Massey University School of Economics and Finance

The Mekong River is the major water source in Southeast Asia, shared by six countries. There is a rush, by riparian states, to acquire sources of alternative energy and other benefits to meet growing demands for water and energy. China and Myanmar have refused to cooperate fully in the Mekong River Commission, leading to increase risks within the region. Development of the water resources of the Mekong River Basin is the subject of intense debate both within the Mekong region and internationally. This paper investigates the concept of issue linkage to resolve unidirectional externalities in the Mekong River. Using linked games, the paper shows that the downstream nations can consider the use of linkage as a form of side payment in achieving a basin-wide agreement. While this approach supports the integrated water resource management (IWRM)-based Basin Development Strategy adopted by the Mekong River Commission in April 2011 for managing the region’s sustainability development, facts on the ground suggest that traditional issues to be linked may not be sufficient. The paper addresses this observation and suggests a cadre of issues, including non-traditional ones, to be analysed in a future work.