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For additional information, contact IFPRI-library@cgiar.org. mailto:IFPRI-library@cgiar.org International Water Resources Association Water International, Volume 29, Number 1, Pages 30–42, March 2004 30 Water Policy Analysis for the Mekong River Basin Claudia Ringler, Joachim von Braun, and Mark W. Rosegrant, International Food Policy Research Institute, Washington, D.C., USA Abstract: Rapid agricultural and economic development in mainland Southeast Asia during the 1990s has fueled the demand for water resources in the Mekong River Basin. An aggregate, integrated economic-hydrologic model for the basin is developed that allows for the analysis of water allocation and use under alternative policy scenarios. The model describes the water supply situation along the river system and the water demands by the various water-using sectors. Water benefit functions are developed for the major water uses subject to a series of physical and system control constraints. Water supply and demand are balanced based on the economic objective of maximizing net benefits to water use. Results from the analytical framework indicate that although competition for Mekong water still appears to be low, there are substantial tradeoffs between in-stream and off-stream water uses. Further development and refinement of such an integrated framework of analysis can be a critical step to overcome some of the obstacles to effective management and joint cooperation in the Mekong River Basin. It could also facilitate the ongoing negotiations of detailed water allocation rules in the lower basin and thus contribute to the reasonable and equitable utilization of Mekong River waters, as envisioned in the 1995 Mekong Agreement. Keywords: Mekong River Basin, water policy, integrated economic-hydrologic modeling Introduction: Background on the Mekong River Basin The Mekong River Basin is the major water source in mainland Southeast Asia, flowing through or forming the border of six countries: southern China, in particular Yunnan Province, Myanmar, Laos, Thailand, Cambodia, and Viet- nam (Figure 1). Globally, the Mekong ranks eighth in terms of discharge, at15,000 m3/sec, and twelfth in terms of length (4,800 km), and it is characterized by a monsoon climate. In the upper basin, China contributes about 16 percent of total Mekong flows and 21 percent to the catchment area. Myanmar has the lowest contribution to both flows (2 per- cent) and area (3 percent). The Mekong drains almost all of Laos (97 percent), which accounts for a quarter of the total basin area and 35 percent of total flows. Thailand’s area contribution – 36 percent of the country and 23 per- cent of the basin – exceeds its contribution to Mekong flows (17 percent). Eighty-six percent of Cambodia’s land area is contained in the Mekong basin and the country contributes 19 percent of total flows. In Vietnam, the bus- tling Mekong Delta, a part of the sparsely populated Cen- tral Highlands, two small areas in the central coast, and the small area of Dien Bien Phu in the northeast of the country together contribute 8 percent of the basin area and 11 percent of basin flows (Table 1). The lower reaches of the Mekong (below Phnom Penh, Cambodia) can be characterized as an estuary, with tidal influences particularly prevalent during the dry sea- son. At Phnom Penh, the Mekong divides into the Bassac, the Lower Mekong, and the Tonle Sap rivers. The Tonle Sap River is the connection between Lake Tonle Sap (or Great Lake) – the largest permanent freshwater body in Southeast Asia—and the Mekong River. Every year, the river reverses its flow direction from the Mekong to the lake in about mid-June. As a result, the lake area increases from about 2,600 km 2 to 10,500 km 2 storing about 70 km3. Other spills into lowland areas add to 30,000 km2, creating one of the greatest fishery and wetland areas worldwide (MRC, 1997). In late fall, when Mekong flows decrease, the Tonle Sap releases water into the Mekong Delta. Thus, the lake acts as a natural reservoir that alle- viates floods during the wet season and augments dry- season flows in the Delta (ESCAP, 1998). About 65 million people live in the Mekong River Ba- sin (MRB), with the highest population densities in the Mekong Delta followed by Northeast Thailand. The lower Mekong basin, including Cambodia, Thailand, Laos, and Vietnam, has been growing rapidly following the end of civil strife and the dismantling of ideological barriers since the 1990s, at 5 to 8 percent annually depending on the Water Policy Analysis for the Mekong River Basin 31 IWRA, Water International, Volume 29, Number 1, March 2004 country. Agriculture remains the backbone of the basin, contributing between 11 percent (Thailand) and 52 per- cent (Laos) to national incomes. Although the Mekong riparian states enjoy abundant water resources, availability varies widely by country, by region within countries, and by season. On a per capita basis, Laos has the largest internally renewable water re- sources in the region at 55,305 m3/yr, whereas Thailand has the lowest resources among the riparian countries in the lower basin, at 3,559 m3/yr (ESCAP, 1998). Major Water Uses in the Mekong River Basin The major basin water uses are shown in Table 2. Irrigated agriculture plays an important role in Mekong basin countries, but estimations indicate that overall only 7 to 10 percent of the cultivated area in the lower Mekong basin is irrigated. In 1996, equipped irrigated area, as a share of agricultural area, was lowest in Cambodia (7 per- cent) and highest in Vietnam (31 percent) among the lower basin countries (FAOSTAT, 1999). For the analysis here, gross water-managed area is used, which also includes partial control irrigation, dry- and wet-season supplemen- tary irrigation, as well as flood recession and floating rice production. Gross water-managed area is concentrated in Northeast and Northern Thailand and particularly in the Vietnamese Mekong Delta. In the two largest urban cen- ters in the MRB, Phnom Penh, Cambodia, and Vientiane, Laos, 60 percent and 33 percent of the population are con- nected to public water supply systems, respectively. In Vientiane, water supply is about 55,000 m 3 /day. In Phnom Penh, water supply was less than 100,000 m3/day in 1993 (Chea, 1998). The MRB supports an estimated 1,200 to 2,000 fish species, including numerous migratory and endemic spe- cies. Capture fisheries production in the lower Mekong basin has been estimated at between 775,000 and 900,000 tons per year (van Zalinge et al., 1998; Schouten, 1998), and more recent estimates have surpassed 1 million tons. Capture fisheries are particularly important in Cambodia, where inland fisheries alone are estimated to yield about 400,000 tons, valued at US$220 to $250 million at farmgate prices during the late 1990s. Wetlands are an important source of nutrition, income, firewood, construction mate- rial, and water supply in the MRB, and many of the wet- lands are under intense and extensive use. Size and definitions of wetland areas in the basin vary widely by source (see, for example, Scott and Poole, 1989; MRCS, 1998; Mundkur et al., undated). The wetland areas used in this analysis are presented in Table 2. The hydropower potential in the MRB is estimated at about 246,700 GWh/yr, 70 percent of which is located in the lower basin. Most of the planned dam projects are located on Mekong tributaries in Laos. The country has signed concession agreements for the development of 23 power projects with a combined installed capacity of some 6,800 MW and total estimated construction costs of US$9.5 billion (Lao PDR, 1997). Altogether, Laos has prepared plans for up to 60 hydropower projects (see Rothert, 1995 for a complete listing). No new tributary projects are planned in Thailand, as the most suitable sites