Build on what people already know and want to improve, highlighting people’s capacities and ideas rather than focusing on what they lack or need; add on new ideas once they have the self-confidence and sense of security derived from expanding on knowledge they already had so as to help them venture more comfortably into uncharted territory. In keeping with the settlers’ dominant food security concerns and the recommendations they made, focus on generating more land for cultivation; this includes converting still more degraded forest land into agricultural uses, speeding up the allocation of cultivation rights on reservoir drawdown areas, repossessing and redistributing 0.66 hectare plots which some villagers were leaving idle, and improving technologies for rice cultivation sought by settlers, like expanded irrigation systems, new seed varieties, and organic fertilizer. 2. The socio-cultural development aspects of the project, meant to be carried out in a participatory manner, were hampered by the financial imperatives of recouping investments and loans as quickly as possible. This meant that the engineering and construction timetable for the completion of the dam had to receive highest priority. This slowed down the participatory process and contributed to dependency on the project in the affected settlements. Thus many of the plans for participation drawn up in the Social Development and Community Strengthening document likewise had to defer to the competing financial and engineering timetable demands. Nonetheless the careful thought that went into planning participatory approaches remain important principles relevant to future projects. With the completion of the dam, project staff are now able to concentrate on and accelerate the socio-cultural and participatory aspects of project sustainability. Implications In future hydropower projects, and in keeping with government policy supportive of participatory development, community consultations should begin at the earliest stage of project planning. Bring in social scientists and NGO facilitator-organizers to work with the affected communities and households as early as possible in order that emerging policies and actions address the real needs of people. Extend that support throughout dam construction and early operations. 3. Participatory governance is gradually being established as a crucial element in village development. This has come about largely as dialogue between project staff and villagers evolved based on experience with compensation claims, grievance processes and land use planning. These models, properly adapted, might well become the standard pattern of relationships between villagers and local authorities. While project staff actively encourage participation, hierarchically-oriented local government officials, as everywhere, tend to have difficulties dealing with villagers in more egalitarian and participatory ways. To effect the important shift requires cultural change in public institutions at all levels (central, provincial & district). Implications Continue the Participatory Land Use Planning process and expand it to include other areas of village decision-making; assess progress by drawing on the UNEP Participation Scale: Inform, Consult, Involve, Collaborate, Empower. Promote amongst provincial and district officials a culture of working with villagers in a participatory way. Adapt the project’s successful participatory innovations to ongoing local government institutional arrangements specifically focused on listening to and processing people’s comments, suggestions, 64 | P a g e Nam Theun 2: Handing Over complaints and protests. That will require political direction, training, mentoring and immersion in people’s life situations. Work with the mass organizations (Lao Women’s Union, youth, farmers, Lao Patriotic Front) to explore possibilities for linking their activities with other kinds of participatory processes promoted by NGOs or other social organizations. Develop participatory monitoring schemes at community level in close consultation with project affected households and local leaders. 