Work has begun on Xayaburi dam, Thai firm says

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Announcement sparks outrage, dismay over future of Mekong River, livelihoods of millions

This photo taken in February 2012 shows work on the building of access roads to the Xayaburi dam site underway in northern Laos. Photo: International Rivers

Even the most optimistic observers did not expect that the Lao government and the Thai contractor would give up their ambition to build the first dam on the lower stretches of the Mekong River.

They were right.

But they are still outraged at the latest move, which environmental groups called a brazen defiance of multilateral agreements and a slap in the face of the other concerned riparian nations, like Vietnam and Cambodia.

On April 17, the dam's developer, Ch. Karnchang Pcl, one of Thailand's leading construction companies, announced to the Thai Stock Exchange that they had signed a 52billion baht (US$1.7 billion) contract with Xayaburi Power, a Lao-Thai joint venture, to build the controversial US$3.8 billion Xayaburi dam. Work on the dam had commenced on March 15, the company said on its website.

It was only last December that Vietnam, Cambodia, Laos and Thailand agreed to shelve Laos's plans to go ahead with the Xayaburi project and take more time study its impacts. But just one month later, the Thai Minister of Energy Arak Cholthanon confirmed that the Electricity Generating Authority of Thailand and the Xayaburi project developer had signed an agreement in October 2011 to buy 95 percent of the electricity from the dam. Four Thai banks have already provided financial support for the Xayaburi dam and in a November 2011 resolution, the Thai cabinet granted permission to the state-owned Krung Thai Bank to invest in the project.

Also in January, Bounthuang Phengthavongsa, a senior official at the Lao Energy and Mining Ministry, told Radio Free Asia (RFA) that the landlocked country desperately wanted to build the Xayaburi dam so it would try to materialize this ambition.

"Our intention and our hope is that in the end we will be able to build it despite all opposition," he was quoted by RFA as saying.


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This steadfast disregard for others' concerns has infuriated Thai communities, activists and Vietnamese scientists.

On Tuesday (April 24), 21 prominent Vietnamese scientists sent a petition to Prime Minister Nguyen Tan Dung and cabinet members, urging the government to oppose the latest move by the Thai contractor which they called "unacceptable," particularly when regional governments have yet to arrive at a decision on whether or not to approve the dam.

"It is obvious that the four riparian countries agreed last
December that there is a need for further studies on the impacts of the [Xayaburi] dam," said Dao Trong Tu, a signatory to the petition.

"I have no idea why the Thai company has gone ahead with the construction. This move is absolutely against international law," Tu told Vietweek.

While the Vietnamese government is yet to respond officially, RFA reported on April 19 that Cambodia has threatened to haul Laos into an international court if it allows the Thai company to push ahead with construction of the Xayaburi dam without any regional consensus.

Also on Tuesday, dozens of protestors belonging to communities along the Mekong River in Thailand that would be negatively impacted by the dam gathered outside Ch. Karnchang's headquarters in Bangkok calling upon the company to respect the 1995 Mekong Agreement, according to International Rivers, a US-based nonprofit group that works to protect rivers.

The protestors also marched outside the Siam Commercial Bank's headquarters asking them to stop funding for the dam, the group said.

Lame duck

The Mekong River Commission, established to coordinate dam projects on the river, had said in a December press release that the riparian countries would approach Japan and  international agencies to further study the impacts of the proposed 1,285megawatt, 810meter (2,600ft) Xayaburi dam in northern Laos, along with other proposed Mekong dam projects.

But the commission did not give a time frame for the studies or details about the involvement of Japan and international development agencies.

A February investigation by International Rivers revealed that preliminary construction on the Xayaburi dam was continuing at the time. A large number of workers had been employed for a two-year period to construct access roads and facilities for the project, the group said.

Opponent say the dam would unleash massive ecological changes on a river that sustains around 60 million people. It would also kick off construction of the other 10 dams proposed on the lower 4,900km-long (3,000milelong)
Mekong River, which also runs through Myanmar from its source in the Tibetan plateau.

A technical review released by the Mekong River Commission (MRC) in March 2011 on the Xayaburi dam is said to be the most comprehensive analysis of the project's impacts to date. Experts hired by the commission estimated that Xayaburi would curtail the migration of anywhere from 23 to 100 species of fish and spell doom for the giant catfish, the river's most distinctive species. The MRC study pointed out that Xayaburi's ability to churn out power would be severely compromised after 30 years because its reservoir would fill up with silt.

But Laos, with a population of around six million people and a gross domestic product of $5.6 billion, has promoted the Xayaburi project as a potential source of income and investment that will spur its economy. An April 2011 report by the Asian Development Bank said hydropower and mining activities would underpin the country's economic growth over the next two years. The same report stated that Laos was shooting for 8 percent annual growth and looking to shed its LDC (least developed country) label by 2020.

If what appears to be Southeast Asia' most fierce environmental battle, Laos and Thailand have maintained that the decision-making stage, or the prior consultation process, of the Xayaburi project is already over, a position strongly protested by Vietnam and Cambodia. Vietnam had even called for a 10-year moratorium on all 11 dam projects proposed on the Mekong River.

Mekong basin countries are bound by a 1995 agreement to hold intergovernmental consultations before building dams, but none has veto powers and Laos will have the final say, although considerable diplomatic pressure can be exerted on it.

"˜Real drivers'

The Mekong River Commission (MRC) said it was aware of the dam-building contract with Ch. Karnchang, but would not be able to intervene. Surasak Glahan, a MRC spokesman, explained that the contract was signed by private sector entities, and the role of the commission in the project was limited to facilitating consultations.

"[But] we will ask for clarification from Laos," Glahan told Vietweek.

Daovong Phonekeo, general director of the Lao Department of Energy Policy and Planning, maintained that the main construction of the dam has not started yet.

"Only exploratory work and preparation work, such as obtaining rock samples for stress test, have commenced since March 15," Phonekeo told Vietweek.

"Other than the Concession Agreement signed in 2010, the [Lao government] has not entered into any agreement recently," he said.

"Ch. Karnchang has signed a loan agreement with its lenders last year, but certain conditions may have just been met and, being a public company, it is therefore required by law to report to the Stock Exchange of Thailand."

With an independent study concluding that electricity generated by the Xayaburi dam is not needed to meet Thailand's demand for energy in the coming decades, experts say that at the end of the day, neither Xayaburi nor other proposed lower Mekong dams would be built if a full accounting of costs and benefits was done.

"The real drivers are the Electricity Generating Authority of Thailand's structural incentives and the profits for the developer and banks, combined with Laos's determination to gain revenues from exporting electricity to Thailand regardless of the downstream impact on its neighbors," said Richard Cronin, director of the Southeast Asia program at Stimson Center, a Washington-based think tank.

The MRC estimates that by 2025, all the proposed lower Mekong dams would provide just 68 percent of Southeast Asia's power needs.

"Thailand could easily reduce its electricity needs by 68
percent simply by adopting a moderately credible plan for reducing the many inefficiencies of the Thai grid and usage of electric power," said Cronin.

"The result of achieving developed country standards for energy efficiency would be significant benefits, not costs, to the Thai consumers," he added.

Instead, would the Lao government and Thai interests "devastate the world's most productive freshwater fishery and the source of food security and livelihoods for tens of millions of people?" Cronin asked.

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