VIENTIANE - The old-fashioned trappings
and rhetoric of shared ideology, common struggle
and political solidarity were on full display when
Vietnam and Laos recently celebrated the 30th
anniversary of their Friendship and Cooperation
Treaty.
Yet throughout the flurry of
reciprocal visits, exhibitions and cultural
performances, the diplomatic undercurrent was
clear: economics and business, rather than the old
fraternal bonds among aging Communist Party
cadres, will be the ties that bind
future
bilateral relations.
The close relations
first forged during the resistance to French
colonialism, the great-power proxy conflicts of
the Cold War, and the US war in Indochina are
fading in significance, yielding to market-driven
economic integration. With global commodity prices
soaring and improved regional road infrastructure,
landlocked Laos has more trade and investment
options today than at any time in its modern
history.
Market forces have gradually
diminished the country's past dependence on
Vietnam for its economic survival. A new
generation of Laotian leaders have slowly but
surely moved to diversify the country's commercial
diplomacy and Vietnam increasingly finds itself
competing head-to-head with Thai, Chinese and
Western investors for access to Laos' rich bounty
of natural resources.
Vietnam now ranks
third among 37 different countries that have
invested in Laos, lagging behind regional
neighbors Thailand and China, who have contributed
US$1.4 billion and $770 million respectively.
Official statistics show total Vietnamese
investment in 106 different projects reached $517
million through this May. Those outlays were
heaviest in mining, agriculture, timber,
pharmaceuticals and hydroelectricity.
In
return, Laotian companies have invested a paltry
$23 million in Vietnam, entailing eight different
projects in trade, tourism and services. Trade
between Vietnam and Laos was $240 million in 2006
and the two sides have optimistically targeted
trade flows to reach $1 billion by 2010 and $2
billion in 2015.
Targets for Vietnamese
investment include mining and export-oriented
agriculture and processing. The state-owned
Vietnam Rubber group plans to invest $30 million
to develop a 10,000-hectare rubber plantation in
Laos' Champasak province. That's on top of an
earlier $18 million rubber project in Laos'
south-central province of Savanakhet. Railway and
road projects aimed at better linking the two
countries are also on policymakers' drawing
boards.
Laos' hydropower potential is
especially attractive to Vietnam, Thailand and
China. Hanoi faces declining domestic oil
production and desperately needs new energy
sources to power its rapid economic growth. Its
state-run oil-and-gas group, PetroVietnam, and the
public utility, Electricity Vietnam, are together
planning new energy projects in both Laos and
Cambodia. Vietnam already takes a small amount of
Laotian power, and Vietnamese policymakers plan
more system integration.
China and
Thailand have similar designs. Beijing has in
recent years made significant investment inroads
into Laos, including big outlays in agriculture,
mining and likewise hydropower. To cement those
commercial ties, China has also made several
symbolic gestures toward Vientiane, including
generous dollops of development assistance.
Bilateral trade is growing as China takes
increasing amounts of Laos-cultivated agricultural
staples and sends back manufactured goods in
exchange.
Thailand has its eye on Laos'
huge hydropower potential, including the $1.4
billion Nam Theun 2 dam project, which is
scheduled to start delivering power to Thailand by
2009. Major Thai players, including power company
EGCO and construction company Ital-Thai
Development, have joined hands with Electricite de
France and the Laotian government in developing
the megaproject. Bangkok has also invested heavily
in the budding Laotian service industry, including
hotels and tourism.
Old ties, new
era The growing regional competition for
Laotian resources is raising old questions about
Hanoi's political influence over Vientiane. Ever
since the Pathet Lao communist government seized
power in 1975, Laos has been widely seen as a
Vietnamese client state. Close administrative and
political ties were established between the two
countries during the time of the French colonial
empire.
By the 1930s, the early communist
movements in both countries had found common
ideological cause in opposing colonialism, and the
alliance strengthened in the years leading up to
the defeat of the Americans in Vietnam and their
respective seizures of power in 1975. Many of the
leaders of the rebel Pathet Lao, which became
today's Lao People's Revolutionary Party, were
educated and trained in Hanoi.
The
Vietnamese communists maintained large numbers of
combat troops in Laos during the Vietnam War, and
the eastern region of Laos was part of the famous
Ho Chi Minh Trail supply route, which allowed the
communist forces to make inroads into US-backed
South Vietnam. After 1975, the two new regimes
consolidated their alliance and formalized it in a
treaty of friendship and cooperation signed in
1977.
For the first 10 years of its
existence, the newly formed Laotian republic was
highly dependent on Vietnam for its economic
sustenance, and in exchange Hanoi maintained
40,000-50,000 foot soldiers in the country through
the mid-1980s. Although both countries are still
nominally communist, they have also embraced
market economics and recently liberalized their
foreign-investment regimes.
With a
population of just 6 million, Laos is one of the
most sparsely populated countries in Asia. Its
economy is the smallest in Southeast Asia and its
per capita income of $500 per year is one of the
lowest in the world. The majority of the
population is still engaged in semi-subsistence
agriculture and fishing and fares poorly in
various health and education indicators.
Those demographics make the country one of
Southeast Asia's most important remaining areas of
natural landscape and biodiversity. In Asia's
growing race for cheap and proximal commodities,
it also exposes Laos to the new regional
competition of economics-fueled power politics.
During the Cold War, Laos unswervingly
sided with Vietnam in its tense relationship with
China. But according to Martin Stuart Fox, a Laos
expert at the University of Queensland in
Australia, Vientiane now tries to balance
relations more equitably among regional players.
It's not yet apparent that Laos'
increasingly diversified trade and investment
flows have completely undermined its old special
relationship with Hanoi. Some analysts contend
that the passing of both countries' revolutionary
leaderships and the emergence of a new generation
of market-minded communist cadres is putting those
old bonds to a new test.
That's being
driven by Laos' greater integration into the
region, including through its 1997 accession to
the Association of Southeast Asian Nations. More
recently, the Laotian government has announced its
ambition to join the World Trade Organization by
2010. Laos is still heavily reliant on
multilateral and bilateral development assistance,
with major foreign donors including Japan, Sweden,
Germany and Australia.
But it is becoming
clearer that trade and investment with its three
larger neighbors - Vietnam, China and Thailand -
will more profoundly drive the country's economic
development. How Laos strikes the balance between
old loyalties and new opportunities, it seems, is
increasingly being decided by market forces rather
than central-committee directives.
Andrew Symon is a
Singapore-based journalist, researcher and
analyst.
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