PHNOM PENH, Feb 15 (Reuters) - Cambodia's parliament approved on Friday a $781-million guarantee for the purchase of electricity generated by a controversial hydropower dam that activists say could damage thousands of livelihoods and trigger a food security crisis.
The government says the Lower Sesan 2 dam will transform the energy sector and it sought house approval to guarantee state-owned Electricite du Cambodge's (EDC) commitment to the 400-megawatt project, which one environmental group described as "one of the worst proposed dams" in the lower Mekong basin.
The controversy over the dam is the latest to flare in Southeast Asia, where the most underdeveloped countries have faced opposition in seeking to harness energy from major waterways like the Irrawaddy in Myanmar and the lower Mekong, which is shared by Thailand, Cambodia, Laos and Vietnam.
Laos's determination to build the $3.5 billion Xayaburi dam despite the opposition of its neighbours has caused an international outcry, while Myanmar was forced to bow to rare public pressure in 2011 and suspend the Chinese-led, $3.6 billion Myitsone dam, which would have flooded an area the size of Singapore.
Like with the Xayaburi and Myitsone projects, villagers in Cambodia's northeastern Stung Treng province are worried the proposed dam on the confluence of the Sesan and Srepok rivers could reduce the flow of fertile silt used for growing rice. Experts say it could wipe out nine percent of fish supplies.
Like many of the biggest investments in Cambodia, a Chinese firm is a major stakeholder in the dam.
Villagers plan to petition foreign governments and say they have been kept in the dark by the authorities about if, and how they would be compensated.
"The Lower Sesan 2 will unleash irreversible environmental destruction and harm to the food security of the nation," Ame Trandem, Southeast Asia Program Director for the International Rivers group, said in a statement.
"It's clear that this dam should not proceed."
Son Chhay of the opposition Sam Rainsy Party expressed concern to parliament about not only the dam's environmental impact, but possible irregularities in licensing for the project and alleged illegal logging at the proposed site.
"We are not against this hydro dam but we demand that there be a thorough study first," he said.
Energy Minister Suy Sem told parliament the dam was crucial for Cambodia's development.
"We believe Cambodia's energy sector will be transformed in ways we have never known, such as the energy supply, energy stability and prices," he said.
The dam is a 90 percent joint venture between Cambodia's Royal Group, which has ventures that include hotels, casinos, a bank, an insurance firm, media outlets and telecoms, in collaboration with China's Hydrolancang International.
The remaining 10 percent is owned by Energy EVN International Joint Stock Company, a subsidiary of state-owned Vietnam Electricity Group (EVN).
Reporting by Prak Chan Thul; Editing by Martin Petty and Robert Birsel