dam collapse

Laos gambles on becoming ‘battery of Southeast Asia’

The collapse of a hydroelectric dam in Laos last week has reinvigorated a debate on the potential consequences of the country’s fervent building of dams, leaving many to question if the rewards outweigh the risks

Thomas Brent
August 3, 2018

When a section of Xe-Namnoy dam crumbled last week in southern Laos, it caused widespread flooding and devastation. While the death count is still unclear, it is thought that hundreds or thousands are still missing.

The collapse also had another effect: it shined an intense spotlight on Laos’ irrepressible building of hydroelectric dams. With nearly 100 projects either underway or in the pipeline, according to the Diplomat, the country is aiming to become a major player in the region’s energy sector, and is hedging its bets on hydroelectric power. But this strategy comes with many risks – not just the possibility of further collapses, but also environmental damage, the long-term disturbance of the Mekong River’s delicate ecosystem, negative economic impact and an end to millions of people’s way of life. But are the risks worth the rewards?

The battery of Southeast Asia

The vast Xe-Pian Xe-Namnoy hydroelectric dam project is just one of a number of projects being built all across the country, both on the Mekong’s mainstream and its tributaries. It highlights the government of Laos’ assertion that hydroelectric dams can underwrite the country’s economy and help one of the poorest countries in the region to prosper. And the benefits are there for all to see.

Laos is a mountainous, landlocked country with a very low population of around 6.5 million people, and few opportunities for sustainable economic and social development. But between 2013 and 2014, Laos exported nearly 12.5 billion kWh of power generated from hydroelectric dams, providing the country with over $610m. Laos also makes big money from rent charges as part of the concessions agreed with outside investors who finance the building and operating of the dams, which provide the country with a stable supply of electricity, paved roads and jobs.

There isn’t a workforce that can support rapid industrialisation in the same way that many other developing countries have pursued

Courtney Weatherby

The Mekong River Commission (MRC), an inter-governmental organisation that works with the four countries that the Mekong River runs through, stated in its Basin Development Strategy for 2016-2020 that “energy from hydropower projects has a part to play in each country’s energy supply mix and can also contribute to growing regional inter-dependence from cross-border energy trading.”

The report continued: “Similarly, the reservoir storage provided by these projects helps to regulate mainstream flows from the wet to the dry season, opening up opportunities if properly operated for increased dry season abstractions and potentially for flood control as well.”

Laos may have very few economic development alternatives other than hydroelectric power, according to Courtney Weatherby, a research analyst with the Southeast Asia programme at Stimson Center, a US-based policy research firm.

“[Laos] doesn’t have a large population, so there isn’t a workforce that can support rapid industrialisation in the same way that many other developing countries have pursued,” said Weatherby.

A Thai villager, one of the people affected by the controversial Xayaburi dam on the Mekong river in Laos, holds a sign in protest of Hydroelectric dam building Photo: Narong Sangnak / EPA
The collapse

The dam that collapsed last week, located in Attapeu Province in southern Laos, is a project of Xe-Pian Xe-Namnoy Power Company (PNPC). Construction began in 2013 and was due to be completed later this year. On Sunday 22 July, workers discovered that one of the auxiliary dams had taken damage, likely caused by unusually heavy rains. PNPC’s warnings and attempts to evacuate people in the surrounding area did little to protect locals when the dam burst the following day, sending a huge flood of water towards six nearby villages.

The chances of incidents like this occurring again seem almost inevitable due to the weather patterns and the number of dam projects in the region, said Weatherby.

“The climate change impacts [construction], so certainly other dams in the future will face similar circumstances that caused this particular project to collapse,” she said. “Hopefully the fact that this has happened now and caused such devastation will ultimately lead to better safety monitoring, but it is certainly going to be a challenge that is going to continue for companies building these types of infrastructure projects anywhere in Southeast Asia.”

Challenges in construction and safety are not the only risks posed by damming the Mekong and its tributaries. According to the MRC, “of the 60 million people living in the Lower Mekong Basin, about 40% live within a 15km corridor along the Mekong River, most within five kilometres of the mainstream,” meaning that should the hydroelectric dams affect the flow or ecosystems of the mainstream, millions of people’s livelihoods would be put at risk.

