Policy Paper

The Political Economy of Hydropower Dam Construction in Vietnam

in Program

The recent surge in the development of economic infrastructure in the six countries that share the 5,800 kilometer long Mekong River, most controversially hydropower dams, has ignited heated debate about where to strike the balance between development and other important national interests. These include trade offs between economic infrastructure and environmental protection, between food security and energy security, and between multilateral cooperation and national sovereignty.


Vietnam is a key country in the 2.3 million square kilometer area drained by the Mekong River and its tributaries that the Asian Development Bank (ADB) calls the Greater Mekong Subregion (GMS). In addition to Vietnam, the GMS comprises Cambodia, Laos, Myanmar (Burma), and Thailand, in Southeast Asia, and China’s Yunnan Province and Guangxi Autonomous Region).1 With the Mekong Lower Basin area covering 25% of Vietnam’s territory and housing 35% of its population, the River and its tributaries are critically important to the economic development, social survival, environmental protection, and national defense of this fast growing Southeast Asian country. As a country located in the lowest part of this international river, Vietnam keeps close track of what upstream countries are doing. Similarly, what Vietnam is doing with the water resources of the Mekong tributaries that rise in its Central Highlands is of concern to downstream neighboring countries.


In addition to its role in the GMS cooperative development program, Vietnam is a founding member of the four-country Mekong River Commission (MRC), which was established 1995 to promote cooperative water management in the lower half of the Mekong River. The MRC also includes Cambodia, Laos and Thailand.Unlike the GMS, the MRC does not include China or Myanmar. Since China controls the upper half of the river, which rises on the Tibetan Plateau and traverses Yunnan Province before entering Southeast Asia near the “Golden Triangle” intersection of Laos, Myanmar (Burma), and Thailand, its absence from the MRC has complicated efforts to promote cooperative water development. Vietnam itself is an “upstream” country in that several important Mekong tributaries rise in its Central Highlands, but a downstream country because the river terminates in its “rice bowl,” the Mekong Delta.


This geographic location puts Vietnam in a dilemma. While Vietnam is rightly concerned about the threat upstream hydropower projects pose to the Mekong Delta, its own dams in the Central Highlands have also caused many transboundary impacts. In fact, as reported by the NGO Forum on Cambodia, because of inadequate Environmental Impact Assessments, Vietnam’s dams in the Central Highlands, especially the $1 billion Yali Falls Dam and others on the Se San River, have caused damage to communities downstream in Cambodia. Since then, Vietnam has improved its EIAs somewhat and also consulted with Cambodia about how to mitigate downstream impacts, especially unanticipated releases of water.2 It should be noted however, that Vietnam is still pushing to complete scores of dam projects in the Central Highlands, turning the region into the country’s largest hydropower source by 2010.3


Cooperation to protect the environment in the Mekong River Basin between Vietnam and its neighboring riparian countries, however, may pale in comparison with their cooperation on industrial development. As reflected in the Joint Communique released after the fourth Trilateral Summit between Vietnam, Laos and Cambodia on December 5, 2006, the main focus of cooperation and policy coordination is promoting socioeconomic development, building infrastructure, and developing trade and investment among the three countries.4 In fact, construction of roads and hydropower dams is explicitly an area of priority in this “Development Triangle.” Vietnam and Laos have agreed to increase electricity exchange between bordering provinces and for Vietnam to help build several hydropower plants in Laos. These projects are estimated to have a total capacity of 3,000 MW by 2020 and will sell the electricity produced to Vietnam.5 Vietnam operates 15 stations that sell electricity to Cambodia and plans to open four more. Additionally, Vietnam has been working with Cambodia to develop plans for a cascade of five hydropower dams on the Se San River in Cambodia, with an estimated total capacity of 818 MW.6


Although the Mekong River is strategically important to Vietnam, its inability to influence China’s actions on the Upper Mekong and the urgency that it attaches to development have led to the dominance of economics in the country’s official thinking and decision-making processes with regard to the development of hydropower dams. Thus, decisions to build major hydropower dams in Vietnam are part of a very centralized national strategy for developing power and generating electricity to meet the increasing energy demands of its rapidly growing economy. According to the national overall electricity strategy as laid out in the Prime Minister’s Decision 176/2004/QD-TTG on October 5, 2004, Vietnam aims to fully exploit its energy potential, building hydropower dams in every technically feasible location.


As is generally the case with the government’s bureaucratic operations, the national electricity strategy was likely drafted by the state-owned Electricity Corporation of Vietnam (EVN) – the sole provider of electricity in the country – under the Ministry of Industry (now the Ministry of Industry and Commerce). The strategy was later approved by the Ministry of Industry and submitted to the Prime Minister in August 2004 before being adopted by the government as the national strategy for developing electricity industry.