in the coun- try have already been developed, and the active environ- DCH1 InfCH1 DCH1 InfCH1 DTNO1 InfTH1 InfLA1 InfMY1 InfTH2 DLA1 InfLA2 InfLA3 InfLA4 InfTH3 InfLA5 InfTH4 InfLA6 InfLA7 InfLA8 InfVI1 InfVI2 DVI1 InfCA1 InfCA2 DCA1 InfTSloc DVI2InfCA3 River reach Tributary Inflow Offtake Demand site Reservoir w/ hydropower station Tonle Sap D River reach Tributary Inflow Offtake Demand site Reservoir w/ hydropower station Tonle Sap D DCH1 InfCH1 DCH1 InfCH1 DTNO1 InfTH1 InfLA1 InfMY1 InfTH2 DLA1 InfLA2 InfLA3 InfLA4 InfTH3 InfLA5 InfTH4 InfLA6 InfLA7 InfLA8 InfVI1 InfVI2 DVI1 InfCA1 InfCA2 DCA1 InfTSloc DVI2InfCA3 River reach Tributary Inflow Offtake Demand site Reservoir w/ hydropower station Tonle Sap D River reach Tributary Inflow Offtake Demand site Reservoir w/ hydropower station Tonle Sap D Figure 1. Mekong River Basin Map and Network Table 1. Water Resources in the Mekong River Basin Catchment Share Share Average Flow Country Area of country of basin flow contribution or Region (000 km2) (%) (%) (m3/sec) (%) Yunnan, China 165 38 21 2,410 16 Myanmar 24 4 3 300 2 Laos 202 97 25 5,270 35 Thailand 184 36 23 2,560 17 Cambodia 155 86 20 2,860 19 Vietnam 65 20 8 1,660 11 TOTAL 795 100 15,060 100 Source: MRC (1998) 32 C. Ringler, J. von Braun, and M. Rosegrant IWRA, Water International, Volume 29, Number 1, March 2004 mental movement in the country has made it increasingly difficult to develop large-scale infrastructure projects. Cambodia has considerable potential for dam construc- tion, but by 2000, there was only one dam with a height in excess of 15 m, and no power generation was carried out. Vietnam has plans for several hydropower projects on Mekong tributaries in the Central Highlands. The largest project, Yali dam with a capacity of 720 MW, has been recently completed. By far the most ambitious hydropower projects are located on the Mekong mainstream. In the upper basin, a total of seven hydropower projects are slated for construc- tion in Yunnan Province, China. Manwan dam, with a ca- pacity of 1,500 MW, and Dachaoshan dam, with a capacity of 1,350 MW, have both been completed; work on Xiaowan has started; and funds for Jinghong have been sought from the Asian Development Bank. In the lower basin, the Mekong River Commission (MRC) had plans to develop up to 13 run-of-the-river hydropower projects; of which nine sites with a total capacity of 14,000 MW were con- sidered priority projects (Mekong Secretariat, 1994a; MRCS, 1995). However, the costs, political and otherwise, were too large to develop them during the dam-construc- tion era (MRCS, 1995). In 2001, the MRC formulated a new hydropower development strategy, with emphasis on advice and information services instead of direct involvement in investment and construction activities (MRC, 2001). The possibility of increased dry-season flows from upstream dam construction has improved the willingness to cooperate among the downstream riparian states and has contributed to the successful negotiation of the 1995 Agreement (see also following section). However, the net benefits and costs of upstream hydropower development and their distribution across countries and sectors are not known. In fact, all riparian countries in the lower Mekong basin could use the estimated additional 1,000 m3/sec dry- season flows following completion of the seven hydro- power projects in Yunnan Province, China. Vietnam could use an additional 2,000 m3/sec in the delta area to meet full irrigation requirements that have increased rapidly due to expanded double- and triple-cropping of modern rice varieties. Northeast Thailand suffers from dry-season ir- rigation water deficits. In Cambodia, water demands for irrigation will increase substantially following the rehabili- tation of its irrigation infrastructure. Laos has ambitious plans to increase the dry-season irrigated area by a factor of 15 by 2020 to 200,000 ha (Department of Livestock and Fisheries, 1999). Moreover, although Myanmar cur- rently makes the least use of basin water resources, there is a possibility of increased future dry-season water use. At the same time, hydropower development will lead to reduced wet-season flows that could threaten the inflows to Tonle Sap and reduce the benefits from fisheries and other environmental water uses. The Mekong Regime The lower basin has a history in transboundary water management of more than 40 years, based on the Mekong Statutes of 1957, 1978, and 1995. The negotiations of the 1995 “Agreement on the Cooperation for the Sustainable Development of the Mekong River Basin” lasted several years, as the potential for conflict and real tradeoffs emerged among the interests of the riparian countries re- garding Mekong development, particularly between Thai- land and Vietnam. The 1995 Agreement has the following major features: (1) Only inter-basin projects by member countries that involve water diversion from the mainstream during the dry season are subject to approval by all MRC members; (2) the maintenance of minimum natural flows during the dry season is the major criterion to judge the appropriateness of water-related projects; (3) the Agree- ment not only created the MRC but also requires the MRC to negotiate additional agreements related to three spe- cific water allocation issues: (a) determination of mini- mum monthly flow at various points along the Mekong River; (b) formalization of procedures for the review of proposed water uses; and (c) drafting of the Basin Devel- opment Plan (BDP) that would guide water resources de- velopment in the lower Mekong basin (Browder, 1998). According to Browder (1998), the Agreement was nego- tiated because the Mekong states, particularly the two regional powers of Thailand and Vietnam, wanted to main- tain amicable relations in the post-Cold War era. More- over, planned Chinese reservoirs were expected to augment the critical dry-season flows in the Mekong River. International development agencies were willing to assist Table 2. Major Water Uses in the Mekong River Basin, 1990 Estimates Gross water Domestic-industrial Hydropower managed area demand Fish production Wetland areas production ha million m3 metric ton ha MW Cambodia 403,000 78.0 400,000 3,650,000 Laos 358,000 69.6 40,250 220,000 195 Thailand 2,360,160 724.8 322,000 200,000 107 Yunnan, China 250,000 121.2 400,000 2,000,000 Vietnam 1,990,000 900.0 100 Total 5,361,160 1,893.6 1,162,350 6,070,000 302 Note: Data used in the modeling analysis. Sources: for gross water managed area and domestic-industrial demand: FAO (1999); for fish production, based on MRC (1997); FAOSTAT (1999); van Zalinge et al. (1998); for wetland areas: Scott and Poole (1989); hydropower production: estimated by the authors. Water Policy Analysis for the Mekong River Basin 33 IWRA, Water International, Volume 29, Number 1, March 2004 the Mekong cooperation technically and financially. Fur- thermore, the United Nations Development Programme provided important negotiation assistance for the drafting of the Agreement. Finally, the Mekong Agreement is a framework document that contains general principles and procedures for the cooperation in water allocation, but does not actually allocate water among the four member coun- tries. None of the subsidiary agreements had been negoti- ated by 2000, which supports the argument that real tradeoffs among water-using sectors and countries are involved in the formulation of water allocation mechanisms for the lower MRB. The currently ongoing World Bank/ GEF (Global Environment Facility) Water Utilization Pro- gram project that aims at supporting “the MRC in devel- oping an integrated and comprehensive Basin hydrologic modeling package and a functional and integrated knowl- edge base on water and related resources and [in using] these tools … [to]… establish guidelines for water utiliza- tion and ecological