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Mekong dam project suffers further setback

Villagers from eight downstream Mekong provinces gather in Nongkhai, Thailand, Dec. 6, 2011, to protest against the proposed Xayaburi Dam in neighbouring Laos.

Associated Press/Associated Press

A controversial hydroelectric dam planned by Laos has suffered another setback after a regional body decided further to delay approval of the project.

The Mekong River Commission, a body comprising Cambodia, Laos, Thailand and Vietnam – countries through which the river flows – voted at a ministerial meeting in Cambodia on Thursday to delay construction of the $3.8-billion (U.S.) Xayaburi Dam project on the Lower Mekong River.

The MRC cited the need for a fresh environmental impact study. The new study, to be led by Japan and other international donors, follows an earlier study presented in 2010 and a subsequent decision by the MRC in April to delay the project.

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The latest decision is a blow to Laos, which has made the Xayaburi project a centrepiece of its economic development strategy – as well as to Thailand, which has agreed to take 95 per cent of the electricity generated by the dam.

Thai companies are leading plans to finance and build the dam and were also involved in the earlier study, which claimed the project would benefit the region.

Vientiane has insisted the dam – the first hydropower plant to be built in the lower Mekong Basin – would not adversely affect the region, describing it as the Mekong's "first environmentally friendly hydroelectric project."

However, its plans have drawn fierce protest from environmental groups and downstream countries, which claim the project would harm agriculture and fish stocks, and disrupt the livelihoods of up to 100 million people along the Mekong River.

In November, Laos's deputy prime minister Thongloun Sisolit said the country would wait for "positive signals" from its neighbours before proceeding with the dam.

More significant, a green light for the Xayaburi project would give a vital boost to Laos's ambitious power expansion plan, under which 55 new dams are set to be built, with the majority of projects to be completed between 2013 and 2020.

Seven dams are already under construction and 15 are believed to be in advanced planning stages. Meanwhile, energy-hungry Vietnam, despite strong opposition to the Xayaburi dam, is building a number of hydropower projects of its own on other, smaller rivers in Laos.

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Vietnam has long been a key ally and development partner for Laos but the growing opposition to the Xayaburi dam has forced Hanoi into rare public criticism of its small, fellow-communist neighbour. According to one western diplomat in Bangkok, the wrangle over the Xayaburi project foreshadows further tensions ahead in the increasingly fraught politics of water management in the Mekong River region.

Maria Patrikainen, an analyst with IHS Global Insight, a U.K.-based economic forecaster, noted that ultimately, the MRC's decisions are "not legally binding" for its member countries. "Nevertheless, given that Laos will sell the electricity from Xayaburi and its other hydro projects to its neighbours, acting against the MRC decision would be reckless," she said.

Copyright The Financial Times Ltd. All rights reserved.

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