A Dam Conundrum: Xayaburi Project Could Help Laos And Thailand, Hurt Cambodia And Vietnam

Officials in Laos announced that construction of the controversial Xayaburi dam will begin with a kickoff ceremony at the construction site Wednesday.

Protests from human rights activists and environmental groups have delayed the project for18 months, but the joint Laotian and Thai project is apparently too lucrative to put off any longer.

The dam is nominally spearheaded by the Laos-based Xayaburi Power Company, but it is financed almost entirely by three Thai enterprises, according to Bloomberg: Ch. Karnchang Pcl (CK), PTT Pcl (PTT) and Electricity Generating Pcl (EGCO).

Nearly all of the energy produced by the facility will be purchased by the Electricity Generating Authority of Thailand, a state-owned enterprise.

The revenues could have a big impact in Laos, which suffers high rates of poverty and depends on foreign aid to augment its meager GDP of about US$8.3 billion. Laotian officials hope that Xayaburi will be just the first of several dams built on the central vein of the Mekong River; future facilities may do more to generate energy for domestic use.

But the project’s critics demand more research to ensure that the dam does not endanger the tens of millions of people who rely on the Mekong River for their livelihoods.

Not So Fast

The Xayaburi controversy essentially pits Laos and Thailand, which stand to benefit most from the dam, against Cambodia and Vietnam, which are further downriver and will suffer the environmental consequences of the deal.

Adding insult to injury, the four countries are members of the Mekong River Commission, or MRC, an organization meant to encourage collaboration on any river projects. The Commission issued a report last year recommending that the Xayaburi project be delayed so that the necessary research could be carried out, and Laos has said it would abide by that agreement.

But Laos had evidently never stopped planning for the facility, and this week’s announcement marks the official decision to bring those plans out into the open.

Viraphonh Viravong, deputy minister of energy and mining, told reporters on Monday that the concerns outlined by the MRC had already been adequately addressed. Investors have spent about US$100 million to modify the dam’s design, he said, making it more ecologically sound.

“We can sense that Vietnam and Cambodia now understand how we have addressed their concerns. We did address this properly with openness and put all our engineers at their disposal. We are convinced we are developing a very good dam,” he said to BBC.

But critics, including not only Vietnamese and Cambodian officials but also internationally based environmental groups, charge that those modifications are untested and inadequate -- especially since the waters of the Mekong River are the lifeblood of thousands of Southeast Asian communities.

All Downriver from Here

The 2,700-mile Mekong River begins in China’s Tibetan Plateau and trickles south through the mountainous Yunnan Province. From there, the Mekong swings through Laos. It demarcates the country’s western border in two spots, separating it from Myanmar and then Thailand. Continuing southward, the river crosses Cambodia and finally Vietnam before emptying into the South China Sea.

The Mekong River Basin is teeming with life; it is one of the world’s most spectacular biodiversity hotspots. Its myriad species of fish and other water-dependent creatures like frogs, snails and turtles constitute the main source of animal protein for human consumption in the region, and are therefore integral to the survival of many rural communities in Laos, Cambodia and Vietnam.

According to the most recent “State of the Basin Report” from the MRC in 2010, the people of the Lower Mekong Basin -- the land along the portion of the waterway that lies south of China -- consume nearly 3 million tons of fish from the river and its tributaries every year. In addition, farmers from Myanmar to Vietnam rely on the river to irrigate their farms, helping them to produce everything from rice to coffee to sweet potatoes.

Thousands of small dams already exist on the Mekong’s many tributaries, but a large facility on the main waterway is far more risky. If not executed carefully, it could have dire consequences for the millions of people who rely on the river’s robust ecosystem.

“Dams are a barrier to fish migrations up and down rivers, and mainstream dams in the middle and lower reaches of the Mekong could affect more than 70 percent of the basin’s catch,” said the MRC report. The lack of fish, combined with lower agricultural productivity across the region, could lead to “reduced production, substantial economic cost and social deprivation.”

But while the people who live in and around Lower Mekong Basin currently enjoy well-irrigated farms and plenty of fish, they also suffer a dire lack of energy -- and this is central to the argument of those who support the Xayaburi Dam.

A Weighted Exchange

Southeast Asia has experienced steady economic growth over the last several years, but the resultant rise in energy demand -- especially for electricity -- has been woefully underserved. Laos, Vietnam and Cambodia are increasingly reliant on fuel imports, which, even combined with domestic production, leave tens of millions of households with no electricity at all.

Hydropower could change that. It is a domestic solution that has the added benefit of being environmentally friendly, if properly executed.

“Hydropower is regarded as an indigenous renewable energy source with limited carbon emissions,” says the MRC report. “Increasing its use could boost the region’s contribution to climate change mitigation, through reducing dependence on fossil fuels (coal, gas and oil) that today account for up to 80 percent of total electricity generation.”

It is no wonder that Laos is eager to forge ahead with its Xayaburi plans. Hydropower electricity generation is the best bet for independent economic development in this poverty-stricken country; its 6.3 million people have plenty to gain, especially with Thailand as a dependable consumer.

But in the end, success depends on execution -- and Laos’s competency as a steward of this project is questionable. The national one-party government tends to exercise heavy-handed control over commerce, despite ongoing liberalization. It is also steeped in corruption.

In the worst-case scenario, that the Xayaburi dam will not only disrupt the livelihoods of tens of millions of people downstream; it could also fail to deliver the expected economic benefits to the Laotian society as a whole.

But it does not seem that Viraphonh is losing sleep over either of these risks.

"I am very confident that we will not have any adverse impacts on the Mekong river," he said to the BBC. "But any development will have changes. We have to balance between the benefits and the costs."