protection, primarily the sensitive eco- logical systems including wetlands and flooded forests” (World Bank, 2000) has helped change this situation, and a first set of agreements has been signed, including the November 2002 agreement on “Preliminary Procedures For Notification, Prior Consultation and Agreement” (www.mrcmekong.org). In the following, the methodology, modeling frame- work, and structure of an aggregate economic-hydrologic model for the basin are described and preliminary model results from a series of alternative scenarios are presented. In addition, conclusions are drawn. Methodology for Integrated Economic-Hydrologic River Basin Model The two principal approaches to river basin modeling are simulation – to simulate water resources behavior based on a set of rules governing water allocation and infrastruc- ture operation; and optimization – to optimize allocation based on an objective function and accompanying con- straints. An overview of these model types is provided in McKinney et al. (1999). Hydrologic models have been developed for parts of the Mekong basin beginning in the early 1960s, basically for reservoir development (UNDP/ UNESCO, 1969); and for flooding and salinity control in the Mekong Delta (MARD/SIWRP, 1999; Tingsanchali and Lien, 1986). More recent modeling efforts include Tingsanchali and Singh (1996), who used a mixed integer linear optimization model to analyze the Mekong-Chi-Mun trans-basin irrigation project in Northeast Thailand, and Huu-Thoi and Nielsen (1999), who use the DHI (Danish Hydraulic Institute) modeling package in the lower Mun river basin. Venugopal et al. (1990) applied the MITSIM simulation model in the lower Mekong basin to analyze the effects and profits of selected tributary and mainstream hydropower projects for the Mekong Secretariat. Moreover, the WB GEF project described above is currently developing a hydrologic and hydrodynamic modeling package. To approach some of the issues discussed above – including the determination of relative costs and benefits and tradeoffs and complementarities in water allocation among different water-using sectors and countries and among the goals of efficiency, equity, and sustainable re- source use – the application of an integrated economic- hydrologic model is required. The model developed here draws on previous economic-hydrologic modeling carried out at the International Food Policy Research Institute, in particular, for the Maipo River Basin in Chile (Rosegrant et al., 2000). It includes hydrologic, agronomic, and eco- nomic components, with a focus on the economic compo- nent. The model is highly aggregated with country/ regional-level water supply and demand, and economic benefit functions and solves for optimal water allocation at the basin level subject to a series of physical, system control, and optional policy constraints. The optimal alloca- tion of water across water-using sectors is determined on the basis of the economic value of water in alternative uses. The model framework takes into account the sectoral structure of water users (agriculture, industry, hydropower, households, and the environment), and the location of wa- ter- using countries and regions. This allows the assess- ment of interactions and tradeoffs and intersectoral competition for water resources among the various sec- tors and countries. Moreover, the model framework can be used to analyze alternative policy options and strate- gies for water allocation and use and their implications on the basin economy. The model focus is on the water economy of the lower MRB – the major beneficiary of Mekong waters. How- ever, the entire basin was modeled and upstream riparian states are included to the extent that they contribute to the analysis. Mekong water uses in Myanmar, for example, are not incorporated, as they are estimated to be negli- gible (Hirsch and Cheong, 1996), whereas discharge from Myanmar into the Mekong was included. The river basin model is developed as a node-link network, which is an abstracted representation of the spatial relationships be- tween the physical entities in the river basin. Nodes rep- resent river reaches, reservoirs, and demand sites, and links represent the linkage between these entities (Figure 1). Inflows to these nodes include water flows from the headwaters of the river basin, as well as local rainfall drain- age. Flow balances are calculated for each node at each time period, and flow transport in the basin is calculated based on the spatial linkages in the river basin network. For modeling purposes, the Mekong basin is subdivided into seven aggregate spatial demand site units based on geographic/administrative boundaries, one for Yunnan Province, China; one for Laos; two for Thailand (North- ern Thailand and Northeast Thailand); one for Cambodia; and two for Vietnam (Central Highlands and Mekong Delta) (labeled in Figure 1). The model incorporates both off-stream and in-stream water uses. Off-stream uses in- 34 C. Ringler, J. von Braun, and M. Rosegrant IWRA, Water International, Volume 29, Number 1, March 2004 clude water diversion for irrigated agriculture, and domes- tic and industrial water uses. In-stream uses include flows for hydropower generation, fish production, wetlands, and navigation and minimum flows for the maintenance of the river ecology and to control saltwater intrusion into the Mekong Delta. In-stream flows are incorporated as model constraints. A number of aggregate demand sites for these water uses are connected to the seven spatial units in the river basin network. Agricultural demand sites are delin- eated according to the size of irrigated areas and adminis- trative boundaries. Nodes for urban-industrial demand sites are connected to the basin network at the major urban centers. Reservoirs are aggregated for either power pro- duction or irrigation/urban-industrial water supplies. Wa- ter demand sites for fish production are connected to all spatial units with the exception of the Central Highlands area, Vietnam, where freshwater capture fisheries play a minor role. Wetland demand sites are established for Cam- bodia, Laos, Northeast Thailand, and the Vietnamese Mekong Delta (Figure 1). Thematically, the modeling framework includes three components: (1) hydrologic components, including the water balance in reservoirs, river reaches, and crop fields; (2) economic components, including the calculation of ben- efits from water use by sector, demand site, and country; and (3) institutions and incentives or rules that can influ- ence both hydrologic and economic components. Water supply is determined through the hydrologic water balance in the river system; while water demand is determined endogenously within the model based on functional rela- tionships between water and productive uses in irrigated agriculture, domestic-industrial areas, wetlands, fisheries, and hydropower. Water supply and demand are balanced based on the objective of maximizing economic benefits to water use (Figure 2). Thus, the river basin model pro- vides a description of the underlying physical processes and the institutions and rules that govern the balance of flows, the flow regulation through surface water, and the water allocation to both off- and in-stream demand sites. The time horizon of the model is one year with 12 periods (months). In the following section, the hydrologic and eco- nomic components are described in more detail. Hydrologic Component Water flow data is taken from 36 fluviometric mea- suring stations in the lower MRB, as well as from a series of other sources (ORSTOM/BCEOM, 1993; Mekong Secretariat, 1994b; MRC, 1998). Flow data of smaller tribu- taries are aggregated. The year 1990 was chosen as rep- resentative or base year, as data could be compared for several stations with longer-term GRDC flow data. Based on this comparison, 1990 can be