By Patpicha Tanakasempipat and Kay Johnson
VIENTIANE/BANGKOK (Reuters) – China on Thursday said it was helping its downstream neighbors cope with a prolonged drought by releasing more water from its dams on the Mekong River, adding it would consider sharing information on hydrology to provide further assistance in the future.
The statement came as a new economic report predicted that the building of dams to harness hydropower on the Mekong River would reshape the economies of five countries along the waterway, fuelling long-term inflation and dependence on China.
The drought over the past year has severely hurt farming and fishing in Laos, Thailand, Cambodia, Myanmar and Vietnam, and many blame China’s 11 dams on the upper Mekong – which China calls the Lancang River – as well as climate change.
Chinese State Councillor and Foreign Minister Wang Yi said a lack of rain was the main cause of the drought and said China had suffered from it too.
“China has overcome its own difficulty and increased water outflow from the Lancang River to help Mekong countries mitigate the drought,” Wang told a meeting of the Lancang-Mekong Cooperation (LMC) grouping.
“We also agreed to strengthen such cooperation within the framework of LMC to ensure the rational and sustainable use of water resources,” he said.
A new spate of dam-building in Laos is poised to turbo-charge water and food security disputes along the Mekong, on which at least 60 million people depend for their livelihoods.
In the past four months, Laos has opened two dams on the mainstream Lower Mekong and is poised to begin construction later this year on a third dam near the city of Luang Prabang.
On Thursday, an analysis by Fitch Solutions Macro Research said dam-building was already changing livelihoods and would have profound implications in the coming decade.
The report cited studies by the Mekong River Commission that projected heavy losses in fishing and farming, which would force these countries to import more food.
“This puts these countries at further risk of elevated inﬂation due to higher foreign food prices in times of shortage, and currency depreciation over the long term due to likely higher structural inflation vis-à-vis their trading partners,” it said.
“This could see these economies increasingly rely on China for essential food imports to make up the shortfall over the long term, making these countries even more vulnerable to Chinese influence,” the report said.
It also predicted a shift away from agriculture towards manufacturing and hospitality services such as tourism.
Fitch Solutions is an economic research center owned by the Fitch Group that operates separately from the Fitch Ratings agency.
(This story has been refiled to clarify headline)
(Writing by Kay Johnson; Editing by Kirsten Donovan)