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In ‘battery of Southeast Asia,’ citizens struggle to keep lights on


As Laotians grapple with supercharged inflation that has spiked electricity prices nearly 30%, many wonder why energy and other necessities are so costly in a nation dubbed the “battery of Southeast Asia” for its dozens of hydropower dams.

“Electricity rates are too high for ordinary people to afford,” a resident of Luang Prabang province told Radio Free Asia (RFA) in March 2023. “The dams built in Laos have affected the Lao people, so power should be free or low cost for everybody.”

In the past 20 years, the communist state of 7.8 million people has built about 80 dams along its waterways, including the biodiverse Mekong River. Many of them are Chinese-funded. But an estimated two-thirds of the electricity generated is exported from the landlocked nation to power factories, hospitals, homes and schools in countries including Cambodia, Malaysia, the People’s Republic of China (PRC), Singapore, Thailand and Vietnam, the Singapore-based news network CNA reported in October 2022. (Pictured: Laos’ Don Sahong Dam on the Mekong began operating in 2020 and generates electricity for export to Cambodia.)

While the power sector accounts for almost 15% of Laos’ gross domestic product (GDP), loans for dam construction have overburdened the country’s finances. In late 2021, public and publicly guaranteed debt hit U.S. $14.5 billion — about half of it owed to the PRC — and was projected to surpass total GDP in 2022, according to The World Bank. Nearly one-third of the debt stems from the energy sector.

Additionally, Laos’ currency, the kip, shed 68% of its value against the U.S. dollar in 2022, “undermining recovery and fueling inflation,” the global development agency reported in November 2022.

Despite persuading some lenders to defer payments, Laos faces debt service obligations of U.S. $1.3 billion annually through 2026, the World Bank estimated. Citizens, meanwhile, struggle to afford rice and water.

Inflation topped 41% in February 2023, according to government statistics. Food prices were up nearly 50% over the previous year and medicine costs by 42.4%, with cooking gas, electricity and water prices rising 28.3%, The Laotian Times website reported in March.

The government recently set price controls on about two dozen essentials, including natural gas, pork and rice. Residents remain skeptical, with one telling RFA that a bag of rice costs 600,000 kip (U.S. $35) — half the minimum monthly wage.

“Lao people’s earnings have not kept pace with inflation,” the World Bank reported. “This particularly affects the urban poor, with some families forced to reduce their consumption of food and fuel … [and] two-thirds of households reported spending less on health and education, which could undermine long-term human development.”

In 2022, Laos earned almost U.S. $1.8 billion from electricity exports, which increased 7.5% over the previous year, The Laotian Times reported. Yet the promise of hydropower profits cascading down to the citizenry has proved little more than a trickle, experts say. Laos is one of the region’s poorest nations.

“Much of the money that’s being made from dams is actually being made by the investors. It’s not really going to improve the well-being of the Lao people,” Philip Hirsch, emeritus professor of human geography at Australia’s University of Sydney, told CNA. “Laos needs to take a break and to ask what’s actually beneficial for the majority of the Lao population, not just for the facts and figures of how much foreign investment (it’s) able to attract.”

A pause is unlikely given the government’s target of generating 75% of electricity from hydropower by 2025. In March 2023, Laos signed an agreement with Chinese and Thai companies to build a third Mekong dam in the northern Pak Lay district beginning in 2024, RFA reported. It is among hundreds of planned dams.

Hydropower projects have helped more than triple Laos’ electrification rate to 95% of households since 2000, according to its energy and mines minister. “We have to use our natural resources to bring more prosperity,” Daovong Phonekeo told CNA.

Still, concerns swirl around the party-state’s strategy, from worries over crushing debt to fears of environmental degradation, community displacement and loss of sovereignty.

For example, all electricity generated by the 700-megawatt Pak Lay dam will be sold to a Thai state-owned entity under a 29-year concession, RFA reported. The investors, Gulf Energy Development Public Co. Ltd. of Thailand and the PRC’s state-owned Sinohydro Corp., will get equity stakes of 40% and 60%, respectively.

Similarly, in 2020, Vientiane relinquished control of the nation’s electrical grid to a Chinese state-owned company for U.S. $600 million “in an apparent debt-for-equity swap,” CNA reported.

Those who depend on Laos’ waterways for their food or livelihood face a murky future. Ecologists warn that the dams are exacerbating droughts already worsened by climate change, with record-low water levels along the lower Mekong, The Diplomat magazine reported in March 2023. The unprecedented drop also is blamed, in part, on Chinese megadams holding back water on the upper Mekong.

Tens of thousands of Laotians have been forced from their homes because of hydropower projects, with 1,000 families from 20 villages expected to be displaced by the Pak Lay dam.

“We villagers have no choice but to comply with the policy of the party and government,” one man told RFA. “We want to oppose the project, but we can’t … fight against the party and government.”


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