In the national strategy, the highest priority is accorded to developing hydropower resources rather than thermal-power, gas, nuclear energy, import of electricity, or alternative energy. By 2006, hydropower reportedly constituted 39% of the country’s power, contributing the highest proportion among all power sources.7 By 2020, the government estimates, all hydropower plants of the nation will generate a total capacity of 13,000-15,000 MW, maintaining the dominant role of hydropower up to 62% of the country’s energy supply. In a way, this reflects the country’s urgent need for energy and its determination to utilize its water resources for electricity.


In the electricity and energy security decision-making process, EVN and the Ministry of Industry under which it is affiliated, play a dominant role. There is little evidence of a broad discussion prior to the adoption of the national strategy involving substantial inputs from other actors who might advocate for a more environmentally friendly approach to the issue of energy security, including the civil society, NGOs, development think-tanks and the domestic press. Potential environmental impacts of major hydropower projects are usually assessed and reviewed by specialized agencies such as those under the Ministry of Natural Resources and Environment (MNRE) only in the stage of feasibility examination. These agencies, however, do not figure significantly in the implementation and operation of hydropower dams. In one telling anecdote, there seemed to be no official representative from the MNRE or other high-level government official who would advocate for environmental concerns in the Son La hydropower plant State Steering Committee, the largest to date in Southeast Asia with a generating capacity estimated at 2,400MW and a 138 meter high dam.8


In an interesting contrast with a lack of sufficient emphasis on the environmental dimension, most major hydropower projects include a well-developed relocation component. Perhaps substantially for political reasons, the inundation of populated areas and the subsequent task of relocating affected residents seems to have become the most important non-economic issue that is factored into plans to build hydropower dams.9 Legally, if a project is estimated to cause a relocation of 20,000 people or more, final approval falls within the authority of the National Assembly, the highest constitutional authority of the state. This constraint is illustrated in the case of the Son La hydropower dam, which involves relocating about 100,000 residents, mainly upland ethnic minorities. Because of concerns about how the relocation was being handled as well as its location in a earthquake zone, the National Assembly delayed action for several years before finally giving the go-ahead in December 2002.10


This requirement, however, does not prevent instances from occurring, in which investors, contractors, and provincial authorities eager to move projects forward, may have incentives to underestimate the number of people who will be seriously affected by the projects and thus require relocation.11 In one example, the water level of a hydropower dam was miscalculated, causing an overflow that damaged 70 households in Kon Tum province.12 In another incident, the Provincial authority of Tuyen Quang and investors in a hydropower project underestimated the number of residents requiring relocation as a consequence of a dam’s construction.13 This is, however, only part of a bigger problem, which is a lack of transparency that may frustrate any accurate assessments of the negative impacts of a hydropower project and thus render ineffective the measures intended to address them. As the Chairman of the Vietnamese Association of Construction and Environment charged, in the Son La hydropower project, there seemed to be a lack of transparency in the way the relocation task was handled only by EVN and provincial leaders.14


The Vietnamese government expects to complete all major hydropower dams by 2015, as revealed by the Government’s Special Advisor on Dams and Hydropower.15 The final major project will be the Lai Chau hydropower plant. Construction on Lai Chau will begin in 2009 and the dam will have a generating capacity of 1,200 MW when completed in 2015. After that time, any hydropower plants to be constructed will be small scale and have a capacity of less than 50MW.


The government’s decision to hastily expedite and finish construction of major hydropower dams by 2015 actually aims to achieve two purposes. First, it needs to quickly satisfy increasing energy demands. Otherwise, the current quick pace of economic growth will be bottlenecked and in danger of sizzling out. Second, by encouraging many hydropower projects to be completed in a short period of time, the government is effectively creating numerous employment and business opportunities for major domestic corporations and contractors, especially those in the public sector. Thanks to this government-induced business boom, it is hoped that the country’s national corporations and domestic contractors can thrive and gain the qualifications necessary to compete internationally in the business of dam and hydropower power plant construction and operation. This second purpose was very influential in the government’s decision to adopt the so-called “special mechanism” in the bidding process. This bidding mechanism skips the normal public bidding process when awarding contracts for hydropower plant projects and was approved in government decree 797/CP-CN on June 17, 2003. It should be noted that this decree is still officially justified by the objective need to speed up the construction of 32 power plants, including 20 hydropower plants, in the period from 2003 to 2010.16


