Mekong Utility Watch

Development-Indochina: recession puts brakes on megaprojects

Bangkok Post
April 16, 1999

BANGKOK, (Apr. 16) IPS – Seven years after Asian governments and international bodies called it a potential treasure trove of economic growth, the Mekong Basin area remains what it has been for centuries: abundant but untapped. While foreign investors blame the slow pace of development on red tape and lack of investment, for environmentalists the lack of ‘progress’ is a sign of hope that the Mekong can still escape the ravages of ecologically disastrous industrialization seen across South-east Asia.

At a recent symposium on the ‘Comprehensive Development of the Greater Mekong Subregion’ here, representatives mostly from the private sector, government and regional funding agencies complained that the Asian economic crisis had further put off chances of rapid growth for the Mekong Basin.

The concept of the Greater Mekong Subregion growth area — encompassing Vietnam, Laos, Cambodia, Thailand, Burma and the Chinese province of Yunnan — was first mooted in 1992 by proponents like businessmen and financial institutions.  It was intended to benefit 237 million people living in an area of 2.3 million sq km.

“The Asian economic crisis has adversely affected Greater Mekong development projects since struggling Asian countries — especially Thailand — are the most active business partners of those involved,” said Peter Warr of the Australian National University and a expert on the Indochinese economies.

Thailand’s per capita income is roughly 10 times that of most Indochinese countries, which are heavily dependent on it in trade and investment.  The investment and demand for imports from Thailand have fallen dramatically since the crisis began in mid-1997.  Thai banks, now in deep trouble over non-performing loans at home, have been the main source of financial liquidity for businesses in Laos, Burma and Cambodia since the early nineties.

“ASEAN (the Association of South-east Asian Nations) accounts for 70 percent of the total investment in Vietnam and 60 percent of Vietnam’s total trade,” pointed out Dao Tuan Dung, manager of the ASEAN department at the Vietnam Chamber of Commerce and Industry.

He says the Asian crisis has already cut Vietnam’s exports, whose growth plunged to slightly more than 2 percent in 1998 from more than 20 percent in the previous year.

Those attending the Bangkok symposium expressed fears that crisis’ effects threaten to impede much of the progress in economic cooperation among the six Greater Mekong countries.

Due to political instability and civil war in much of Indochina in the 1970s and 1980s, its economic potential has been recognised only since the early nineties.

The Asian crisis has also affected the long-term projects planned in the Mekong Basin. Much of development potential there lies around the 4,200 kilometer-long Mekong river, whose vast waters can be tapped for a variety of large projects.

The Manila-based Asian Development Bank (AsDB) has been a major force behind the grand plans to develop infrastructure in the Mekong basin, viewing it as one of the last economic frontiers in the region.

Since 1992, it has invested more than 300 million dollars in studies and projects for developing tourism, agro-industries, export processing zones and small-scale businesses.

Reflecting keen interest in the Mekong area, the Japanese government too has between 1993 and 1997 poured in more than 3.8 billion dollars in aid to Thailand, Cambodia, Laos and Vietnam.

But environmentalists worry about the emphasis of donor agencies, governments and banks on mega-projects that take little consideration of their negative impact on the region’s pristine ecology and livelihood of ordinary people.

Particularly controversial are a series of massive hydro- electric power projects planned along the Mekong, which activists say will displace thousands of local folk, destroy their way of life and disturb the ecological balance irreversibly.

According to the AsDB, by 2010 the Greater Mekong area will need an additional 57,000 megawatts of energy that can be raised at an investment cost of 100 billion dollars.

AsDB studies have already identified eight hydropower and two oil and natural gas energy generation projects that have been endorsed by the six countries in the Greater Mekong.

“Fifty million residents and countless river and floodplain biota of the Mekong Basin depend on the Mekong’s annual flood- drought cycle and all the natural functions driven by this process,” said Aviva Imhof of AID Watch, an international NGO that monitors the activities of large donor agencies.

“Planned water resource developments threaten the integrity of this system on a grand scale,” she added.

Environmentalists argue that the cumulative impact of the various dam projects could cause drastic alterations of natural flow patterns along the Mekong.

They say the frequency of floods will decrease, affecting thousand of hectares of agricultural land which depend on annual flooding for irrigation and deposits of fertile soil.

“Fisheries are the most vulnerable aspect of the Mekong river ecology. The proposed dams will block fish migration and cause a dramatic decline in fisheries throughout the lower Mekong river,” added an activist with Towards Ecological Recovery and Regional Alliance (TERRA), a Bangkok-based NGO.

He says the resulting disruption could plunge large numbers of people into total poverty and negate any economic gains accruing from the large hydropower projects.

In ecological terms too, the dams are considered disastrous.

The $1.2 billion Nam Theun 2 dam project in Laos, for example, is expected to flood more than 450 sq km in the Nakai Plateau in the highlands near Laos’ border with Vietnam.

But what has really been stalling governments from going ahead with the megaprojects is lack of funds due to the Asian crisis.

With the collapse of South-east Asian economies, the neo- socialist governments in Indochina are having second thoughts about rushing into unsustainable development projects.

Several large dam projects have already been pared down or put on hold due to falling energy demand in Thailand, the region’s main market for the product.

Surprisingly at the Mekong symposium here, a word of caution against rushing development projects came from Thailand, long been accused by NGOs of imposing its own model of free-wheeling capitalist development onto Indochina.

“Development must be pursued in a balanced way such that politics, social welfare, environmental concerns are given equal attention as economic performance,” said Thai Foreign Minister Surin Pitsuwan.

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