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3 May 2007

Development and Plunder in the Mekong Region

Shalmali Guttal, Focus on the Global South. November, 2006

Note: This paper attempts to provide a glimpse of the high costs of the development model promoted in the Mekong region by International Financial Institutions (IFIs), bilateral donors and Mekong country governments. It is based on past work done by the author and fellow researchers who have been working on the Mekong region for several years, and personal interviews and travel in the region.

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The Mekong Region

The Mekong region encompasses the province of Yunnan in the the Peoples’ Republic of China (China), Burma, Thailand, the Lao Peoples’ Democratic Republic (Laos), Cambodia and Vietnam. The region derives its name from the Mekong river, which emerges from a source approximately 5500 metres above sea level in Tibet and flows 2161 km through China’s southern provinces of Qinghai and Yunnan, and then flows another 2719 km through Burma, Laos, Thailand, Cambodia and Vietnam, where it finally joins the South China Sea.

Except for China, all Mekong countries are members of ASEAN. Thailand is one of the original ASEAN five countries. Burma (Myanmar) is the newest entrant. China, however, has started to cement economic ties with ASEAN through a free trade agreement and an “Early Harvest Programme” with the regional body. The Mekong region is possibly one of the wealthiest regions within the ASEAN grouping in terms of environmental resources and bi-diversity.

The Mekong river is the world’s 12th longest river in the world (about 4,200 km long) and 10th largest in terms of annual water yield (about 475,000 million cubic metres) with a massive drainage area of approximately 795 000 square km across six countries. It is one of the most seasonal rivers in the world as measured by the difference between maximum and minimum monthly flows. From its origins in the snow-fed plateau of Tibet, the river passes through and shapes a wide range of topographies and geographies, including the gorges of the Upper Mekong in China, the uplands of Burma and Laos, the flood plains of Cambodia and the nine-tailed dragon of the Mekong Delta in South Vietnam.

The Mekong region is a region of immense environmental, social, cultural, biological and economic wealth and diversity. From water, timber, flora and fauna to gemstones and minerals, the natural wealth of the region provides a strong base for diverse domestic and local economies. Although the Mekong region extends well beyond the river basin, the Mekong river drains much of the region, especially downstream from the Golden Triangle. Changes in the Mekong river or its tributaries can effect significant changes in the entire region’s environment and economy. The high rise and falls of water flows in the Mekong river and its tributaries between wet and dry seasons support numerous lake, riverine, swamp, wetland and backwater ecosystems that are rich in biodiversity such as Cambodia’s Tonle Sap lake (also called the Great Lake) and South Vietnam’s vast Mekong Delta in the lower Mekong. The Mekong freshwater system is the third most diverse in the world and home to at least 1200 species of fish, the Irrawaddy Dolphin, Giant Catfish and Siamese Crocodile.

More than 250 million people inhabit the region, of which at least 80 million live in the basin itself. The region is brought alive by over 70 distinct ethnic and linguistic groups, who are often found in varying proportions across the countries of the region. About eighty percent of the population in the region is dependent on small holder agriculture and artisanal fisheries as the main sources of livelihood. More than half of the protein intake of the region’s people comes from fish, and fish is an important source of income and livelihoods for local communities and commercial fishers alike. For most rural communities—upland and lowland—forests, woodlands and plains serve as crucial sources of food, medicinal plants, raw materials for housing and occupational tools, and forest products for local trade.

The region is also home to an extraordinary variety of agricultural practices and land, forest and water stewardship methods, many of which have evolved from age-old traditional practice and local knowledge. These include upland swidden fields, wet rice cultivation, river-bank gardens and horticulture. Rural communities tend to meet their food and income needs through rice cultivation, horticulture, hunting, fishing and foraging.

The region has a varied political history. Four of the region’s countries—China, Laos Cambodia and Vietnam—are moving from centrally planned to market based economies. Thailand is a constitutional monarchy with an elaborate market economy. Burma is ruled by a military junta. Over a span of just over sixty years, countries in the region have variously moved through numerous political-economic formations—colonies, monarchies, military dictatorships and communist republics—as they established their current identity as modern nation states.

The Mekong region has been marked by political conflicts for hundreds of years, many among neighbors from within the region. Some of the most visible imprints on the region have come from the colonial aggressions of the nineteenth and twentieth centuries from Britain, France, Imperial Japan, China, and most recently, the United States (US). During the 1960s and 1970s, much of the lower Mekong was consumed by war, whose human, social, economic and environmental costs have yet to be fully mapped and acknowledged. The cold war provided the US and its allies with the impetus for full-blown war (in Vietnam), the heaviest bombing recorded in history (in Laos) and political manipulation with tragic consequences (in Cambodia). China and Thailand, while quick to protect their own lands from becoming theatres of war, colluded with external aggressors at various times.

Now it is peacetime and the regions’ peoples are exhorted to look towards the future rather than at the past. But collective memory is more difficult to rewrite than history books. Despite a newfound spirit of inter-governmental cooperation in the Mekong region, old suspicions and prejudices linger. Former occupying powers too seem unable to give up their spheres of influence. What they are no longer able to do with colonial administration, artillery and bombs, they attempt to do through economic policy and development assistance.

