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Economy

Dam failure clouds Laos' dream of becoming regional power force

Delays to power plant projects could harm other economies in Southeast Asia

A collapsed dam in southern Laos has forced over 7,000 people to evacuate and set back the country's hydroelectric ambitions.   © Reuters

BANGKOK -- The dam collapse in Laos has cast a shadow on its goal of quickly ramping up hydroelectric power generation and could threaten industrial policy in Southeast Asia, which counts on electricity from the country.

The breach occurred on the night of July 23 at the Xepian-Xe Nam Noy hydropower dam in Attapeu Province, killing 27 residents. Another 131 are still missing. Laos' state-run news agency reported that over 7,000 people have been evacuated.

Laos' energy ministry said on July 26 that the cause was substandard construction as it prepares to investigate Seoul-based SK Engineering and Construction, utility Korea Western Power and others involved in the $1 billion project, which was 90% complete. The companies blamed heavy rain for the failure.

The ministry on July 25 ordered all dams, either operating or under construction, to submit regular safety reports with such information as water level maintenance. It will require the same of all future projects and likely demand tighter safety controls.

The government is expected to stay the course with plans to build more hydroelectric power plants, but stricter safety measures could slow construction.

Laos is home to plentiful mountains and rivers that make it ideal for hydroelectricity. The country derives 86% of its power from about 50 hydroelectric plants. Electricity is also a key source of foreign currency for Laos as it aims to lift itself from poverty by exporting power to other Southeast Asian countries.

Around 70% to 80% of domestically generated electricity is exported to neighboring countries, with about 90% heading to Thailand. But Laos also supplies Myanmar, Cambodia and Vietnam, and would like to serve Malaysia as well. Just under 10% of Thailand's power consumption is thought to come from Laos. Laos meets just a few percent of Vietnam's electricity needs.

These Southeast Asian countries are home to many factories of Japanese, South Korean and multinational companies. If electricity supplies slow from Laos, due to these failures or slower construction, it could hamper growth in the region.

The energy ministry has plans to rapidly increase capacity by adding 159 hydroelectric plants by 2030, increasing output from such facilities sevenfold compared with 2015. It is also conducting feasibility studies for hydroelectric plants at 200 sites, which together could produce about 136 billion kilowatt-hours of power, 9.6 times the amount in 2015.

But Laos has now suffered two dam collapses in a year. A small one under construction by a local company failed in the northeastern province of Xieng Khouang last September, flooding farmland and villages. July 23's breach was a shock, however, since construction was being handled by large foreign partners based in South Korea and elsewhere. 

"It is clear that there are large risks even for projects handled by foreign companies that are considered technologically trustworthy," said Norihiko Yamada, a research fellow at the Institute of Developing Economies.

Dam construction safety is now becoming a larger concern in Laos. "There are numerous dam and power plant projects in the works," said a government official. "The public is becoming more worried about whether these other projects are sound."

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