The International Financial Institutions and Nam Theun 2

1. The International Financial Institutionsand Nam Theun 2 International Stakeholder Workshops Bangkok, Tokyo, Paris, Washington, Vientiane 31 August-24 September 2004

2. What is the role of the IFIs in Nam Theun 2? The World Bank Group and the ADB have been asked to support NT2 through: • Loan guarantees • Credits to support social and environmental activities and the Government’s equity contribution to the project • Other external partners have also been asked to support NT2 to facilitate mobilization of commercial bank financing.

3. Why are the IFIs considering support to NT2? • If properly managed and implemented, NT2 could bring significant benefits to the Lao people by providing incremental revenues for poverty reduction and environmental protection. • The IFIs’ Safeguard Policies help to ensure that social and environmental risks are mitigated. • IFI involvement brings standards of transparency and accountability to project preparation in the framework of the broader reform agenda in Lao PDR.

4. The IFIs’ Decision Framework Project processing linked to three ‘pillars’: • Implementation of a development framework with concrete performance that leads to poverty reduction and environmental protection • Technical, financial and economic soundness of the design of the proposed project and the implementation of our environmental and social Safeguard Policies • Broad understanding and support from international donors and civil society for Lao PDR’s development strategy and the NT2 project itself.

5. Decision Framework – first pillar Policy and institutional reforms to strengthen the governance framework and capacity in Lao PDR to manage eventual NT2 revenues including: • Maintenance of sound macro-economic policies • Improvements in the financial sector (stabilize finances of banks, launch micro/rural finance) • Improvements in the public sector (budget planning and control, increase budget transparency, improve public expenditure management) • Improvements in oversight of SOEs.

6. Decision Framework – second pillar • Sound technical assessment • Sound design and implementation of Safeguard Policies - Environmental Assessment and Management Plan (EAMP) - Social Development Plan (including Resettlement Action Plan and Ethnic Minorities Development Plan) - ‘SEMFOP’ (Watershed Conservation and Management Plan, including Ethnic Minorities Development Plan) • Sound economic analysis.

7. Decision Framework – third pillar International support and understanding for Lao PDR’s development framework and NT2: • International donor commitment to the policy and institutional reform agenda • External support (grants, technical assistance) • Communications and consultations with international stakeholders.

8. Learning from past • Comprehensive approach to project preparation and implementation • Selectivity - support to projects which are technically, economically, environmentally and socially sound • Recognizing the importance of downstream impacts • Consultation as a continuous process to benefit communities • Integrating environment and social aspects into overall project costs and implementation schedule.

9. In NT2, What is emerging to be different? • Baseline impact work and mitigation actions defined more broadly and handled more proactively • “Off-set” for environmental damage through long-term sustainability approach • Broader range of stakeholders identified through the consultation process • Contractual and financial obligations to mitigate known and unknown impacts.

10. Progress to date Project under serious consideration by IFIs’, preparation is accelerating, and confidence is growing; though issues remain. • Progress on overall macro and structural policy reform • Due diligence: safeguards documents and economic analysis, based on extensive studies, nearing completion and local consultations on-going • International support and understanding: transparent project preparation process, stakeholder workshops are on-going.

11. Purpose of these workshops • Provide an opportunity for open and well-informed dialogue on the project • Explain project details, clarify issues and debate stakeholder concerns • Provide feedback to GoL and NTPC before finalization of project documentation • Inform Bank’s due-diligence process • The workshops complement past and on-going local consultations with affected people.

12. Summary of concerns raised – Workshops in BKK, Tokyo, Paris and DC • GOL capacity to manage large projects like NT2 – revenues, past dam projects, environmental & social mitigation issues • Involvement of local communities in decision making relating to the project – adequacy of local consultations • Sustainability of environmental and social mitigation measures in the project area and livelihoods – both on the Plateau and in XBF • Civil society constraints in Lao PDR – suggestions for a more formal and direct role of NGOs in the project • Economic rationale, viability, alternatives • Timing and objectives of workshops questioned.

13. Follow up to International Workshops • Publish reports from each of the Workshops, as well as provide information to the public on how feedback from workshops has influenced project documentation • Host follow-up discussions with stakeholders as necessary (Bangkok on Project Economics, for example) • Continue to post information on our website www.worldbank.org/laont2 about the project • These workshops, plus the ongoing local consultations, will lead to further refinements as we move towards finalizing the project documents.

14. Next steps… • Further analytical work and consultations leading to completion of project documents • Review by management and decision on whether to proceed with project appraisal, then negotiation of legal documents with GoL and Sponsors • Consideration of the NT2 project by senior management and the Boards of Directors of the IFIs • Only then will a final decision be made on the project.