4. Formal institutions like the Village Forestry Association and the Village Fisheries Group are having difficulties operating as planned owing in part to an apparent disconnect between their mode of operation and villagers concepts of resource use and community organization. . Experience from other NGO-organized villages in Lao PDR and other parts of Southeast Asia show that when smaller groups work on solving problems they identify, the organizational lessons learned carry over to more formal associations. The informal organizing engenders self-confidence in trying out new challenges successfully while simultaneously building trust relations within the community. Implications For future hydropower or similar projects, enable villagers initially to engage more informally in working together on specific forest or fishery matters of their choice. This would generate a problem-identification-and-solving learning mode. Once their organizational capacities have been firmed up through the experience of successful action, then get them involved in the process of creating and formalizing new associations, like the Village Forestry Association or Village Fisheries Groups that are responsive to both household and environmental interests. 5. The sharp reduction in paid employment from construction and forest clearance coupled with a decreasing fish catch have diminished incomes, particularly for men. The rules that have closed the forest to logging, animal trapping and entry in general have deprived settlers of traditional sources of livelihood. Thus are longstanding livelihoods “illegalized�. Yet these government promoted rules notwithstanding, a resistant if disguised cultural reaction surfaces. Although the government has declared even traditional small-scale logging “illegal,� settler perspectives apparently do not concur with this judgment of wrong-doing. Some households have once again turned to the forest as their major resource for survival. Since villagers’ values concerning forest rights and use were formed in times when the forest was an abundant and open terrain nurturing villages in its midst, the prospect of apprehending their relatives and neighbors for “illegal� activities is not strongly embedded in their moral codes of right and wrong. Possibly some of the loggers are being paid off by powerful interests whom villagers want to avoid antagonizing for fear of reprisal. The protection issue becomes even more daunting when commercial logging groups invade the forest, especially if they come across the border from neighboring countries. Although these are clearly invading law-breakers, villagers are unlikely to court retaliation by confronting them. As one official commented regarding the protective roles of forest beings, “Even the spirits are afraid of the chainsaw!� Accordingly, forest protection is only lackadaisically carried out by VFA members and might even decline further if they are not paid for their patrolling efforts. Implications Explore with the help of social scientists and NGOs the settlers’ traditional concepts of forest rights and responsibilities. Bring in also Buddhist functionaries to help formulate the religious or philosophical principles that apply. Use the findings to develop a culturally appropriate forest sustainability scheme that focuses on environmental protection and appropriate resource use more than apprehension of violators. Use outside protection groups to apprehend forest violators, drawing largely on enforcement officers who will not be intimidated by personal ties or threats from powerful interests. 6. Women’s capacities and roles have expanded greatly as a result of the project, moving them into the forefront of innovation. Lao women have the greatest flexibility culturally to venture into new areas of experimentation – once their food security goals through rice availability are fulfilled. Their multi-tasking roles in society encourage this kind of compatibility between traditional cultivation and modern 65 | P a g e IAG Report No 10 experimentation in the household and farm, where they are actually the chief cultivators. The poorest women are usually those in labour-scarce households with several young children, elderly or disabled members and no male member. Implications Strengthen women’s capacities by enabling them to gain access to the technical knowledge, leadership skills, confidence-building mechanisms and outside exposure needed for them to handle livelihood innovations, whether in agriculture, forestry, fishing, craft production or entrepreneurial ventures. In promoting promising activities for women, e.g. techniques of irrigated rice cultivation, vegetable growing or frog raising, discuss with the women the added amounts of labor and time that will be required of them, and how they might find ways of adjusting their workloads. Gear programs to the different levels of