MUANG NGOI NEUA, Laos – The route would take us past Luang Prabang, Laos’s famed World Heritage Site, but there was no time to check it out on this trip. From there we headed north, travelling for three hours to catch a boat at Nam Ou pier. We then followed the path of Nam Ou, the longest inland river in Laos, going upstream.
[See side bar story: A community needing green regulations]
Exploring Nam Ou between Luang Prabang and Muang Ngoi, we found that the Chinese had started constructing an operation centre for Nam Ou2 Dam at Sinn village.
We had been told the authorities had declared a “study period” to assess the potential impacts of the dam. But there it was before us: Site clearance and the relocation of local population had already started in earnest.
Top on the list of those affected are those living in the area where construction will kick off first: 119 households in Baan Muang Sinn, which is the last community of Muang Ngoi before Pak Ou; 66 households in Baan Pak Keeb; 70 households in Baan Haadpong; and 98 households in Baan Dongkeng.
Around mid-April this year, the villagers had already known for certain they were going to be relocated. They were unhappy because they did not wish to move out of their settlements that had been the home of their ancestors for centuries. But the Chinese developers had already built three large buildings and two small ones at the foot of the hill by the river. A new bridge now stood between two sides of the river to facilitate transport of materials and equipment.
Amid mounting opposition from environmentalists and human-rights groups, China has been aggressively pursuing its plans to dam rivers in Southeast Asia, particularly in impoverished Laos and Burma. What we saw in northern Laos was in fact just one among the reported 18 Chinese dam projects that had been proposed or are already under construction in the country. There are at least 56 similar ventures in Burma in various states of development and about 10 in Cambodia as well, among many others in the region.
The Asian economic powerhouse is dangling multi-billion dollars in investments in its bid to source more of its energy requirements to power its industries from its neighbours, especially those that are resource-rich but cash-poor. Targets of some of these hefty investments are dam projects in sections and tributaries of the Mekong River in Laos and the Irrawaddy and Salween in Burma.
A Chinese energy push
Not all of the dam projects involving China are meant to have the Asian giant as the major power beneficiary, of course. In many cases, Chinese participation in the projects is limited to funding and construction. Nevertheless, there are a number of push factors for China itself to secure external sources of energy supply, says Dr. Aksornsri Phanishsarn, assistant professor at Thammasat University’s Faculty of Economics in Bangkok. With its robust economic growth and massive population, she says, China is keen to push its ‘energy diplomacy’ policy in order to reduce its dependence on coal-fired plants and increase the share of hydropower in its energy grid. At the same time, says Aksornsri, China is aiming for energy security to avoid a recurrence of a power shortage that occurred about a decade ago.
Several studies also say that the country wants to shift its energy profile from the current 50 percent dependence on hydropower to 70 percent by 2020. By doing so, China will not only be able address the problem of pollution, but also be able to join the ranks of developed nations that rely on hydropower to meet more than 60 percent of their industrial sectors’ energy demand.
Due to its extensive use of coal, China is the world’s top emitter of greenhouse gases. According to the international environmental watchdog Greenpeace, 80 percent of China’s carbon dioxide emissions and 85 percent of sulfur dioxide pollution come from burning coal.
And so with the apparent green light from Beijing, Chinese corporations and banks have become major financiers of the global dam industry, filling in the gap left by traditional dam funders like the World Bank, says the non-profit International Rivers. Indeed, says the Berkeley, California-based organisation, China is bankrolling 300 dams under construction in 66 countries in Southeast Asia and Africa.
What is worrying, International Rivers says, is that China-sponsored dam projects both at home and overseas lack sound environmental impact assessments, and are implemented without transparency and little accountability. This runs counter to standard practice in countries where governments can properly monitor the impact of big projects on the environment and on communities.
China’s own US$24-billion Three Gorges Dam on the Yangtze River is one case green groups like citing to drive home their point about such a gigantic venture’s disastrous environmental and social impacts: the displacement of communities, navigation route diversion, and the negative effects on fisheries and other natural resources.