Development Trends in the Mekong Region

The countries of the Mekong region are not on the same economic footing. Burma, Laos, Cambodia are categorised as Least Developed Countries (LDCs) and are the smallest economies in GDP/per capita income terms. Along with Vietnam, they are less economically powerful than China and Thailand. But in terms of natural resources and environmental wealth, they surpass their larger neighbors, who have aggressively depleted and degraded their natural reserves through ill-considered and poorly planned development strategies. Thailand is the most prosperous in terms of income and consumption, and has been the hub for much of the post-cold war economic activity in the region. China, Thailand and to a significant extent Vietnam, have made important investments in health, education, basic and financial services, science and technology, and labour-force development. Burma, Laos and Cambodia, however, continue to have poor social indicators with little national public investments in key social sectors.

Development in the Mekong region is increasingly market led. Development models across five Mekong countries (except for Burma) prioritise rapid economic growth, integration with regional and global markets, and increasing the role and share of the private sector in the domestic economy. Private sector involvement is particularly sought in sectors such as physical and social infrastructure, tourism, finance, energy, power and agriculture. National development plans are augmented by regional economic cooperation frameworks promoted by the Asian Development Bank (ADB), the World Bank, The International Financial Corporation (IFC), northern bilateral donors and private venture capital funds.

At the heart of all development plans, national and regional, is the exploitation of the region’s immense environmental and natural wealth, water resources and agricultural potential. The ADB has summed up the prevailing vision of development as follows:

“The economic potential of the river and that of the land and peoples its passage defines is huge, although until now it has been largely undeveloped…. Water from the Mekong river supports agriculture, and its fish yields are a source of both protein and income. It can also be used to generate electricity and as transport corridors. Forests in the Mekong region protect hydro-power projects and agriculture from siltation and erosion, contribute to tourism potential, and provide subsistence to rural communities…” [1]

According to the ADB—and the World Bank—the Mekong region has the natural resources, a growing and trainable labour force, abundance of land and strategic location to become a fast economic growth area. What it lacks is capital, technology, know-how and political will among the Mekong countries to effect their transformation from subsistence to hyper market economies. This lack is now quickly being made up by a plethora of development, investment and “capacity building” projects, with numerous development professionals and “experts” ready to advise governments on how to transform their natural wealth into GDP growth figures and bank accounts.

Although many development projects in the smaller Mekong countries do emphasise social sectors such as health, education, water supply and sanitation, "development" in the Mekong seems to mostly imply hydroelectric dams, massive irrigation and electricity-transmission systems, logging of the region’s ancient forests, extractive industry, the construction of roads, highways and ports, tourism, massive irrigation and electricity-transmission systems, industrial tree plantations, commercial, chemical-intensive and mono-crop agriculture, and aquaculture of exotic (non-native) fish species. [2]

The Mekong river basin has long been coveted by the dam industry. Since the onset of economic liberalisation in the 1980-s, dam builders—backed by International Financial Institutions (IFIs), UN agencies and donors—have flocked into the region to stake their claims to the region’s relatively untapped water resources. Quick on their heels have been the timber, pulp and paper industries, followed by tourism and mining companies. The region’s water ways, forests, wetlands, river-banks and agricultural lands are seriously threatened by dams, commercial mono-crop agriculture, plantations, tourism, mining and road projects. Land-grabbing by local/national elites (including powerful government officials) is rife and hundreds of thousands of people across the region are being ousted from traditional occupations and territories.

But all this seems to be of little interest to the region’s governments, development policy advisors, bankers and donors. Majority of the region’s peoples are systematically excluded from development planning, have little hope of legal redress when their lands, rivers and forests are stolen, and are routinely intimidated by state and non-state actors if they dare express dissent against the prevailing development wisdom of the day.

Staking Claims

“With vision and capacity, Swedish business has an excellent opportunity to play an important part in supplementing Swedish development cooperation in one of the world’s most dynamic regions, while generating profits at the same time. This means more than simply selling goods and services paid for by Swedish aid; it is a question of whether business and aid can work together to contribute to development in line with Sweden’s Global Development Policy.” Johan Brisman, Consultant at SIDA’s Asia Department [3]

Development financing in Mekong countries comes from multilateral and bilateral sources. China, Laos, Cambodia and Vietnam are under World Bank-International Monetary Fund (IMF) loan regimes, which mandate privatisation, liberalization and market-friendly regulation as conditions for credits. These countries are also heavy borrowers from the ADB, which prioritises the establishment of free market conditions in all loans and technical assistance grants. Bilateral donors to the Mekong countries include Japan, China, Canada, Ireland, the Netherlands, Sweden, Denmark, Norway, Finland, Australia, the US, Britain, South Korea, Switzerland and Thailand.

In 1997, the World Bank’s IFC set up the Mekong Private Sector Development Facility (MPDF). The MPDF operates in Laos, Cambodia and Vietnam and aims to reduce poverty reduction through sustainable private sector development. Support for the MPDF comes from the ADB and the governments of Australia, Canada, Finland, Ireland, Japan, New Zealand, the Netherlands, Norway, Sweden, Switzerland and the United Kingdom. [4]

In 2002, with support from the MPDF, the Mekong Enterprise Fund (MEF) was launched as the first venture capital fund to make equity investments in small and medium sized private businesses in Vietnam, Laos and Cambodia. The $16 million Fund aims to provide investment capital and technical support to private companies founded and managed by private entrepreneurs, with a focus on export industries and local service providers. MEF investors include the ADB, the Nordic Development Fund (NDF), the State Secretariat for Economic Affairs of Switzerland (SECO), the Finnish Fund for Industrial Cooperation Ltd. (Finnfund) and other private investors. The Investment Manager of the Fund is Mekong Capital Ltd, and the Advisor to the Fund is MPDF.

