International Business Review


Controversy of the Mekong River
The Xayaburi dam project paves the way for energy security and economic development, but can this much needed boost justify environmental and social instability?

25 May 2015

Running through China, Myanmar, Laos, Thailand and Cambodia, the Mekong River is known to be a major source of food and livelihood, particularly for those living around its lower river basins. However, the US$3.5b Xayaburi hydroelectric dam initiated by the Laos government in 2012 has stirred the waters. With a targeted 11 dams on completion – 9 in Laos and 2 in Cambodia – Xayaburi is at the centre of a fierce battle of energy and economy among the governments of Cambodia, Laos, Thailand and Vietnam, and environmental activists. But with the closely-linked economies of these four country-members of the intergovernmental Mekong River Commission – and the dam now half-complete, damaging economic relations may not be ideal.

The project already caused strife between Cambodia, Laos, Thailand and Vietnam when the four governments had their first discussion on the project. All four parties had, in 1995 signed a treaty which resulted in the formation of the Mekong River Commission, whose responsibility is to promote cooperation with regards to the use and sustainability of the river. Cambodia and Vietnam called for a postponement of the construction, to allow sufficient transboundary impact studies to take place. No agreement was reached, but Laos went ahead with the project, which went against the treaty.

Laos and Thailand stand to benefit economically from the construction of the Xayaburi dam, as steady economic growth over the last few years has brought about increased demand for electricity; an essential catalyst for growth that both of these countries currently lack. While Laos, Vietnam and Cambodia use a combination of fuel imports and domestic oil production to power their countries, it is not enough, as there are at least one million households without electricity.

This is the argument that has been used to rally support for the dam’s construction, and hydropower seems to be the solution to this problem due to its indigenous renewable energy-source status. What’s more, hydropower has limited carbon emissions, and if properly implemented, is environmentally friendly. This would, in a way, help Southeast Asia mitigate climate change.

Investment benefits for Laos in terms of independent economic development, is a goal. With a country consisting of 6.3 million people, Laos is one of the poorest and least-developed countries in Asia. The dam would not only provide continuous electricity supply, but potentially, paved roads and new job opportunities, benefits that are certainly attractive. Additionally, the country will be able to secure much needed financial resources for its development programmes, because of its energy portfolio expansion, while Thailand and China will be constant, dependable consumers for 95% of the power generated.


The Aftermath

However, besides impacting food security and livelihood, completion of the Xayaburi dam would critically affect the Mekong basin’s marine inhabitants, the world’s second-highest biodiversity, after the Amazon, plus their unique ecosystem. A third of the fish species use the river to migrate a few times a year, for feeding and breeding purposes.

The river provides nourishment in the form of nutrients to paddy and agricultural fields in the Vietnam delta, and is also a tourist hotspot, which contributes to the economies of, Cambodia, Laos, Thailand and Vietnam.

Responding claims have been made by the Laos government and the Xayaburi Power Company that technological innovations, such as the redesigning of the spillway, which are constructed at dams to provide safe release of flood waters coupled with a fish passage system, will ease environmental fears raised.

According to the the Bangkok Post, Somkuan Watakeekul Board Adviser to CK Power (CKP) Thai power company and developer of the Xayaburi Dam), notes that the company has already relocated 617 families in 15 villages that will be affected by the construction and provided them with essential infrastructure and careers. He adds, “The fish migration system is a crucial part of the project, as the dam is located in northern Laos and is the country’s first hydroelectric dam on the Mekong River. Whatever the cost is to address the fish migration problem will be, CKP must accept, but the Laotian government will find a solution to compensate for the cost overrun.”

Alternative Energy

The construction of the Xayaburi dam has led to various discussions and opinions about other possible sources of energy for the region which may be equally efficient and more environment-friendly. The International Centre for Environmental Management, a non-governmental organisation, conducted a study in 2014, where they discovered that developing a combination of renewables could produce more energy in comparison to the dams, by 2025.

In Thailand, there have been suggestions to strengthen conservation measures by minimising electricity consumption in large commercial buildings. Significant financial support in advance for innovative energy projects should also be encouraged because their potential is often overlooked or overshadowed. In Vietnam, developing smallscale hydro-power systems could potentially aid with their electricity shortage. However, in both countries, the potential of solar power is massive.

Former Regional Director of USAID-Asia, David Roberts also proposed the creation of an investment fund to finance large-scale developments of alternative and sustainable forms of energy. He asserts that it will fulfil the energy needs of Vietnam and Cambodia without the environmental and social concerns. He states that this fund would be for sustainable energy, and that it could be modelled after the Global Fund to Fight AIDS, Tuberculosis and Malaria (GFATM).

Naturally Hydro

According to research and analysis company the Economist Intelligence Unit, Laos is expected to have the world’s fourth fastest growing GDP after Papua New Guinea, Turkmenistan and the Democratic Republic of Congo, 30% of which is generated from only 5% of the country’s workforce in the area of subsistence farming. Hydropower, copper and gold mining, and construction have foreign investments and participation, which have further prompted growth and reduced poverty.

This rapid economic development is also one of the reasons the country now has its own stock exchange which was established in 2011. Interestingly, Laos’ debt burden at US$32.56b is modest, compared to many of its Asian counterparts (US$46b for Cambodia, Myanmar at US$89b and Vietnam’s US$474.8b).

In terms of hydropower advances, the country is one of the ideal countries. Its excellent geographical location, in comparison to the countries surrounding it, with rivers and rainfall in abundance, already meets the primary requirements for hydropower. Besides that, it also has many mountains, which is needed to generate hydraulic momentum that can be transformed into electricity.

The construction of the Xayaburi dam undeniably brings about progress. However, the promise of economic and investment benefits does not allow an automatic elimination of environmental and social matters. A priority to work hand- in- hand with the necessary parties in an attempt to solve pending issues affecting the project, could serve a better future in boosting investment renewable energy programmes, and achieve outstanding energy sustainability, as well as a solid relationship among the said four countries.

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