The economic, geopolitical, and social implications of China’s prolonged economic expansion have been felt and debated in almost every corner of the globe. Perhaps nowhere, however, has the impact of China’s rise been more dramatic than right in its Southeast Asian backyard. One of the countries most affected is also home to one of the world’s most opaque regimes – Laos. Historically, relations between Laos and Vietnam have been closer than those with China. However, China’s sheer size, massive economic output, and hunger for Laotian natural resources have inevitably resulted in Laos being sucked ever-further into China’s orbit.
Despite having adopted modestly market-oriented economic policies in the 1980s, the Lao government remains an utterly closed system. All decisions are made by highly centralized Lao People’s Revolutionary Party (LPRP) elites, patronage is the preferred transactional currency, and corruption is endemic. As the 2007 Countries at the Crossroads report acidly notes, “the rule of law is honored more in the breach than the observance.”
In recent years, Chinese production has flooded Laos with new products, while Laotian exports, mostly in the form of raw materials, have surged more than 650 percent just since 2004. Just last week the two countries agreed on a new package of projects at a Greater Mekong Subregion summit. Of particular importance is the pace of infrastructure development, which is a natural realm of cooperation given both countries’ interest in expediting increased land- and river-based trade.
However, the criticisms that often accompany the presence of Chinese investment are present as well. A recent episode involves the granting of a lease for the land encompassing the Vientiane area’s largest wetland to Chinese investors in exchange for the construction of a sports complex. Like all such decisions in Laos, it was the result of largely secret negotiations. However, by Laotian standards, the outcry greeting the pronouncement was significant, or at least notable enough that the government felt obligated to hold a press conference to deny that tens of thousands of Chinese would be moving onto the land or that the wetland would be destroyed. Nonetheless, the mechanisms behind the transaction, the details of the plan, and perhaps most importantly, the impact on the residents currently dwelling near the project, all remain highly uncertain.
This sort of story has become typical within countries doing business with China, especially ones with weak institutions. As the Crossroads report also notes, one of the few semi-exceptions to Laos’ murkiness has been in foreign aid distribution, where demands for a modicum of transparency have in the past been at least partially accepted. The Chinese feel little such compunction; the author of the Crossroads report, Martin Stuart-Fox suggests in a Reuters story that intra-elite rivalry for Chinese kickbacks is probably at the root of the controversy rather than real concern over the decision-making process and its potential impact on the land. In addition, the record of both the Chinese and Laotian governments in issuing compensation to people whose land is seized is very poor.
Perhaps the fact that the government even felt the need to explain its actions represents an example of the very slow movement that is about the most that can currently be expected of the LPRP. At the very least, greater attention will likely be paid to the project’s impact than might be expected in the absence of any debate. The optimistic view is that it will be an opportunity for China and Laos to show that they are responsive to local and international concerns. Given the increasing opprobrium heaped on China’s investment and management style, it would be wise to demonstrate improved willingness to coordinate and engage in dialogue with locals. But given the history and nature of both countries’ ruling regimes, such an outcome would be very surprising indeed.
Photo of Chinese construction in Laos by Flickr user fredalix
