Laos has pledged to stall construction of a controversial multi-billion dollar dam on the Mekong river until all its neighbours' environmental concerns have been answered, state media said Friday.

The $3.8 billion hydroelectric project at Xayaburi, led by Thai group CH Karnchang, has sharply divided the four Mekong nations -- Laos, Vietnam, Cambodia and Thailand -- who rely on the river system for fish and irrigation.

"The Xayaburi project will develop one of the most transparent and modern dams in the world," Deputy Minister of Energy and Mines Viraphonh Viravong told state-run Vientiane Times.

He promised that construction would not start until all the concerns of neighboring countries have been resolved.

The minister said changes to the project will address the two major issues -- fish migration and sediment flow -- by including a passage to allow 85 percent of fish to travel along the river and a "flushing system" to prevent sediment build up.

The mooted 1,260 megawatt dam, the first of 11 on the key waterway, has become a symbol of the potential risks of hydropower projects in the region and the Mekong nations have tussled over its varying impact.

Communist Laos, one the most world's under-developed nations, believes the dam will help it become "the battery of Southeast Asia" by selling electricity to its richer neighbours.

Thailand has agreed to buy most of the electricity generated by the project, but Cambodia and Vietnam fear the dam could decimate their farming and fishing industries.

Environmentalists say the dam would be disastrous for the 60 million people who depend on the river for transportation, food and economy.

They fear Mekong fish species will become endangered as vital nutrients are trapped and dozens of species are prevented from swimming upstream to mating grounds.

Campaign group International Rivers said the Thai firm had already "undertaken significant resettlement and construction activities", despite calls from the four-nation Mekong River Commission to halt work until further impact studies have been carried out.

Laos rejects the accusations and has invited neighbouring governments to visit the project site.