Mekong region countries have signed on to a host of bilateral trade and investment agreements, and regional cooperation agreements through the ASEAN (Association of Southeast Asian Nations), the Greater Mekong Sub-region Economic Cooperation Programme (GMS), and the more recent Ayeyyawadi-Chao Phraya-Mekong Economic Strategy (ACMECS) framework. With the exception on Laos and Burma, all the Mekong countries are members of the World Trade Organisation (WTO). Vietnam signed a bilateral trade agreement (BTA) with the US a few years ago, Thailand is currently negotiating BTAs with the US and Australia respectively, and Cambodia has entered into a Trade Investment Framework Agreement (TIFA) with the US.

The most sustained and high profile impetus for market led development in the region has come from the ADB through the GMS. Initiated in 1992, the GMS is an ambitious master plan to create a “frontier” of rapid economic growth through regional economic cooperation. The GMS aims to transform the rich human and natural endowments of the Mekong region into a region-wide free trade and investment area, fueled and led by private sector growth. Majority of the capital investment in the GMS has been in the areas of transportation infrastructure (road, railways, air and waterways), power/electricity, tourism, and trade and investment facilitation. Since 1992, more than 100 projects in transportation, energy, telecommunications, trade and investment, tourism, environment, human resources and agriculture have been launched through the GMS, although investment capital for most of these projects is still to be secured. GMS projects are developed almost entirely by ADB staff and private consultants and firms.

On July 4-5, 2005, the Heads of States of the GMS countries met in Kunming at the second GMS Summit and declared that, “The GMS is committed to creating a conducive and competitive environment for trade, investment and private sector development. To strengthen market fundamentals, we will promote financial efficiency, a sound policy and institutional, legal and regulatory framework, and undertake further facilitation and harmonization of trade and investment regimes.” [5] And further, “A well-built, seamless, multi-modal infrastructure is essential to the facilitation of trade, movement of people and the provision of basic services throughout the whole region. We therefore commit ourselves to fully ’connecting GMS’.” [6]

According to ADB Vice-President Liqun Jin, "The vast development potential of the GMS makes it an attractive trading partner, investment location and tourist destination." [7] In a bid to woo investors and leverage private capital for infrastructure projects in the region, the ADB has established a Mekong Development Forum, which serves as a rotating platform to bring private companies, investors, donors and Mekong country governments to discuss future cooperation. In November 2005, the Forum was held in India, in collaboration with the Confederation of Indian Industry (CII). According to the CII, of particular interest to India are trade and investment opportunities in the transport, energy, information technology, agribusiness and tourism sectors. [8] In March, 2006, the Forum met in Singapore to discuss the investment opportunities for Singaporean companies in the Mekong subregion. In April, 2006, the Forum was organised in Stockholm and this time it was Swedish investors who gathered with the ADB, Swedish Governments and Mekong region governments. In a news brief to SIDA, Johan Brisman, Consultant at SIDA’s Asia Department asked, “Might we get to see Vattenfall and ABB invest in the energy infrastructure of the region, Skanska and Vägverket becoming involved in transport, and the Swedish environmental movement, forestry and pharmaceutical industry working actively on forest issues and biological diversity?” [9]

Another important regional cooperation framework is the ACMECS, which brings together Burma, Laos, Thailand, Cambodia and Vietnam. Named after the three major river systems that run through these countries, the ACMECS aims to increase cooperation in five main areas: trade and investment facilitation; agricultural and industrial cooperation; regional transport linkages; tourism, and; human resource development. ACMECS aims to transform the border areas of its five members into special economic zones of high growth. With the fertile lands and hydro-power potential that the river basins offer, key areas of investment are agriculture and energy.

Regional agreements do not diminish the roles of old and new heavy-hitters in the Mekong development-investment business. Over the past 15 odd years, China has started to play a leading role in speeding up investments in the region independently and through the GMS and ASEAN + 3 frameworks. China is arguably becoming the most dominant driver of trade and investment in the region, as well as one of the most sought after markets for exports of the region’s raw materials and processed products. China has signed numerous agreements with other GMS member countries in areas such as transportation, animal epidemics prevention, information technology, superhighway construction, power trade, tourism and environmental protection. According to an official Chinese daily newspaper, “Ever since the inception of the GMS Programme, China has been both a beneficiary of, and a contributor to it and has made large investments in infrastructure construction within the region.” [10]

China is also pouring massive amounts of money into transportation and energy facilities including hydro-power dams on the Lancang (as the Mekong is called in China), Laos and Cambodia. China has funded the "North-South Corridor," a highway that links Kunming to Bangkok via Laos (scheduled to be fully operational by 2007) and several other smaller roadways in Laos and Cambodia. It is the largest investor in Laos and the 3rd largest investor in Cambodia. For China, one of the most important trade routes is the 4,425 km long Mekong River itself and it has blasted rapids in the Upper Mekong to make it navigable. On March 6, 2006, the Joint Coordination Committee of Navigation on Lancang-Mekong

The Mekong River is known as the Lancang in China. River met in Champassak, Laos, to discuss commercial navigation on the Lancang-Mekong as a way to boost trade activities among the upper Mekong countries. A Lancang-Mekong navigation channel is being developed through inter-governmental cooperation among China, Laos, Burma, Thailand and Vietnam. It is estimated that a total of US $ 36.11 million of capital assistance will be committed to Lancang-Mekong navigation development and management by the ADB, governments of the Netherlands, Sweden and Britain, and other international organizations. [11]

China’s growing influence is in direct competition with the region’s traditional economic “hub,” Thailand. With its well developed export capacity and long standing relationship with the world’s large capitalist powers, Thailand has been the most voracious consumer of the region’s natural resources, as well as the region’s favoured destination for capital, labour, goods, services, and tourism. Since its recovery from the 1996-98 economic crisis, Thailand has aggressively promoted itself as a champion of Asian self-sufficiency with Thai businesses leading the charge. Thai corporate interests in the region are largely focused on agriculture, electricity and tourism.