considered an average runoff year (GRDC, 1998; Ringler, 2001; Interim Com- mittee for the Coordination of Investigations of the Lower Mekong Basin, undated). Using one-year representative flow data does not allow for stochastic analyses of flow data, but the effects of alternative flow regimes can be analyzed based on sensitivity analyses (see below). As the observed flow data are in fact post-depletion flows, they were augmented by consumptive uses for model pur- poses; that is, withdrawals were added and return flows discounted. Total estimated basin flows for 1990 add to 475,686 million m3 . After augmentation with estimated basin depletion, basin flow amounts to 500,785 million m3. Major hydrologic relations and processes, which are based on the flow network, include: (1) flow transport and balance from river outlets/reservoirs to crop fields or ur- ban- industrial demand sites; (2) return flows from irrigated areas and urban-industrial areas; (3) evapotranspiration from crop fields; (4) reservoir releases; and (5) in-stream water uses. The rainfall-runoff process is not included in the model. It is assumed that runoff starts from rivers and reservoirs. Effective rainfall for crop production is calcu- lated outside of the model, and included into the model as a constant parameter. The basic flow balance at a node in the basin network is calculated as flow_downstream = flow_upstream + local_drainage + return_flows - withdrawals – (evaporation) losses (1) Economic Component In order to establish a relationship between crop yield and water, the crop yield-water stress relationship, which has been developed by the FAO following extensive field experiments over a wide range of crops, was incorpo- rated into the modeling framework (for details, see Doorenbos and Pruitt, 1977; Doorenbos and Kassam, 1979). The function is specified for each crop, cp, and demand site, ag, as (2) where y a is actual yield (mt/ha); y m is maximum yield (mt/ ha); ET a is seasonal actual evapotranspiration (mm); ET m is seasonal potential evapotranspiration (mm); and ky is sea- sonal crop yield response coefficient. River Basin Hydrologic system operation On-Farm water distribution Crop production/ Irrigation profits Fish Profit Wetland Benefits Instream uses •Power generation •Fish production •Wetlands •Minimum flows Off-stream uses M&I Irrigation Institutions / Economic Incentives M&I Benefits Hydrop. Profits Hydrologic component Economic/Agronomic component Maximization of net benefitsRiver Basin Hydrologic system operation On-Farm water distribution Crop production/ Irrigation profits Fish Profit Wetland Benefits Instream uses •Power generation •Fish production •Wetlands •Minimum flows Off-stream uses M&I Irrigation Institutions / Economic Incentives M&I Benefits Hydrop. Profits Hydrologic component Economic/Agronomic component Maximization of net benefits Figure 2. Model Structure: Hydrologic, Economic/Agronomic, and Institutional Components )]/1((1[ ,,, m cpag a cpagcp m cp a cpag ETETkyyy −⋅−⋅= Water Policy Analysis for the Mekong River Basin 35 IWRA, Water International, Volume 29, Number 1, March 2004 Crop yield data were obtained from FAOSTAT (1999) and local sources. Yields were adjusted by a factor of 1.1 to transfer actual (y a ) to potential yield (y m ). Seven major irrigated annual and perennial crops in the Mekong Basin are included (coffee, fruit tree, maize, rice, soy- bean, sugarcane, and vegetables); if the various types of and cropping patterns for rice are considered separately, a total of 13 crops are incorporated. Rice yields for differ- ent types of rice (flood recession, floating, double- and triple-cropped, wet season and dry season) were estimated based on various reports from the region. Due to the sparse, incomplete, and often inconsistent data for crop produc- tion in the basin, crop inputs were synthesized from crop models for Cambodia (FAO/UNDP, 1994) and FAO country-level statistics. The function for net profits from irrigated agricul- ture (VA) is specified by irrigation demand site as follows (3) where A is crop area (ha); p is crop price (US$/mt); fc is fertilizer input cost (US$/ha); mc is machinery cost (US$/ ha); lc is labor cost (US$/ha); ic is irrigation cost (US$/ ha); oc is other production costs (US$/ha); w_ca is water supply cost (US$/m3); and Ina is monthly withdrawals for irrigation (million m3) at off-takes. The net benefit function for M&I water uses (VM) is derived from an inverse demand function for water for each domestic demand site, md. Net benefit is calculated as water use benefit minus water supply cost. Values are synthesized from secondary sources. The function is specified as (4) where w0 is maximum normal monthly withdrawals (mil- lion m3); p0 is value of water at full use (US$/m3); w is actual water withdrawals (million m3); e is price elasticity of demand; α is 1/e; w_cm is water supply cost (US$/m3); and l is calculated factor from synthesis data, here 0.743. In-stream water uses are of particular importance in the MRB. Profit from power production (VP) is calcu- lated as power production (pow) multiplied by the differ- ence between power selling price (pr ) and power production cost (pc) for each hydropower station, pw. In the base year, all power production is carried out on Mekong tributaries. (5) Fishing is important for all basin economies, but par- ticularly for the downstream countries of Cambodia and Vietnam. Standard functional forms are not available in the literature for the evaluation of the relationship between water flows and the value of fish production. In the model, profit from fish production (VF) is calculated as a function of fish price and production cost and water availability in the Great Lake and on the mainstream at fishery demand sites. In order to account for the varying contribution of flows to fish yield, an arctans function is used that relates actual profit from fish production to maximum profit, based on monthly actual, minimum, and maximum water levels. The lowest monthly factors relating actual and maximum in-stream flows (mfdft) and actual and maximum lake stor- age (mldft), calculated from the arctans function, are in- cluded in the fish production function. The function is specified as (6) where fpr is fish production (mt), by demand site (fd); fp is fish price (US$/mt); fcs is fish production cost, esti- mated (US$/mt); a is parameter relating normal to esti- mated maximum fish production; mfdft is calculated lowest monthly factor for in-stream flows from arctans function; and mldft is the calculated lowest monthly factor for Lake Tonle Sap storage from arctans function. Connecting fishery demand sites in Cambodia, Laos, Thailand, and Vietnam with the storage of Tonle Sap al- lows for some representation of the importance of fish migration from the lake to these sites. Net benefits from wetlands (VW) are specified as a function of wetland area and yield with potential wetland damage related to the deviation of actual flows from rep- resentative monthly flows towards both flooding and drought. Thus, wetland benefits are a declining function of increasing flow deviations from “normal” flows. The flow deviation, fd, is calculated as the difference between “normal” and model-calculated flows. The damage coef- ficients are estimated for each month so that at a flow deviation equal to a doubling of normal flows the damage to wetland benefits equals one-twelfth of the maximum wetland benefit. Monthly wetland damages accumulate over the year. The same procedure was used for water storage in the Great Lake, which is estimated to account for half of total wetland benefits in Cambodia. (7) where wa is the area of wetland (ha), by site, wd; wy is wetland yield, estimated (US$/ha);fd is deviation of flows from “normal” flows; lw is deviation of lake storage from “normal” storage (only for