Street stalls stand illuminated at a night market along the Mekong river in Vientiane, Laos. (Photographer: Taylor Weidman/Bloomberg)

How a Frenzied Race to Harness the Mekong Turned Deadly

(Bloomberg) -- Stretching from its headwaters in the high-altitude Tibetan Plateau to its endpoint in the delta marshes of Vietnam, the mighty Mekong River is one of the world’s great ecosystems. For Laos, it represents so much more: the energy source behind an ambitious hydro-power buildout and decades of potential economic growth.

Now the landlocked nation’s dream of becoming the “battery of Asia” fueled by scores of hydro-power projects has suffered a catastrophic setback, following the collapse Monday of a dam connected to a $1 billion project backed by its Communist government as well as Thai and South Korean companies.

How a Frenzied Race to Harness the Mekong Turned Deadly

The breakneck race to harness the Mekong and its tributaries for hydroelectric power has been under way for years and reflects Southeast Asia’s insatiable energy demand, projected last year by the International Energy Agency to expand by about 66 percent by 2040. Chinese investors are bankrolling huge projects in the region, particularly in Laos, Cambodia and Myanmar.

With the dam failure this week, following another incident last fall, questions have arisen about whether the Laos government led by Prime Minister Thongloun Sisoulith and President Bounnhang Vorachith can safely manage the wave of investments coming into the country from international energy and construction firms doing business there.

How a Frenzied Race to Harness the Mekong Turned Deadly

Still, there may be little incentive for a one-party state like Laos to slam on the brakes. Its bet on hydro-power comes down to economic survival: It delivers this nation of almost 7 million nearly all of its electricity consumption, and sales of surplus power to neighboring countries are a crucial source of export earnings.

“I don’t believe this will affect the government too much,” said Dane Chamorro, a former U.S. diplomat and senior partner with consulting firm Control Risks in Singapore. “The prime minister is new and well-regarded, and given the importance of the sector as an export earner, I can’t see this slowing down future development.”

For China, bankrolling the Mekong region’s hydro-power projects improves its energy security and delivers added geopolitical leverage over Southeast Asia. That has raised concerns in the region, particularly from Vietnam, that China could block water flows downstream.

“There has been some controversy building over (Chinese-financed) Asian hydro projects,” Simon Nicholas, an analyst at the Institute for Energy Economics and Financial Analysis, said by email.

Environmental groups also worry about whether project engineers and construction companies have adequately prepared for climate change and the torrential rains of recent years. There’s also concern about a growing vulnerability to fisheries and rice production in Laos and Cambodia from the hydroelectric power boom and dam networks.

“The dam collapse shows that the current policy of developing hydro-power for export, and the rapid escalation of dam construction, needs to be re-examined,” said Maureen Harris, Southeast Asia program director for International Rivers, an environmental group.

She said there were major concerns expressed about the ability of the Laos government to handle infrastructure projects of this scale.

‘Clearly Failed’

“It’s that lack of capacity inside Laos that has led to an open-door policy to private sector investors from outside the country who have clearly failed to follow proper standards and that raises serious concerns about other projects going forward,” Harris said.

Heavy rains this week have caused extensive flooding from southern China to Vietnam and played a role in the collapse of a dam tied to the hydro-power project, a joint venture between SK Engineering & Construction Co., Thailand’s Ratchaburi Electricity Generating Holding Plc, Korea Western Power Co. and the Laos government.

Engineers struggled for almost 24 hours to prevent the dam’s failure, according to SK Engineering. However, the development’s smaller auxiliary dams failed amid torrential rains.

The dam’s failure in the southeast province of Attapeu caused massive flash flooding that engulfed villages and left more than 6,000 homeless, thousands more missing and at least 20 dead, according to the official Laos News Agency.

All In

The mishap in Attapeu follows another dam collapse late last year in the central province of Xaisomboun, according to Keith Barney, a public policy professor at Australian National University.

“Construction standards and the regulation process appear to require improvements,” Barney said. “This could represent an opportune moment for a considered pause in Laos’ breakneck expansion of hydro-power.”

While the Laos government may express regret, it will likely press ahead, according to Milton Osborne, author of “The Mekong: Turbulent Past, Uncertain Future.” There are plans for construction of up to 120 dams on the Mekong and its tributaries, with the bulk of them slated for Laos, he said.

“It is in Laos that the greatest expansion of tributary dams is planned as part of that country’s determination to become the battery of Southeast Asia,” Osborne said. “They will crack down on any effort to make this a reason to change their plans to keep building more dams along the Mekong. This is such a poor country, they have very few alternatives.”

©2018 Bloomberg L.P.