Power in Asia
October 17, 2000

Article quotes Probe International’s Grainne Ryder, and discusses ADB’s new caution to finance hydropower projects in the Indo-China peninsula.

The Asian Development Bank has identified infrastructure development in the Indo-China peninsula as a high potential area for financial support but it is having to proceed with extreme caution on the explosive issue of hydropower schemes along the upper reaches of the Mekong River.

The positive side of development plans, according to the Greater Mekong Subregion (GMS), is highway development through the peninsula, which groups Vietnam (pop 78m), Laos (5.7m), Cambodia (11.4m), Burma (46.4m) , Thailand (62m) and China’s southern Yunnan province (42m). Roads connecting Ho Chi Minh city with Phnom Penh, Bangkok with Kunming in Yunnan are planned or under construction, as are links between Rangoon and Kunming and Hanoi, and a link from Rangoon and Bangkok with the ancient city of Hue in central Vietnam.

The GMS action plan is long-term, extending well beyond 2005, and also involves development of water-borne traffic and telecommunications, helped by a refinement of custom regulations at the numerous border points.

According to David Michael, president of GMS Power, “Although the GMS is roughly one-quarter the size of the US, it has an equivalent population and it is a potentially massive market.”

According to a report in Japan’s Nikkei Weekly, GMS Power has set up a joint venture with Yunnan province to build a hydropower dam at Jinghong, which will provide electricity for Laos and Thailand. Further hydro schemes in Burma are also being considered.

It is at this point that the ADB’s involvement – and for that matter the World bank and other development agencies – is becoming cautious, reflecting the mounting concerns of many locals whose livelihoods will be disrupted by extensive hydropower developments that have been identified as ‘possible’ for the Mekong River region.

According to Canada-based Probe International, reports of five drownings as a result of flooding caused by Vietnam’s second largest hydrodam, the Yali dam, have prompted the ADB to suspend financing this year for a 26OMW dam on the Se San River, a Mekong tributary flowing from the central highlands through lowland Cambodia. Hydro-Quebec, the Canadian utility, has been eyeing development of the Se San. The tributary contributes 17% of the total Mekong flow into the South China Sea. The Yali’s current capacity is 180MW with an eventual capacity of 700MW planned.

The ADB reaction stems from reports in the spring that the Yali had caused devastating flash floods in Cambodia’s Ratanakiri province, destroying livestock, crops and fishing equipment and threatening the livelihoods of 20,000 people living along the Cambodian stretch of the river. According to a survey by Ratanakiri officials, some 1,800 downstream families have lost crops this year due to the river’s erratic flows.

Says Probe, the dam has obstructed fish migrations from the Mekong to the Se San, seriously damaging the river’s fishery industry, the main source of food and income.

Grainne Ryder of Probe, said that an evaluation of ADB practices last year “found that ADB-backed hydro developers routinely dismiss or under-estimate downstream impacts, they sometimes pay for environmental mitigation programmes that don’t work, and they never properly compensate people who have lost their fishing and farming livelihoods.”

It had been the ADB’s plan to provide a $80m startup loan for the Se San dam this year as seed money for the $320m scheme, the rest coming from investors such as Hydro-Quebec.

Ryder was excoriating about the ADB’s model for hydro development. “Dam builders expect to get water rights and hydro revenue without any binding responsibility or accountability to the people who depend upon the river,” she told Power in Asia.

Energy specialists point out however, that pressure for more hydroelectric projects on the upper Mekong will mount, given the energy import dependency of the region, a fact which will become dramatically underlined in the next decade as demand picks up. Apart from some oil, and gas reserves offshore Vietnam, the region’s main energy source is from its rivers, notably the Mekong. The energy demand issue is becoming exacerbated by the likelihood of several years of high oil prices.

As the World Bank has pointed out, the region is woefully low on electricity supply with scarcely 30,000MW of electricity serving a population of 240m. France, Germany and the UK, with a collective population of 200m, have a capacity of approximately 260,000MW. “It is impossible to imagine that such a gap will be narrowed without the addition of some hydroelectric power,” said one energy official.

The official view in Vietnam, partly governed, say some critics by the fact that Hanoi, the capital, is in the north, therefore upstream Mekong, is that hydropower is a natural resource to be exploited. The country has nine hydropower plants producing 23,739m kWh or 58.7% of national output. Russian-built Hoa Binh, built in 1980 and in the far north, accounts for 40% of total capacity and 60%. of output.