According to a report from River Watch East and Southeast Asia, 1.9 million people were displaced to make way for the mega dam in the central Chinese province of Hubei. Hundreds of communities were affected in the process, including 640,000 people who had to be resettled, and who still face difficulties getting compensation and adjusting to changed livelihoods.
In mainland Southeast Asia, China’s dam ambition within and beyond its boundaries has direct impact on transnational rivers that run through the countries in the so-called Mekong region comprising Burma, Laos, Thailand, Vietnam, and Cambodia. The most prominent is the Mekong River, which originates from Tibet and flows past China and the riparian countries in the sub-region, where over 100 million people living in communities depend on it. China has already constructed four megadams on its part of the Mekong and plans to have several more on the same river. Aside from the Mekong, however, China has set its sights on major rivers in Burma like the Salween, the only major river in the region without a dam to date, and the Irrawaddy. In Laos, China is pressing ahead with its plan to develop hydroelectric dams for Nam Ou and Nam Khan rivers in northern Laos.
Pianporn Deetes, Thailand Campaign Coordinator for International Rivers, says that while the direct impact of dams upstream of the Mekong in China is yet to be definitely quantified, countries downstream have already witnessed its impact in terms of the diminishing fish species and the accompanying threat on food security. This November, one international wire service quoted the U.S. think tank Stimson Centre as saying that the four completed Chinese dams on the Mekong “are already altering the river’s hydrology and impeding the flow of nutrient-rich silt that sustains soil productivity, nurtures fisheries and keeps the sea at bay in the Mekong Delta”.
Pianporn comments that China has been exporting its dam-building expertise, including a ready and trained labour pool, to other regions even though the country is aware of the impacts big dam projects have on the environment and communities. Thus, though welcomed by governments, China’s investment buildup in the region is met with distrust and resistance by environmental advocates.
The environment is just one aspect of this ‘specialised’ Chinese invasion, however. From an economic point of view, a key question is the distribution of benefits derived from a dam project, according to economist Dr. Chalotorn Kansuntisukmongkol of Thammasat University.
“From the developers’ perspective, building dams is to harness the river instead of just letting it flow into the sea,” he says.” Conservationists meanwhile look at impact on the environment. The truth is that several dams were built without assessing the impact, but built solely on the basis of shared benefits among parties involved.”
Safeguards against abuse
Aksornsri, meanwhile, says that one cannot make a blanket accusation against Chinese capital without first looking at what the recipient countries get out of the investments.
“Chinese capital would be frightening for sure if its attitude and approach is to ‘take all’, in which everything ranging from capital to workforce is brought in from China,” she remarks. “We have to consider what the host country gets in return.”
The economics scholar underlines the importance of a host country’s capacity to have leverage when dealing with foreign investments. She says that to prevent exploitation, governments should have a legal framework to screen investments so that only “clean and good quality investments with sound technology” are brought into the country.
The benefits from such investment must go to the public, Aksornsri says — outside the circle of lobbyists and politicians who get commissions for allowing unscrupulous Chinese investors to come in and exploit resources.
Another protection is a mechanism that would call for rigorous law enforcement efforts including the mandatory requirement for both environmental and health impact assessments before qualifying for investment privileges extended by the host government.
But while there may be enough safeguards, other analysts say that enforcement may be wanting in countries with weak political systems. That, say analysts, is one loophole China appears to be exploiting.
They say that by investing in countries with weak governance, China can build dams using its own standards, with no consideration given to environmental impact, communities, or compensation.
Choosing the weak
As it turns out, China’s choice investment destinations are usually developing countries in Africa and within the Association of Southeast Asian Nations (ASEAN), in particular Burma and Laos, Thai campaigner Pianporn says.
“Burma is in transition, and there is no legislation on the environment,” she says. “Impacts of dams on people are relatively new issues to the country.”
For projects in Laos, she points out, the affected communities have neither access to information nor any say in the decision-making process. There are no public hearings to inform stakeholders of the potential impact of the dams, no compensation for the affected communities or the environment. It is difficult to scrutinise the accountability of these projects, adds Pianporn. She says as well that China-sponsored dam projects usually reveal very little information to the public.
