XAYABURI, Laos (Reuters) - Laos held a groundbreaking ceremony on Wednesday for a $3.5 billion hydropower dam on the Mekong River that is opposed by environmentalists and neighbouring countries because of the possible impact on livelihoods, fisheries and agriculture.
"We had the opportunity to listen to the views and opinions of different countries along the river. We have come to an agreement and chose today to be the first day to begin the project," Deputy Prime Minister Somsavat Lengsavad said at the site.
The poor Southeast Asian country has ambitions to become the "Battery of Southeast Asia" through power exports from dams across the 4,900 km (3,044 mile) Mekong.
However, after pressure from neighbours, it agreed to suspend the Xayaburi dam last December, pending a study led by Japan.
"Laos has made a misleading statement by saying it has already addressed environmental concerns, in an attempt to get support from the other governments. The studies that have been conducted are not yet finished," said Kirk Herbertson, Southeast Asia coordinator for environmental group International Rivers.
Government officials from Cambodia and Vietnam, which have opposed the dam, did not respond to requests for comment
The groundbreaking ceremony, which normally celebrates the formal start of construction, went ahead the morning after 29 European and Asian states, among them critics of the dam, held a summit meeting in Laos's capital, Vientiane.
Thai construction giant Ch Karnchang Pcl has been carrying out what it called preliminary work for nearly two years, with Lao officials repeatedly playing down the extent of the work. The dam had been scheduled to be built by 2019.
A Reuters journalist at the site on Wednesday said substantial construction had taken place, including access roads and work on the riverbanks, but nothing appeared to have been built on the river itself.
Herbertson said International Rivers had visited the site in June and noted work involving digging into the riverbed.
"The groundbreaking ceremony would be the start of building the first structure on the river, so this would be the beginning of blocking the river including fish and nutrients flowing down the river," he said.
Prime Minister Thongsing Thammavong was quoted by the Wall Street Journal on Wednesday as saying the plans were still under study and that the day's event was simply an organised visit for journalists, scientists and others.
However, a banner at the site described it as a groundbreaking ceremony.
Ecologists warn the livelihoods of 60 million people in the lower Mekong region, mainly in Cambodia and Vietnam, would be at risk if the dam went ahead as the design could block migratory routes of fish and deprive swathes of rice land of fertile silt.
"PLAYING ROULETTE WITH THE MEKONG"
They say environmental impact assessments by Laos were inadequate and meant to appease international critics, including the United States.
In Finland, at the urging of environmental groups, a government committee is looking into whether engineering firm Poyry followed international guidelines in work for the dam, Antti Riivari, a director at the Ministry of Employment and the Economy, said.
Activists say it gave misleading information about the dam's potential impact in a report. They also say there is a conflict of interest since it is doing engineering work on the project. The company declined comment.
"Laos is playing roulette with the Mekong river, offering unproven solutions and opening up the Mekong as a testing ground for new technologies," said Pianporn Deetes, Thailand Campaign Coordinator for International Rivers.
Mekong basin countries - Thailand, Vietnam and Cambodia as well as Laos - are bound by a treaty to hold inter-governmental consultations before building dams.
But none has veto powers and Laos is within its rights to proceed with Xayaburi, the first of 11 hydropower dams planned in the lower Mekong that are expected to generate 8 percent of Southeast Asia's power by 2025.
Thailand, another country affected by the dam, has refrained from criticising Laos. It will buy about 95 percent of the power generated by the facility.
Ch Karnchang, Thailand's second-biggest building contractor, has a 57 percent share in the project. State-owned Thai energy giant PTT Pcl has 25 percent and state-run Electricity Generating Authority of Thailand 12.5 percent.
Early reports of the groundbreaking ceremony sent shares in Ch Karnchang up 5.7 percent on Monday to 9.3 baht, the highest since January 2011. They ended flat at 9.25 baht on Wednesday.
Ch Karnchang CEO Plew Trivisvavet defended the project.
"If this (would) badly affect the environment, we wouldn't do it. This company wouldn't do it. This is the company's strongest policy," he told Reuters at the site.