poverty and well-being of women—those somewhat well off and already engaged in innovative activities (active adopters), those focusing on rice-growing but cautiously interested in exploring new alternatives (cautious adopters), and those living in dire poverty (marginal adopters). Ensure frequent follow-up visits by the technical trainers and sufficient time for women to absorb the new knowledge with ease and develop self-confidence. Gear programs to the different levels of poverty and well-being of women as well as their openness to innovation. Offer literacy and numeracy programs for interested women not only for their own utilization but as part of confidence-building mechanisms that encourage women to go into business or other productive ventures. 7. Young people have the greatest interest in accommodating to and mastering the new economic set-up. Many more are attending school than previously and a number have higher educational aspirations. No longer familiar with how life operated in the former forest environment, they can most easily adapt to and create new ideas, technologies and opportunities. Sustainability lies especially in them, and institutions and governance mechanisms need to be formulated with this in mind. Implications Ensure that all village children complete elementary school and insofar as possible, high school. Establish high schools in or near the larger settlement villages to encourage broader attendance. Enable the most talented youth – female and male – to compete for scholarships allowing them to pursue their studies at secondary school, technical colleges and university levels; expand their knowledge through work internships. To assure their return to serve the community for a specified period of time, have the recipients sign contracts as conditions for the scholarship award. Organize short-term on-the-job training in farming and off-farm work for out of school adolescent girls and boys. 8. A faintly emerging trend finds younger naiban and village council leaders in the early 30s and 40s, including some women not necessarily representing the Lao Woman’s Union, being selected for village positions. This apparently stems from positive perceptions of their ability to deal with local development issues as well as with outside people of influence, greater drive, and more formal schooling than the older leaders. Implications Develop training programs for nascent young leaders, including cross-village visits and exposure to the outside world. Encourage village leadership among qualified young adult men and women in governance, economic activities, and basic services provision by offering them priority access to management, technical and leadership training programs. 9. Although the project took great pains to help the resettlers move their sacred icons with the proper ceremonies to their new site, there appears to be much less attention given to the spiritual or Buddhist traditions that sustain values common to the people in their new village. Religious elements do not normally 66 | P a g e Nam Theun 2: Handing Over fit into governance or institutional thinking, yet the integration of the sacred and the profane contribute immensely to the sense of well-being that fosters sustainability. Implications As part of people’s participation in planning, implementation and monitoring, include their concepts of cause and effect in nature and in their daily lives as defined by their religious and cultural traditions. Include the local Buddhist monks in these discussions if the villagers wish, recognizing also that the wat or temple is a key village institution. 67 | P a g e IAG Report No 10 2. Es ti ma t e d E nv ir o n m en t al a n d S o cia l C o m po n e n t C os ts Note: information supplied by NTPC. Table 1: Total E&S Costs incurred Cost Actions (US$m) Estimated E&S proportion of project development costs (Total NTEC expenditure of US$55m) 16 Total E&S program expenditure from Financial Close to Commercial Operation Date (2004 - April 2010) 79 Total E&S investment of Head Contractor construction (See table for breakdown) 200 † Nam Theun riparian release generation revenues loss (NPV over concession period) 23 † Projected post-COD E&S costs (NPV) 40 Total 358 † Total pre-COD spending (minus items) 295 Total project cost: US$1,300m Pre-COD E&S expenditure expressed as % of total project cost: 22.7% Table 2: Total E&S investment of Head Contractor construction Costs incl. HC costs, spare IDC parts, tools, financing Total Cost