Scarred by war and plagued by poverty, Laos now dreams of becoming a regional energy superpower. Its communist government plans to capitalize on 55 hydroelectric dams built on rivers that crisscross this sliver of land between Thailand and Vietnam.

"If all sources of energy can be developed, Laos can become the battery of Southeast Asia," says Industry and Commerce Minister Nam Viyaketh during a recent interview in the capital. "We can sell our energy to our neighbors. Laos can be rich."

Perhaps nowhere is Mr. Nam's ambitious hydropower plan more explicit than in the massive Nam Theun 2 (NT2) hydroelectric plant, which began operating April 17 and is expected to bring in $2 billion in government revenue over the next 25 years by selling 95 percent of its electricity to Thailand.

The $1.45 billion, 1,070-megawatt (MW) dam was bankrolled in part by international investors including Électricité de France. French President Nicolas Sarkozy is expected to attend the official inauguration on Nov. 2, along with the presidents of the World Bank and Asian Development Bank.

Laos produced 1,600 MW of energy before NT2 began operating, and Nam says the government wants to increase production to 23,000 MW by 2030. Both Vietnam and Thailand want to buy 7,000 MW each, while Cambodia wants 2,000. As far as China goes: "However much you have, they will import from you."

However, echoing a story that's played out for decades across Asia, Africa, and South America as developing countries dam their rivers for energy, critics say the dam projects will displace thousands of Laotians and cause irreparable environmental damage.

Such trepidations are groundless, according to Christopher Hnanguie, a country economist with the Asian Development Bank, which provided loans for the project. Eighteen years of research and consultation with local communities went into the project, he says, resulting in an agreement whereby resettled communities receive better housing, medical clinics, electricity, and financial assistance such as small business loans.

"The environmental and social safeguards are the best in the world," says Mr. Hnanguie.

'Life used to be better'

While proponents of NT2 say adversely affected communities have been compensated and profits will be funneled into alleviating poverty, villagers affected from past projects say their lives have yet to improve.

"Life was definitely better in the old village," says a man who was relocated in 1997 to make way for the Huouay Ho dam, also in the central Laos province of Khammuan.

He and other villagers received new houses, schools, and health centers. But some pledges, such as electricity, were not honored, says the villager, speaking on condition of anonymity for fear of government reprisal.

Worst of all, he says, they were not provided enough farmland. In their old villages, agriculture was the main source of food and income, and people did not need to hire themselves out as laborers. Now, "almost every family is unable to grow enough food to feed themselves. Now they depend on selling their labor."

Some resettled villagers still sneak back to their old farms inside Huouay Ho dam's watershed, he says. The old farms are about 36 kilometers from the current settlement, so farmers have built shacks to sleep there for days at a time.

Two years ago, the villager says, 59 families signed a petition asking to be allowed to return to their former homes. The government responded by pressuring villagers into writing a pledge that they would not go back.

Ikuko Matsumoto, a researcher with the nongovernmental organization International Rivers, worries that people affected by NT2 have also lost access to forests and rivers. "I think the most important issue for villagers is the food security issue," she says in a telephone interview from Khammuan Province where she visited communities affected by NT2 just days after its turbines began humming.

"Their everyday life relies on fishing, rice cultivation, and collecting material from the forest," says Ms. Matsumoto. "How can companies and the government help restore a similar way of life? That is the biggest challenge and I really haven't seen much success."

Matsumoto says villagers told her they were worried about fish stocks declining, and they feared that rising water levels would flood riverside gardens.

Benefits outweigh costs

Nam, the industry minister, admits that massive development of Laos's energy sector has had some negative impacts. "Development is never pure good," he says.

He argues that the benefits far outweigh the costs, though, saying that building the energy sector is a key element of the government's plan to reduce rural poverty. Laos is ranked 133 out 177 nations on the United Nation's Human Development Index, which measures education, income, and life expectancy. The World Food Program estimates that 40 percent of children under age 5 are chronically malnourished.

The Laos government also touts NT2 as a way of reducing its dependence on international donors, who provided $560 million in fiscal year 2008-09, about 1/10th of total gross domestic product, according to the CIA World Factbook.

Critics remain skeptical that huge profits generated by hydroelectric plants will actually trickle down to those displaced – especially in a country that Transparency International in 2008 ranked one of the world's 10 most corrupt. "How about the loss from hydropower development that is not part of formal economic data?" says Matsumoto. "I think this is a big question for the Laos government."

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