Thammasat’s Chalotorn agrees that countries with weak democratic governance, weak legal regime, and a weak civil-society sector are more vulnerable to the type of foreign investments that focus on natural resource exploitation. By comparison, in Thailand, “civil society sector is strong, it will stand up against activities or projects that impact the public,” he says.
Between Laos and Burma, however, it is Laos that is perceived as having lesser capabilities to guard itself against exploitation. Notes Pianporn: “For the Burmese people, they fight even if there’s a gun pointing at their heads. In Laos, no one dares to campaign against hydropower dams at all.”
She says that while people in Burma have been subject to authoritarian rule for a long time, they have not lost the strength to get up and fight. But in Laos, she says, people strictly obey their government’s order and put up no resistance at all even in cases of serious human-rights violations.
Other observers echo this, saying that Laos’s civil-society sector and does little advocacy. But in fairness, they say, authorities allow nongovernmental organisations to work only in the fields of poverty reduction, education, and food.
The governments in Burma and Laos also have different approaches in dealing with China, analysts say. While Laos seems willing to let itself be overpowered, Burma seeks other foreign capital sources to balance the Chinese dominance over its economy that grew during the time when Burma was under international sanctions. Still, as in Laos, China looms large over the waters – and economy — of Burma.
At present, China ranks among the top three foreign investors in Burma and Laos.
Although Thailand pioneered hydropower investment in Laos, China has now trumped Thailand in this area. In 2009, of the total foreign direct investment projects worth $2.699 billion approved, $1.77 billion are hydropower projects, or 65.8-percent share. Thailand was the top investor, followed closely by China and Japan. But in the last few years, China and Vietnam have outranked Thailand as top foreign investors in Laos.
Dr Carl Middleton, lecturer at the International Development Studies programme at Chulalongkorn University in Bangkok, says China’s engagement in the Greater Mekong Sub-region (GMS) is an important strategy towards building economic cooperation with mainland Southeast Asia. In a June 2012 paper entitled ‘China’s Dam-building in Southeast Asia: Diplomacy, Contentions and Discourses of Development’, Middleton writes that the GMS programme is in line with Beijing’s ‘Going Out’ policy to encourage Chinese companies to invest overseas and develop physical connectivity via roads, railways, and river transportation.
Powering up Asia’s ‘battery’
At the very least, China’s investment in Laos is a matter of consent and agreement for the mutual benefit of both governments, says veteran Thai journalist and Laos expert Songrit Pongern.
The Chinese government has long been a major donor of development and financial aid to Laos. Between 1990 and 2010, Laos received development aid to the tune of 6.5 billion yuan and another $1.85 billion for over 130 projects implemented in Laos. A $100-million package from China even enabled Laos to host the Southeast Asian Games in 2009.
Songrit describes Laos as a small country with little capital and technology to invest in energy generation, but with abundant natural resources in the form of forests and rivers. It is receptive to Chinese development overtures not only because Beijing is its biggest ally in terms of political ideology, but also because China offers what it takes to realise Laos’s aspiration to get out of the Least Developed Country status and achieve high economic growth by 2020 on the basis of earning foreign currency from being the ‘Battery of Asia’.
Various studies establish that Laos has the capacity to generate up to 30,000 MW of hydropower that could earn the country about $6 billion per annum and enable it to achieve per capita income of $1,700 in 2015, from nearly $1,000 in 2012. Laos has signed several Memoranda of Understanding to sell electricity to three neighbours, with the most recent including 7,000 MW to Thailand by 2015; 5,000 MW to Vietnam by 2020, and 1,500 MW to Cambodia, also by 2020.
Another key component of the Lao-Chinese cooperation is Beijing’s pledge to invest $7 billion in the construction of the 421-km high-speed rail link between Kunming in the southern province of Yunnan and the Lao capital of Vientiane. Says Songrit: “Laos is very keen to have this high-speed rail link. Once complete, this will be a historical milestone. It would be the first country, beating Thailand, to have a high-speed train link. The Lao leadership has made clear that this rail connection between China and Vientiane will be in place by 2015.”
In his view, Laos and China serve each other’s objectives. China wants to be a key player in ASEAN, while Laos wants to turn its land-lock status into an advantage of functioning as the “land link” of mainland Southeast Asia.
