Laos Seeks to Gain Neighbors' Approval for $3.8 Billion Mekong River Dam

Apr 18, 2011
By Daniel Ten Kate
Bloomberg Markets Magazine

Laos will meet with neighboring Mekong River countries today in an effort to win their approval for a planned $3.8 billion hydropower dam and allay concerns it would disrupt fish catches and rice production downstream.

The Xayaburi hydropower plant is the first of about 10 dams the government plans to build on the mainstream Mekong, which runs from China’s Tibetan plateau through Myanmar, Thailand, Laos, Cambodia and Vietnam. Lao officials will make the final decision on plans for its biggest electricity plant to date after today’s meeting.

“The government will consider the concerns of the riparian countries and try to convince them of the advantages,” Daovong Phonekeo, deputy director general of Laos’s Department of Electricity, said by phone from Vientiene, the capital. “The project is necessary because our country is less developed. We don’t have other means to increase revenue.”

Southeast Asia’s smallest economy is aiming to use its resources to boost incomes for its 6 million citizens who comprise Asia’s youngest population. Hydropower and mining projects are set to underpin gross domestic product growth that may reach 7.7 percent this year, the Asian Development Bank said in an April 7 report.

The Mekong and its tributaries provide food, water and transportation to about 60 million people in those four countries. U.S. Senator Jim Webb said April 15 that approval of the dam could cause “irreversible” damage and threaten the stability of Southeast Asia.

Thai Builders

Thailand agreed in December to buy 95 percent of the electricity from the plant, which will have a capacity of 1,285 megawatts. Ch. Karnchang Pcl, Thailand’s third-biggest construction company by market value, owns a 57 percent stake in the 115 billion baht ($3.8 billion) project.

Ch. Karnchang shares have fallen 6.3 percent this year, compared with a 5.5 percent gain in Thailand’s benchmark SET Index. The Laos Composite Index, which opened on Jan. 11 with two stocks, has gained 34 percent since then.

PTT Pcl (PTT), Thailand’s biggest energy company, has a 25 percent stake, while Bangkok-based Electricity Generating Pcl (EGCO) owns 12.5 percent, according to company filings. The project is expected to start commercial operations in January 2019, PTT told the Thai stock exchange on March 1.

The Xayaburi plant will help “to secure and to stabilize” Thailand’s energy supply over the long term, Prasert Bunsumpun, president of state-owned PTT, said in the statement.

‘Bleak’ Future

Representatives from Laos, Thailand, Cambodia and Vietnam will attend today’s meeting hosted by the Mekong River Commission, an intergovernmental body. The countries agreed in 1995 to consult each other before building hydropower plants on the Mekong or its tributaries.

International Rivers, a Berkeley, California-based nonprofit group that aims to protect rivers and human rights, expressed outrage yesterday after a report in the Bangkok Post that preliminary construction activities had begun on the dam.

“If the Lao government does not act in good faith and respect the regional processes that it has committed to, the future of the Mekong River and its people is indeed bleak,” Ame Trandem, a Mekong Campaigner with the group, said in a statement.

Vietnam officials in January recommended delaying the project and moving it to a Mekong tributary because it would affect “the safety of water sources and food security for Vietnam as well as for the whole world,” according to notes of the meetings posted on the commission’s website. Thailand and Cambodia also favored more studies on the dam, they show.

Giant Catfish

“Mekong nations need to work closely together to exploit and use the natural resource in a fair and proper manner in order to protect the environment,” Nguyen Phuong Nga, a spokeswoman at the Ministry of Foreign Affairs, was quoted as saying in state-run Vietnam News today.

A technical review by the commission released last month found that the dam may lead to the extinction of species like the Mekong giant catfish and “gaps in knowledge” mean the full extent of the downstream impact on fisheries is hard to estimate. The dam “will not materially affect” the quantity and timing of river flows to Cambodia and Vietnam, it said.

China has already built four hydropower dams on the Mekong, completing the first one in 1993 without consulting its downstream neighbors. It plans to build four more as part of efforts to almost double its hydropower capacity to at least 300 gigawatts by 2020.

Laos also plans to sell electricity to Vietnam, Daovong said, adding that hydropower serves as an alternative to nuclear power. Vietnam, which faced rolling electricity outages in February, last year announced plans to build as many as 13 nuclear power plants with a capacity of 16,000 megawatts over the next two decades.

“We are trying to benefit not only our country, but also develop a cheap source of electricity for our neighbors,” Daovong said. “Each riparian country has the right to use the Mekong River for its own development.”