A woman with a dog ride on a vehicle carrying belongings in the flooded area in Sanamxai, Attapeu province, on July 26, 2018. Photo: AFP/Kao Nguyen
A woman with a dog ride on a vehicle carrying belongings in the flooded area in Sanamxai, Attapeu province, on July 26, 2018. Photo: AFP/Kao Nguyen

The July 23 Xe-Pian Xe-Namnoy hydropower dam collapse that left at least 35 dead, 99 missing and 6,000 homeless in Attapeu province in southern Laos was an unprecedented manmade tragedy and wake-up call for the communist-run nation.

But the disaster’s negative impact, highlighted in international media coverage questioning the government’s safety and construction standards, might yet have a long-run upside for the Greater Mekong Sub-region.

On August 8, Lao Prime Minister Thongloun Sisoulith ordered an investigation on the cause of the disaster, while his Cabinet called for new inspections of the country’s 42 existing dams and those still under construction.

The Cabinet also announced a suspension of all investments in new hydroelectric power proposals, with 56 such projects currently in the pipeline.

The suspension of Laos’ previously rapid hydropower push is welcome news for environmentalists, farmers, fishermen and villagers living downstream of planned new dams on the lower Mekong River and its tributaries in Cambodia, Laos, Thailand and Vietnam.

Lao Prime Minister Thongloun Sisoulith in a November 28, 2016 photo. Photo: Reuters/Thomas Peter

Even Lao technocrats, the masterminds of the country’s drive to become the “battery” of Southeast Asia through hydroelectricity exports, now agree with the need to pause the nation’s rapid dam-building.

“For me, it is for the better,” said Viraphonh Viravong, former vice minister of energy and mines and the main technocrat who pushed through many controversial projects including the Xayaburi dam on the Mekong mainstream. “We have done so many projects; it is time we reassess,” he told Asia Times.

There were warnings before the Xe-Pian Xe-Namnoy dam’s collapse. A previous dam disaster occurred in September 2017, when the reservoir of the 15 megawatt Nam Ao dam – built by a Lao contractor – overflowed its banks and wiped out downstream villages. There were no reported fatalities in that smaller-scale disaster.

By comparison, the US$1 billion Xe-Pian Xe-Namnoy dam, built by a joint venture between South Korea’s SK Engineering & Construction, Korea Western Power, Thailand’s Ratchaburi Electricity Generating Holding PLC and Lao Holding State Enterprise, is part of a massive 420 megawatt project.

The dam, financed mainly by Thai lenders, was scheduled to open next year and planned to export 90% of its power to Thailand.
Both incidents have raised questions about the Lao government’s ability to supervise mega-dam construction and enforce basic safety standards.

“It comes down to the government’s oversight capacity,” said Soulinthone Leungkhamsing, senior economic officer at the Asian Development Bank (ADB) in Laos. “You have to go back to the strategy of hydropower and question it.”

An aerial view of the flood in Sanamxai in Attapeu province two days after a dam collapsed on July 23. Photo: AFP/ Handout/ Mime Phoumsavanh

Laos’ ambitions to transform its abundant water resources into foreign currency-generating energy exports have been questioned before. Its plans to build ten dams on the mainstream Mekong River – one of which, the 1,285 megawatt Xayaburi dam, is due to begin production next year – have drawn sharp criticism from both regional governments and nongovernmental organizations.

The Xayaburi dam, built by Thai contractor Ch Karnchang PCL and designed to export 90% of its electricity to Thailand, was opposed by both Cambodia and Vietnam. Both expressed concerns about the run-of-river structure’s downstream impact on their fisheries and sediment flows.

Under the 1995 Mekong Agreement, signed by Cambodia, Laos, Thailand and Vietnam, mainstream dam projects are required to be vetted by the four-nation Mekong River Commission before commencing, but the pact lacks the legal teeth to actually halt projects. The MRC is comprised of Cambodia, Laos, Thailand and Vietnam.

Laos, for instance, decided to go ahead with the Xayaburi scheme in 2011 despite ongoing objections from Cambodia and Vietnam. In an 2010 assessment study on the impact of 12 dams planned for the mainstream Mekong River in Laos and Cambodia, the MRC called for a ten-year moratorium on the projects.