China’s growing influence in the Mekong region is also viewed with concern by Japan, which has attempted to maintain a large economic and political presence in the region. As far back as the mid 1960-s, Japan attempted to be a “bridge builder” among the newly formed ASEAN and the communist regimes of Indochina. In 1993, Japanese Prime Minister Kiichi Miyazawa proposed the creation of the "Forum for Comprehensive Development of Indochina," which held its first ministerial-level meeting in Tokyo in February 1995. Japan is the largest bilateral donor in Cambodia, Laos, Burma and Vietnam (CLMV). On its own, as well as in collaboration with the ADB, Japan has funded several regional infrastructure projects. Most high-profile among these is the "East-West Corridor," a super highway—including a bridge over the Mekong River—that links Muktahan in northeastern Thailand, Savannakhet in southern Lao PDR and the port of Da Nang in central Vietnam. Scheduled for completion next year, the highway is expected to be extended to Mawlamyine in southern Burma at a future date. A second “East-West Corridor" is also in the works to link Bangkok, Phnom Penh and Ho Chi Minh City, scheduled for completion in 2006-2007.

Capturing the Waters

Some of the most serious threats to the environments, ecologies, economies and livelihoods in the Mekong region come from the frenzy of dam building on the Mekong and its tributaries. More than 100 dams have been planned for the region, some already built and many still in the design and survey stages. While some dams are billed as multi-purpose, majority are hydro-power dams aimed at meeting the ostensible power/electricity needs of a rapidly growing region.

Hydro-power development in the Mekong is largely catalysed and supported by the World Bank, ADB, the United Nations Development Program (UNDP), export credit agencies (ECAs) and bilateral donors including Norway, Sweden, China, France, Japan, Thailand, and Australia. The ADB estimates that the Mekong Basin has a “theoretical” hydro-power generating potential of 58,000 MW and of this, about 37,000 MW of installed capacity is actually feasible. One of the flagship projects of the ADB supported GMS is the Mekong Power Grid that aims to purchase electricity from hydro-power projects in China, Burma and Laos and distribute it across the region (mainly to Thailand) through a regional power grid.

Hydro-power projects in the Mekong are lucrative business for consulting and engineering companies from Europe, North America, Australia and Thailand, who are able to secure relatively risk free contracts to survey and build dams under Build-Own-Operate (BOT) arrangements. Many companies have formed international consortia of public and private sector companies to bid for large hydro-power projects, and are able to secure financing because of the guarantees and subsidies provided by IFIs and ECAs. While Laos and Cambodia rely on IFI and donor support for hydro-power development, China and Vietnam have been able to leverage capital for their dam building projects from private capital markets.

Upstream on the Lancang, China has started to develop a huge cascade of hydro-power projects in Yunnan, which has already started to change the Mekong’s seasonal ebbs and flows. Huaneng Power International, China’s largest energy generator, has been given most of the hydro-power development rights on the Mekong and Yangtze rivers. At least eight dams are in the pipeline; the Manwan and Dachaoshan dams have already been built and the Xiaowan dam is under construction. The Xiaowan dam alone will be able to capture some 25 per cent of the Mekong’s total annual volume of water flowing downstream from Yunnan.

The potential impacts of the Yunnan dams on the natural flow of the Mekong River all the way down to Cambodia and its Great Lake system are alarming. The Tonle Sap in Cambodia and the Mekong Delta in South Vietnam—which encompass some of the most fertile and rich rice growing and fisheries areas—will be particularly endangered by dams on the Mekong. Fish migration, feeding and reproduction cycles in the Mekong river basin are likely to be disrupted, thus decreasing the productivity of Mekong fisheries and affecting the food supply of millions of people living in the basin. Impacts within Yunnan itself give cause for concern. The Yunnan Resettlement and Development Bureau estimates that about 500,000 local people will be displaced by Yunnan’s hydro-power development plans in the coming 15 years. The province will have to move an average of 40,000 people every year to pave the way for hydro-power projects—possibly the largest known figure for dam displaced peoples anywhere in the world over the past 50 years. [12]

The Central Highlands of Vietnam are fast turning into a hub of hydroelectric development. It is estimated that by 2010, the Central Highlands will have an installed capacity of 5,000 MW (one-third of the current national electricity capacity) through more than 20 large and medium sized dams on the Sesan, Se Re Pok, Ba and Dong Nai rivers. The Yaly and Sesan 3 hydro-power plants have already been in operation for some years now. The plethora of hydro-power projects in Vietnam are justified by the government as necessary for generating electricity to meet the country’s development needs and for providing employment for thousands of workers. However, there is little acknowledgment by the government of the long term negative impacts of these projects on downstream communities (many in neigbouring Cambodia), or on communities that have been forcibly relocated to make way for the projects, or on the lands and forests that are flooded by the dam reservoirs.

Laos is a haven for hydro-power projects partly because of its abundance of rivers and appropriate topography for dams, but more so because the Lao Government has willingly accepted hydro-power as its only long term revenue option. Laos is estimated to have the potential capacity to generate 18,000 MW and more than 50 dams are proposed to be built in this small, largely rural and environmentally rich country over the next 25 years. Almost every province of Laos is abundant with streams and rivers, many of which have already started to be dammed over the past two decades. Dams already and built and proposed include those on the Namngum, Namleuk, Namkading, Namtheun, Seset, Senamnoi, Sekaman and Sekong rivers.

