Forced displacement, destroyed livelihoods
Now that the Nam Theun 2 Hydropower Project is in operation, a wide range of negative social, environmental and economic consequences are apparent. The project has directly affected approximately 1 in 50 Laotians. Despite being propped up with financing from the Asian Development Bank and World Bank, programs to restore villagers' livelihoods have ultimately failed to come up with options to sustain  people's social and economic well being on both the Nakai Plateau and along the Xe Bang Fai River.

The approximately 6,200 resettled indigenous people now living on the Nakai Plateau have new houses, roads, and electricity. But they continue to raise major concerns about how they will be able to feed their families over the long term and earn sufficient incomes to pay for electricity and basic daily goods. Villagers have received small plots of poor quality land on which traditional farming methods for rice and vegetables consistently fail. Given the lack of market for any produce, and a lack of ability to grow enough food on which to live, they have come to rely on expensive outside goods being trucked up to the plateau. People have also been confronted with lower fish catches on the reservoir than originally promoted by NTPC.

With few livelihood opportunities available, many young people are migrating out. The illegal trade in rare rosewood timber is also providing some families with an immediate cash windfall that is neither sustainable over the long haul nor a solution to the question of how to ensure the well-being of future generations of local people.  

Along the Xe Bang Fai, villagers are now faced with more frequent flooding, a complete loss of the fisheries they once relied upon, and flooded riverbank gardens. Solid plans to replace these critical sources of food and income have failed to materialize, and the short-term programs set up by NTPC, the World Bank and Asian Development Bank have yet to successfully restore all affected villagers' livelihoods.

Nam Theun 2 has already had significant negative impacts on the biodiversity of the area. The project is located in and adjacent to one of the largest remaining tropical forests in mainland Southeast Asia. The reservoir fullly inundated the habitat of 60 species of birds and mammals and disrupted migration routes. Before the dam was built, the area was home to a large variety of rare and endangered plant and animal species, including one of the last remaining populations of wild elephants in Laos. The project will has had adverse impacts on fisheries on the Theun River and the Xe Bang Fai.

A key selling point of the Nam Theun 2 project was that it would provide funds for the protection of the globally significant Nakai-Nam Theun National Protected Area, yet the reservoir has opened up access to the area, threatening its ecological biodiversity.  As of mid-2013, the international Panel of Social and Environmental Experts that has been conducting monitoring missions since the beginning of project operations, observed that poaching of animals and illegal logging of rosewood trees continues at an alarming pace. The programs and staff that are supposed to protect the area are grossly underresourced. As a result, the forest area surrounding the dam is being decimated with little hope of preservation of this rich diversity of life for future generations.

The World Commission on Dams found that women and ethnic minorities were disproportionately affected by dam projects. As women are often responsible for ensuring the sustainable livelihoods of their families, impacts on these livelihoods through destruction of fisheries, flooding of agricultural land and forests, and displacement often result in women bearing a disproportionate share of the costs. It is women who are often left with the burden of caring for their families, finding alternative land and water sources and alternative livelihoods when these are taken away through the development of destructive dam projects.

Faulty "development" justification
Nam Theun 2’s “development” justification hinges on the Lao government using revenues from the project to help the project affected people and ensuring that their livelihoods are improved or restored. This claim was the basis for World Bank and ADB support for Nam Theun 2. As evidenced by some of the problems to date, including the failure to provide replacement land to villagers affected by NT2's construction, the World Bank and the ADB have no real enforcement powers to ensure that Lao the government and NTPC keep their promises.

According to World Bank governance indicators, Laos rates far below most low-income countries on civil and political rights and control of corruption. The World Bank’s revenue management proposal for Nam Theun 2 provides no assurances that these constraints will be overcome. Revenue allocation, monitoring and reporting is left to the finance ministry officials in the Lao Government. The revenue management arrangements specifically reject the use of an independent oversight body or external independent auditing of Nam Theun 2 revenues.