Cambodia); dfw is damage coefficient for flows at wetland sites; dlw is damage co- efficient for lake storage at wetland site (only for Cambo- dia); and f is an adjustment factor (here: 1.1). ∑ ∑ ∑ ⋅ ++++⋅− ⋅⋅= pd cpag cpagcpagcpagcpagcpagcpag cp cp cp a cpagcpagag Ina ociclcmcfcA pyAVA ,ag ,,,,,, ,, w_ca- )( ( ) ∑           ⋅−         +−+ ⋅+ ⋅⋅ = + pd mdpdmd pdmdpdmd pdmd md cmww l ww pw VM _ ))1/(1( )/()1/(1 , 10 ,,0 , 0 α α α ][, pwpw pd pdpwpw pcprpowVP −= ∑ [ ] fdfdfdfdfdfd mldftmfdftfcsfpafprVF ⋅⋅−⋅⋅= )( pdwdpdwd pd pdwdpdwd pdpd wdpdwdwd dlwlw dfwfdfwywaVW , 2 , , 2 ,, )( )( ⋅− ⋅−⋅⋅= ∑ ∑∑ 36 C. Ringler, J. von Braun, and M. Rosegrant IWRA, Water International, Volume 29, Number 1, March 2004 The objective function solves for all the sectoral wa- ter use benefit functions described above simultaneously (8) where VA is net profit from irrigation, across demand sites; VM is net benefit from M&I water uses; VP is net profit from power production; VW is net benefit from wetlands; and VF is net profit from fish production. The seasonal crop yield function (Equation 2) drives the seasonal water allocation among crops, but cannot dis- tribute the water within the crop growth season according to the water requirements of crop-specific growth stages. In order to achieve consistency between the seasonal yield function and the monthly water balance in the hydrologic system a penalty term is introduced in the objective func- tion that minimizes the difference between the maximum and average crop stage deficit due to water stress for a given crop and demand site. A crop growth stage is de- fined as one month (see also Rosegrant et al., 2000). It is formulated as (9) where mdft is the maximum stage yield deficit due to wa- ter stress by crop & demand site; adft is the average stage yield deficit, with (10) where dft is the monthly stage deficit by crop and demand site; and kym is monthly crop yield response coefficient, following Doorenbos and Kassam (1979). As no information could be obtained on the operating rules of any of the reservoirs in the MRB, a relatively constant power production across the year is assumed and implemented through the introduction of a power produc- tion penalty. The penalty term is formulated as (11) where mpdft is maximum power production deficit; and apdft is average power production deficit with pdftpw,pd = pw_cp pw /12 • a – pow pw,pd (12) where pdft is monthly power production deficit by station; pw_cp is annual power production capacity (GWh); and a is a factor (here: 1.15). The model has been coded in the GAMS modeling language (Brooke et al., 1988). The CONOPT2 solver has been used. The model is calibrated to 1990 data as described in Ringler (2001). Modeling Results Model results do not necessarily fully reflect the real situation as far as water uses, users, and the value of water in the basin are concerned. Furthermore, the basin economy is not fully represented as some users, for ex- ample, tourism and forestry, and some water sources, for example, groundwater, are not incorporated into the cur- rent model framework. Finally, and most importantly, ex- isting data limitations in the Mekong basin, particularly, regarding irrigated agriculture, water withdrawals by sec- tor, and the value of in-stream uses, make model results at this stage preliminary. Thus, the focus of analysis is less on specific numbers and more on the types of analyses that can be carried out based on such a framework. In the following, the results of a full optimization scenario with- out institutional rules are described and discussed and al- ternative policy scenarios related to intersectoral and multi-country water allocation are presented. Basin-Optimizing Solution (OPT) For the OPT scenario, off-stream withdrawals and in-stream flow demands are driven by the objective of maximizing basin benefits from water use subject to a se- ries of physical and system control constraints as well as minimum in-stream and downstream flow requirements. According to model outcomes, discharge into the South China Sea amounts to 467,584 million m3. These flows are below 1990 basin flows, which can be explained, in part, from the optimization approach of the model. Out- flows to the sea during the dry season (Jan-May) average 4,258 m3/sec; flows are lowest in April at 2,036 m3/sec. Total effective rainfall for irrigation demand sites amounts to 39,868 million m3. Actual crop evapotranspiration is es- timated at 53,095 million m3, which is 95.8 percent of the total potential crop evapotranspiration of 55,449 million m3. Total water withdrawals are estimated at 39,279 million m 3 , 7.8 percent of total runoff. Almost 35,000 million m3 are withdrawn for irrigation and 4,920 million m3 for domestic and industrial uses. Return flows as a share of water with- drawals are estimated at 27 percent for agricultural and at 35 percent for urban-industrial uses. Total power produc- tion amounts to 1,441 GWh. Figure 3 shows the distribution of water withdrawals, total source flows, and effective rainfall across the year for the baseline solution. A bottleneck in the water supply/ demand situation can be seen for the dry-season month of April when gross water demands of 9,661 million m3 – consisting of 4,933 million m3 of off-stream demands and 4,728 million m3 of minimum in-stream flows (which are not shown in Figure 3) – need to be met from total inflows of 8,398 million m3 but also throughout the dry season. Irrigation water demand drops in May, increases again until July, and is again low during September through No- vember when precipitation can meet most crop water de- mands. Based on this graph, the MRB can be characterized ∑ ∑ ∑∑ ∑ ++ ++= wd fd fdwd pw pw ag md mdag VFVW VPVMVAObjMax )( ,,,, cpagcpag ag cp cpagcp m cpag adftmdftApypa −⋅⋅⋅= ∑∑ )/1( ,,, m cpag a cpagcpcpag ETETkymdft −⋅= )(, pwpwpwpdpw pw pd apdftmpdftprpowpp −⋅= ∑∑ Water Policy Analysis for the Mekong River Basin 37 IWRA, Water International, Volume 29, Number 1, March 2004 as a basin that has reached a semi-closed state, as off- stream water requirements compete with in-stream de- mands during the dry season. In “open” river basins, excess water is available, over and above all committed legal, ecological, and environmental requirements, even during the dry season. In “closed” basins, on the other hand, there is no excess water flowing out of the basin; all water re- sources are committed to use. In semi-closed basins, there is excess outflow during the wet season, but not during the dry season (Keller et al., 2000). Preliminary estimates from optimal water allocation and use at the basin level add to US$1.8 billion for the base year of 1990 (Table 3); US$917 million from irri- gated agriculture; US$170 million from M&I water uses; US$43 million from hydropower production; US$546 mil- lion from fish catch; and US$134 million from wetland uses. Vietnam obtains the largest benefits from basin wa- ter uses, contributed chiefly by irrigated agriculture and fish production. Thailand ranks second in overall basin profits. Profits from hydropower are largest in Laos, and fish catch and wetlands are the major water-related in- come sources in Cambodia. To achieve these profits, off- stream water withdrawals are 17,434 million m3 in Vietnam, 13,004 million m3 in Thailand, 4,145 million m3 in Cambo- dia, 3,318 million m3 in Laos, and 1,379 million m3 in Yunnan Province, China. Rice accounts for 88 percent of total irrigation water withdrawals, and irrigation withdrawals account for 87 percent of total off-stream withdrawals. Location-specific crop water requirements, irrigation water availability, effective rainfall, crop planting date, length of the growing period, and crop profitability jointly determine water withdrawals. Annual irrigation water ap- plication, measured at the off-take level, is largest for fruit trees, at