Hydro-power development in Laos is driven completely by IFIs, bilateral donors and specialised consulting firms and at present, Thailand is more or less the sole market for Laos’ electricity. All recent and new projects are variations of the BOT model. Consortia made up of public and private sector companies (including Electricite du France, Transfield, Snowy Mountains Engineering Corporation, John Holland Holdings Limited, Tasmanian Hydroelectric Commission Enterprises Corporation and GMS) have made hefty profits through consultancy services, procurement and construction contracts. Laos is considered a “high risk” investment destination and private financing for infrastructure projects is leveraged through an elaborate system of IFI brokered guarantees and counter-guarantees that ensure that investors recoup their money before the government. The people of Laos are left with infrastructure that they don’t have the funds and equipment to maintain and a mounting external debt. In order to keep the dam infrastructure running after investors have recouped their profits and left, the Lao government will remain bound to IFIs and donors for more loans and grants. Contrary to IFI assertions, hydro-power development in Laos will increase rather than decrease its aid dependency.

Although the gains to Thailand and the dam building industry from Laos’ hydro-power projects are evident, it is far more difficult to estimate how Laos’—mostly rural—population will benefit from these projects. Rural electrification is still a distant dream in the country; hydro-power generation is primarily for export and the state simply does not have the cash to put in place the required systems for distributing electricity across its vast (at many places mountainous and remote) rural areas. On the other hand, thousands of families have been relocated to alien environments without adequate compensation to make way for dams. Communities living downstream from dam projects have lost their seasonal river bank gardens and have reported losses in fish species and numbers, as well as losses of other local flora. Primary, as well as abundant growth secondary forests have been indiscriminately logged in and around dam sites, and fertile agricultural lands and woodlands have been flooded by dam reservoirs. The World Bank funded Nam Theun 2 dam in central Laos will divert millions of cubic meters of water from the Theun river into the Se Bang Fai river, thus completely altering the natural flow of the Se Bang Fai river and potentially destroying the fisheries and riverbank vegetable gardens of more than 100,000 people living along the Se Bang Fai and its tributaries. Widespread logging in and around the proposed dam sites of the upper Sekaman and Sekong rivers have resulted in loss of precious old growth forests.

The Lao Government, IFIs and donors justify dam projects as necessary for “poverty reduction.” But there is little evidence to back this claim. Field reports indicate quite the opposite—dams in Laos are severely impoverishing rural communities as well the entire country through the loss of environmental wealth that cannot be replaced and mounting external debts.

Rivers know no boundaries. Together, the Se Kong river in Laos and Cambodia, the Se San river in Vietnam and Cambodia and the Nam Theun river in Laos contribute approximately 20 per cent of the Mekong’s annual flow volume and nurture some of the most biologically diverse ecosystems in Southeast Asia. They are also home to thousands of communities many of whom are ethnic minorities and indigenous peoples. Dams on any of these rivers in any country will affect the ecologies and lives of peoples in another. More that 50,000 people living along a 200 kilometer-stretch of the Se San River in northeast Cambodia have experienced deaths by drowning, sudden and abnormal flooding and severe damage to their fisheries because of the Yali Falls dam located upstream on the Se San in Vietnam.

As elsewhere, dams in the Mekong region have far-reaching and long term negative impacts that can neither be reversed nor mitigated. Large scale logging, flooding of forests, agricultural, foraging and grazing lands, loss of of local diverse flora and fauna, and the destruction of entire micro eco-systems in inter-related watersheds are habitual companions to these dams. Thousands of families are resettled to alien, inhospitable environments where they are expected to start life anew without the resources, knowledge and skills required to do so. Many are not able to survive and move on looking for more hospitable environments. Freshwater fish, shrimp and crabs are some of the most important sources of protein and income for nearly 65 million people living in the Lower Mekong Basin. Dams, navigation channels, rapid economic regionalisation and infrastructure development are all contributing to unprecedented changes in water resources and rural livelihood opportunities. [13]

However, these impacts are neither fully studied nor acknowledged by the dam industry, IFIs and governments. Although dam projects are promoted in the name of “regional development,”no attempts have been made by any of these institutions to comprehensively assess the cumulative impacts of existing and proposed dams on the ecologies and livelihoods of the region’s peoples.

Selling the Forests and Grabbing the Lands

One of the most crucial features of the Mekong region, its forests, is being rapidly eroded as a result of dams, rampant and indiscriminate logging, rapid expansion of industrial tree plantations and land grabs by local/national elites and foreign companies. Forests in the Mekong region are a mix of lowland and highland tropical, deciduous, semi-evergreen, evergreen, peat and mangrove formations. Over the past two decades, about 50 percent of this forest cover may well have vanished due to dams, logging, commercial agriculture, plantations, tourism and roads.

Forests are not only crucial repositories of much of the region’ biological wealth and diversity, but equally important, they are intrinsic parts of the lives, cultures and economies of majority of the region’s peoples. For rural communities, forests and woodlands are a source of medicinal herbs and plants, fuel-wood, housing materials such as wood, leaves and grasses, small animals for food, and a variety of products such as mushrooms, bamboo and rattan shoots, honey, vines, resin, roots and wild vegetables for food and income. Many communities—particularly indigenous or animist communities—have sacred, spirit forests that are governed and shared through stringent rules and practices. Many sacred forests are sources of local rivers and streams and protecting the forest also means protecting the communities’ water sources. Forests are also important for local folklore, education and knowledge; children learn the value of plants, animals, poisons and medicines by accompanying their parents to forests. In both upland and lowland areas, the demarcation between forest and agricultural lands is often blurred. Swidden cultivation is rotational and letting the forest regenerate on fallows is important to preserve the fertility of swidden fields. The system of rotating production fields and fallows is common in lowland farming as well. It is common for farmers to say that fields that are not planted become forests. Vegetable gardens and small fruit orchards are often planted in forests and woodlands to ensure hospitable growing conditions.

