Is there a Pareto solution to the misaligned incentives and competing objectives of water grabbing in the Lao PDR?

Abstract

'Water grabbing' in the Mekong River has been accelerating at a feverish pace. The stakes have never been greater. Talks between international socio-environment groups, public-private dam partners, and Mekong countries are increasingly fractious and dysfunctional. The departure of the multilateral agencies, such as the World Bank and Asian Development Bank, from large-scale infrastructure funding has allowed the private sector access to investment opportunities in hydropower, and as a result facilitated the promise of rapid hydropower growth in the Lao PDR. The antagonism of international social and environmental groups towards these dams is due primarily to the transboundary impacts of multiple constructions and modifications to the Mekong. We posit that the dilemma in the negotiations over the Mekong dams in Lao can be best understood from the perspective of misaligned incentives-objectives. We examine the major stakeholders involved in contractual negotiations and group parties according to their aligned incentives-objectives. We employ a criteria trade-off framework to show that if talks take place over two rounds under particular rules, compromises of objectives and trading of incentives are possible. We stipulate that a Pareto-optimal solution is indeed possible-if a non-partisan, authoritative agent with retributory powers to design and enforce corrective incentives for all stakeholders takes part in both negotiation rounds.