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Nam Theun 2 – How are the resettled people doing overall?

Nina Fenton's picture

The NT2 project required the damming of the Nam Theun river and the creation of a reservoir that has flooded large areas of the Nakai plateau, leading to the physical relocation of 17 villages by April 2008.  However, this physical relocation was just the first step in the resettlement process. The key challenge now is to ensure that the 6,200 people who were resettled because of the reservoir develop new and better livelihoods—and do so in a sustainable fashion—meeting the high-level commitments made in the project’s Concession Agreement (CA) (787 kb pdf).

The project has invested in strong socioeconomic monitoring systems to track progress in meeting the CA commitments, although it’s far too early to judge whether the objectives have been achieved and livelihoods are sustainable. This series of blogs uses some of that evidence to give insights into how the resettlers are doing so far and the challenges they still face in improving their livelihoods. By presenting this information a bit at a time we hope to slowly build up a comprehensive picture of the resettlement process, with all its complexities, complications and surprises...

In the next blog I’m going to go into some detail about the specific tools and methodologies used to collect and analyze information on these households. Understanding these details is essential for understanding the results. But I also know that people are itching to get a broad-brush answer to the question “how are the resettled people doing overall?” So, in this post I’ll present what I believe to be the most reliable indicator of how the households are doing at this stage of the project—household consumption. Although we’re going to be looking at income and other measures of household situations, consumption is usually used as a broad indicator of overall household well-being. Median consumption, which is consumption of the “middle” household, is presented, to control for outlying values. 
 
Lao PDR has three main seasons. The households on Nakai practice rainfed agriculture, so most of their produce grows during the rainy season, from the end of May to the start of October. They harvest in late October. The weather becomes cooler between October and February, followed by a hot, dry season from March to May. Some households, with irrigated lowland plots, harvest at the end of this season. The resettled households do not currently cultivate a dry season harvest—although this may be possible with new varieties and irrigation. This means that consumption is likely to be low during the summer months (May-September), before rising after the harvest.

Household consumption is the most reliable indicator of how the households are doing at this stage of the project. (WB photo)

The LSMS survey was carried out in different seasons, which makes it difficult to compare levels across time—future rounds will be carried out at the same time of year. However, what we can say for now is that in all rounds median consumption was well above the rural poverty line. In simple language, this means that well over half of the households are already above the poverty line. This is an encouraging sign at such an early stage of the project, and considering the enormous changes that these households are adapting to, and the conditions they lived in before NT2. Consumption was not measured in the 1998 baseline survey, but according to data from the 2005 Census, combined with national survey data, poverty levels in the villages just before resettlement began were between 36% and 66%. For Nakai district as a whole they averaged 55%, compared to a national average of 34%.

However, it is clear that challenges remain. During the resettlement process, a group of households were identified by the Resettlement Management Unit as needing extra support to improve their livelihoods- support that they continue to receive. These “vulnerable” households were identified based on a variety of indicators, including:

  • Having little available adult labour (i.e. very old or very young members, female-headed households with young children to care for)
  • Suffering from chronic illnesses
  • Being members of historically disadvantaged ethnic minorities, who come from very different traditional livelihood systems and may be unable to speak the mainstream Lao language.
A female headed household with young children to care for is considered a "vulnerable" household: Single Headed family in Ban Phonpanpek - Nakai (WB photo)

Experiences in other projects show that households with these characteristics often find it difficult to restore livelihoods after resettlement. To ensure these households don’t get left behind, the NT2 project has committed to improving incomes for all households. This means it is particularly important to monitor these households, so we’ve presented their consumption separately in the chart. 

Despite the support, these households are still lagging behind the non-vulnerable. Although this is perhaps unsurprising given their characteristics, providing extra attention to enable all of these households to improve their livelihoods remains the most important challenge facing the project. (However, even in this group the “middle” household is significantly above the rural poverty line, meaning that well over half of the vulnerable households have escaped poverty.)

In upcoming posts I’ll be presenting some data on incomes and broader indicators of welfare. However, I’ll continue to refer to consumption per person as the main indicator of overall household well-being.  Why? There are several reasons for this, many of which apply particularly to contexts like Nakai. A few of these are:

  • Incomes fluctuate a lot by season, but households use borrowing and saving to “smooth” consumption, so it is usually considered a more reliable measure of “permanent income”. However, in reality many households are unable to borrow as much as they’d like, so we are likely to see some seasonal fluctuations, as discussed above.
  • Because consumption is more stable over time than income, we can use a shorter recall period, which means the information tends to be more accurate. The recall period in the LSMS survey is a week for most food items, whereas for most income components households are asked about the last year.
  • A lot of income is non-monetary- households grow food and consume it themselves rather than selling it. Households often forget about this income when asked, and even when it is reported, it is difficult to value. Consumption of own produce is easier to recall and value using market prices. 
  • The national rural poverty line, which is the relevant income target for the resettled households (because the poverty line is adjusted upwards over time, it is now higher than the nominal target of 1.4 million kip), was designed to be related to consumption, not to income.  
  • There is a conceptual link with household “welfare” (whereas, for example, a household with very high income may not be considered very well-off if they have to use most of that income to pay off large debts)

Comments

Submitted by Jeff Brez on
I am working on the WBG's 2010 Environment Strategy consultations. One of the main threads winding through the feedback we receive from stakeholders worldwide is that there is a "gap between what the Bank says and what it does" regarding environmental and social sustainability. This hurts the Bank's credibility and damages its ability to garner consensus on its role, and the full support of some segments of civil society. Following our consultation in Vientiane on March 17, 2010, I am particularly interested to understand how the Bank is monitoring the implementaiton of Safeguards relating to NT2 - so thank you Nina for this posting.

