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"We will have a ground-breaking ceremony in Xayaburi on Wednesday," Viraphonh Viravong, deputy minister of Energy and Mines, told dpa.
The ceremony will mark the beginning of work in the river bed, with construction on access roads and facilities already under way.
The hydroelectric project is to be the first run-of-river dam to be built on the lower Mekong. Four dams have already been built on the upper Mekong in China.
The project has been criticized by environmentalists, neighbouring countries and downstream riverside communities for its possible impact on the flow of sediments and fish migration.
An organization called the Network of Thai People in Eight Mekong Provinces on Monday held a flotilla protest of 45 boats on the Thai side of the river in Nong Khai, across from Vientiane, which is currently hosting the Asia-Europe Meeting that has drawn about 50 Asian and European leaders to the Laos capital.
"We want the visiting leaders to become aware of the Xayaburi dam project and the impact it is going to have on people living downstream," the network's spokeswoman Pianporn Deetes said.
"We've already seen a negative impact from the Chinese dams on the upper Mekong in terms of greater fluctuations in the river's flow," she said.
There are 10 more dams planned on the lower Mekong, South-East Asia's longest river and one of the of the world's richest sources of fish, worth an estimated $2 billion per annum.
In December, members of the Mekong River Commission's council, consisting of water and environment ministers from Cambodia, Laos, Thailand and Vietnam, urged a delay to allow further environmental research.
In response, the Lao government and its chief partner in the project, Thailand's Ch Karnchang Public Co Ltd, agreed to spend an additional 100 million dollars to revamp the design of a fish ladder and sediment flow gates.
The recommendations were made by project consultants Poyry of Finland and the French Compagnie Nationale du Rhone and incorporated into a new design of the project.
"They have no more serious complaints on the redesign of the dam," Viraphonh said of Laos' neighbours. "The Lao government is confident that with all these changes there will be no serious environmental impact, and that's why we've decided to go ahead."
Laos, a mountainous, land-locked country that ranks among the world's poorest nations, has abundant hydropower which the government hopes to export to its neighbours as an engine of economic growth.
The country already has 13 hydroelectric plants in operation with a total capacity for 3,000 megawatts.
The Xayaburi project, to be operational by 2019, will be one of its largest, with more than 90 per cent of its electricity to be exported to neighbouring Thailand.
"Xayaburi is a very good project," Viraphonh said. "The financing is there and if we don't go ahead what are we expected to do? Solar farming? It's too expensive."