Case Study

Laos: Hydropower built in consultation with Indigenous communities

The NT2 project serves as an example of how benefit sharing can lead to net positive benefits for affected Indigenous Peoples - if a thorough, transparent and consultative process is employed, according to Eduard Wojczynski, author of IHA’s How-to Guide on Hydropower and Indigenous Peoples.


The Nam Theun 2 (NT2) Hydropower Project on the Nam Theun River in Laos has an electricity generation capacity of 1,075 MW. NT2 is the largest hydroelectric project in Laos and exports power to Thailand. Its development created a 490 km2 reservoir in the Nakai plateau, which involved the resettlement and livelihood improvement of 6,300 people.

Image: Aerial view of resettlement areas along the Nakai reservoir (Asian Development Bank).

Resettlement in hydropower development

Resettlement in hydropower development needs to be handled with care and commitment, respecting the dignity and human rights of affected communities. For resettlement to be conducted in the best way possible, a careful consultation process with affected communities is necessary, to understand their lives, their needs and the benefits that they would most value through the resettlement process.

Find out more about resettlement in hydropower.

Engaging with affected communities

Between 1996 and 2002, more than two hundred and fifty public consultations were conducted with communities in areas affected by the NT2 development by the project developer. Village and district-level consultations constituted the base for international consultations.

This process was described by the World Bank as “the first time [a comprehensive program of public consultation] has been used in Lao PDR in a large private sector infrastructure project”. In addition to the consultations, research, information dissemination, village meetings, seminars, Rapid Rural Appraisals (RRAs) and Participatory Rural Appraisals (PRAs) were organised.

Local consultations included the use of visual materials, posters, fact sheets and multimedia kits to account for differing levels of literacy in the community. Additionally, separate workshops were conducted between men and women to ensure that everyone had their opportunity to let their voice be heard.

Special consideration was paid throughout the consultation process to gender, ethnicity, Indigenous people and vulnerable peoples’ issues.

A new Standard

Read the consultation paper on the development of a global sustainability standard for hydropower.

If adopted, the Hydropower Sustainability Standard would apply a rating, or label, to projects of any size or stage of development.

Making the consultation process accessible to local communities

Thorough consultation between the project developer and project affected people (PAP) led to practical consequences on the development's planning. The process was conducted in PAPs own language. This led to a transparent resettlement process where affected people could choose their own resettlement area based on their spiritual territory. New houses required for resettlement were also designed in consultation with villagers. Most PAPs confirmed and accepted resettlement planning, site location, details of the new village design, allocation of residential and agricultural plots and other joint issues.

In each new village, a Village Resettlement Committee was set up and the entire process was monitored by an independent third party.

A sustainable Reservoir Management Program also had to be implemented, based on co-management between communities and authorities. Village Fishery Groups were implemented as part of the Reservoir Fisheries Association to make patrols to prevent illegal fishing practices and reinforce marketing of fish. Resettlers were also given reserved access to the reservoir.

Understanding affected Indigenous Peoples

To best understand the history and needs of the affected Indigenous Peoples, baseline studies of and with communities took place in the 1990s and early 2000s. This resulted in the developer having a deep understanding of Indigenous Peoples’ customs, cultural patterns, differentiation, land and water uses, history of land occupation and migration, livelihoods, material culture and infrastructure and health status, involving social experts who specialised in Laos indigenous culture.

This led to an Ethnic Minorites Development Plan and an Environmental Assessment and Management Plan being drafted. Furthermore, a Resettlement Action Plan was conducted following a detailed census and public consultation.

Key outcomes

Identified in the planning process, a strong emphasis was made in leading PAPs out of poverty by National authorities, International Financial Institutions and lenders. An objective was set of doubling the income of those being resettled, which became binding when placed in the development’s concession agreement.

To ensure that social and environmental objectives were achieved, and that the interest of local indigenous communities were represented, an independent international Environmental and Social Panel of Experts was established. The panel's validation was needed to close the Resettlement Period. In its latest report, the international Panel of Experts (POE) of the Nam Theun 2 Multi-Purpose Project acknowledged that the provisions of the Concession Agreement relating to the resettlement program have been successfully met and it recommended the closure of the Resettlement Implementation Period.

Livelihood, social and technological support was also made a priority to affected Indigenous Peoples which required the utilisation of several hundred members of staff and consultants for twelve years.

As a result, 97 per cent of resettled affected people were officially lifted out of poverty. Most of these people have expressed satisfaction with the process and declare that they would not return to their old villages if they were able to. Furthermore, the Health Programme set up for PAPs showed impressive outcomes with a drop in mortality, no maternal deaths since 2010, a decrease of stunting rates among children (from 45 per cent to 35 per cent in 2018), and the immunisation of 90 per cent of children under five years old. These rates are above the national average.

Benefit sharing

Benefit sharing in hydropower development is the act of providing affected or nearby communities with important benefits such as economic infrastructure, electricity subsidies and local employment.

The NT2 development used benefit sharing in multiple forms to improve the lives of affected Indigenous Peoples.

These included:

- The provision of approximately USD 100 million of local infrastructure assets handed to the government in 2010

- A Social and Environmental Remediation Fund (SERF), set up of over USD 300,000 a year for community infrastructure maintenance, yearly adjusted to the Consumer Price Index (CPI) to reflect inflation

- The funding of a protected area including indigenous villages, the first National Park of the country, Nakai-Nam Theun National Park with USD 1 million a year, yearly adjusted to the CPI to reflect inflation (USD 1.4 million in 2021)

- Local employment preference with capacity-building activities for both villagers and governmental staff.

- Indigenous Peoples livelihood improvement and resettlers’ housing and village improvement

- Health improvement through a comprehensive local and regional program.

These measures helped contribute to the implementation of the NT2 project.

Extending relationships with affected communities

Today, the developers of Nam Theun 2 are going beyond their contractual obligations by implementing, in a co-governance structure with local authorities, voluntary and comprehensive benefit sharing programs through the Nam Theun 2 Development Fund and their own CSR program.

The goal is to set the conditions for the communities living around the project’s area to develop their own development ambitions and sustainable livelihoods, through the Nam Theun 2 Development Fund (NT2DF). This fund is financed each year with an amount based on the company’s electricity generation. Over the last three years, the average yearly amount dedicated to NT2DF was USD 630,000.

These NT2DF projects must result from consultations with local communities and align on Village Development  Plans, must feature contribution from the communities to foster ownership of the project and are co-managed with local authorities.

The NT2DF is the second Pillar of Nam Theun 2 Sustainability Vision for 2035, building on the protection of Nakai-Nam Theun National Park on the watershed, the maximisation of the use of the downstream channel to propose irrigation outlets to farmers living along the water stream, and the mitigation of climate change with a hybrid floating solar project on the reservoir.

Find out more about Indigenous Peoples.

Read the new How-to guide on Indigenous Peoples and Hydropower.

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