between 20,928 and 26,768 m3/ha. Whereas be- tween 2,269 and 3,548 m3 of irrigation water per hectare are withdrawn for wet-season rice, and between 11,158 and 14,157 m3/ha are allocated to dry-season rice, de- pending on the demand site. According to Chun and Dung (Chun, S. and D.D. Dung. 2000, personal communica- tion), field irrigation requirements of coffee plants in Viet- nam are about 6,200 m3/ha in Lam Dong and Binh Phuoc provinces, which are adjacent to the Central Highland prov- inces within the Mekong basin. This compares well with withdrawals of 10,946 m3/ha at the off-take level from model results, at a distribution/conveyance efficiency of 0.55. Net profits per hectare irrigated harvested area are largest for fruit trees, followed by coffee and sugarcane. Net irrigation profits per ha are largest in the Central High- lands of Vietnam, due to the substantial coffee area. Net profits are lowest for rice production, in particular for dry- season and floating rice production. Figure 4 presents average water consumption (actual evapotranspiration) from irrigation and effective rainfall per ha harvested area in the basin. Fruit trees consume the largest amount of water on a per-hectare basis annu- ally, followed by sugarcane, coffee, and triple-cropped rice. Soybean, on the other hand, has the lowest water needs. Although, in general, effective rainfall meets the largest share of crop water demands, the average contribution of irrigation water to total crop evapotranspiration is more than half for dry-season rice (77 percent), vegetables (76 percent), flood recession rice (54 percent), and fruit trees and soybean (both 52 percent). 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec m ill io n m 3 Source Agriculture Effective Rainfall M&I 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec m ill io n m 3 Source Agriculture Effective Rainfall M&I Figure 3. Distribution of Inflows and Withdrawls, Mekong River Basin, Baseline Scenario Table 3. Baseline Scenario, Profits from Water Use (million US$) Hydro- Wet- Country/Region Irrigation M&I power Fisheries lands Total Yunnan, China 20 11 0.05 31 Laos 38 6 33 19 5 101 Vietnam 513 81 188 44 825 Central Highlands 29 6 35 Mekong Delta 484 75 188 44 790 Thailand 320 65 10 151 4 551 North 52 5 10 68 Northeast 268 60 10 141 4 483 Cambodia 26 7 188 80 301 Total Basin 917 170 43 546 134 1,809 10,300 14,623 11,274 18,592 12,254 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 Fru it tr ee Su ga rca ne Coff ee Rice , tr ipl e Rice , do ub le Rice do ub le, ( sb ) Rice , flo atin g Ric e, f loo d re c . Rice , w et s ea so n Ve ge tab les Ric e, d ry sea so n Maiz e So yb ean effective rainfall irrigation 10,358 7,215 12,046 6,122 7,394 3,627 7,101 6,120 (m3/ha) Note: Hectare refers to irrigated harvested area. Figure 4. Average Water Consumption Per Hectare and Crop from Irrigation and Effective Rainfall, Baseline Scenario 38 C. Ringler, J. von Braun, and M. Rosegrant IWRA, Water International, Volume 29, Number 1, March 2004 Sensitivity Analyses and Alternative Policy Scenarios Table 4 presents a series of sensitivity analyses based on the basin optimization scenario. A reduction in basin runoff by half causes a decline in net profits from water uses by 42 percent. Irrigation profits decline by 36 per- cent, M&I benefits by 5 percent, hydropower profits by 44 percent, fishery profits by 68 percent, and wetland ben- efits by 8 percent. Agricultural water withdrawals decline by 6 percent. Moreover, total crop area harvested declines by 2 million ha, or 32 percent. The irrigated harvested area of all crops – save coffee and sugarcane – declines. As effective rainfall is reduced concomitantly with a reduc- tion in hydrologic flow levels – here to 75 percent of nor- mal levels – total agricultural water withdrawals decline less than expected to compensate, at least in part, for the decline in effective rainfall. In the real world, the cost of water abstractions at low flow levels is typically high, caus- ing further declines in farm incomes. Urban-industrial water withdrawals, on the other hand, are typically maintained. At inflow levels of 120 percent, total basin profits from water use increase to 111 percent. Profits from irrigation increase to 103 percent, and irrigation withdrawals de- cline as effective rainfall availability for crops is increased (here to 110 percent of average effective precipitation). In addition, profits from fish catch rise sharply whereas benefits from wetlands decline by 4 percent due to flood- ing from unusually large flows. In the OPT scenario, field application efficiency is estimated at 0.7, that is, 70 percent of the water applied at the field level is used beneficially by the plant. Overall irrigation efficiency (including distribution and conveyance efficiency) is estimated at 39 percent. When field applica- tion efficiency is reduced to 0.5 (equal to an overall irriga- tion efficiency of 28 percent), total basin profits decline by 16 percent. Under this scenario, irrigation water withdraw- als would need to increase by 39 percent to reach the OPT irrigation level. However, due to irrigation withdrawal capacity constraints incorporated in the model, the vol- ume of water withdrawals cannot be further increased anywhere but for multipurpose reservoirs in Northeast Thai- land, where withdrawals would directly take water away from M&I and in-stream uses. In fact, there is a slight decline in irrigation water withdrawals in Northeast Thai- land in this scenario, due to an existing tradeoff between fish production and irrigation water withdrawals. As in- centives for irrigation in the region decline, keeping a small additional amount of water in-stream for additional income from fish production becomes the preferred strategy. On the other hand, when field application efficiency increases to 0.9 (equal to an overall irrigation efficiency of 50 per- cent), total basin profits increase to 104 percent, due to increased profits in irrigation and, to a lesser extent, in- creased hydropower and fish production, as less irrigation withdrawals are required to achieve higher profits in the irrigation sector. In the sensitivity analysis for irrigated area, agricul- tural withdrawal capacity levels are adjusted proportion- ally, as an increase in irrigated area is typically accompanied by an increase in capacity, whereas the deterioration or elimination of irrigated areas is accompanied by a decline in capacity. A decline in irrigated area by 25 percent re- sults in a drop in basin profits by 12 percent. Irrigation profits decline by 24 percent and irrigation withdrawals by 21 percent, whereas profits from fish production increase slightly. On the other hand, if irrigated crop harvested area were increased to 175 percent of baseline levels, total basin profits would increase by 11 percent and profits from irri- gation alone would increase by 22 percent. At the same time, profits in the urban-industrial sector and hydropower would decline by 3 percent and 9 percent, respectively. Although profits from fish production should drop sharply in this scenario, there is actually a tiny increase in overall profits. This outcome is the result of a substantial increase in fish production profits in Northeast Thailand of US$6.3 million (offsetting sharp declines in other fish production sites). The increase in profits from fish production is achieved at a cost of US$5.2 million of M&I net benefits and US$1 million of hydropower profits, and at a rela- tively low increase in profits from irrigation at just under 8 percent – corresponding to US$20 million – due to a drop in dry-season rice yield to 50 percent of maximum poten- tial yield and of fruit tree yield to 97 percent of maximum potential yield. Table 4. Sensitivity Analyses, Various Parameters (in percentage terms) Irrigation Parameter