Page 2 of 2 China and Vietnam square off in Laos
By Brian McCartan
concerning the ethnic Hmong insurgency. Lao military delegations to Vietnam in
1999 and 2000 went, according to some analysts, to seek advice after protests
and a wave of mysterious bombings across the capital, Vientiane.
In contrast, China only resumed normal diplomatic relations with Laos in 1988 -
but it is now fast making up for lost time. China was able to vastly increase
its clout in Laos by bailing out the country from the 1997 Asian financial
crisis through increased aid, investment and trade. Generous export subsidies
and interest-free loans helped stabilize the tanking local currency, the kip.
Since then, a series of bilateral agreements have been signed
covering economic and technical cooperation, infrastructure development and
investment and banking. In 2000, President Jiang Zemin paid the first visit
ever by a Chinese head of state to the country, paving the way for continued
high-level government-to-government exchanges. According to Chinese media
reports, Beijing canceled much of Laos' $1.7 billion debt owed in 2003.
China's interest in Laos is primarily economic, as both a source of natural
resources and a conduit for its manufactured goods into Southeast Asia. Chinese
investors are heavily involved in Lao hydropower and several dams are under
construction with more in the planning stage. Mining is also an important area
of investment, with concessions granted to Chinese investors for gold, copper,
iron, potassium and bauxite.
So, too, is commercial agriculture, with Chinese investing heavily in corn,
cassava, sugarcane and rubber in northern regions for export to China. Noting
the new technology, seeds and markets brought in by Chinese investment,
spokesman Yong said "Improved relations and opening up to China in those six
(northern) provinces has had an immediate benefit."
Two-way trade stood at $249 million in 2007, but similar to Vietnam, China has
said it hopes bilateral flows will hit $1 billion over the next few years.
According to the Lao Committee for Planning and Investment, Chinese direct
investment totaled $1.1 billion by August 2007, making China the second largest
investor behind Thailand.
During Chinese Premier Wen Jiabao's visit to Vientiane in March, in conjunction
with a Greater Mekong Subregion Summit, seven agreements were signed between
the two countries covering economic issues, technology, energy and
e-governance. China also offered $100 million in export purchaser credits for
the vehicles and helicopters. Chinese loans have also helped to set up the Lao
Telecom Company and Lao Asia Telecom, establish e-government projects and
purchase aircraft for Lao Aviation.
China has paid particular attention to the development of the fast-expanding
network of roads in northern Laos. Reconstruction of Route 3, connecting the
Chinese city of Jinghong in Yunnan, through Laos to the town of Huay Xai across
from Chiang Khong, Thailand, was completed earlier this year. Construction on a
bridge - funded by China - across the Mekong River to complete the route is
expected to begin later this year. The road project is a part of the Greater
Mekong Subregion's North-South Corridor to connect China, Laos and Thailand.
China hopes that the route will allow it to more efficiently transport goods
through Thailand to the rest of Southeast Asia and provide a link with Thai
seaports.
Soft and hard power
However not all Chinese investment has been strictly commercial. Considerable
effort - and money - has been spent on "soft influence" projects, including the
Beijing-financed construction of the $7-million National Cultural Hall, the
13-kilometer Central Avenue, renovation of the Patuxai Victory Monument and its
surrounding park in Vientiane. It has also constructed a Sino-Lao Friendship
Hospital just outside of the tourist town and old royal capital of Luang
Prabang. In addition, increasing numbers of LPRP cadre are attending trainings
and seminars in China, many in the southern Chinese city of Kunming, while more
and more scholarships are being made available for Lao students to study in
China.
Significantly, China has built on these economic ties to make strategic
initiatives towards Laos, seen by some as a potential threat to Vietnam's
position. It has recently increased contacts between the Lao People's Army
(LPA) and the Chinese People's Liberation Army (PLA), while the number of Lao
officers attending trainings in China has increased.
The Lao military's budget has grown steadily in recent years, according to
analysts, and the government is no doubt aware that with China's huge weapons
industry and Beijing's demonstrated willingness to exchange military hardware
for commercial concessions is better placed to modernize its military through
closer ties with China than Vietnam.
Not everyone is happy with China's growing role, however. While many Laos are
happy to have access to cheaper Chinese manufactured goods, they are not always
as enthused about what some see as a growing influx of Chinese migrants into
the country and a perceived increase of Chinese influence over the government.
Lao fears of a gradual "Chinese invasion" were perhaps most in evidence through
the disapproval expressed in the wake of the government's announcement of a big
land concession to Chinese investors near Vientiane's iconic That Luang
Buddhist monastery.
While the land grant was apparently made in exchange for China's construction
of a modern new sports stadium complex to be used when Laos hosts the 2009
Southeast Asia Games, the arrangement apparently angered some in the LPRP who
were not consulted on the deal. Although the government has been at pains to
dispel these rumors, they continue to persist.
Former Lao president Kaysone Phomvihan once said, "The mountains may wear out,
rivers may run dry, but the Lao-Vietnam relationship will last forever." That
may be true, due to geography as much as history, but China-Vietnam competition
for influence in Laos is running high and so far the country has benefited
nicely in balancing the two neighbors' advances.
Brian McCartan is a Chiang Mai-based freelance journalist. He may be
reached at brianpm@comcast.net.
(Copyright 2008 Asia Times Online (Holdings) Ltd. All rights reserved. Please
contact us about
sales, syndication and
republishing.)
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road,
Hua Hin, Prachuab Kirikhan, Thailand 77110
