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A potent mix of economics, geo-politics and development assistance is about to foster a brand new major market in distributed generation in the five Southeast Asian countries of the Mekong river basin—Cambodia, Laos, Myanmar, Thailand and Vietnam.

Conservatively worth around 2-3 GW per year of mostly 1-5 MW systems, initially largely diesel but later mini-hydro, gas or even biomass-fired, the market would kick off around 2003. That is when most of the new forces start to take effect.

The foundations for the market were laid in October 1995 when the Asian Development Bank (ADB) published detailed energy, transport and telecommunications sector development studies for the Greater Mekong Sub-region (GMS) that also includes Yunnan province of China.

The ADB's goal was to jump-start GMS development by explicitly tying Indochina, Yunnan and Myanmar to the then vibrant Thai economy. Regionally coherent power- road- rail- and telecom-links would be the ties.

Power-wise, eight projects from a candidate list of 20 were selected. These were mostly basin, pre-feasibility or feasibility studies for hydro schemes that would support the development of a regional transmission grid and coordinated power sector. There were also two natural gas projects.

But by the time the necessary new institutions—in power, an Electric Power Forum (EPF) and an advisory Experts Group on Power Interconnection and Trade (EGP)—got going, the region was plunged into crisis beginning July 1997.

Little beyond one east-west highway linking central Vietnam to northeast Thailand and work started on a second Kunming-Bangkok road link through Laos had been achieved before most activities ground to a halt.

Fast forward to July 2000. The sub-region had by now ostensibly recovered from the crisis albeit Thailand, the supposed engine, was still limping badly. But China, anticipating its imminent entry into the World Trade Organization (WTO) and hence increased trade with its immediate neighbors, started mending several Cold War-damaged fences.

This alarmed India which, wary of Chinese expansion, does not want to be excluded from the region. So it proposed a Mekong-Ganga Partnership (MGP) in such low-key areas as culture, tourism, transport and communications. Information technology (IT), an Indian strength, figured prominently.

The five Mekong countries agreed. The partnership was formally launched Nov. 10 last year in Vientiane, Laos. The same day, Lao Prime Minister Sisavat Keobounphanh urged a second phase that would extend to trade promotion, investment and development cooperation.

Just two weeks later, China told ASEAN's 10-country annual summit in Singapore that it will:

• host an IT seminar for ASEAN in 2001
• help finish the GMS-planned Kunming-Bangkok highway by building the missing 440-km link through Laos
• partially finance the GMS Singapore-Kunming rail link
• dredge a 300-km riverine GMS transport link along the Mekong
• consider direct ASEAN-western China air links.

So Jan. 8 of this year, Indian Prime Minister Atal Vajpayee in Hanoi signed a deal to increase assistance to Vietnam in nuclear power development and IT. And Jan. 20, in New Delhi, India and ASEAN pledged "more cooperation," especially in IT. The first crop of MGP activities will be presented to ASEAN in Hanoi this July.

It gets busier. Initially, Singapore suffered only temporary fallout from the 1997 crisis. After near-zero growth in 1998, its Gross Domestic Product (GDP) bounced back strongly at 5.5% and 10% in 1999 and 2000, respectively. But it expects only 6% this year mainly, it believes, because China and Northeast Asia generally are stealing the lion's share of East Asian foreign direct investment (FDI).

In 1994, for example according to UN Conference on Trade and Development (UNCTAD) data, ASEAN countries attracted 30.5% of US$66.9 billion FDI inflows to East Asia. Northeast Asia got the rest. But in 1999, ASEAN got only 14.9% of US$108.9 billion—an absolute decline of US$4.2 billion and an even more worrying relative short-fall.

Singapore's solution: "Asian regionalism." It wants to tap in, either through a limited ASEAN Free Trade Area (AFTA) which kicks in 2002 and is causing Japanese companies in Southeast Asia to regroup or through a so far ill-defined but 1.7 billion-strong IT-based East Asian economic community, to all that money. The Mekong basin would be a major beneficiary.

Back in the GMS, meanwhile, things are beginning to bubble. The respective Chambers of Commerce of Laos, Myanmar, Thailand and Yunnan finally established Jan. 21 a Joint Economic Quadrangle Committee (JEQ) to boost sub-regional trade and investment just as Asia's lead UN agency is putting together a GMS IT project.

Specifically, Japan is expected to fund a three-year US$23 million Economic and Social Commission for Asia and the Pacific (ESCAP) project beginning 2001 to strengthen GMS IT readiness in e-commerce, e-governance, the necessary legal and regulatory frameworks and training to "mainstream" the region into the global economy.

The impact this will likely have is underscored by a joint Ericsson-UN Industrial Development Organization (UNIDO) study released in mid-November last year that says that from 2002 "all new mobile phones costing as little as US$100 will be able to access the Internet. This could help many small and medium-scale enterprises (SMEs) participate in the electronic economy."

So let's see. Starting next year the IT technology that will give small rural businesses access to the global economy will be available. So too in the GMS will be all the necessary training and institutional support from India, China, UN—you name it. The business links will be there, as well as the physical transport infrastructure. About the only thing missing is power.

This is crucial. So far only ADB, UNIDO and Ericsson have seen that IT is essentially economically useless unless energy and transport infrastructure is also available to make and ship the goods that have been sold on the Web. No doubt the penny will soon drop elsewhere. The situation is also fairly desperate. The table shows how little power is now available in the region.

To get a grip on the figures, if Thai electrification—most villages most of the time albeit quality can vary widely—is seen as the minimum to take significant advantage of remote 3G IT, most of the rest of the region is an order of magnitude behind.

And if Japan is taken as the optimum, the entire Mekong region is another order of magnitude behind. In terms of required capacity, some 173 GW of new power would be needed to match Japan's present availability. If it will take 50 years to make the transition, that's around 3.5 GW per year. Say 2-3 GW per year to accommodate reality.

It is also relatively easy to see what kind of equipment will sell. It must be small but modular to accommodate initially small, distributed loads that, once people who now have next to nothing realize their handicrafts can be sold direct into Tucson or Tallahassee, will grow like wildfire.

Since about the only fuel/technology combination that would work in most places just now is diesel, they're going to be diesel. But gas and year-round biomass are coming and there's plenty of opportunity for mini-hydro.

Significantly, the process has already begun. The ADB signed Dec. 6 a US$24 million package that will put MW-scale diesel generators into eight Cambodian provincial capitals—Banlung, Kampot, Kompong Speu, Pray Veng, Sisophon, Svay Rieng, Stung Treng and Takeo—by 2004.

In the private sector, Jupiter Power International formally commissioned Oct. 13 its fourth diesel power plant in Cambodia, a 15 MW modular plant in Phnom Penh based on 10 Caterpillar 3516HD gen-sets. Jupiter's Battambang plant also uses Caterpillar modular units. Its other plants are at Pursat and Kompong Chhang.

And if this is possible in Cambodia now, it cannot be impossible in Laos, Myanmar and Vietnam in a couple of years when distributed generation will become an urgent need. You have less than 24 months to organize.

About the author: Tim Sharp's insight on the Asian power market also appears in his monthly column for Power Online, Logical Output. tsharp@loxinfo.co.th.

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