The study found that while the 12 dams could generate up to 14,697 megawatts of power, earning Laos and Cambodia up to US$2.6 billion in export revenues a year, they would also impose huge environmental costs.

Fisheries, in particular, would suffer, with losses estimated at US$476 million a year, the MRC study found. Suspended sediments in the river, an important source of rich soil for downstream agriculture and a necessary bulwark against sea-water influx in southern Vietnam’s Mekong Delta, would be reduced by 50%, the same study said.

Reservoir of the Nam Theun 2 hydropower station in the Lao central province of Khammouane. Photo: AFP/Nam Theun Power Company

A more recent MRC assessment published in December 2017 warned that under hydropower projects scheduled for competition by 2020, nearly 25% of their economic gain would be lost in fisheries’ decline alone.

Thailand is the top beneficiary of Laos’ relatively cheap hydroelectricity. Conspicuously missing from the MRC studies are detailed assessments of the impact of the eight Chinese dams already built on the Upper Mekong, or Lancang, where another 20 such projects are planned.

China and Myanmar have both refused to join the MRC. Since 2015 Beijing has pushed the Lancang Mekong Cooperation (LMC) as a rival regional coordinator of water resource development, another indicator of China’s growing political and economic clout in Southeast Asia.

“I see this disaster and potential environmental crisis down the road as an opportunity for Cambodia, Laos, Myanmar, Thailand and Vietnam to use as an impetus vis-a-vis China and vis-a-vis water resource utilization,” said Thitinan Pongsudhirak, director of the Institute of Security and International Studies (ISIS), a Bangkok-based think tank.

“This is an opportunity to bring in the ADB, bring in the international expertise and to maybe beef up the MRC. It’s a good pretext to reorganize how the Mekong is managed.”

View of the Mekong River approaching Pak Beng in Laos. Photo by Rob Young/Flickr 

For a start, a strengthened MRC might help Laos get its own hydro-priorities in order. Either way, the country faces difficult decisions ahead, which could be made easier by a realistic reassessment of future regional demand for its hydropower.

Hydroelectricity is currently Laos’ main export, as revenues from silver and copper mines taper off due to depleted reserves. Analysts say the government is banking on hydroelectricity exports to fill the gap from the decline in its mining sector.

Despite being one of Asia’s poorest countries, Laos faces oversupply on its domestic electricity market. “There is oversupply for the domestic market, because there is no demand,” ADB’s Soulinthone said. “There is no industry to absorb our supply.”

Whether or not there is a looming oversupply for electricity exports to the region is a more complicated projection. Currently, Laos’ two major markets for hydropower are Thailand and Vietnam.

While there are well-established transmission connections to Thailand and southern Vietnam, Laos has yet to build a transmission line to northern Vietnam, limiting that market’s potential.

Power distribution lines coming from hydropower plants run through Pak Se district in Champasak province, Laos, July 25, 2018. Photo: AFP/Ye Aung Thu

“People are now saying that Laos is heading into an oversupply situation,” said one Vientiane-based international agency’s head who requested anonymity.

“Thailand will not be able to use all the power they have signed up for, and big plants are coming on soon like Xayaburi in 2019 and Xe-Pian Xe Namnoy which will be fixed and go ahead, maybe a year late. So there is a lot of generation going on.”

Both Thailand and Vietnam are now looking more seriously at solar power as a viable renewable energy source and one without the environmental and social risks of hydropower, as the Attapeu disaster starkly highlighted.

“What happens in the Mekong region is they start with a project and then they find the market and the financier, instead of assessing the overall demand for electricity in the region,” said Pianporn Deetes, Thailand campaign director for International Rivers, a nongovernmental organization.

The Xe-Pian Xe-Namnoy dam disaster could yet lead to that regional rethink. But with Laos increasingly banking on electricity exports for its economic development, it’s still more likely to halt smaller domestic-oriented power plant projects and after a delay resume the larger projects aimed at Thai and Vietnamese markets, experts predict.