Songrit says Laos’s perspective is different from that of the Thais, owing in some measure to the fact that while Thailand is now considered one of Asia’s so-called ‘economic tigers’, Laos is just aspiring to achieve steady economic growth. On another level, Thailand has had to deal with the ill effects of dams on its rivers. Laos, by contrast, has yet to experience major natural disasters and is therefore is less focused on environmental concerns.
It is in this context that Songrit says, “Laos and China have negotiated and entered into bilateral agreement whereby China complies with conditions such as compensating those affected by the dams. They conducted Environmental Impact Assessment in a way that is mutually accepted by the two countries. As these projects are financed by Chinese banks and not loans from other source like World Bank, they need not go through public hearings.”
Megawatts trounce kai
Songrit says Vientiane’s ‘Battery of Asia’ strategy prescribes several undertakings for the Lao government that has led to China developing, among others, the Pak Beng Dam in Oudoomxai province with a capacity of 855 MW and the 660-MW Xanakham dam in Xayaburi province. Both Oudoomxai and Xayaburi are in northwest Laos.
The most important of the China-Laos dam deals, though, is Vientiane’s agreement with Sino-Hydro Corp, China’s state-owned energy giant, to invest in seven dams along the entire 500-km stretch of Nam Ou. A tributary of the Mekong, Nam Ou converges with Southeast Asia’s longest river at converges at Luang Prabang. The planned dams along Nam Ou require total investments of about $20 billion. Once completed, Laos would sell 90 percent of the power generated to the Electricity Generating Authority of Thailand (EGAT). Nam Ou2 Dam, which will have a 640-MW capacity, will cost $800 million. Reports say, though, that the Kunming-Vientiane high-speed rail link will also source its power from the dam.
According to Songrit, implementation seems to be proceeding smoothly. Within a week after the Lao government approved the contract for the dams, China’s Development Bank approved a loan of $2 billion for Sino-Hydro Corp.
Nam Ou originates from two mountains that lie along the border between China and Laos’s Phongsali province in the extreme north. It then cuts through over 80 villages that rely mostly on fishing, rice farming, and harvesting kai (river weed). The area has no paved roads and people have no access to a power utility service but get electricity only from small-scale facilities. Locals get around on water transport, making full use of the 30 smaller streams at one point or another.
Construction activities at the Nam Ou2 Dam project site have already affected the collection of kai, a major source of food and a pillar of food security for the local population at Muang Mgoi Nuai, which is popular among backpackers and nature lovers. The site is near Pak Ou City, before the river meets the Mekong.
Villagers collect kai river weed, dry, and preserve them for their own consumption, as well as for selling in markets to tourists in Luang Prabang. Says a local who declines to be named: “As work had started to blast the cataracts to clear the riverbed, the kai weed started to perish. For farmers in Pongxali, yields from farms have seen a decline.”
Some villagers mention chemical residues polluting the water following the explosion of cataracts. This has made residents here nervous about eating kai.
Reticent Lao, rebellious Burmese
The villagers say that they knew about the dam construction but were not aware of any effect the dam would have on their lives in the future. They say they have not received any information about the impact of such projects from media; it has only been through word of mouth that they have managed to hear bits and pieces about possible repercussions on them because of the dam.
Villagers who are displaced and resettled by such projects in Laos seem to simply comply without any struggle. Locals here indicate that they have no choice, as they all have heard about the incident where those protesting against the golf course construction in Luang Prabang were incarcerated, a punishment known euphemistically as “attending a seminar”. It has been quite a few years now but those protesters, they say, remain incommunicado.
But the affected villagers are talking among themselves. Those about to be resettled talk to those who have been relocated and were told that the Chinese have left it entirely up to the Lao authorities to handle compensation of people who have lost their farmland. Shares one: “For example in the case of Nam Ou dam, a tea tree that is older than five years is worth 15,000 kip (about two dollars) in compensation. Trees less than five years old get half of that. If you have 1,000 trees, you get compensated for 500 which is the maximum allowed.”