(Note: (The title of this comment was edited shortly after posting for better clarity) Since posting the blog I've had quite a few emails with some very relevant questions. I thought it might be helpful to summarize the replies here in case others are wondering the same things. I would also encourage everyone to post questions and comments directly here on the blog, so that everyone can benefit, especially if I haven’t been completely clear about some of the technical points. Firstly: how much could the statistics be affected by large outlying values from the rich households? There are some households on Nakai who are doing quite well, many of whom were already well off before the project. Are their consumption levels biasing the statistics upwards? The answer to this is no, not really. The statistics I have used here, and will try to use as far as possible in future blogs are median not mean values. To get the median we basically line up all the households in the sample (or subsample) in order of consumption (or whatever variable is under consideration). Then we pick the one in the middle- the median household, and list that household’s consumption level. This is affected by the richer households- if we removed them, the middle person would be lower down in the ranking. But the middle household itself, the one that we list, isn’t going to be one of these rich households.

(Note: The title of this comment was edited shortly after posting for better clarity) Secondly: what does it mean when I say that median consumption is above the poverty line? If the consumption of this median household is above the poverty line, then by definition at least half of the households (the households that rank higher than that household) must be above the line- see my comment above. Looking at the graphs, the median household’s consumption is quite a long way above the poverty line, which makes me think that the percentage meeting this level must be quite a lot higher than 50%, representing a significant improvement since the 2005 data I cited. This is really encouraging at this stage in the project, but the last thing we want to do is to decide that these households are already doing well enough, when in fact they will continue to require support throughout the next few years if this progress is to be sustainable, and the Concession Agreement commits to supporting ALL household to reach above the poverty line.

(Note: The title of this comment was edited shortly after posting for better clarity) Third: what do the percentages in poverty in 2005("poverty levels in the villages just before resettlement began were between 36% and 66%. For Nakai district as a whole they averaged 55%, compared to a national average of 34%.") mean? The percentages I cited were estimated by the Swiss National Centre of Competence in Research (NCCR) North-South, Switzerland, working with the Department of Statistics (DOS) (see http://www.laoatlas.net, or buy the Atlas itself, which is a real work of art!), using the national Expenditure and Consumption Survey of 2002/3 (LECS) and the 2005 Census. They used techniques of small-area estimation to get estimates at the village level, something which is not possible with the LECS data alone. The figures tell us that 55% of people in Nakai district were below the national poverty line. This poverty line was designed to cover basic needs of 2100 calories plus a small allowance for non-food consumption. So we’re talking quite severe poverty in the area. Of course it varied between villages, so in some villages around 64% were able to provide for basic needs (still below the national average), whereas in others it was as low as 34%. Of course we need to bear in mind that, as with all statistical techniques, there is some margin of error here. But it still gives the most accurate available picture of poverty rates before the project.

(Note: The title of this comment was edited shortly after posting for better clarity) Fourth: why wasn't consumption included in the 1998 baseline? The answer is partly that, although many academics prefer consumption as a measure of household well-being, views are far from unanimous. Different literatures and regions have different preferences- for example many Latin American countries prefer to use income indicators, while in other regions consumption-based measures are more common. Secondly, in 1998 it was essential to collect information on income sources in order to design appropriate livelihood programs. Adding a full consumption module would have been a big challenge, especially as many items consumed were produced or collected by the household, and very difficult to value. I’ll be talking about this problem later when I present some data on forest products. However, the first round of the LSMS survey took place at a time when only the pilot village of Nong Boua Satit had been relocated, and therefore can give us some ideas about consumption just before resettlement began.

(Note: The title of this comment was edited shortly after posting for better clarity) Finally, there seems to have been a decline in consumption since May 2007. What is driving this? Is it a real decline in living standards? As I said in the blog, I don’t want to read too much into these figures, because the surveys were carried out at different times of the year. Consumption is measured with a 1 week recall, and therefore may be affected by seasonal fluctuations in consumption. Consumption is also affected by changes in the amount of support the households receive from the project. During physical relocation households received transitional assistance such as rice support, which has now been phased out or reduced for all but the most vulnerable households. In addition, later in the blog we are going to see the opposite picture with incomes- from which we exclude assistance from the project- which are measured with a one year recall period. We will see that incomes fell during the first, disruptive, stages of physical relocation, but have begun to increase again now that households are settled into their new environment.

Submitted by Grainne Ryder on
The Nt 2 company claimed that resettler income would triple within first 5 to 7 years of power generation as a direct result of compensation and income generation plans supported by the project and world bank. Income either increased or it didn't; where is the data for each year of operation? Who is collecting data now?

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