Some observers suggest that while the country’s energy demands remain unmet, with major cities experiencing regular blackouts during the dry season, the second target of strengthening state-owned corporations could prove far-sighted. Some state-owned corporations have improved enough to actually venture outside the country in search of business opportunities. For example, the PetroVietnam Corporation, one of the country’s largest state-owned entities, is implementing a hydropower project in Luang Prabang, Laos, that is worth more than $1.7 billion.17 Prior to that, a joint venture owned by six major corporations in Vietnam secured another project to build the $273 million Xecaman 3 hydropower plant in Lao’s Sekong province in 2005.18 Although foreign policy and political factors are likely to have played a significant role in these projects, the fact that major Vietnamese corporations have started to engage in the costly business of building hydropower dams abroad suggests that the experience gained from their prior undertakings inside the country has made them more capable and competitive.


Many domestic concerns in Vietnam are voiced not about major hydropower projects, but more often about the construction of numerous small- and medium-scale hydropower dams. As estimated by EVN, by the end of 2007 there were more than 200 completed, ongoing or approved small- and medium-scale hydropower projects across the country, with a combined capacity of 4,067 MW.19 While this high number of small and medium hydropower projects has been the cause of many doubts and much skepticism, most of the concerns are mainly about the procedural registration, financing, economic benefits, operation and utilization of the dams.20 More strategically, a group of experts from Harvard has reportedly warned the Vietnamese government about its increasing dependence on hydropower, given the fact that it cannot control the upstream water resources which its hydropower dams require to operate.21


Against such a backdrop some NGOs, including the WWF, have expressed concerns about the likely negative social and environmental impacts of a series of recently constructed small- and medium-scale hydropower dams without proper, sequential assessment of the impacts of each dam.22 As the Deputy Minister of Natural Resources and Environment rightly observes, it is now quite common that the planning and designs of hydropower dams usually pay insufficient attention to a holistic assessment of economic, social and environmental impacts. They tend to narrowly focus on the generating capacity, electricity output and economic benefits of hydropower dams. Consequently, many hydropower dams are not fully maximized in terms of irrigation, fishing, and tourism.23 In a rare decision, the central government decided to cancel five hydropower projects in Quang Nam province for fear that these dams would jeopardize the Song Thanh natural conservation area, deemed to have the highest biodiversity in Central Vietnam. These hydropower projects, however, were expected to have very small capacity, ranging from 2.5MW to 18MW.24


In an interview with the local press while conducting a socio-environmental impact assessment of hydropower projects in Quang Nam province, a WWF representative argues that a balance between economic growth and sustainable development could be somehow struck by providing necessary information about the environmental impacts of hydropower projects so as to enable the government to make the right decisions.25 Of particular importance, he suggests public forums be opened up so that affected residents can understand the possible impacts of hydropower projects on their livelihoods and voice their stakes in the planning of hydropower projects and adjust their livelihood accordingly.


This argument, while well-intended, does not seem to give enough weight to the role of politics and power relations in the government’s decision-making process with regard to the construction of hydropower dams. The problem is that the economic benefits of hydropower projects are usually apparent while their deleterious impacts on the environment are less visible. More importantly, beneficiaries of hydropower projects, including corporations, industries and more generally urban residents, are usually much more politically and economically powerful than those adversely affected by hydropower projects, many of whom are poor ethnic minorities in rural areas. This is especially the case after the government decided to allow private investors to finance “independent” small-scale hydropower projects. So far, according to the EVN, there are currently almost 100 independent hydropower projects under implementation with a registered capacity of 3,150MW.26


Legally speaking, there are two inter-agency bodies in the government that may participate in the government’s decision-making process to build hydropower dams. They both involve to a large extent the Ministry of Natural Resources and Environment in terms of expertise and bureaucratic structure. First, the National Water Resources Council, headed by a Deputy Prime Minister who used to be the Minister of Industry, is mandated by the Law on Water Resources and a Government’s Ordinance to consul the government on major decisions relating to the country’s water resources. Second and more relevant to the use of water resources in the Mekong River tributaries, is the National Mekong Committee, whose standing body was recently transferred from the Ministry of Agriculture and Rural Development to the Ministry of Natural Resources and Environment in April 2008.27


The National Mekong Committee includes one Chairperson, three Vice Chairpersons and other members. The Chairperson of the Committee is also the Minister of Natural Resources and Environment while the three Vice Chairpersons are concurrently the Deputy Ministers of Foreign Affairs, Agriculture and Rural Development, and Planning and Investment. Other members in the Committee are high-level officials from Ministries of Industry and Commerce, Science and Technology, Transportation, Natural Resources and Environment, Agriculture and Rural Development, and four provinces in the Mekong Delta and one in the Central Highland. As part of its mandate as stipulated in the Prime Minister’s Decision 860/TTG on December 30, 1995, the National Mekong Committee is charged with overseeing, monitoring and managing water and related resources in the Mekong Lower Basin and joining in reviewing all projects involving the Mekong Lower Basin of all agencies and provinces in the Mekong Delta and the Central Highland.


