BANGKOK — Thailand has threatened to sink plans for a Chinese-developed dam planned for the Mekong River in neighboring Laos, in a rare rebuke that hints at a rising tide of dissension in an area where all three countries share Southeast Asia’s largest waterway.
Thailand has raised objections to the $2 billion Sanakham Dam since late last year, when government officials broke diplomatic protocol and made critical statements in the media against the project.
The dam, which is being developed by China Datang, is due to generate 684 megawatts of electricity when it comes online by 2028 and is considered an integral part of the Laotian government’s strategy to become “the battery of Southeast Asia.”
Bangkok raised concerns again this month, saying it rejected a new technical report at a meeting hosted by the Mekong River Commission, an intergovernmental body based in Vientiane, the Laotian capital. The commission was established to manage water resources in the Mekong basin, which is shared by members Cambodia, Laos, Thailand and Vietnam.
“We are raising our concerns through the [commission], which sent us the insufficient and out-of-date data,” Somkiat Prajamwong, secretary-general of the Office of National Water Resources, told Nikkei Asia, referring to the report submitted by the Laotian government and Datang.
Thailand has flagged multiple concerns rooted in the project’s potential environmental effect on its side of the border. The dam is slated to be built 2 km from the Chiang Kan district in Loei, a remote, mountainous province in northeast Thailand.
“This will be the first dam that is being built so close to Thailand,” said Somkiat. “We are worried about the impact, since it will be unpredictable.”
Thai fears that the dam will change the flow of the Mekong have not been ruled out, since it threatens to affect a stretch of its eastern border. “If this dam is built, it will be more difficult to manage the boundary of the deep channel” in the Mekong River, Somkiat added.
The Thai side has gone so far as threatening to extract a financial price, saying it may not sign a power purchasing agreement (PPA). The agreement is usually customary before a dam is built and allows the developer to secure loans and guarantee its return on the investment. This move suggests a departure from Thailand’s long-standing bilateral ties with Laos as the largest purchaser of Laos’ hydropower exports. The PPA is an agreement underwritten by the Electricity Generating Authority of Thailand (EGAT), the state-owned utility.
Bangkok’s reluctance to endorse the project has raised eyebrows among environmentalists in Thailand. “There are many firsts happening now: the first time Thailand is objecting about a Laos dam in public and the first time there is an announcement about not signing a PPA,” said Premrudee Daoroung, coordinator of the Laos Dams Investment Monitor. “Somkiat’s position on the PPA is going against the existing Thai policy of EGAT and the energy ministry that Thailand will buy its electricity from Laos — it has never happened till now.”
The pushback against the Sanakham Dam comes as Thailand’s energy policy has come under scrutiny, with questions raised about the need to keep importing electricity from Laos in the future. Thai green groups are driving this debate that has been fueled by Thailand’s electricity consumption rates and its reserves. According to EGAT, the December 2020 peak was slightly less than the projected peak of 27,500 MW for the country, while installed power capacity at the time was 45,480MW, revealing a nearly 50% excess in electricity reserves, attributed to the economic slowdown caused by the coronavirus pandemic.
“This is a clear sign that Thailand doesn’t need to buy power at its current rates from Laos for its domestic use,” said Pianporn Detees, Thailand campaign director for International Rivers, a global environmental pressure group. “Building dams today are not only for electricity, but it is also for politics. EGAT should adjust its policies.”
Laos and China have been in the crosshairs for years about dam building on the Mekong River and its tributaries. The river is the world’s 12th longest and its 4,600 km course begins from China’s Tibetan Plateau and winds its way through Yunnan, China’s southern province, before it heads through the Mekong basin shared by Myanmar and the four Mekong Rover Commission members till it flows through Vietnam’s Mekong Delta into the sea. China has built a cascade of 11 large dams in the Lancang River, as the Chinese call the upper stretches of the Mekong that flows through it.
Laos has already built 79 dams on the Mekong’s mainstream and tributaries on its way to building 100 dams by 2030, according to the country’s ministry of energy and mines. The government of the landlocked and impoverished country has turned to dams, built through loans, as a financial lifeline. Leaders of the one-party state have pinned hopes on unlimited power exports mostly to Thailand on the country’s road to becoming the “battery of Southeast Asia“ — with a goal of exporting 20 gigawatts of electricity set for 2030.
But the emerging shift in Thailand toward the Sanakham Dam signals a warning to Laotian dependency on dams to fuel its economy, analysts say. The warning comes as the Laotian government is facing grim news about its ballooning foreign debt, much of it stemming from building dams that have fallen short of their projected financial returns.
“I don’t think there is an alternative buyer [to Thailand] over the medium term because of the lack of transmission lines to deliver the power to alternative markets,” said Toshiro Nishizawa, a Japanese academic and a former policy adviser for the Laotian government. “The government is aware that some of the hydropower projects are unproductive and are partly responsible for the soaring debt burden.”