The New “Battery of Asia?” – Laos intends to build more than 70 dams along tributaries of the Mekong River

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By Luke Hunt

November 01, 2012

Laos intends to build more than 70 dams along tributaries of the Mekong River. While there are rich profits to be made, is the cost too high?

Photo Credit: International Rivers (flickr)

International concerns about Lao’s plans to massively dam the Mekong River and its tributaries have again been brushed aside by the authorities in Vientiane who have announced new contracts worth about $1.0 billion to build three dams.

The dams will feed a hydropower plant on two tributaries of the Se Kong River, just 100 kilometers from Laos’ southern border with Cambodia. The Se Kong flows into the Mekong from the Bolaven Plateau which then feeds into the Lower Mekong Delta.

However, no environmental impact assessments are known to have been done and the incident has further stoked tensions between Laos and conservation groups and regional countries already angered with Vientiane and its attitude towards the construction of the U.S. $3.8 billion Xayaburi Dam to be built 150 kilometers downstream from the old royal capital city of Luang Prabang,

The Xe-Namnoy will be constructed by South Korean firm SK Engineering & Construction and will be aimed at producing 400 megawatts of electricity from water flowing from a height of 630 meters.

According to media reports, SK Construction expects to earn about U.S.$30 million a year from fees while the South Korean state-run firm Korean Western Power will operate the dam until 2045. After that control will be handed over to Laos.

More importantly, conservationists now say that Laos intends to build more than 70 dams along tributaries of the Mekong River, significantly higher than previously thought.

Plans for a possible 11 dams have long been known, but International Rivers says that of the 70 dams, eight were currently under construction on the Xe Kaman and Xe Kong rivers, another 15 are intended for the Sekong River basin and a further seven on the Nam Ou River.

Laos is enjoying a purple patch. The upcoming Asia-Europe Meeting (ASEM) will be the most important diplomatic event in Laos since the communist takeover in 1975. It is also on the verge of joining the World Trade Organization (WTO). Massive rail, road and airport projects are also in the works.

And authorities are convinced the tiny landlocked country will get rich quick by turning itself into the “battery of Asia” using its steep mountains and caverns and the abundant rivers that flow through them to feed hydropower plants which will produce enough electricity to allow Laos to export it to its neighbors.

However, independent reports on food security have been consistent. One prepared by the International Center for Environmental Management for the Mekong River Commission (MRC) found that 11 dams could cut fish resources by more than 40 percent.

The impact of 70 dams on the 60 million people who depend upon the Mekong for their livelihoods is impossible to measure at this stage and getting straight answers out of any of the countries involved has proven almost impossible.

The Mekong River countries– Thailand, Cambodia, Laos and Vietnam– had agreed last December not to proceed with Xayaburi until a trans-boundary impact study was made among the communities living downstream.

The World Wildlife Fund and International Rivers want Xayaburi scrapped, labeling it an environmental disaster that will alter the river’s patterns and impact on fish catches.  This came amid increasing concerns over Chinese dams built further upstream that have already been blamed for recent droughts along the Mekong with water shortages causing conflict within farming communities.

Pressure from the United States and Australia – both significant financial backers of the MRC – added to the momentum over Xayaburi. Japan offered to fund the impact study but to date it has not been initiated. Laos paid lip service to these concerns but proceeded with construction anyway.

This probably has more to do with Thailand. Thai company C.H. Karnchang has been contracted to construct the 1,206-megawatt Xayaburi dam over the next eight years while the Electricity Generating Authority of Thailand (EGAT) will buy 90 percent of the power on completion.

90 percent of the electricity generated at Xe-Namnoy will also be sold to Thailand while some reports suggest deals are being made to sell power to Cambodia.

This has changed the geopolitical makeup of the region with deals between Laos and Thailand upsetting traditional ties between Laos and Vietnam. Hanoi – with food security in the Mekong Delta as its primary concern – had been unusually vocal in its opposition to Xayaburi.

The controversy has also left its mark on the other side of the world. Finnish engineering company Pöyry Group produced a report claiming designs for Xayaburi had met dam construction standards as laid down by the MRC.  Cambodia and Vietnam rejected the report a year ago.

Pöyry was then forced to issue a public statement denying allegations made in a complaint filed to the Finnish government by 15 civil society groups claiming Pöyry had engaged in unethical behavior in the Mekong region.

They said Pöyry’s actions had violated OECD guidelines for Multination Enterprises, a global standard for corporate responsibility that all Finnish companies are obliged to adhere to.

Further, under the Laos government’s own laws regulating development projects it must publicly release all assessments made on such projects. Failure to release any reports on Xe-Namnoy would be a breach and should be a major concern for contractors and bankers prepared to sign off on the deal.

