Only China has so far dammed the Mekong, and controversially so: many communities still depend on the river for food, water, fertile silt, trade and transport. But there are signs that governments further downstream may also cave in to the lure of lucrative hydropower development. Feasibility studies are being carried out at seven sites for potentially huge dams, two of which lie on the stretch of river we are in.

Our boat comes with a captain and a couple of accommodating cabin crew who have a knack for delivering cold beer at exactly the right hour and conjuring up three-course Lao lunches from a tiny galley. All that's left to do is watch, at the leisurely pace of the current, the day-to-day lives of the people along the riverbank.

The trip sets out from the Lao town of Houay Xai, with Thailand on one side and Laos on the other. The eight metres of riverbank exposed when the water level drops from its wet-season high to dry-season low belongs to Laos, providing extra land for locals and a sequence of fascinating vignettes.

On sandy beaches, seasonal peanut plants flourish in the loamy soil. In the shallows, where water buffalo wallow, sinewy fishermen cast homemade traps, hoping to net a giant Mekong catfish, the largest freshwater fish in the world.

As Thailand disappears in our wake, the Lao landscape - a mishmash of farmed land, dense jungle, plantations and clearings - surrounds us. This stretch of river is home to the Hmong, one of about 130 ethnic minorities in Laos. Their semi-nomadic tradition of controlled burning to clear and fertilise land for crops is evident in the spiralling wisps of smoke and the razed patches of land where rice and corn have been harvested.

In Hmong villages, visitors are inevitably trailed by an entourage of souvenir-hawking children. The village of Huay Lam Peu is home to 70 families who live in large wooden houses with low-pitched, thatched rooftops that extend almost to the floor. In the dark interior of one home, a woman prepares food for an extended family of 10 people. Our parting gift from the village's children is the rusted shell of a sinister-looking bomb found in the sandy river dunes. It's a reminder of the Americans' clandestine and illegal bombing during their war on the Vietcong, when US planes dumped more than a million tonnes of explosives on Laos. The tranquility of the place offers little clue to its bloody history.

Further downstream, the sandy riverbanks offer an opportunity for gold prospecting. Mountain streams deposit small particles of gold in the sediment. From January to May, women in colourful sarongs slosh wide-brimmed pans from side to side in the hope that specks of the metal will turn up at the bottom.

In other villages, the locals earn a living weaving the brightly coloured silk and cotton materials found in the markets of Luang Prabang. Others get by distilling lao lao, a kind of wine made from fermented cakes of ground rice, and a harsh style of whisky named after the river.

At the village of Pak Beng, we spend the night at the Luang Say Lodge, built in traditional Lao style with wooden pavilions perched along a walkway overlooking the Mekong. The French owners have employed 37 villagers and encourage locals to grow fruit and vegetables and raise livestock for the resort's kitchen, which serves its fare on a deck overlooking the river.

Just upstream, Thai surveyors are camped out at the site of the proposed Pak Beng dam. Environmentalists say damming the river will displace thousands of people, destroy the well-being of others and harm the fragile riverine ecology. But the Lao government says dams will lift people out of their US$2-a-day poverty.

From the deck I see a fisherman drifting silently on the inky, moonlit water in his wooden longboat - a sight unlikely to survive should construction of a dam go ahead.

At Pak Beng the river heads east, past wooden stilt villages where Lao Loong and Khamu minorities live. Occasionally the gold of a stupa can be seen in the tree canopy, and around each bend smiling children stop playing to run alongside us, waving until we are out of sight.

When the hills and farmland are replaced by limestone karsts, you know you're close to Luang Prabang and the famed 15th-century Pak Ou Buddha Caves. Dug deep into the cliff face, the dark caverns glint and wink with the light shining off hundreds of gold Buddha statues.

Not far away, more tents and surveyors indicate that this, the most scenic part of the journey, is the second dam site.

Luang Prabang, listed by Unesco as a World Heritage site, is one of Asia's most beautiful treasures. With its French colonial buildings and gold-topped temples in frangipani-scented air it's a successful example of how the preservation of customs, culture and traditions can bring economic benefits to local people.

If the dams are built and the place is ruined, the governments of Laos and Thailand, like Colonel Kurtz, will have shown just how mad they can be.

Getting there: Thai Airways (thaiairways.com) flies to Bangkok, from where Bangkok Airways (bangkokair.com) flies to Luang Prabang and Chiang Rai. Houay Xai can be reached from Chiang Rai by a combination of bus and boat.