Such multiple uses of forests among local communities are not a romantic perception, but a reality. Forests and the water systems they support—streams, rivers, lakes and wetlands—are crucial to ensure food and livelihood security in a region where most governments have more or less abandoned their obligations to citizens. However, this is not acknowledged by the region’s policy makers and development experts. In the prevailing development imagination, forests are economic resources for timber, non timber forest products (NTFPs) for commerce, and sources for new pharmaceuticals. Already logged forests are designated as ’degraded forests’ and handed over to companies for industrial tree plantations. Forestry “experts” accept that some forests do need to be protected for maintaining important watersheds (and preserving hydro-power potential), flora and fauna. To achieve this, it is imperative that these forests be designated as protected and conservation areas and local communities be barred from using these areas. But ironically, most of the region’s forests have been destroyed as a result of modern forest governance systems and not because of their use by rural communities.

In Cambodia, forestry officials and experts estimate that the country has lost about 2.6 million hectares of forest over the past twenty years, [14] much of it to logging companies. Cambodian hard wood fetches a high price (US $ 120 per metre) and Cambodian timber companies have generated tens of millions of dollars from their operations. A forestry law was passed in 2002 that makes it illegal to cut trees outside forest concession areas and in areas designated as national parks and wildlife sanctuaries. The Cambodian Government also placed a moratorium on granting further forestry concessions during this period. While these have significantly reduced logging, the moratorium does not cover economic land concessions which are owned by many logging companies and on which logging continues, albeit on a much smaller scale than before.

Commercial logging has been going in Laos for more than 30 years now. By the end of the 1980-s, timber products accounted for half of the country’s export earnings. Commercial logging in Laos has been supported by the World Bank, the ADB, UNDP, the Food and Agriculture Organisation (FAO) and bilateral donors such as Sweden, Australia and Finland. In 1990, Laos adopted the World Bank-UNDP-FAO initiated Tropical Forest Action Plan (TFAP), which laid out a framework for land and forest management, and recommended a logging rate of 280,000 cubic metres a year and the establishment of industrial tree plantations. [15]

In the following years, commercial logging reached unprecedented scales with clear cutting of high-value hard wood forests well beyond the permitted limits. Private companies from neigbouring countries and Lao military owned companies (such as Bolisat Phattana Khet Phudoi (BPKP) and DAFI) sparred for the best cuts. By the mid 1990-s, a worried Lao Government attempted to ban all commercial logging in the hope of curbing illegal logging. But both legal and illegal logging continue with the tacit assent of forestry and highly placed government officials, and much of the logging revenues do not reach state coffers. Although precise figures are hard to come by, it is possible that Laos has already lost about 40 percent of its total forest cover and most of its hard wood reserves.

With the TFAP also came categorisation of forests as production, conservation, protection, regeneration and degraded forests. Although the Lao Government recognised that rural communities need forests to meet their food, health, livelihood and spiritual needs, a key objective of forest categorisations and management plans was to restrict the access of ’unauthorised’ rural people into the forests. Those who are considered properly authorised are forestry officials, logging and plantation companies, selected donors and conservation organisations. Often, forests that rural communities have used for decades for foraging and firewood are declared off bounds for village residents. If village residents need to cut a few trees to build or repair their homes, the village meeting house or a local wat (Buddhist temple), they must get permission from district authorities, or they are likely to be penalised. But companies that extract more than the permitted amount of timber, or log protected areas, are rarely chastised. Such contradictions have led to increasing tensions between rural communities (especially those who are already impoverished) and forestry officials.

In Burma, abundant teak and hard-wood forests along the Burma-Thailand border have sustained more damage in the past 25 years because of logging by Thai companies than during 100 years of colonial timber extraction. In the mid 1980-s, about 18 Thai firms were granted permission by both, the ruling Military junta in Burma, as well as some rebel groups to log forests in Burmese territory along the Burma-Thai border from Chiang Rai in the north to Ranong in the South. For the military junta, the main motivations for granting logging concessions were that they could get money from timber extraction (through royalties) in rebel territories without actually engaging in logging and equally important, they could use the roads and other infrastructure developed by logging companies to transport arms and scale up the war against rebel groups. [16] For the rebel armies, the main motivation was money; they needed the logging revenues to purchase sophisticated arms and weaponry, much of which were supplied by the Thai military.
Because of the risky nature of operations—logging in war zones—logging companies speeded up their operations and cut all the trees they could, big and small, mature or not. Between 1988 and 1992, Burma’s forest areas along the Burma-Thai border were completely devastated by Thai logging; the devastation extended 100 km deep into Burma. Because of international outcry against destruction of one of the world’s richest tropical forests, the Burmese Government canceled all logging concessions between 1992 and 1995. But this did not stop the logging. Logs that were already cut and stored at border areas were still claimed by Thai companies. Also, the Burmese Government has no authority over the rebel armies who continue the timber trade with Thai companies. [17]

Organised, commercial logging is an old story in Thailand and was possibly first established by the British logging industry, which expanded its operations from Burma into northern Thailand. While the early logging era focused on teak, after World War II, commercial logging continued with non teak trees and was Thailand’s predominant form of forest exploitation until it was banned in 1989. The ban, however, did not end timber extraction from natural forests. [18] Thailand’s wood industry simply switched its supply chain to illegal logging inside the country and legal and illegal imports from Burma, Cambodia and Laos. The wood industry also found a new supply source: commercial tree plantations.