Only Laos seems unequivocal in its right to get rich quick by damning the Mekong. Few others with any modicum of common sense seem to agree.

Photo Credit: International Rivers (flickr)

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• Mekong Battle Delayed
• The Battle Over the Mekong
• Battle for the Mekong Heats Up
• Asia’s Water Crisis
• Asia’s Opium Resurgence

Myanmar, Laos see large increase in opium cultivation, UN says

• CHINA NEWS
• Updated October 31, 2012, 4:58 p.m. ET

Opium Production Rises on China Demand

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By SAM HOLMES

Opium cultivation in Southeast Asia’s main poppy-growing countries has more than doubled over the past six years driven largely by rising heroin demand in China and despite recent efforts by regional governments to eradicate the crop, the United Nations’ narcotics office said in a report released Wednesday.

AP.  In this photo released in Feb. 2012 by the U.N. Office on Drugs and Crime (UNODC), villagers harvest opium at a field in Myanmar’s Shan state.

The report’s figures show a resurgence in poppy cultivation in Southeast Asia’s notorious Golden Triangle—an area where parts of Myanmar, Laos and Thailand converge—that abuts southern China. It is one of the world’s two main opium-producing regions, the other being the Golden Crescent across Pakistan, Afghanistan and Iran.

In Myanmar, the increase in illicit drug production comes despite recent political and economic reforms in the country—which as the world’s second-largest grower of poppy after Afghanistan accounts for a quarter of global cultivation—and risks reversing inroads made in a 13-year effort to eliminate opium there. The planted areas are extremely rugged and often controlled by insurgents turned traffickers.

“Because it threatens both the livelihoods of desperately poor people as well as income for armed groups, the act of eradication involves a lot of risk,” said Gary Lewis, the representative for the U.N. Office on Drugs and Crime’s East Asia and Pacific division.

“We must engage with the farming communities and persuade them—with alternative development —to stop growing poppy,” Mr. Lewis said.

The number of opiate users in East Asia—particularly China—and the Pacific now accounts for a quarter of the world’s total use, up from a fifth between 2000 and 2005. According to the World Drug Report, also put out by the U.N. Office on Drugs and Crime, registered heroin users in China rose to 1.1 million in 2010 from about 900,000 in 2002 and account for more than 70% of all heroin users in East Asia and the Pacific.

While estimates of the total number of heroin users in China—including unregistered users—are harder to gauge, the total number of injecting drug users is believed to be about 2.5 million, according to the U.N.

A spokesman for China’s Foreign Ministry on Wednesday said the country has contributed to regional and global counternarcotics initiatives and “made great efforts in preventive education and the prohibition of drugs and drug rehabilitation.”

In July, China’s Ministry of Public Security said the Golden Triangle remains China’s biggest source of illicit drugs.

The drug trade remains a funding source for weapons purchases by armed groups in Myanmar, Mr. Lewis said, though cease-fire negotiations in many of the conflict zones mean progress has been made in breaking part of this nexus. About 90% of the country’s cultivation takes place in Shan state in the north, where a cease-fire between the Myanmar military and several ethnic militias was recently brokered. The area also produces methamphetamines, which are sold in abundance across the border in Thailand.

The annual report, which focused on cultivation patterns in Myanmar and Laos, with Thailand’s poppy production now negligible, found that while annual cultivation is still well below the highs seen in the late 1990s, it has made a steady comeback since the low levels seen in 2006.

Opium cultivation in Myanmar increased to 51,000 hectares in 2012 from 21,600 in 2006, while cultivation in Laos rose to 6,800 from 2,500 over that period. In 1999, when

Opium Rebounds on China Demand

Myanmar had more than 89,500 hectares under cultivation, the country outlined a 15-year plan to eradicate illicit opium cultivation by 2014, a target that the government clings to, with hedging.

“No one can say absolutely we will be drug free by 2014,” said Lt. Col. Zaw Lin Tun, deputy director of Myanmar’s Central Committee for Drug Abuse Control in the Ministry of Home Affairs, though he thought that cultivation and drug use can be reduced. He said that the U.N. assessment was accurate.

With the monetary yields of opium crops about 15 times as high as other cash crops, the plant has remained a far more compelling livelihood for many farmers, who live on steep hillsides and often lack means to get other crops to market.

Seng Wan, secretary of the anti-narcotics committee of the political arm of the Shan State Army, which has mostly made peace with the government, said that many young people in the state, home to about 4.8 million people, are addicted to drugs and blamed the increase in cultivation on the lack of alternative development options.

“When you try to cut down poppy plants, you are taking away their livelihood,” he said. “We are trying to cooperate with the government and the UNODC to reduce farming of poppies.” But the unrest in the state has meant the U.N. group has until recently been barred from all but two small districts in Shan to help promote alternative crops.

