BANGKOK - Laos aims to lift itself out of least-developed country status by
2020, but a shift underway from reliance on Western aid to Asian private
capital has sparked criticism from development specialists who believe the
trend towards large-scale projects is unsustainable and works against the
country's long-term economic goals.
Lao Prime Minister Bouasone Bouphavanh announced new plans to increase foreign
investment and reach annual growth rates of over 8% for the next five years at
the "Future of Asia" business conference held in Tokyo in May. He said, "From
2011-2015 there are plans by our government to achieve economic growth targets
of about 8% or more while at the same time maintaining our stability."
Towards that end, he announced an overhaul of investment
policies and said "we want to develop human resources to cope with this growth
and, at the same time, care for and nurture our precious asset - the
environment". Bouasone reiterated the government's fast growth strategy earlier
this month at the World Economic Forum on East Asia in Ho Chi Minh City,
Vietnam, where he stated that Laos aimed for "no less than" 8% annual economic
growth through 2015.
As part of that plan, the Lao government seeks to promote greater foreign
investment in agriculture, electricity generation, alternative energy, hotels
and tourism, and logistics and services. It is also promoting expanded
investment in infrastructure as part of its plan to transform the country from
"land-locked to land-linked" as a trade crossroads in mainland Southeast Asia.
Plans to open a stock exchange this year are also in the works. Officials hope
the new bourse will help to finance a mounting mining and hydropower boom
driven by foreign investment and a rebound in global commodity prices. The new
bourse will be set up though a joint venture with the Korea Exchange and
hydropower and mining companies are expected to be the first to list, followed
by telecommunications and manufacturing firms.
The World Bank, in its mid-year Lao Economic Monitor, estimated that real gross
domestic product (GDP) in Laos will increase from 7% in 2009 to 7.8% this year.
The growth is mostly a result of rapid expansion in the natural resources
sector, as well as steady growth in agriculture, construction and a rebound in
the processing and tourism industries. The multilateral lender has forecast
that Lao GDP will average 7.7% per annum between 2011 and 2015.
However, development experts are concerned about the country's over-reliance on
hydropower and other mega-projects to stoke growth. The INGO Network, a
grouping of more than 60 international development agencies active in Laos, has
recommended that the government make stronger efforts to ensure social
development in tandem with economic growth, including an emphasis on reducing
wealth disparities and providing greater access to health and education. Their
recommendations were made as part of an effort to advise the government during
the preparation of its 7th National Socio-Economic Development Plan for
2011-2015.
The group criticized large-scale foreign investments, saying that "they are
land-intensive, there is little value-added in Laos, the labor force is often
foreign, and there are high and potentially negative impacts on the environment
and socio-economic development". This, the group claimed, had resulted in
competition and conflict over natural resources that due to "the imbalance of
power and the lack of voice of those affected, led to top-down,
non-participatory and exclusive decision-making".
Controversial ventures
Already several controversial large-scale foreign investment projects are in
progress or been given official approval. Earlier this year, the Nam Theun 2
hydropower facility, Laos' largest-ever infrastructure project, was completed.
The US$1.45 billion dam was jointly developed by Thai, French and Lao companies
and will generate 1,070 megawatts of electricity, 95% of which will be
purchased by Thailand. Over 6,000 villagers were relocated to make way for the
dam. The government claims it will use the more than $2 billion it is expected
to receive in royalties, dividends and taxes over the next 25 years on poverty
reduction.
Not everyone is convinced the revenues will flow mostly in that direction and
other projects have observers equally worried. In January, Vietnamese state
media announced that the Long Thanh Golf Trading and Investment Co would
develop a golf and tourist resort near the Lao capital, Vientiane. The $1
billion project, which will also include school and hospital facilities, is one
of the largest foreign investment projects in the country.
China's Minmetals Corp's copper mine in Xepon province in southern Laos has
also caused controversy over the scale of its project and impact on the
environment and neighboring communities. The company has announced it will
expand production from 60,000 tons of cathode last year to 85,000 tons this
year. Vietnam's top coal miner Vinacomin announced in January it would begin
exploration in Laos this year.
Thai companies are also making deeper inroads into Laos' mining and power
sector. Padaeng Industry announced it will close its zinc mining operations in
Thailand and concentrate instead on ventures in Laos. Banpu, Thailand's largest
coal miner, announced this year it planned to spend $255 million over the next
six years on its 40%-owned power plant in Laos - a $3.5 billion project that
when completed will be the country's largest power plant.
Instead of racing ahead, the INGO group has recommended that the government
slow down to build up the capacity of local Laos to control, manage and monitor
foreign investment projects. In addition, they have called for negotiating
clear conditions with foreign investors to guarantee the long-term interests of
local people and ensure compliance in their projects.
It also noted the increased pressure on land as a result of foreign investment
projects. In largely mountainous Laos there is a shortage of arable
agricultural land. The situation has been made worse through government grants
of large swaths of land to foreign agribusiness projects and the flooding of
huge areas by hydropower dams.
Meanwhile, villagers relocated under government-sponsored resettlement schemes
to make way for dam reservoirs put pressure on land availability in lowland
areas. To bridge a growing gap between urban and rural development, the INGO
group called for stronger assurances of progress in social development and
access to services. It said a singular focus on GDP as an indicator for
development was "too limited" in Laos' underdeveloped context.
These recommendations, however, will not likely be as readily heeded as in the
past. Observers note that the influence of Western aid donors has fallen out of
official favor in recent years. After embracing Western aid and assistance in
the 1980s and into the 1990s, there is increasing evidence that Laos is now
looking more towards Asian donors, especially China, Vietnam, South Korea and
Japan. This is especially the case with large-scale infrastructure, energy and
agriculture projects that have the potential to enrich state coffers and, some
whisper, the pockets of corrupt officials.
The shift has been driven by the increasing interest these countries have shown
in Laos' economic potential and the large-scale development projects they
prefer differ from the more grassroots socio-economic initiatives favored by
many Western aid agencies that often have inconvenient strings attached that
require local participation and sustainability.
Chinese Vice President Xi Jinping's visit to Laos last week saw the signing of
18 new cooperation pacts, including on infrastructure construction, power
generation and electrical grid renovation. The Chinese delegation also
announced its intent to expand bilateral trade and economic cooperation.
The Lao government has made poverty eradication and removal from the United
Nations' list of least-developed countries one of its core priorities. While
the government has made strides in achieving this goal, experts note there is
still a heavy reliance on foreign development assistance and a growing
inequality between urban and rural poverty levels. According to the United
Nations Development Program, poverty levels in rural and urban areas are
respectively 41% and 29%.
The country's national poverty eradication strategy is embodied in the National
Growth and Poverty Eradication Strategy (NGPES), which was integrated with the
Sixth National Socio-Economic Development Plan for 2006-2010. The government
refers to the NGPES as the "strategic framework under which all of the
government's future growth and poverty eradication programs will be developed
and implemented" and calls for eradicating poverty in "a sustainable manner".
It also states the government's commitment to gradually lessen its past high
dependency on official development assistance. But while the government's
increasing access to Asian private capital will likely continue to pump up
economic growth statistics, without taking into greater account the social
aspects of breakneck growth, it could simultaneously imperil the sustainability
of its current impressive progress.
Brian McCartan is a Bangkok-based freelance journalist. He may be reached
at brianpm@comcast.net.
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