Near Luang Prabang (about 425 kms north of Vientiane) is another tributary of the Mekong called Nam Khan. Sino-Hydro Corp. is building two dam projects – the Nam Khan 2 with a 130 MW capacity and the 95- MW Nam Khan 3 – on the river. Construction has already begun on Nam Khan 2. The 935-km Nam Khan has its origin near Phou Nam Pa, a mountain in the country’s north-east, and then flows in an east-west direction to meet the Mekong at Luang Prabang City. The confluence of the two rivers creates a two-tone area that is a beautiful sight to see. These days, however, this section is dry, even in July, the peak of the rainy season. Locals whisper that this may be due to the efforts to control the flow of both the Mekong and the Khan Rivers.
By comparison, in Burma, local opposition to a proposed dam on the legendary Irrawaddy River has led the government there to say that it was putting the project on the backburner.
In a move that surprised many and signaled to the world that the people of Burma are now claiming their rights to make decisions on key foreign investment ventures, President Thein Sein in September 2011 announced the suspension of the Myitzone Dam project.
China Power Investment Corporation had proposed to develop the 6,000-MW Myitzone Dam in the northern Kachin State, about 1.6 kms downstream from where Malai and N’mai tributaries meet and give birth to the Irrawaddy. It is supposed to be the largest of the dams the Chinese are going to build and invest in in Burma.
But Burma’s transition towards democracy and the lifting of economic sanctions against the country has ushered in a new era for business. Securing deals or business contracts through military connections, which was the mode for decades, may no longer be the way to go there. The change in the behaviour of the Burmese government is so pronounced that even contracts already signed can be shelved, like the $3.6-billion plan to build the Myitzone Dam on the Irrawaddy, the country’s longest river. From the northern mountains of Burma, Irrawaddy River travels some 2,170 kms through the country and down to the southern delta before it spills into the Andaman Sea.
A shock to China
Pianporn Deetes of International Rivers says the decision to suspend the Myitzone dam project must have been a shock to the Chinese because it came despite the fact that site clearance works had started, the workforce were in place, and equipment imported from China.
“This shows that Burma is trying to balance the influence of China,” says Pianporn. “With the exception of some investment by EGAT, China has almost virtual monopoly of all large-scale dam projects in Burma.”
The suspension of Myitzone Dam also demonstrated that for the first time in decades, the government was heeding the voices of civil society, private sectors, technocrats, media, and other sectors in Myanmar. Ei Ei Toe Lwin, a journalist from theMyanmar Times, notes that opposition to the Myitzone Dam has provided a rallying point that galvanised a cross-section of Burmese society, beyond the confines of environmentalists and conservationists.
“They are united around the love and their sense of ownership of the Irrawaddy,” says Daw Daewi Thant Zin, environment activist and chief editor of the monthly magazine Aungpinlae . “It is after all the only national river (we have) and we don’t want to lose this precious heritage.”
Dr. Tan Lwin, former director of the Meteorology and Hydrology Department, explains that people in central Burma especially have close historical ties with the Irrawaddy. Any change of water flows caused by presence of a dam would have social, economic and cultural impacts because the Irrawaddy is the central lifeline that feeds Burma’s agriculture. Says Tan Lwin: “This is a national problem — not just the local problem affecting one section of Irrawaddy River.”
“Building a dam over Irrawaddy calls for very careful consideration,” Daewi Thant Zin also says. “It may take 10 years to finish building a dam, but it could take more than 100 years to rehabilitate environmental damages resulting from it.”
U Cho Cho, managing director of National Engineering and Planning Services, for his part says that if completed, the Myitzone dam project would have an impact beyond the locality where the dam is located. It would affect the ecosystem of the entire river, says the government official, and increase the risk of floods and compromise the Irrawaddy’s water quality.
Two rather disparate assessments
Findings of the project’s environmental impact assessment (EIA) were kept secret for more than two years after the report was completed. It was not until construction on the project began in late 2009 that the assessment became known to the public.
Results of the EIA showed that the dam would wreak catastrophic consequences. Then again, this was hardly a surprise, since Myitzone Dam is designed to have a reservoir 152 metres deep, inundating a geographical area roughly the size of Singapore. It would drown an ecosystem with more than a hundred fish species, archeological sites, and 40 villages that are home to more than 10,000 people, according to reports.