Levels/ Values Irrigation Profit M&I Benefit HP Profit Fish Profit Wetland Benefit Total Profit Withdrawal Inflow 50% 64 95 56 32.0 82.0 58 94 60% 69 99 65 45.0 87.0 66 96 80% 95 99 76 82.0 95.0 91 87 120% 103 100 102 133.0 96.0 111 82 Field 0.5/a 70 98 95 100.3 100.0 84 99 Efficiency 0.9/a 108 100 101 100.7 100.0 104 92 Irrigated 75% 76 100 100 101.1 99.9 88 79 Area 150% 106 98 84 100.0 99.9 103 108 175% 122 97 91 100.6 99.8 111 123 Note: /a Field application efficiency, baseline: 0.7. Water Policy Analysis for the Mekong River Basin 39 IWRA, Water International, Volume 29, Number 1, March 2004 Alternative Policy Scenario: Upstream Hydropower Development Increased dry-season flows have been hailed as one of the largest benefits of upstream hydropower develop- ment. In order to analyze the effects of additional hydro- power projects on the basin water economy, three alternative scenarios are developed for the year 2020, when most of the proposed hydropower projects are supposed to be completed. These scenarios include conservative projections for 2020 off-stream water uses and incorpo- rate additional tributary/upstream and lower mainstream dams into the modeling framework. Projections include an increase in irrigated area of 45 percent (accounting for large government-planned expansions), a more than dou- bling of M&I withdrawals, and an increase in fish produc- tion by 40 percent, to reach 1,625,000 mt (see also Ringler, 2001). For the 2020 ND scenario, additional water uses are projected without additional hydropower development. For the 2020 with tributary/upstream dams scenario (2020 TU), projected water uses to 2020 were combined with a total of 39 additional hydropower projects in Cambodia (1), Laos (21), Thailand (1), Vietnam (12), and Yunnan Province, China (4). For the 2020 with tributary/upstream/lower mainstream dams scenario (2020 TU), an additional nine dams were added on the lower Mekong mainstream. These dams were implemented as run-of-the-river hydropower projects, that is, power generation is not dependent on res- ervoir release but on in-stream flows. As some of these dams are international, their profits are not allocated to a specific country. In the 2020 ND scenario, the minimum downstream flow requirement to control saltwater intrusion of 1,500 m3/sec is reached in April under normal flows. Under low- flow conditions (80 percent of average flows), it is reached in both February and April. In the 2020 TU scenario, flows into the Mekong Delta increase in April by 64 percent and, on average, by 26 percent during the dry-season months of December to May (see also Figure 5) compared to the 2020 ND scenario. On the other hand, flows during the rainy season decline, on average, by 8 percent, with the largest drop in September. The total volume of inflows into the Mekong Delta declines by 2,378 million m3 or 0.5 percent due to slightly increased abstractions and thus lower inflows from Thai tributaries into the Mekong as well as increased abstractions by Cambodia, both for irrigated agriculture. The influence on downstream flows is more pronounced under low-flow conditions. At 80 percent of average flows, dry-season flows into the Delta are 76 per- cent higher in March, and 29 percent higher, on average, in the 2020 TU scenario compared to the 2020 ND sce- nario. Moreover, runoff decreases by 1.1 percent or 5,713 million m3 in the 2020 TU scenario compared to the 2020 ND scenario. The runoff pattern in the 2020 TUM sce- nario is very similar to the one in the 2020 TU scenario as the additional projects are run-of-the-river power stations. Total profits from water usage, without considering the capital cost of hydropower construction (which are considered sunk cost for analysis purposes here), are largest under the full development or 2020 TUM scenario at al- most US$8.3 billion under average flow conditions, com- pared to US$6.8 billion and US$4.8 billion under the 2020 TU and 2020 ND scenarios, respectively. The increase in profits between the 2020 ND and 2020 TU scenarios is largest for Yunnan, China, at 639 percent, followed by Laos with 378 percent. Profits for Vietnam increase by 6 per- cent and for Thailand by 0.3 percent, but overall profits from water uses decline in Cambodia by 4.4 percent. In the 2020 TU scenario, Cambodia benefits from in- creased water availability during the dry season afforded by flow regulation through additional dams and profits from irrigation increase by US$0.9 million. This increase in profit is minor as values close to maximum potential areas and yields are already achieved for the irrigated areas speci- fied in the 2020 ND scenario. At the same time, profits from fish production and wetlands drop sharply, leaving the country worse off by US$22 million under the 2020 TU scenario compared to the 2020 ND scenario. The drop in fish production is due to the substantial decrease in wet- season flows from hydropower development. Other con- sequences for the flow regime and migration patterns from additional hydropower development cannot be accounted for in the model, but are likely substantial. Laos reaps sub- stantial profits from additional hydropower generation in the 2020 TU scenario, most of which would likely be sold to Thailand. These profits are much larger than losses from declines in fish production and wetland uses, affording the country an added annual net wealth of US$810 million, without taking into account construction costs for the ad- ditional 21 dams. Under normal flow levels, Thailand increases its net profit situation by US$3 million in the 2020 TU scenario compared to the 2020 ND scenario, due to increased profits in irrigated agriculture and hydropower production (assum- ing no decline in fish catch in Northeast Thailand follow- ing construction of Pak Mun dam). The net result for Vietnam from increased hydropower production, a small increase in wetland benefits, no change in irrigated agri- 0 5,000 10,000 15,000 20,000 25,000 30,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec flo w (m 3 / se c) 2020 TU 2020 ND Figure 5. Flows into the Mekong Delta, 2020 ND and 2020 TU Scenarios 40 C. Ringler, J. von Braun, and M. Rosegrant IWRA, Water International, Volume 29, Number 1, March 2004 culture, and a decline in profits from fish production is an increase in total profits of US$188 million. The assumed addition of nine lower mainstream hydropower projects (2020 TUM scenario) results in small increases in basin profits from irrigated agriculture compared to the 2020 TU scenario, an increase in hydropower profits of 69 per- cent, a small additional negative impact on fish production, and no additional impact on wetlands. Detailed impacts on the river ecology from lower mainstream dam construc- tion cannot be evaluated based on the current modeling framework. Conclusions Rapid agricultural and economic development in main- land Southeast Asia during the 1990s has fueled the de- mand for water resources in the MRB, leading to increased competition for water resources among sectors and coun- tries, especially during the dry season. Off-stream uses are directly competing with in-stream flows for hydro- power production, fisheries, wetlands, navigation, for a balanced river ecology, and to combat saltwater intrusion in the Mekong Delta. Recent economic growth has also renewed interest in large-scale development of Mekong waters, particularly for hydropower. The Asian financial and economic crisis of the late 1990s has only postponed some of the more ambitious national and international de- velopment programs. Balancing the economic, political, and environmental interests in the basin is a highly complex task. Equitable sharing of transboundary water resources by riparian coun- tries with highly diverse economic development and water resource needs, efficient and beneficial use of scarce water