Myanmar remains on the U.S. government’s list of major drug-producing and drug-transiting countries, although the U.S. is now exempting the country from aid restrictions due to its recent democratization reforms and efforts to work with the U.S. on drug enforcement.

—Celine Fernandez,
Wayne Ma and Kersten Zhang contributed to this article.

—

Related News:

• Myanmar, Laos see large increase in opium cultivation, UN says  Los Angeles Times-10 hours ago
• Opium Output Jumps in Burma, Laos Radio Free Asia
• Myanmar opium output rises despite eradication effort Highly Cited – Reuters

Laos Comes of Age as Trading Partner

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• WORLD NEWS
• Updated October 25, 2012, 9:59 p.m. ET

By PATRICK BARTA

A vote on Friday that formally approved Laos’s application to join the World Trade Organization marked a key coming of age for the small, landlocked Communist country, which has quietly posted some of the world’s strongest economic growth over the past several years.

It also marked the latest step in a Southeast Asian push to integrate economies in the region of 600 million people as it tries to present itself as a single-market, more-viable investment alternative to China.

Laos remains one of the weakest links in Southeast Asia’s ambitious effort to create a 10-nation economic community by 2015, with streamlined customs procedures, better transport links and freer flows of labor, among other steps. With just 6.5 million people, poor road and rail links, and some of the lowest income levels in Asia, Laos is rarely seen as a serious contender for manufacturing or other investments and it carries relatively little weight in regional economic matters.

Most people familiar with the country still think of it as little more than an offbeat tourist destination where backpackers down bottles of locally made Beerlao along stretches of the Mekong River. Daily trading on Laos’s new stock exchange, launched in January 2011, fell to as low as $941 in April, according to the World Bank.

Joining the WTO isn’t expected to change that overnight. Nor is it expected to produce the kind of surge in investment that accompanied China’s and Vietnam’s accession to the global trade body in 2001 and 2007, respectively. Those countries already had sizable export industries when they joined, and their giant labor forces made them far more attractive for multinationals.

But over the longer term, Laos’s membership in the WTO is expected to provide a badge of approval for the country that could make it easier for global firms to do business there, especially as manufacturers look for substitutes for China, where wages have risen rapidly.

Accession to the WTO “sends a very positive signal to the international community that Laos has arrived,” said Jayant Menon, lead economist in the Office of Regional Economic Integration at the Asian Development Bank. “They’re on the radar now.”

It will also help make it easier for Southeast Asian leaders to make investors view the region as one giant market, with the ability to connect supply chains across its 10 countries, all of which will now be subject to WTO mechanisms for the first time. Even Myanmar joined in 1995, before the West launched its most crippling economic sanctions, which are only now being lifted after the country’s recent reforms.

“We hope the WTO will open our doors,” said Oudet Souvannavong, a vice president of the Lao National Chamber of Commerce and Industry who also runs an import-export business that imports construction equipment into the country from as far away as Australia. Although it will likely take a few years, he says, he hopes Laos will now start emerging as a serious option for Japanese and Western companies that currently source manufactured goods like mechanical parts from places like Thailand or Cambodia.

“We cannot afford to be out of the value chain,” he said.

In particular, WTO membership could help Laos further develop its small, but growing, garments sector, an industry that has become a major source of jobs in other lesser-developed nations such as Cambodia and Bangladesh.

Laos’s landlocked position between Thailand, Vietnam and other countries means that anything it produces faces added transportation costs to get it to global markets. The country is heavily reliant on just a few industries, including copper and gold mines, and it lacks some of the institutional capacity to enforce WTO rules of larger countries such as China. But it has already made enormous progress in recent years, investors say, and its WTO membership talks accelerated rapidly over the past year after a slow start with years of little progress.

Laos’s small presence in the global economy goes back to the Vietnam War era, when U.S. bombing missions dumped more ordnance on the tiny nation than was dropped on Germany and Japan together in World War II.

Afterward, it became a Communist nation, but the government began encouraging private enterprise in the mid-1980s, and today the country is increasingly market-oriented. The U.S. normalized trade relations with Laos in 2004, and its new stock exchange, though small, is expected to grow.

This year, Laos is expected to post 8.3% growth according to the International Monetary Fund, which likely would make it the fastest-growing economy in Southeast Asia. That follows a decade in which Laos averaged 7% growth a year, driven largely by investments in mining and hydroelectric power, with 20 hydrodam projects now under development.

A number of U.S. companies have visited on trade missions over the past 18 months, including Coca-Cola, Chevron and Citibank. The main city of Vientiane is increasingly chock-a-block with traffic and new wine bars.