Industrial tree plantations in the Mekong region are a scourge as widespread and deadly as large dams. Plantations are an old phenomena in the region dating from French and British colonial eras when colonial companies established large hard wood and rubber plantations. In the past twenty odd years however, every country in the region has handed tens of thousands to hundreds of thousands of hectares of agricultural and forest lands over to private companies for commercial and industrial tree plantations. These include eucalyptus, pine and acacia plantations for the pulp and paper industry, teak and other hard wood for the timber industry, and commercial crops such as rubber, cassava, sugar cane, palm oil and cashew-nuts. The tree/crop species that are planted are generally fast growing in order to maintain a steady supply of raw materials for industry, and all of them are alien to the region. A new category of plantations that has recently emerged is “carbon sink” plantations through which, countries can purchase “carbon credits” by financing tree plantations

Plantations have been heavily promoted by donors, IFIs, ECAs and private forestry consulting firms as a development strategy to maximise the economic use of “degraded” forests and unused land, prevent soil erosion and flooding, increase reforestation and alleviate poverty. One of the most notorious forestry consulting firms is Jaako Poyry from Finland. Poyry promotes a purely industrial approach to forests based on a northern model of sparse population and low biodiversity, which is completely opposite to the dense populations and high bio-diversity of tropical forest areas. [19] Poyry is the darling of the pulp and paper industry (it has carried out over 400 projects for the industry over the past 40 odd years). It is also a favoured consultancy firm for many IFIs, ECAs and donors.
Although the specifics vary according to country, the overall story of plantations in the Mekong region is a story of forest destruction, land grabs and impoverishment of peoples and environments. Fast wood plantations are generally accompanied by processing plants close at hand. Paper and pulp mills in the region have poisoned local water systems and soils with chemicals and wood particles. Plantations and their processing plants consume huge amounts of energy and water which are denied to local communities living in and around the plantations. Eucalyptus plantations create aridity and rapidly deplete the soil of moisture and nutrients. Plantations are mono-cultures and repeated planting of the same crop/tree in close cycles requires intensive use of chemical fertilisers, pesticides and herbicides, which leach into the soil and ground water and reduce the fertility of surrounding areas. In some cases (for e.g., the Green Sea concession in Northeastern Cambodia and Lao World Coconut concession in central Laos) the primary objective is logging of tropical forests.

Plantations are displacing people from their villages, fields, forests and traditional occupations. In many cases (as in Cambodia, Vietnam and Yunnan), village residents are actually forced to relocate to new areas to make way for the plantations. In other areas, village residents can remain in their villages but not use the surrounding forests and woodlands for foraging and cultivation since these are now under the control of plantation companies. A common occurrence in every country is encroachment by plantation companies on village, forest and public lands, well beyond the area permitted in concession contracts. Villagers in Southern Laos report that Vietnamese plantation companies have put fences around their grazing lands and are claiming them as part of the plantation areas. Although this is in violation of verbal and written agreements, government authorities have not taken action against the companies.

In Cambodia, a handful of powerful companies with high political connections have secured “economic land concessions” across the country for rubber, eucalyptus, pine, acacia, teak, palm oil, sugar cane and cassava. Many of these concession areas are not actually being used for the agreed purposes, for example, the Pheapimex area in central Cambodia. The common wisdom in the country is that these lands have been grabbed by companies for speculation and tourism development and that they will not be returned to the communities. In northeastern Cambodia, land grabbing by powerful local elites and private companies has become so commonplace that local communities often remark that the only reason the government supports road building projects is so that their lands can be stolen more easily.

One of the most irresponsible supporters of industrial tree plantations is the ADB. In Laos, the ADB and JICA (Japanese official aid) are promoting “small holder” plantations of 2 – 3 hectares whereby farmers are contracted to grow trees under contract to private companies that are subsidised by the ADB and JICA. But Lao farmers are not mono-culture producers and plantation production systems are completely alien to their definition of agriculture. On April 6, 2006, the ADB approved a Forest Plantations Development Project for Laos. With a budget of US $ 15.35 million, the project aims to establish 9,500 hectares of small livelihood plantations (SLPs) and a Lao Plantation Authority. The loan document states that:

“The goal of the Project is to support the establishment of financially viable SLPs and MEPs and to facilitate industrial plantation development and the associated processing industry, to create a substantial plantation resource base. The Project will catalyze large-scale foreign direct investment in forest plantations to develop an efficient wood processing industry. The long-term objective is to develop an efficient and equitable Subsector to accelerate the pace of economic development, reduce poverty, and improve the environment.

Alarmingly, the above loan was approved barely months after the ADB’s Operations Evaluation Department (OED) found that the precursor to this project—which also promoted eucalyptus plantations among family farmers—was completely unsuccessful and ridden with fraud and corruption. From 1993-2003, the ADB financed a US $ 11.2 million loan project to promote eucalyptus tree plantations among small and medium scale farmers. In its evaluation of the project, the OED concluded that because of the project, people were driven further into poverty by having to repay loans for failed plantations, and that the ADB’s performance was completely unsatisfactory. [21]

As in the dam building industry, plantation companies get subsidies, preferential financing and other supports from the institutions such as the ADB, World Bank, UNDP, and FAO, and from northern donors such as Canada, Britain, Japan, Australia, Finland and Sweden. Each Mekong country is also supporting its own private companies to corner land concessions for plantations. Although many plantation companies operating in the region are Asian, their knowhow and equipment comes from northern consultancy and engineering firms, who in turn are promoted by northern donors and IFIs. [22]

To date plantation promoters have not provided any empirical evidence that plantations have provided employment, regenerated forests or generated revenues that governments have used for national development and poverty reduction. Grabbing land and replacing diverse, natural forests with mono-culture plantations is thus relatively cost-less for the companies. But it has proved extremely expensive for the rural communities who depend on these forests and lands for their very survival.

