Laos Dam Raises Ethical Bar

Dam projects in poor countries tend to wreak havoc on the communities they displace. But the $1.4 billion Nam Theun 2 dam in central Laos is a different story. Piu, a smallholder in her 30s, moved in May to a village built for some of the 1,200 families displaced by the project, scheduled for completion in 2009. "It's very beautiful," she says. Nearby, workmen finish neighboring units—wooden homes on stilts with a traditional feel.

The justification for NT2, like that for many big infrastructure projects, is to lift the locals out of poverty. Indeed, the dam's electricity will be a boon: over the next quarter century, developers expect to bring in $2 billion, paying for the dam and much-needed economic development. But unlike dams elsewhere, NT2 may represent a new generation of massive World Bank projects. Prompted by a growing awareness of the impact that megadevelopments can have, the Bank now attaches strict conditions to its aid. "It used to be accepted that some would have to lose so that the majority could benefit. But now we're asking whether anyone has to lose," says Chaohua Zhang, who oversees NT2's social and environmental projects.

As for displaced families, the World Bank and the Laotian government promise to double their incomes within four years. And where villages have been moved, communities have been kept together, transported nearby and given a role in designing their new homes. Those efforts are accompanied by new environmental protections. "We had 80 or 90 percent participation in the decision making," says Ontaa Kaakaeson, a village headman.

Bank officials say the NT2 project is the beginning of a broad trend. "The environmental and social policies we're imposing here are broadly applicable ... whether it be irrigation, ports, roads or major urban development," says Stephen Lintner, an adviser to the Bank on safeguards.

The project has its doubters: dozens of NGOs chided the Bank for not adopting even more demanding standards. But World Bank support helped keep NT2 from running to the financiers of the Merowe dam in Sudan, where, in April, 3 protesters were killed and 50 wounded.

There's a lot riding on NT2. Laos needs the boost to its economy and its human-rights credentials. The World Bank wants to prove that kinder, gentler megaprojects are possible. And advocates think it's a way to make the Bank more accountable to the locals. "The World Bank has put itself in a situation where they've given us standards to hold them to," says one. "If they fail, there will be no hiding the fact."