resources, and sustainable development of the natural re- sources in the basin requires effective international coop- eration for the allocation and management of water resources. Tradeoffs among the diverse national and re- gional development goals must be carefully accounted for and examined in an integrated framework of analysis, in order to facilitate a structured approach to the develop- ment of Mekong water resources. The paper describes an innovative integrated eco- nomic-hydrologic model for the entire MRB that allows for the analysis of alternative water allocation and use scenarios. Due to data limitations and model aggregation, only preliminary conclusions can be drawn from the analy- sis. The MRB can be characterized as a basin that has reached a semi-closed state, as off-stream water require- ments compete with in-stream demands during the dry season. Tradeoffs in water allocation and use are particu- larly evident between capture fisheries and off-stream water uses. Irrigated agriculture, which includes a wide range of irrigation technologies in the monsoon climate of Southeast Asia – from floating rice production, over wet season supplementary irrigation, to dry-season irrigation – is by far the largest water user in the basin. Moreover, the Mekong Delta in Vietnam is by far the largest water user and the region benefiting most from water uses in the ba- sin. The dependency on large dry-season water withdraw- als and its location at the downstream end of the basin makes the Vietnamese delta particularly vulnerable to changes in upstream water management and uses. Model results show that a change in the cropping pat- tern and the choice of crop alone could save large amounts of water resources in the dry season, as both the water consumption per hectare from irrigation and the water pro- ductivity vary substantially by crop. Moreover, an increase in the field application and in the overall water use effi- ciency, which allows for the irrigation of more area with the same amount of water, not only improves the water productivity in agriculture, but also benefits fisheries and hydropower production. The analysis of alternative hydropower development scenarios for the year 2020 shows that changes in techni- cal parameters related to future water allocation and use in the basin lead to a series of new intersectoral and inter- country tradeoffs. The incorporation of additional hydro- power projects can help alleviate dry-season water shortages in the Mekong Delta and elsewhere. The added benefits from future hydropower development for other sectors – here US$4.4 million for irrigated agriculture – are overshadowed by losses in the fishery and wetland sectors of US$62 million. Cambodia is particularly vulner- able to large-scale hydropower development. The countries in the Mekong River Basin need to co- operate very closely to achieve the benefits indicated from model results. The optimal utilization of the basin water resources through allocation of water to the highest val- ued uses requires extensive information about the quan- tity and value of Mekong waters over space and time. The governments of the lower Mekong basin have pledged to increase data collection efforts and to share data to facilitate improved decision making for transboundary water sharing in the basin. Data collection efforts should focus on water withdrawals by sector, the economic value of in- stream water uses, and irrigated agricultural production. Although the Mekong River Commission cannot play the role of the “near-omniscient” decision maker in the basin with “perfect” knowledge about the basin water resources – the information and transaction costs would be prohibi- tive – the riparian countries should still strive to collabo- rate more closely so as to increase both national and overall basin benefits. The further development and refinement of an inte- grated economic-hydrologic modeling tool together with complementary analyses can be a critical first step to over- come some of the obstacles to effective management and joint cooperation in the Mekong River Basin. It could also facilitate the ongoing negotiations of water allocation rules in the lower basin and thus contribute to the reasonable and equitable utilization of Mekong River waters, as envi- sioned in the 1995 Mekong Agreement. Water Policy Analysis for the Mekong River Basin 41 IWRA, Water International, Volume 29, Number 1, March 2004 Acknowledgments This paper is based on dissertation research carried out at the Center for Development Research, Bonn Uni- versity, in collaboration with the International Food Policy Research Institute in Washington, and the Mekong River Commission Secretariat in Phnom Penh, Cambodia. About the Authors Claudia Ringler is a Postdoctoral Research Fellow at the Environment and Production Technology Division of the International Food Policy Research Institute (IFPRI). She obtained a degree in Business Management in Germany and Spain, an M.A. in international and devel- opment economics from Yale University, and a Ph.D. in agricultural economics from the Center for Development Research, Bonn University. She was outposted during 2000-2002 to the Sub-Institute for Water Resources Plan- ning in Ho Chi Minh City, Vietnam. There she focused on the development of an integrated economic-hydrologic model for water allocation and use in the Dong Nai River Basin in South Vietnam. She has also worked and pub- lished on Cambodia, Chile, and Ghana. Her research in- terests are water resources management, in particular, river basin management and agricultural and natural re- source policies for developing countries. Email: c.ringler@cgiar.org Joachim von Braun is Director General of the In- ternational Food Policy Research Institute (IFPRI) since Sept 2002. Before that he was Director of the Center for Development Research and Head of the Center’s De- partment for Economics and Technological Change at University of Bonn. His research and policy advice fo- cuses on poverty reduction, on technological innovation, and on governance and trade policies. von Braun serves on boards of international institutes, is President (2000- 2003) of the International Association of Agricultural Economists (IAAE), and an academic advisor to interna- tional organizations and the private sector. Recent aca- demic books by von Braun address issues of poverty and famine in Africa, and biotechnology in developing coun- tries. Email: j.von-braun@cgiar.org Mark Rosegrant is director of the Environment and Production Technology Division at IFPRI. Rosegrant has a Ph.D. in Public Policy from the University of Michigan and 24 years of experience in research and policy analy- sis in agriculture and economic development, with an em- phasis on critical water issues as they impact world food security, rural livelihoods, and environmental sustainability. Rosegrant also developed IFPRI’s International Model for Policy Analysis of Agricultural Commodities and Trade (IMPACT), and the IMPACT-WATER models, which are world-recognized models for projecting global and regional food demand, supply, trade and prices and water supply and demand to 2020 and 2025. He is the author or editor of five books and over 100 professional papers in agricul- tural economics, water resources and food policy analy- sis. Email:m.rosegrant@cgiar.org Discussions open until September 1, 2004. References Brooke, A., D. Kendrick, and A. Meeraus. 1988. GAMS: A User’s Guide. San Francisco, California: Scientific Press. Browder, G. 1998. “Negotiating an International Regime for Wa- ter Allocation in the Mekong River Basin.” PhD Disserta- tion. Stanford University. Chea, V. 1998. Water supply in Phnom Penh. In: Towards Effi- cient Water Use in Urban Areas in Asia and the Pacific. ESCAP. ST/ESCAP/1874. New York: UN. 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