The High Cost of Development

Every country in the Mekong region has special government departments devoted to wooing and negotiating contracts with private and public investors, donors and creditors. But no such facility exists to systematically document the loss of waters, forests, fish, bio-diversity, lands, livelihoods and incomes, or to record testimonies of local communities about how their lives and environments have changed as a result of the largely unregulated investment pouring into the region. Whatever documentation exists on these issues has been carried out by national and international civil society organisations, independent researchers and academics, often under insecure political conditions.

There are several issues that this paper does not cover, for example the impacts of roads, mining, tourism and agribusiness activities on the region’s resources and livelihoods. Tourism for example, is an extremely complex phenomenon whose effects extend to changes in social and cultural organisation, labour and trafficking of humans, flora and fauna. [23] Roads, although necessary for connecting national communities, are also the means of carrying the region’s precious resources to markets over which local people have no control.

Contract farming is being aggressively promoted in every Mekong country to “integrate” small hold farmers into the regional and global economies. While contract arrangements may provide some income to farmers in the short term, contract terms do not generally favour subsistence and small scale agricultural producers. In Cambodia, small hold farmers are facing acute financial distress because of contract farming related debts. Thailand’s experience over the past thirty years of leaving its small hold farmers vulnerable to market forces with no protection is a cautionary tale. Real farm income in Thailand has not increased since 1977, whilst spending on agricultural inputs has increased over the same period. Small farmers are increasingly indebted and many farming families have lost their lands due to heavy debts that they are unable to service. Out of 5.7 million farming families, 4.7 million do not have enough land to sustain themselves. In Cambodia, Laos and Thailand, distress migration from rural to urban areas is rapidly increasing. Those who were once able to live off their lands, forests and rivers are now trying to survive as workers in the construction, services and hospitality industries.

Where is the wealth of the Mekong region going? Certainly not to the majority of the region’s peoples. Instead, the region is being plundered to feed the pockets and bank accounts of government officials national elites, and domestic and foreign private companies. Mekong country governments, IFIs, bilateral donors and regional groupings like ASEAN are pushing development projects in which the Mekong region has little meaning beyond being a source of raw materials and cheap labour to feed the needs of wealthy consumers and destructive industries. Despite their prattle about human rights, good governance and the rule of law, national and international policy makers are blind and deaf to the realities and voices of the communities whose rights to their environments and livelihoods are being trampled on in the name of development.


[1A Wealth of Opportunity, Development Challenges in the Mekong Region. Asian Development Bank, 2000

[2"Development" in the Mekong Region . Dave Hubbel.

[3Open door to investments in the Mekong region. In-depth information 28 Mar 2006.

[4See IFC MPDF website for more information.


[7Mekong Development Forum in Singapore to Explore $15 Billion in Potential Investments. ADB Media Release, 3 March, 2006.

[9Open door to investments in the Mekong region. In-depth information 28 Mar 2006.

[10Hu Xuan /China Daily, July 7, 2005, page 4.

[11Xiao Yu-hui, Kunming Daily. 7 March 2006.

[12Chuncheng Wanbao, Kunming Evening Daily. 23 May 2006. In addition to this is the massive flooding of agricultural lands, river bank farms, forests and fallows that are crucial sources of livelihoods for the province’s rural communities.

[13Fish Trade, Food and Income Security: An overview of the constraints and barriers faced by small scale fishers, farmers and traders in the Lower Mekong Basin. Dr. Simon R Bush and Le Nguyet Minh. Oxfam America, 2005.

[15Making money from trees? Commercial tree plantations in Lao PDR. Watershed. Volume 9, No. 3. March-June 2004.

[16Until No Trees Remain: Illegal logging in the Salween Forest. Veerawat Dheeraprasart in After the Logging Ban, Politics of Forest Management in Thailand.. Foundation for Ecological Recovery. Thailand 2005.


[18The Politics of Nature Conservation in Thailand, Dr. Pinkeaw Luangaramsri in After the Logging Ban, Politics of Forest Management in Thailand.. Foundation for Ecological Recovery. Thailand 2005.

[19Jaakko Poyry and the Fin(n)ished Forests of the Mekong Region. Tove Selin. Watershed. Volume 9, No. 3. March-June 2004.

[20ADB Loan Agreement (Special Operations, Forest Plantations Development Project) between Lao Peoples’ Democratic Republic and the Asian Development Bank. Loan Number 2209-LAO(SF).”

[21Creating Poverty in Laos, the Asian Development Bank and Industrial Tree Plantations. Chris Lang and Bruce Shoemaker. World Rainforest Movement. April, 2006.

[22For a comprehensive analysis of industrial tree plantations in the Mekong region, see The Pulp Invasion, The International Pulp and Paper Industry in the Mekong Region by Chris Lang, World Rainforest Movement. December, 2002.

[23For excellent analyses on tourism, see New frontiers, Briefing on Tourism, Development and Environment Issues in the Mekong Subregion.


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