Infrastructure training cost (US$m) Regulating Pond 5.0 1.4 6.4 Regulating Dam 25.6 6.7 32.4 Downstream Channel 42.4 11.6 54.0 Downstream Tunnel 23.3 3.3 26.6 Downstream irrigation facilities 0.8 0.0 0.8 Access roads & bridges - public roads 55.0 15.1 70.1 Access roads & bridges - other roads 7.5 2.1 9.5 Total 159.6 40.2 199.8 [Amounts rounded by IAG to nearest 0.1 million.] Notes: Figures in Table 1 rounded up and down to whole millions Construction figures and E&S budget include removal of unexploded ordnance Potential loss due to cessation of generation following Xe Bang Fai flooding is not included. Net present value (NPV): represents future costs recalculated as if occurred today by the application of a discount rate (8.2% used by NTPC). Without considering the timing of the payment, cumulated actual costs are much higher. Exchange rate fixed at Financial Close: 1 USD = 40 THB. Any update on the exchange rate will impact the results. . 68 | P a g e 3. Or ga niz a ti on of t he L ao s ta t e 40 40 Source: UNDP (2001) 69 | P a g e 70 4. L ao P D R v il la g e l ev e l or ga n isa t io n 70 | P a g e IAG Report No 10 V. The people we met Government of Lao PDR: Ministry of Energy Management: Mr. Sychath Boutsakitirath, Deputy Director General, Department of Energy Promotion and Development; Mr. Viraphonh Viravong, Director General, Department of Energy; Ministry of Agriculture and Forestry: Mr. Phoumy Phoumanivong, Director General, Mr. Khamphout Phandanouvong, Deputy Director General, Mr. Thongphanh Ratanalangsy, Chief of Administration and Planning Division and Mr. Sangvane Bouavong, Deputy Director, Division of Forest Resource Conservation Department of Forestry Inspection; Ministry of Finance: Mme. Thipphakone Chanthavongsa, Director General, External Finance Department; Ministry of Planning and Investment: Mme. Sisoumboun Ounavong, Deputy Director General, Department of International Cooperation; Water Resources and Environment Administration (WREA) : Mme. Khempheng Pholsena, Minister to the Prime Minister’s Office, Head of WREA, and Chairperson of the Lao National Mekong Committee; Ms. Chanthakesone Bounkham; Ms. Sonephet Posalath; Khammouane Province: H.E. Khambay Damlat, Governor; Mr Bounma Soudsadavone, District Governor and Mr Linthong Malakeomany, Vice Director, District Agriculture and Forestry Office (DAFO), Nakai District; Resettlement Management Unit: Mr. Sivixay Soukkharath, Manager and Mme. Keoula Souliyadeth – Vice President, Lao Women’s Union. Watershed Management and Protection Authority: Mr. Thong Eth Phayvanh, Director, Executive Secretariat, Mr. Soukhatha Vannalath, Deputy Director for Law Enforcement, Dr Tienne Vannasouk, Deputy Director for Rural Development. Reservoir Management Secretariat: Mr. Khamthone Vongphachan, Manager and Mr. Bounsin, Head of Fisheries Association Office Village Forestry Association: Mr Bounjong, Head of Administration Office Nam Theun 2 Power Company (NTPC): Mr. Jean-Pierre Katz, Chief Executive Officer; Mr. Ruedi Luthi, Environment and Social Director; Mr. Aiden Glendinning, Manager, Public Relations and Communications; Mr. Pat Dye, Government Affairs and Corporate Communications Manager; Mr. Marcel Frederik, Manager, Nakai Resettlement Office and Project Lands Department; Ms. Marissa Duran, Deputy Manager, Nakai Resettlement Office and Project Lands Department; Mr. Francois Demoulin, Downstream Manager, E & S Division; Mr. Richard Peary, Deputy Manager, Environment and Social Division; Mr. Soun Nilsvang, Deputy Manager, Nakai Resettlement Office. The World Bank: Ms. Keiko Miwa, Country Manager, Vientiane; Ms. Jeeva A. Perumalpillai- Essex, Sustainable Development Leader, Southeast Asia; Mr. William Rex, Lead Specialist, Sustainable Development; Mr. Shabih Ali Mohib, Financial Management Specialist; Mr. Satoshi Ishiwara, Senior Social Development Specialist; Mr. Sybounheung Phandanouvong, Social Development Specialist; Ms. Meriem Grey, Communications Specialist; Ms. Souksavanh “Back� Sisoulidavanh, Program Assistant, Vientiane. And a special thanks to the other administrative staff who assisted with our visit. Dr. James R. Chamberlain, Anthropologist Khammouane Development Project Office: Mr. Khamhou Phanthavong, Deputy Director of Planning and Cooperation Division, Manager of Component 2; Mr. Vic Macasaquit, Implementation Advisor; Mr. Somsanong Keovilay, Consultant Team Leader The villagers of Lao PDR: Ban Nakai Nua: Mr. Chanlay Kommasit, Nai Ban, and his wife Mrs. Touy, Ms. Chanpheng