Is Laos a battery for Thailand?

Is Laos a battery for Thailand?

By Malee Traisawasdichai

BANGKOK: "If a country does not have too many options to earn money, except exporting electricity, should it not export it?"

This remark was made by one of the World Bank's senior officials, concerning the development policy of Laos. It is also a common perception among outsiders and Laotian policy makers who view export of electricity as the only viable means to develop this small landlocked country -- which is blessed with an abundance of untapped rivers and mountains.

Yet, even if Laos has a series of dam projects to boost its future export, the country does not have money to finance its own stake. Guided by the World Bank and the Asian Development Bank (ADB), Laos has no choice but to adopt the "build-operate-and- transfer" (BOT) system. Under the BOT system, unlike the two existing dams -- Nam Ngum and Xexet, the new dams, which are about to emerge in the country will not be owned by Laos.

The BOT system is simply to get the private sector to invest in building a dam project. The companies then make money by owning and operating the dam for about 25-50 years, and after that, the rest will be left for the Laos government, represented by the Electricte du Laos (EDL).

This is particularly crucial when hydro-electricity is the only major source of income for Laos. It leads to a pressing, but so far unexpected, question: who will really have total power to decide if the country at one point in time does not want to trade with the powerful Electricity Generating Authority of Thailand (EGAT)? How much control does the independent country of Laos have over the foreign companies who will run the operation of the dams?

The BOT system seems to pave the way for foreign private companies to engage in the episode of "colonizing" Laos, after it once came under the shadow of French imperialism. Logically, there is no state in the world that would allow foreign companies to take over control of its watersheds and forests through dam operations -- the least to preserve its security and sovereignty.

Besides, how much money is going to stay in Laos after the companies have creamed off peak benefits for a period of 25-50 years? The Laos government can neither foresee the remaining capacity of the dams by the time the ownership is transferred to Laos. Nor can it predict whether the used dams will still be economically feasible. It does not even know whether the so- called "second hand" dams will be silted up or not, which makes them no longer a source of revenue, but leaving behind a heavy cost in terms of watershed and habitat destruction for Laos.

To date, Laos' hydropower policy has automatically paved the way for expanding the logging industry despite Vientiane's log export ban since 1992. The MOU between Laos' EDL and its counterpart EGAT apparently has become a license for logging in the proposed dam sites, regardless whether the dams will actually he built or not.

According to Leuane Sombounkhan, vice chairman of Laos' Committee for Planning and Cooperation, the current logging concession policy in Laos allows only three Laotian state enterprises to clear the forest at the dam sites in order to make way for the proposed construction of the dams.

Leuane told The Nation that at Houy Ho dam site alone, up to 100,000 cubic meters of logs will be sold to a Thai firm.

Perhaps the most threatening ecological impact in the foreseeable future is the logging concession in the Nakai Plateau in Central Laos, where the 600-MW Nam Theun 2 Dam will be built. The Nakai Plateau, one of the 18 protected areas declared a sanctuary by the International Union for Nature Conservation (IUCN), is home for the world's important endemic flora and fauna species and is one of the remaining fertile forests in Southeast Asia.

The plateau is believed to be home for the newly-discovered species, and largest mammal, Vuguang ox, scientifically known as Pseudosyx Ngnetinnensis. The species was first found by the Worldwide Fund for Nature in an adjacent wildlife sanctuary in Vietnam two years ago. The Douc Langur or Pyqathrix Nemaeus species is also recognized by scientists as an endemic species, found only in Laos' Nakai Plateau, according to an IUCN official in Vientiane.

The plateau also harbors the world's last remaining place for the endangered Fokienia tropical spruce, which grows at an altitude of over 1,000 meters above sea level. The Taiwanese- owned Changlin Lumber has already received sub-concessions through the state enterprise's concession to log some of the spruce, the IUCN official said.

About 48,000 hectares of the Pinus Mekersi species in the overall 350,000-hectare forest in the plateau will have to be clear-cut to make way for the Nam Theun 2 reservoir. This amounts to wood of about 1,500,000 cubic meters or 50-70,000 cubic meters per year for export to Taiwan, said Leuane.

Environmentalists have warned of the wholesale damage of the Nam Theun Basin where altogether four dams have been proposed -- 210-MW Nam Theun-Hinboun, whose construction has already started, Nam Theun 1 and Nam Theun 3, in addition to Nam Theun 2. Yet, a collective environmental impact assessment of the projects, that should be done by donors and funding agencies, for the whole basin has not been heeded.

While bearing all the social and ecological costs, Laos also has no control over the price deal with Thailand. EGAT has insisted that the price of household electricity for Thai consumers is only up to one baht per kilowatt hour. This is reflected in EGAT's tough negotiations over the price of power with Laos.

During the recent state visit by Laos President Nouhak Phoumsavanh, EGAT and EDL have agreed on the price for power export from Nam Thoen 2 at the modest 4.5 U.S. cents per kilowatt hour, only .2 cent higher than the previous price for the Theun- Hinboun Dam, which is 4.3 cents.

Like it or not, Laos has to accept this given price. EGAT is its sole customer, which can at anytime shut the door with Laos and turn to Myanmar, Vietnam, and possibly Cambodia in the future, as they are proving to be promising sources of energy. What can Laos do when it has only one single, but abundant electricity source to earn foreign exchange?

Clearly EGAT has passed on the cost to Laos. The then deputy governor, Somvonk Posayanonda, said EGAT would have to meet the cost of the expenses to build a transmission line to pick up the power from Laos and the cost of estimated 10 percent electricity loss in the system. The question is: why does Laos have to absorb this cost?

Yet there has never been a fair deal for Laos in the history of trading in electricity between the two brotherly countries. Viraphone Viravong, director of the EDL's project department, told The Nation, Laos sells electricity at an average of 3.7 cents per kilowatt hour from Xexet Dam and 2.9 cents from Nam Ngum Dam to Thailand. But Laos buys from Thailand electricity for its border areas at a price which is 20 percent higher.

Sadly, the support of multilateral banks in building large dams in Laos only serves Thailand, at the expense of Laotian people. The Mekong Secretariat estimates that Laos' electricity demand is up to three megawatts a year while that of Thailand is 1,000 megawatts.

The figure points to the fact that Laos has no need for large hydroelectric dams at all. With only a population of four million and the lack of capital and technology, Laos has no comparative advantage to develop the labor-intensive industry. Therefore, only small hydropower projects with low investment and simple maintenance will be enough for Laos.

The aggressive promotion by multilateral banks in building large dams hardly benefits Laos, but also plunges the country into a debt crisis to serve neighboring Thailand.

An environmentalist in Vientiane commented: "What the World Bank and the ADB are doing is to make Laos a battery for Thailand. Laos has no industrial base so the World Bank has no interest to develop industry in Laos. Laos will simply become a source for raw materials for Southeast Asia."

With the World Bank and ADB's guidance, Laos will unavoidably continue to embark deeper in the hydropower export policy. The banks' imposed development model is simply to make sure that there are no alternatives for the market-oriented approach. Yet, Laos seems to sacrifice much to make itself competitive through the BOT approach for hydropower policy towards the free market economy.

In essence, it is a responsibility of the World Bank and ADB to create a mechanism guaranteeing a fair deal for electricity trade between the voiceless Laos and powerful EGAT. It is criminal to set up a system that brings in the private sector to Laos to rake in as much profit as possible and leave the country with social and environmental hazards.

-- The Nation

Window A: Sadly, the support of multilateral banks in building large dams in Laos only serves Thailand, at the expense of Laotian people.

Window B: Only small hydro-power projects with low investment and simple maintenance will be enough for Laos.