President Barack Obama will find major governments and international organizations heavily involved in Laos1 when he arrives in Vientiane to attend the East Asian Summit in September. Japan, Australia, and South Korea all have significant interests there that support the rules-based order Washington seeks. Thailand also has major interests and historical antecedents in Laos, but tends to follow its own compass there. The World Bank, the Asian Development Bank, and all major United Nations agencies are well established in Laos and enjoy leverage.
China and Vietnam, however, are the most active foreign powers in Laos today. The Lao government and the Lao People’s Revolutionary Party (LPRP) – whose membership and authorities overlap – would look to Beijing and Hanoi for help if needed and try to avoid offending either of their larger neighbors.
However, China’s wealth, size, and recently expanded physical connectivity to Laos give it an edge over Vietnam, whose influence is based largely on historical connections to the LPRP. Some of China’s investments and activities in Laos have engendered resentment among ordinary Lao, particularly those affected by long-term land concessions given to China by the Lao government. Nevertheless, China is well on its way to achieving its primary objectives in Laos: stability on its borders; unfettered transit rights linking into its “One Belt, One Road” to markets around the world; and continued access to Laos’ natural resources.
Beijing used its muscle on both Laos and Cambodia to prevent the Association of Southeast Asian Nations (ASEAN) from mentioning the landmark international court ruling on July 12 against Beijing’s territorial claims in the South China Sea, first at the ASEAN-China foreign ministers’ meeting in Kunming on June 14, when it leaned on the Lao to recall a statement suggesting ASEAN concern about China’s activities there;2 and again at the ASEAN foreign ministers’ meeting in Vientiane on July 25, when it pressured Cambodia to reject language in a joint statement mentioning the tribunal’s ruling against China’s territorial claims.3 As one experienced analyst aptly noted, “China did not create the disunity in ASEAN, but it does exploit the divisions and uses its economic clout to try and get its way.”4
It is equally clear that the Lao government welcomes China’s investment and trade as well as Beijing’s “soft power” support for development of human capital. The salient questions going forward will be how Beijing and Hanoi use their power and influence, and whether the other major investors – Japan, Thailand, South Korea – continue to find Laos an attractive location in which to invest their money and to engage diplomatically, including provision of development assistance.
Australia, the European Union, other Western governments and international organizations, as well as foreign nongovernmental organizations, also have important roles to play in Laos’ future. Whether the political climate in Laos and its resources at home will allow it to continue to engage fully will be pivotal issues to watch.
The United States has built an imposing new chancery on the outskirts of Vientiane, signaling Washington’s intentions to continue to play a significant role in the country. During annual Lao-American consultations in Vientiane on May 6, the United States pledged “up to $50 million” in new development assistance for Laos.5 Finding ways to use the new facility and those additional funds to advance American interests in Laos will not be easy. The needs are great, but the ability of the Lao People’s Democratic Republic (PDR) government to utilize more foreign assistance is limited.
Developing the bilateral Trade and Investment Framework (TIF) the United States and Laos signed in February 2016 will require American investors to operate innovatively, as those already there have. The Lao government also will have to improve and clarify investment conditions if it is to attract a more diverse group of investors.
Geography, the new trade routes across mainland Southeast Asia, and a need for geostrategic balance in the region call for an effective American presence in Laos. Clearing the unexploded ordnance dropped on Laos by the U.S. Air Force during the during the Vietnam War currently absorbs much of the United States’ assistance, and American policymakers should bring that effort to an end as quickly as possible. The United States and its allies also have insights into the environmental and human problems around the hydroelectric dams on the Mekong River, and should work with the concerned governments toward regional solutions to those complex problems.
The United States has expertise in the areas in which the Lao government needs assistance: education, health care, and agriculture. The operational concepts underlying the United States’ assistance programs should be to bring Lao and Americans together to work on those and other specific problems of concern to the Lao. Of related concern, Lao youth need instruction that is hands-on, activity-based, and student-centered for critical thinking and problem solving. The Peace Corps, the four major American universities with campuses in Southeast Asia, and Americans with experience and language skills in the region are resources that Washington can use to help Laos remain a fully participating member of the international community, open to mutually beneficial relationships with all.
President Barack Obama, Chinese President Xi Jinping, and Japanese Prime Minister Shinzo Abe will join Southeast Asian and other heads of state at the East Asian Summit in Vientiane, September 6–8. The government of Laos will host the Summit as the 2016 ASEAN chairman. Obama will be the first American president to visit Laos. His attendance will underscore Washington’s commitment to the “strategic partnership” he formed with ASEAN in 2015, and follow the informal summit he hosted in California with ASEAN leaders in February.
The primary purposes of this policy brief, however, are to look at current developments within Laos’ own borders, and to examine how those developments shape this small, landlocked country’s place in Asian-American relations, in particular its relevance for the incoming administration’s Asian policies in 2017 and beyond.
More operationally, this paper provides background for future policymakers about what the major powers are doing in Laos today and how those activities relate to the United States’ interests there. It also assesses the impact of those activities on the Lao economy and society, and it recommends projects the United States might undertake to project its values and the rules-based order it supports in Laos and elsewhere in Southeast Asia. Finally, this policy brief highlights ways the United States can help contribute to Laos’ ability to continue its movement toward prosperity and full participation in the international community.
The full report is available online.
- The Kingdom of Laos became the Lao People’s Democratic Republic (Lao PDR) when the country’s government changed leadership and doctrine in December of 1975. Its citizens and their language, however, are still known as “Lao.” The text refers to the country as both “Lao PDR” and “Laos.” The latter was more commonly used during the time of the former government but does not have any political connotations. ↩
- Steve Mollman, “ASEAN’s statement about the South China Sea that was reportedly issued then retracted,” Quartz, June 15, 2016, http://qz.com/707331/read-aseans-statement-about-the-south-china-sea-that-was-reportedly-issued-then-retracted/. ↩
- Michael Martina, Lesley Wroughton, ”CORRECTED - Diplomatic Win for China as ASEAN Drops Reference to Maritime Court Ruling,” Reuters, July 25, 2016, http://in.reuters.com/article/southchinasea-ruling-asean-idINKCN1050EQ. ↩
- Simon Denyer, “U.S. Hypocrisy and Chinese Cash Strengthen Beijing’s Hand in South China Sea,” The Washington Post, June 19, 2016, https://www.washingtonpost.com/world/asia_pacific/us-hypocrisy-and-chinese-cash-strengthen-beijings-hand-in-south-china-sea/2016/06/18/6907943a-330a-11e6-ab9d-1da2b0f24f93_story.html. ↩
- “United States Reaffirms Further Assistance to Laos,” Vientiane Times, May 9, 2016, http://www.vientianetimes.org.la/FreeContent/FreeConten_United_states.htm. ↩