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Development Challenge
Laos turns a new chapter


  • Chinese Premier Wen Jiabao
    met with Laotian Counterpart Saman Vinhaket















Laos is no longer a sleepy land-locked country it has always been known. Although it is small country, features of development largely confined to the capital Vientiane and a few other urban centers, there is an emergence of a middle class in this communist country of nearly six million people.

The wealth created from the country's gathering economic boom is apparently trickling down to a wider cross-section of the population. Statistics from aid agencies show the economy has grown by more than 7 percent for the past two years, thanks to foreign investment being poured into the development of the hydroelectric power industry.

On top of the expanding gold and copper mining activity, tourism industry is growing rapidly. While overseas aid remain a key contributor to the national budget, merchandise trade has started to drive the growth, which has climbed to 61 percent of GDP in 2006 from 45.8 percent a year earlier, according to World Bank statistics.

Garment, horticultural and timber sectors also show steady growth, boosting economic performance and helped to narrow external debt.

By far the most apparent of this increasing economic activity is in Vientiane, the capital. There is little sign of pot-holed, dusty streets but paved roads full of traffic. From well-decorated shop windows, imported consumer wares beckon potential customers, new motorcycles and cars zoom through the once sleepy streets, and a bevy of Internet cafes which are now frequented by locals.

The other visible proof of rising prosperity is the number of mobile phones which grew to 638,200 in 2006 from a mere 29,500 in 2001, one of the fastest expansions in the region over the same period.

The percentage of the population in Laos with mobile phones, still lower than in neighboring Vietnam, is notably higher than in nearby Cambodia, which likewise is experiencing an unprecedented economic boom, and considerably higher than in impoverished Myanmar and East Timor.

Meanwhile, the authorities continue to maintain socialist rhetoric and vestiges of the old central planning regime, but Laos has unmistakably entered the mainstream market economy.


 Second Laos – Thai
friendship bridge 

 Nam Theum dam, a  
symbol of Laos deveropment drive

This is the result of the structural reforms in trade, private sector development and public financial management the government has taken in recent years. China and Vietnam's capitalist transformations are the lessons the Laos government has probably taken.

Following the development route beaten by its powerful neighbours, Laos finds itself under their influence, in particular, China.

A high-rise Chinatown being planned to built in Vientianne is worrying some Laotians.

The "Chinese City" has become a hot topic lately but the calls the venture a "New City Development Project", which Deputy Prime Minister Somsavat Lengsavad said poses no threat to local culture and values. Well. Almost every country in the world has a Chinatown, and it not unusual for Laos have one, the miniter argued.

The state-run media shows an artist’s impression of the new development with high-rises. It is not however known how big the Chinese community will make up this Chinatown.

The speculation is 50,000 families, which is quite a number to add to a city of 460,000. No wonder this spark fear among the locals. The other concern is the location as the new town will be built in the That Luang marsh, an area known for its nationalist symbolism and ecologically importance.

The concerns aside, the Chinatown project is ready to roll. Laos government has granted a Chinese company a renewable, 50-year lease to transform 4,000 acres of paddy fields into a modern city.

The grant came after Laos asked the China Development Bank for loans to build a stadium for the Southeast Asian Games it will host next year. The bank offered a Chinese company, Suzhou Industrial Park Overseas Investment Co a loan to build the stadium in exchange for the lease. The deal was signed last September.

Apart from the Chinatown project, and the billions of dollars in investment and aid from China, there are other development projects, such as the highway running from Yunnan province in China to Thailand via Laos explain why the Chinese presence is growing fast.

In the last few years, the number of Chinese living and working in Laos has been rising steadily. Official statistics say at least 30,000 live there, but in reality the figure could be 10 times greater. Not only is the Chinese presence highly visible in the northern border areas, but in the capital as well.

In Vientiane's downtown Samsenthai quarter, streets are adorned with red lanterns and the smell of Chinese cooking adds to the dusty heat of the dry season.

At the Lao-Chinese market off Asean Street and the newly opened San Jiang trade centre, shops are packed to the ceiling with Chinese goods, from fake flowers to electric massage chairs.

Even the Vietnamese hawkers, once a regular sight on Vientiane streets, have now been replaced with Chinese vendors. Laos has traditionally had strong links to Vietnam. During the French colonial period, the country was run by Vietnamese civil servants and when Laos became communist after the Vietnam War, its politics and economy tilted towards Hanoi and the Soviet bloc.

But the Chinese are set to regain their foothold in this sleepy regional back-water. Since 2000 China has been pouring aid and investment into Laos. Chinese companies are involved in almost all areas of the country's economy, from hydropower to mining, agriculture and hospitality.

As Laos turns a new chapter in economic development it cannot avoid taking on the challenges brought about by the rapid growth fuelled by foreign investment.

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