A Cambodian woman washes fish on a fishing boat on the Mekong River in Phnom Penh, Cambodia. Millions of people living in the Lower Mekong Basin could be affected by the construction of hydroelectric dams on the Mekong River and its tributaries Photo: Mak Remissa / EPA
The life of the Lower Mekong Basin

Weatherby explained that the Mekong and its tributaries form “the most productive freshwater fishery in the world. Just the Tonle Sap itself produces more fish than, for instance, the entirety of North America.”

Hydroelectric dams produce a clean form of energy and could be seen as preferable to coal or nuclear, which each come with their own environmental impacts. But it has been widely noted that the unchecked damming of the Mekong would pose a significant threat to the region’s ecosystem, biodiversity and the lives of the millions of people who rely on the river.

When contacted, a spokesperson for the MRC said that while hydroelectric power can offer huge benefits to Thailand, Laos, Cambodia and Vietnam, the projects must be carried out correctly – with environmental effects taken into consideration.

“Our stance is that hydropower development is an opportunity as agreed in the Basin Development Strategy, but [it] has to be implemented according to MRC procedures and guidelines for the mainstream and national regulations for the tributaries,” the spokesperson said. “The MRC is currently updating its hydropower strategy for the four countries and expects to recommend sustainable development pathways that take into account trans-boundary benefits, reducing costs and risks.”

Build-operate-transfer

The development plan that the government of Laos has largely settled on is the construction of dams by foreign companies under a build-operate-transfer (BOT) system.

PNPC, the company in charge of the construction and operation of the dam that failed last week, will own all rights to the dam for the next 27 years, at which point ownership and responsibility will be passed over to the government of Laos ­– hence the name build-operate-transfer. The deal brokered between PNPC and Laos rules that 90% of all power produced will be exported to Thailand, while the remaining 10% will go to Électricité du Laos, the state-owned energy company, which will have the choice of using the energy generated to power Laos or export it for its own gains.

This is very much a long-term bet on the part of the government of Laos, that these projects will still be cash cows

Courtney Weatherby

A 2004 paper by Maarit Virtanen outlined some of the benefits of the BOT system: “The advantages of [BOT] to the host government can include the possibility to obtain a needed infrastructure project at little or no cost to taxpayers and increased effectiveness in the project implementation in comparison to public-sector projects.”

On its face, this deal looks appealing. Laos doesn’t require a great deal of energy, so taking only a 10% portion from the dam’s output is not necessarily bad. The potential trouble is in the long term.

Two questions arise when considering the outcome of the build-operate-transfer system. The first is that in 20 to 40 years, when Laos inherits full ownership of the dams from the various private investors, the dams may not be in working condition. The second is that even if they are, they may not be competitive in a market where alternative energy solutions like solar and hybrid projects are becoming cheaper every year.

Weatherby believes the benefits are debatable: “This is very much a long-term bet on the part of the government of Laos, that these projects will still be cash cows and that when they are transferred they will still be in working order and the government of Laos will then be able to directly sell and benefit from the entirety of the electricity sales.”

A Laotian child is helped by Thai rescuers to evacuate a flooded area caused by the Xe-Pian Xe-Namnoy dam collapse Photo: AB
An outcome for a tragedy

As search and rescue teams continue to look for missing persons and to clear up the devastation caused by the dam collapse, questions keep coming from foreign media outlets. They question the future of these dams not just for Laos, but also its southern neighbour Cambodia, whose northeast region was consequently flooded by the dam collapse and which has its own hydroelectric dam ambitions.

Whether this incident will spark debate inside Laos is another question. The country, which saw enormous year-on-year GDP growth between 1989 and 2017, averaging at 6.96%, appears to have put all its eggs in the hydroelectric power basket.

“I don’t think this incident specifically will cause the government to… put a moratorium on dam building,” said Weatherby. “That would be an extremely strong response and I don’t think the government of Laos is in a position financially… to immediately make that sort of transition.”

She added that it might stir the government to consider alternative solutions – which would be “a potentially important outcome for this tragedy.”

If Laos really is to become the “battery of Southeast Asia”, then this incident may well not be the last one. In its pursuit of economic prosperity through hydroelectric power, the government of Laos is taking a huge risk on behalf of its people. But is it worth it? At moments like this, it is difficult to justify.



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