UPDATE 2-Laos delays Mekong dam project, Japan to conduct study
* Environmentalists say the dam would hurt millions
* Laos sees sales of electricity as a way out of poverty
* Close ally Vietnam had been unusually critical
* Thai firms lead the project, Thailand will buy the power (Adds WWF comment)
By Prak Chan Thul
SIEM REAP, Cambodia, Dec 8 (Reuters) - Laos has suspended a $3.5 billion dam project on the lower Mekong River while Japan leads a study into the environmental impact, after activists and some neighbouring states said it would harm the livelihoods of millions of people.
The decision was announced by a Cambodian official on Thursday after a meeting of water and environment ministers from Mekong River Commission states in the Cambodian town of Siem Reap.
"When the four member countries agreed to conduct a further study, this meant the construction would not start until we have a clear result," Te Navuth, secretary general of the Cambodian National Mekong Committee, told reporters.
The four countries that share the lower stretches of the 4,900 km (3,044 mile) Mekong -- Laos, Thailand, Vietnam and Cambodia -- had failed at a meeting in April to reach an agreement on construction of the 1,260 megawatt Xayaburi dam.
The project, which would bring the first dam across the lower Mekong, is being led by Thai builders, power firms and banks and Thailand would take about 95 percent of the electricity generated.
Communist Laos has ambitions to be the "battery of Southeast Asia", seeing the generation of power for neighbouring countries as the best way to drag itself out of poverty. Until now, it had resisted calls to stop the project despite the dangers highlighted by critics.
An earlier Environmental Impact Assessment by the Lao government was criticised as inadequate by environmentalists and activists.
Experts had warned that dozens of migratory fish species would become extinct if the dam was built. Fish stocks would dwindle, hitting the income of fishermen and the food supply of people residing along the Mekong river.
The dam could also prevent the movement of fertile silt needed to replenish agricultural land and as a result crops such as rice that are vital to domestic consumption and exports would be starved of nutrition.
CAMBODIA, VIETNAM HAPPY
A statement released by the Mekong River Commission after the meeting said the ministers had agreed to approach the Japanese government and other international development partners to carry out the new study.
"Further study will provide a more complete picture for the four countries to be able to further discuss the development and management of their shared resources," Cambodia's water resources minister, Lim Kean Hor, said in the statement.
"The outcome today demonstrates the member countries' continued commitment to work together in the regional spirit of the Mekong Agreement to bring about economic development without compromising sustainability of the livelihoods of their peoples and the ecology," he added.
He declined to elaborate to reporters but was smiling broadly when he left the meeting and posed for photographs with a Vietnamese delegate, who looked equally happy.
Vietnam and Cambodia had called for the project to be postponed pending further studies, and state-controlled media in Vietnam had been uncharacteristically critical of allied Laos.
China has built four dams on the upper river, closer to its source, which are equally controversial. Activists say they were responsible for a drought last year that sent lower Mekong water levels to their lowest in half a century.
Environmental pressure group WWF said it wanted a 10-year moratorium on lower Mekong mainstream dams until there was adequate information to assess their impact, and lower Mekong countries wanting to build hydroelectric plants should do so on tributaries rather than on the main river.
Jian-hua Meng, WWF's sustainable hydropower specialist, said the decision to delay the dam was a positive step towards sound stewardship of one of the region's most valued resources.
"The countries must now use this delay to properly and fully assess the impacts of the dam project, using the best scientific advice and consultative processes," Meng said in a statement.
"International consultants contracted to provide their expertise must adhere to international best practice and not cut corners."
The Lao government had hailed Xayaburi as a model for clean, green energy that would stimulate its tiny $6 billion economy and improve the lives of its 5.9 million people, over a quarter of whom live below the poverty line, many without electricity.
Thailand's second-biggest building contractor, CH Karnchang Pcl, has a 57 percent share in the project.
Company officials were not immediately available for comment on Thursday. In late November, Vorapote Uchupaiboonvong, its executive vice president for finance, said it expected to sign a contract soon to build the power plant. (Reporting by Prak Chan Thul; Additional reporting by Khettiya Jittapong in Bangkok and Tom Miles in Geneva; Writing by Alan Raybould, Editing by Jonathan Thatcher and Ron Popeski)