Engaging Laos on Hydropower: Urgent Tasks, High Returns

By Duong Tran & Ngoc Phan

Mekong River in Laos. Source: Pierre Lesage’s flickr photostream, used under a creative commons license.

In the most recent meeting of the Mekong River Commission (MRC), Laos agreed to consult with its neighbors on the controversial Don Sahong hydropower project, allowing it to undergo a six-month review process. While the decision could be seen as a result of strong pressure from other MRC members, Cambodia, Thailand, and Vietnam, recent efforts led by the United States to engage Laos under the Lower Mekong Initiative (LMI) could have helped to influence Vientiane’s calculations. With the Don Sahong dam currently under review, now is the time for the United States and its regional partners to step up joint efforts to address Laos’s dire need for additional revenue, the real driver behind the country’s desire to aggressively tap the Mekong River and become the so-called “battery of Southeast Asia.”

Since former secretary of state Hillary Clinton announced the LMI in 2012, U.S. government agencies have committed significant resources to the program, creating opportunities for Washington to engage the Lao government in a number of governance and infrastructure projects, in part helping address Laos’s capacity and infrastructure challenges. For example, under the Smart Infrastructure for the Mekong program, Laos has worked on concept notes of science-based decision-making on infrastructure, in collaboration with experts from the U.S. Department of Interior and U.S. Army Corps of Engineers.

Another U.S.-led program that is designed to engage Laos on the need to provide greater transparency is the Mekong Partnership for the Environment. The program was allocated $15 million over four years in an effort to help bring the voices of civil society and other non-government stakeholders into the decision-making process in Laos as well as other lower Mekong countries. Taken together, these U.S.-backed initiatives under the auspices of the LMI may have played a small role in convincing Laos to reconsider its construction of the Don Sahong dam.

But the lesson of the Xayaburi dam – the first dam in Laos built on the mainstream of the Mekong – is a reminder that engaging Vientiane on hydropower matters has always been a difficult task. Back in 2012, Laos assured the United States that the Xayaburi project would be suspended for a comprehensive study, but later reneged on its promise. Lao government officials generally see less potential for economic development from engaging with the LMI process than from building dams which produce electricity they can sell to neighboring Thailand for hard currency. Meanwhile, the MRC lacks enforcement mechanisms for its inter-governmental consultation process. If Vientiane decided to go ahead with the Don Sahong when the six-month consultation process lapses, it would further reinforce a dangerous trend of unsustainable development along the Mekong River.

At the same time, Laos has recently shown some positive responses to U.S.-led efforts under the LMI. During the LMI Regional Working Group Meeting in March, Lao vice foreign minister Bounkeut Sangsomsak discussed with U.S. ambassador Daniel Clune the importance of the LMI to all countries in the region. The ability of the United States to influence Laos’s decision on the Don Sahong dam may be a crucial test for the LMI’s effectiveness as a whole.

The six-month consultation process is an opportunity for the United States to help the lower Mekong countries complete solid research on the possible effects of the Don Sahong and find ways to address economic alternatives to hydropower dams for Laos. These efforts could potentially convince Laos to reconsider its options.

In particular, the United States should work with countries in the Friends of Lower Mekong group such as Australia, New Zealand and Japan to provide a clear roadmap for sustainable economic development for the Lao government to consider by the end of the consultation process.

Japan can serve as an example for the United States in this respect. Between 2000 and 2011, Japanese investment in Laos amounted to $348 million, dwarfing U.S. investment by four times. In 2010 alone, Japanese companies poured $8 million into the landlocked country, compared to $1.6 million by U.S. companies, according to Laos Ministry of Planning and Investment. Tokyo took a step further in April by opening a Japan External Trade Organization office in Vientiane to attract direct investment from Japanese businesses to help develop local industries.

By presenting concrete deliverables before the end of the consultation period, the United States could help convince Lao leaders of its serious commitment to supporting Laos and the sustainable development of the Mekong River.

Mr. Duong Tran and Mr. Ngoc Phan are researchers with the Sumitro Chair for Southeast Asia Studies at CSIS.

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2 comments for “Engaging Laos on Hydropower: Urgent Tasks, High Returns

  1. David Brown
    August 28, 2014 at 18:07

    Laos is not the real problem here. It’s not the lure of economic development via electricity sales to Thailand that’s motivating bad decisions by Lao officials, but rather under the table payments by the Thai and Chinese construction companies that will build the cascade of dams on the Mekong. Nor is it mainly Washington that Vientiane is stiffing; it has reneged on promises to Hanoi and Phnom Penh as well. The consequences will be brutal — not to Laos but to Cambodia and Vietnam’s delta provinces — when the yearly flood surge that fills the Tonle Sap and flushes salt from the Mekong Delta is suppressed. Authors Duong and Ngoc are right, however, that only a better offer from Japan and others is likely to turn the Lao around.

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