“We see real potential in Laos as another growth market for the region,” said Dave Westerman, Asia Pacific regional manager for export operations at Ford Motor Co. The auto maker is working with a local distributor to make “some significant additional investments to upgrade and expand our local operations” as part of plans to create a nationwide sales and service network, he said.

Under the terms of membership, Laos is agreeing to cap its tariffs at an average of about 19% and expand market access. It has also passed or is working on legislation to boost protections for intellectual property, improve customs procedures and otherwise bring the country into line with international trade norms.

After Friday’s vote at the 157-member WTO, Laos must still formally ratify the agreement. It is expected to do so in the coming weeks.

— Jacob Gronholt-Pedersen and Celine Fernandez contributed to this article.A version of this article appeared October 27, 2012, on page A9 in the U.S. edition of The Wall Street Journal, with the headline: Laos Comes of Age as Trading Partner.

Laos on Mekong River Dams: More Lao dam deals inked

More Lao dam deals inked

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Published : Thursday, October 25th, 2012
By : The Phnom Penh Post

Category : Energy, Water
Region : Cambodia, Laos
Tags : dams, electricity, food security, hydropower, rivers

Laos has contracted firms to build and operate another significant hydropower plant on the Mekong River system, adding to the existing furore over potential effects on downstream countries such as Cambodia from the controversial Xayaburi dam.

The contracts, reportedly worth $1 billion, are for a series of three dams making up the Xe-Namnoy plant on two tributaries of the Se Kong River, which flows into the Mekong from the Bolaven Plateau in southern Laos – just some 100 kilometres from Cambodia.

Because of this close proximity, communities on the Cambodian-Lao border would feel particularly acute downstream affects; however, since no impact assessments of the project had been made public, this was hard to measure, conservation group International Rivers warned yesterday.

Sang Lee, an employee from the architectural department of South Korean firm SK Engineering & Construction, which has been contracted to build the dams, confirmed yesterday that project details were now being ironed out ahead of construction.

“As far as I know, they’re trying to arrange finances, and at this stage, they are working on technical documents,” he said. “I’m not so sure about when construction will start.”

Lee asked for further questions to be emailed so they could be answered by someone handling the project. A response was not immediately received.

Tania Lee, Lao program coordinator at International Rivers, said the plant would have potentially severe but unclear impacts on hydrological flow, fishing and food security.

“The major lack of any information is a huge problem, because we don’t know if the environmental impact assessment has been done or a social impact assessment has done,” she said.

The Laos government’s failure to publicly release such assessments violates the country’s own laws regulating development projects, yet despite this, an international lender was considering granting a loan for the project, she added.

In total, Lee said, Laos planned to build more than 70 dams on various tributaries of the Mekong and was now constructing eight dams on the Xe Kaman and Xe Kong rivers dams with about 15 planned for the Sekong River Basin and seven on the Nam Ou river in the north.

The Xe-Namnoy plant will generate an estimated 400 megawatts of electricity from water flowing from a height of 630 metres, according to the website of the firm Team Group, which is providing consulting services for the project.

As is the case with Xayaburi, Laos is planning on selling significant amounts of the power generated by the dam – 90 per cent – to the Electricity Generating Authority of Thailand, Team Group’s website states.

EGAT, which has resisted pressure from conservation groups to cancel its power purchase agreement for the 1,285 megawatt Xayaburi dam because of the predicted environmental havoc it will wreak, did not respond to inquires from the Post yesterday.

An SK Construction spokesman estimated Laos would earn about $30 million annually from fees and taxes, Agence France Presse has reported.

South Korean state-run firm Korean Western Power will operate the dam until 2045, when control will be handed over to Laos, according to AFP.

Officials at the Lao Ministry of Natural Resources and Environment could not be reached and Mao Hak, Cambodia’s director of river work at the Ministry of Water Resources, declined to comment, because he was not aware of the project.

South Korean Construction will build three dams and a hydropower plant on Mekong River

S. Korean firms win $1bln hydro-plant deal in Laos

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(AFP) – October 23rd, 2012

SK Construction will build three dams and a hydropower plant on Mekong River (AFP/File, Voishmel)

SEOUL — South Korean builder SK Engineering and Construction and state-run Korean Western Power have won a $1.0 billion deal to build and operate a hydropower plant in Laos, an official said on Tuesday.

Under the deal with the Laotian government, SK Construction will build three dams and a hydropower plant at the Mekong River in the southern plateau of Bolaven by 2018, an SK Construction spokesman told AFP.

The Xe-Namnoy plant — with an estimated capacity of 410 megawatts — will be owned and managed by Korean Western Power until 2045, after which it will be taken over by the Laotian authorities, he said.

The electricity generated at the plant will mostly be sold to Thailand while the Laos will earn an estimated 33 billion won ($30 million) annually in taxes and other fees, he added.

Copyright © 2012 AFP. All rights reserved.