Malaysian infrastructure group Gamuda signed an agreement with the Laotian government to develop a two-billion-ringgit (526-million-dollar) hydropower dam project.

Gamuda holds a 50 percent stake in the Nam Theun I hydroelectric power project in the northeastern province of Bolikhamxay, the Laotian government 20 percent and a Thai power company the remaining 30 percent.

Hydroelectricity is a rare source of foreign currency for communist Laos, which exports the power notably to Thailand.

The Laotian government first proposed the dam in the early 1990s. Officials said they expected construction to start in 2006 and be completed by 2010.

The project comprises a dam and an adjacent power station with a capacity of 450 megawatts on the lower end of the Nam Theun river. A transmission line will be built to a delivery point at the border with Thailand, officials said.

Giant dam

The project will be developed concurrently with another dam, the giant and controversial Nam Theun II and its 450-square-kilometre reservoir to be built some 250km southeast of Vientiane on the Nam Theun river, a tributary of the Mekong.

The World Bank has yet to approve financial backing that is vital for the project to go ahead.

Malaysian Prime Minister Abdullah Ahmad Badawi, in Laos for the Association of Southeast Asian Nations summit starting today, witnessed the signing of the agreement.

The project marks the first foray into the Mekong sub-region for Gamuda, which has completed seven large infrastructure projects worth three billion dollars in the past decade, said its managing director Lin Yun Ling.