With all the aforementioned legal mandates, it remains to be seen how much these two inter-agency bodies can incorporate and advocate for environmental concerns in the government’s decision-making process when it comes to the construction of hydropower dams. Although information from public media sources does not provide us with many real insights into how effectively these two inter-agency bodies have performed, there are reasons to speculate from the relative lack of visibility of environmental advocacy discourse in the government, the swift pace of building hydropower dams across the country, and the quick deterioration of the environment on the ground that these bodies may not prove as effective as one might expect.


In sum, by examining the government structure, processes, and bureaucratic agents involved in the government’s decisions to build a series of hydropower dams in Vietnam, this paper suggests that economic factors seem to dominate. This might indicate a broader pattern, in which the issue of how to achieve rapid economic growth continues to receive higher priority over environmental protection. Whether this pattern can be reversed in the future depends perhaps not as much on a restructure of the government apparatus as on the continuing challenge of further environmental degradation, the increasingly vibrant international and domestic NGOs network, development think-tanks, and a more environmentally aware public opinion.


Photo credit: Chris Lang,

[1] The latter, which technically is not part of the Mekong Basin, shares a common border with Vietnam.

[2] Forum on Cambodia, “Down River: The Consequences of Vietnam’s Se San River Dams on Life in Cambodia and Their Meaning in International Law,

[3] Liberated Saigon, “Central Highlands to Become Country’s Largest Hydropower Source in 2010,” April 27, 2007;

[4] Vietnam News Agency, Joint Communique at the Fourth Vietnam-Laos-Cambodia Summit, December 5, 2006,

[5] Industry Review of Vietnam, “Vietnam, Laos, and Cambodia Cooperate for Development,” July 11, 2007,

[6] Industry Review of Vietnam, “Vietnam, Laos, and Cambodia Cooperate for Development,” July 11, 2007,; The Saigon Times, “EVN to Push Hydropower Projects in Cambodia,” December 5, 2007,

[7] The Saigon Times, “Golf Course, Hydropower and the Planning Conundrum,” April 22, 2008,

[8] The Vietnamese Prime Minister’s Decision 677/2004/QD-TTG.

[9] The Saigon Times, “The Dilemma of Hydropower and Environmental Sustainability,” April 20, 2008,

[10] “Vietnam starts resettlement to make way for massive Son La dam,” World Rainforest Movement, WRM Journal, No. 69, April 2003

[11] Vnexpress, “Tuyen Quang Hydropower Projects Leaves Out 5,000 People Relocated,” October 2006,

[12] The Saigon Times, April 10, 2008,

[13] Vnexpress, “Tuyen Quang Hydropower Projects Leaves Out 5,000 People Relocated,” October 2006,

[14] The Saigon Times, “Small Hydropower Projects Jeopardize the Environment,” May 20, 2008,

[15] Interview of the Government’s Special Advisor on Dams and Hydropower,

[16] Vietnamnet, “With Bidding Appointments, Power Plants Projects Still Lags Behind?,” March 14, 2007,

[17] Labor, November 29, 2007,

[18] Vietnamnet,

[19] Electricity of Vietnam, “Building Small Hydropower Plants: Concerns of Investors,”

[20] Vietnam News Agency, “Scores of Small Hydropower Projects Approved,”; Labor, “Central Highland Racing for Hydropower Projects for Stock Profits,” July 16, 2007,

[21] The Saigon Times, “Golf Course, Hydropower and the Planning Conundrum,” April 22, 2008,

[22] The Saigon Times, “Hasty Development of Hydropower: Unseen Consequences,” April 8, 2008,

[23] The Saigon Times, “The Dilemma of Hydropower and Environmental Sustainability,” April 20, 2008,

[24] Youth, “Stop to Five Hydropower Project Jeopardizing Song Tranh Conservatory,” May 26, 2008,

[25] The Saigon Times, “Hasty Development of Hydropower: Unseen Consequences,” April 8, 2008,

[26] Liberated Saigon, “Investing in Hydropower Projects: Caution Needed,” December 18, 2007,

[27] Vietnam Mekong Committee,⟨=VN


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