Testing the Waters: Laos Pushes Xayaburi Dam to Critical Point

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For a brief moment last week, Laos earned the praise of governments throughout the Mekong region. The region was on the brink of conflict over the controversial Xayaburi Dam, as Cambodia and Vietnam were angered by Laos’ unilateral decision to continue construction on the project. Last December, the Mekong governments had postponed deciding on whether to proceed with the Xayaburi Dam, while agreeing to conduct further studies on the impacts of Xayaburi and other proposed Mekong dams. At a high-level meeting in Cambodia on Friday, July 13th, the Lao Foreign Minister publicly announced that “the Lao government decided to postpone it. We have to do further studies.” The news spread rapidly throughout the region.

Xayaburi construction site on 17 July 2012

Four days later, on Tuesday, July 17th, the chairman of Ch. Karnchang – the Thai company building the dam – was quoted in the Bangkok Post saying that the project continues on schedule: “we’ve worked closely with the Lao government, and I think we must wait for official word that the project will be postponed.” He further said, “If the project does become postponed for no more than a few months, then I think it will remain on course to finish on schedule in 2020.” Ch. Karnchang’s share prices remained the same, indicating that construction continues as planned.

How can the dam be simultaneously postponed and on schedule?

The answer is that Laos appears to be sending mixed messages to test the waters of how far it can push the Xayaburi Dam forward without creating conflict with neighboring countries. Recent events suggest that Laos hopes its neighboring governments will enter a dialogue on “how to mitigate the dam’s impacts” rather than continue to discuss “if the dam should be approved.”

Construction was never postponed

On Monday, July 16th, three days after promising to postpone construction, the Lao government changed its position. At the request of Mekong River Commission (MRC) donors, the Lao Ministry of Energy and Mines invited around 70 delegates from foreign governments to the city of Luang Prabang to listen to presentations about the dam and visit the dam site the following day. According to sources who attended this meeting, Deputy Minister Viraphonh Viravong explicitly told the delegation that construction activities on the project will continue.

Xayaburi construction site on 17 July 2012

According to the Lao government, the actual wall of the dam will not be built for another five or six years, but first the company must complete a number of other activities such as dredging and widening river, building the dam’s powerhouse, building temporary “coffer dams” to divert the river’s flow away from the construction site, and building associated structures to run the hydropower plant. The Deputy Minister reportedly also announced to the delegation that any further impact studies will be completed while these construction activities are already underway.

Even before the river is fully blocked, however, construction will disturb the riverbed enough to significantly affect fish populations and the flow of sediments downstream. It will be impossible to collect baseline data and conduct accurate impact studies while construction is underway. (See e.g., MRC’s review of the Xayaburi project, page 32).

Xayaburi construction site on 17 July 2012

The project developers have hinted at the next steps in the construction process. The Deputy Minister told the Vientiane Times that “road building” and “resettlement of communities” would continue, omitting mention of the other construction activities that are underway. The Lao government told delegates that the dam’s powerhouse and coffer dam would be completed within the next two years. International Rivers’ investigation last month revealed that dredging and widening of the river has already taken place. The Mekong River Commission confirmed this after the delegation’s visit, telling the Cambodia Herald that “the project is in an advanced preparation stage with…exploratory excavation in and around the river completed.” One village has already been resettled, and at least two more will be resettled within the next six months. The resettled village already faces serious food security challenges.

Laos sought “expert” advice from a blacklisted company

The delegation heard presentations from the Pöyry Group, a World Bank-blacklisted company that wrote a report for the Lao government in August 2011 on the Xayaburi Dam’s impacts and is now acting as one of the project’s lead engineers. Pöyry assured the delegates that the project would have minimal impacts, based on the findings of its August report. Yet Pöyry’s report drew widespread criticism last year throughout the region when it advised Laos that dam construction should continue, despite identifying over 40 additional studies that are still needed to understand the project’s impacts. (For examples of problems with the report, see here, here and our own analysis). The Cambodian government declared in November 2011 that “Cambodia would not agree with this report—we strongly disagree with it.” The Vietnamese government lodged similar complaints.

Xayaburi construction site on 17 July 2012

The delegation also heard a presentation from Compagnie Nationale du Rhône (CNR), a French company that CNR issued a report, Laos hired in January to provide further analysis after Pöyry’s report received so much criticism. CNR issued a report in April describing possible ways to pass sediments through the dam. However, the report is based largely on theory that has never been used successfully in the Mekong region. As CNR acknowledges, its report is only a “desk study” and “there is a lack of data about present solid transportation along the Mekong River…Thus, data collection on sediment yield and sediment sources is necessary.” The report did not address the controversial fisheries issue.

Neither the Pöyry nor the CNR reports actually respond to the concerns of the Thai, Cambodian, and Vietnamese governments. Over one year ago, the three governments requested that Laos study the transboundary impacts of the project, since the project’s original EIA only examined impacts 10 km downstream from the project. A transboundary impact study, of course, requires collection of baseline data along the river to understand how the project might alter existing conditions. This has not yet been done. Indeed, the Pöyry and CNR reports are only desk studies based on the limited data that is currently available. Nevertheless, Deputy Minister Viraphonh Viravong reportedly told the delegation that transboundary impact studies will not be conducted, because Laos’ consultants have already concluded that the dam will not have any impacts.

Thailand has remained silent about whether the dam should be postponed

In many ways, the Xayaburi Dam is also a Thai project. The dam is being built and financed by Thai companies, and 95% of the electricity will be sold to Thailand. As a result, postponing the project depends on the will of the Thai government as well as Laos.

Yet the Thai government continues to avoid the issue. On Monday, July 16, the Phnom Penh Post reported that the Thai Prime Minister said, “We will study together the scope of the impact along the Mekong and we will see what the impact is.” She did not say, however, whether Thailand would take the key steps necessary to postpone the Xayaburi project, such as cancelling the power purchase agreement, ordering Ch. Karnchang to stop construction activities while further studies are conducted, and asking Thai banks to suspend their financing until a final decision has been made.

With all of this in mind, we can only conclude that Laos’ promise on July 13th was at best an empty one, and at worst a lie. Laos’ decision to proceed unilaterally with the Xayaburi Dam is already a clear violation of the 1995 Mekong Agreement, and its failure to act in good faith towards its neighboring countries is a violation of international law. Fortunately, Laos still seems to be testing the waters of how far it can push the Xayaburi Dam forward. Now is a critical time for the region’s governments and donor partners to take a strong stance against building the Xayaburi Dam. As Cambodia and Vietnam have insisted for the past year, the project simply should not be approved without a complete transboundary impact assessment and proven measures to mitigate the impacts. Relying on the discredited research of the Pöyry company is not the responsible way forward.