The official view is that the state approves the building of another 20 power plants with a combined capacity of 35,000MW, including 11,000 MW from hydropower plants in the 2001-20 period.

Curiously, the state-approved report does not mention hydropower projects on the Se San River. But what it did say on 13 October was that China should ensure its dam building on the upper Mekong does no harm to the environment downstream.

“We think that the use of the Mekong should not cause any impact on the quality and quantity of water in the River,” said Phan Thuy Tranh in a statement. “[it] should ensure the sustainability of the ecological environment of the entire river as well as legitimate and equal interest of all the countries located in the basin.”

He was responding to a regional news report querying the sustainability of the ecology of the entire river and of those countries relying on it. Its criticism was in particular reference to the near completion of the second of 14 planned hydro dams on the Chinese section of the River; completion is due next year.

The anti-dam lobbyists have marshalled considerable documentation to dissuade developers from extensive damming of the Upper Mekong and associated rivers.

According to the Vietnamese American Science & Technology Society and the Mekong Forum, existing and future capacity along the Mekong tributaries stands at 8,180MW from 26 dams, all located along the Kok, Muri, Lam di Moi, Chi, Pong and Huay Mong rivers, and all but five located in Laos. At present, just four are in operation and their power is destined for Thailand. On the Chinese side of the Mekong, a total of seven dams are in operation or under construction under a time frame running till 2010.  There is little doubt these will be built. They will have a capacity of 15,400MW.

According to a report by the Society and the Mekong Forum, a further nine run-of-river dams are planned for the Lower Mekong, six of them in Laos, one in Thailand and two in Cambodia. Proposed investment in the schemes is conservatively put at $17.6bn and ultimate capacity would be 13,690MW.

Says Long P. Phan of the Mekong Forum, power projects on the Yunnan sector of the Mekong will imperil the Tonle Sap and Mekong Delta. He said that Tonle Sap fishers would be diminished and the Mekong Delta would turn into an acid-plain. The Tonle Sap is the largest freshwater lake in Southeast Asia and covers 27,000 hectares in the dry season and 150,000 hectares in the rainy season.

His submission to the two group’s working papers argued that dam projects, while intended to control floods, would have the reverse effect. “Small floods are our blessing, not our disaster.”

Vietnam in recent years has re-emerged as a major Asian rice producer. Phan argues that the Mekong Delta, the region’s rice bowl, would suffer. The region has acid sulphate soil already, which is hostile to rice sowing; Delta farmers depend on the annual flood for a large value of water needed to flush the acid off their soil.

Aviva Imhof, in a submission to the Mekong Forum from the International Rivers Network attacks hydro planners in Laos.

“While the Laos government has invested millions of dollars in encouraging private sector investment in hydropower, there are already signs that this strategy is not working.”

She says that of five projects built in Laos, four involved concessionary financing from a public source, one was financed entirely from a company’s own resources. No other private consortium has managed to raise commercial financing nor successfully negotiate a power purchase agreement with Thailand.

“Nor,” she says, “are they likely to until at least 2006 when Thailand may negotiate additional PPAs from Laos.”

She says that hydropower is increasingly being used as a pretext to resettle ethnic minorities from upland areas to lowland areas in keeping with the government’s policy of resettling shifting cultivators by 2000.

She finds fault with anticipatory resettlements, which is sometimes occurring well before it is certain that a dam will actually be built.

On the Laos issue, she is troubled by inadequate compensation, uncontrolled logging and access to protected areas, problematic environmental impact assessments, lack of appropriate regulation.

Much of her complaints also focus on the official viability of building hydropower projects in such a small country with such a small income base.

There is an implication in her report that the Laos case is still open for debate but that the economic evidence to support major hydropower schemes so far is wanting.

Her comments said that the project slowdown, caused by the Asian economic crisis, should be seen as an opportunity for the Laos government and donor organisations to reconsider the problems connected with hydropower development and initiate changes.

“The IRN believes that as western taxpayer’s money is being used to subsidize hydropower development in low income countries, we have a right and a responsibility to question the strategies being promoted by these development agencies and demand accountability for their activities,” she concluded.