Komnaloun, 16 year-old student, Ms. Maita Komnaloun, 14 year- old student; Ban Khone Khene: Mr. Phomma Joumdala, Nai Ban, Mr. Khampoun, Deputy Nai Ban, Mr. Somenoy, Deputy Nai Ban, Mr. Tone, Lao Front, Mrs. Khoun, traditional birth attendant; Ban Done: Mr. Keo Sython, Deputy Nai Ban, Mr. Janmoun Nolady, Deputy Nai Ban, Mr. Sin Nidthavong, Mr. Tay Boudsady, Ms. Bouapha, Ms. Chantha Chanthida, Ms. Khem, Ms. Sen, Ms. Boun, Ms. Nouanta; Ban Oudomsouk: Mr. Phetkesa, Nai Ban; Ban Nakai Neua Women’s Village Credit Fund : Ms. On-ouma, chairperson of the Fund, women’s union at a village level, Ms. Chommany, in charge of loan, Ms. Saysamon, treasurer, Ms. Bounpheng, cashier/ assistant treasurer; Ban Sangkeo: Mr. Sengheung Sengthong, Nai Ban, Mrs. Khem and family, villagers cultivating mushrooms, Ban Lao, Nang Seo , Nang Khiean, Nang 71 | P a g e 72 Saikham, Ban Sop Hon, Mr. Kham Thit Somphou, former Nai Ban and now Party Secretary, Dangtha Village, Mr. Souksavanh Inthanongsack – Village Chief, Mr. Keneta Phonimala – Deputy Chief, Mr. M. Khamdy Siphonthong – Lao Front, Ms. Keo Sengmany – Lao Women’s Union Deputy, Ms. Khommy – Lao Women’s Union, Ms. Kongsoune – Lao Women’s Union, Boung Houana, Mr. Kila Phettam Pheun – Village Chief, Mr. Phieck Sivolang – Deputy Village Chief; Ban Nakok Nai: Mr. Keo, Lao Front, Mr. Buakham, Lao Front, Mr. Dam, Village Chief. And other villagers from Nakai to Thakhek who welcomed us into their homes. 72 | P a g e IAG Report No 10 VI. References Barma, N., V. Fritz and W. Rex (2010) Governance of Natural Resource Management in Lao PDR: A Value Chain Perspective Washington DC: World Bank. Dam Safety Review Panel (2010) Report on Visit to Lao PDR, November 2010. Nam Theun 2 Hydroelectric Project: Dam Safety Review Panel. Government of Lao PDR (2011a) IPP (Independent Power Plant) Project Implementation Process www.poweringprogress.org. Downloaded 1 May 2011. --- (2006a) National Policy: Environmental and Social Sustainability of the Hydropower Sector in Lao PDR. Vientiane: Science Technology and Environment Agency, Lao Environment and Social Project. --- (2011b) Power Projects in Lao PDR www.poweringprogress.org. Downloaded 18 March 2011. --- (2011c) Powering Progress Website www.poweringprogress.org. Downloaded 5 May 2011. --- (2003) Priority areas for Governance Reform: Public Service Reform, People’s Participation, Rule of Law and Sound Financial Management. A Policy Paper of the Government of Lao PDR on Governance Issues. Roundtable Process, Vientiane: Lao People’s Democratic Republic. --- (2006b) Strategic Plan on Governance (2006-2010). Vientiane: Government of Lao PDR. November 2006. Hodgdon, B. D. (2007) A note on the FSC certification of forests in Laos. Maunsell Limited (2004) Power System Development Plan for Lao PDR. Auckland: Maunsell Limited / Lahmeyer GmbH for Ministry of Industry & Handicrafts, Lao PDR. Moore, M., M. Choudhary and N. Singh (2000) 'How Can We Know What They Want? Understanding Local Perceptions of Poverty and Ill-Being in Asia' Institute of Development Studies Working Paper 80 Nakai Village Forestry Association (2010) Workshop Outcomes. Nakai District, Khammouane Province, Lao PDR: NTPC (2005) 'Public Consultation, Participation and Disclosure.' In NTPC (ed) Nam Theun 2 Hydroelectric Project: Social Development Plan: Introduction and Cross-Cutting Issues (pp Vientiane: Nam Theun 2 Power Company Limited. Porter, I. C. and J. Shivakumar (2011) Doing a Dam Better: The Lao People’s Democratic Republic and the Story of Nam Theun 2. Washington DC: The World Bank. Savas, E. S. (2000) Privatization and Public-Private Partnerships. New York, London: Chatham House Publishers. Twyford, V. and C. Baldwin (2006) Compendium of Relevant Practices: Stakeholder Participation. United Nations Environment Programme: Dams and Development Project UNDP (2009) Handbook on Planning, Monitoring and Evaluating for Development Results. New York: United Nations Development Programme. --- (2001) National Human Development Report Lao PDR 2001 - Advancing Rural Development. New York: United Nations Development Programme. World Bank (2010) Lao PDR Development Report 2010 - Natural Resource Management for Sustainable Development: Hydropower and Mining. 59005-LA. Washington DC: World Bank (with AusAId and the European Commission). 73 | P a g e 74 World Bank (Independent Evaluation Group) (2008) Public Sector Reform: What Works and Why? An IEG Evaluation of World Bank Support. Washington DC: World Bank. 26 February 2008. 74 | P a g e