In its own feasibility study, China International Power Investment (CPI) chose to stress how Myitzone Dam would help address Burma’s energy needs for economic growth and production. The CPI study estimated Burma’s hydropower capacity at up to 100,000 megawatt (MW), yet it said actual production is only 2.45 percent of capacity.
Key figures from the study include: all the planned dams over Irrawaddy require an investment of $20 billion. Once completed, they will have the capacity of 20,000 MW. The overall impact of the dams, including the Myitzone project, on the Burmese economy will be worth $160 billion (1,000 billion renminbi) After 50 years, the Burmese government would earn an annual average of $500 million per year, or 20 percent of income from power generated by the dams.
The CPI study also said that the Myitzone Dam project in particular would stimulate both local and regional economies. Burma’s construction contractors and related industries would benefit, it said; at Myitzone site alone, 2,709 jobs out of which 1,440 Burmese Myanmar nationals would be created.
Yet while the study extolled the many virtues of how dams planned for the Irrawaddy would be economically sound, it also said they would be environment-friendly. It said the sites for the dams would account for only 1.4 percent of the natural area while their construction would conform to standards recognised in China and elsewhere in the world. Moreover, it said, the dams would have zero impact on 195 fish species.
Opportunities and an unfinished story
Members of the business community say the suspension of Myitzone Dam project will likely have no impact on domestic economy. In the view of Moe Mint Kyaw, president of the Burma Fishery Product Processors and Exporters Association, the suspension of Myitzone dam project represents a great opportunity for Burma to raise its standards for ensuring responsible investment activities in the country. But he doesn’t believe that the incident would force Chinese investors to withdraw from Burma.
“We just cannot close the doors on China because it is the major investor who has been around in a long time,” he also says. “I myself have at least two business meetings per month with the Chinese. But the Myitzone episode opens up a new chapter for environmentally responsible investment that takes into account equitable use of natural resources in Burma.”
U Win Myu Thu, manager of the Economically Progressive Ecosystem Development, Environment and Development Cooperation (ECO DEV Myanmar) acknowledges that Burma needs energy. After all, just 25 percent of the country’s 55 million people have access to electricity at present. But Win My Thu is opposed to any large-scale dam construction.
Lacking the capital and technology, the country should draw up a national power production plan that provides a framework for national energy initiatives that would include warding off ‘ruthless exploitation’ by foreign investors, he says. Burma should have a law to protect the environment and the government must be careful in negotiating terms of power production and electricity sale to foreign partners, he adds.
“The priority should be to serve domestic demand and sell excess output,” says Win My Thu. “But we seem so naive to agree to sell 90 percent of output when the country does not have enough to get by. We are not opposing virtually every dam project. We want the government to dam only smaller rivers, and leave the national lifeline of Irrawaddy alone. It is not possible to put a dollar value on the Irrawaddy River.”
He believes Burma and China would eventually reach a mutually beneficial agreement, saying it would reflect badly on China in the global community if it is seen as a big country bullying a smaller one.
“Chinese investors should care about environmental and social responsibility if they wish to succeed in their overseas ventures,” Win My Thu says. “They should not just succumb to everything dictated by the host government. If the people receive no benefit, China may not succeed in a market with 80 million people. As Burma undergoes political transition and is interacting more with the rest of the world, China as a good trading partner should heed the concerns of Burma’s people.”
Still, Burma needs to tread carefully in order to keep good ties with China, and the Southeast Asian country’s leaders know this only too well. With the Myitzone Dam project, for example, many people are not so sure that the announced suspension is indeed the end of the story. According to media reports, construction equipment and materials are still stationed on site. Authorities, meanwhile, have imposed a blackout on coverage of the issue.
“It’s such a complicated issue: whether the government would allow the Chinese to continue building the dam secretly, or it would stand by the people’s side,” says one observer at a café in downtown Rangoon. “The leadership might change its attitude about development, but the second-tier leadership like many generals may stick to the same old way of seeking kickbacks from large-scale project such as this one. So there could be a struggle between those who would let go and those who wouldn’t.”
[Prakaidao Baengsuntia is a reporter for Bangkok Biznews.]