[governance-vn] atimes: China and Vietnam square off in Laos

[Vern Weitzel]

Subject: 	atimes: China and Vietnam square off in Laos
Date: 	Fri, 29 Aug 2008 21:02:04 +0700
From: 	nguyen mai <henmoc at gmail.com>



*China and Vietnam square off in Laos
*By Brian McCartan

VIENTIANE - China's growing influence in resource-rich Laos is seen by
some as coming at the expense of ties with Vietnam, long the communist
country's main patron and de facto security guarantor. The diplomatic
recalibration is part of the landlocked country's bid to more fully
integrate economically with the region and has so far served its
interests well.

Laos is of increasing strategic importance to both China and Vietnam,
two of Asia's fastest growing countries. Vietnam's interests lie
primarily in securing its long land border with Laos and developing
greater access to markets in Thailand. For China, Laos provides a
growing avenue to export products to wider Southeast Asia, particularly
from its remote and less-developed, landlocked southwestern regions.

Both countries have a growing interest in Laos' bountiful and largely
untapped natural resources, agricultural products and hydropower to fuel
their expanding economies.

Some analysts here predict that the balance of influence inside the
ruling Lao People's Revolutionary Party (LPRP) could soon shift in
Beijing's favor, as senior Lao leaders fade from the political scene and
younger, more market-savvy cadre lacking experience in the communist
revolutionary period assume positions of power.

Although 10 of the 11 member politburo's standing committee speak fluent
Vietnamese - a mark of their deep personal ties to Hanoi and its
political leadership - rising mid-ranking cadre are less likely to have
studied in Vietnam while an increasing number have studied in the former
Soviet Union, China or elsewhere.

Lao Prime Minister Bouasone Bouphavanh's appointment at the 2006 Eighth
Party Congress was seen by many as the beginning of a shift towards more
Chinese influence over the government. Born in 1954, he was a
21-year-old student activist and not a revolutionary war veteran when
the communists took over the country in 1975. He later studied in the
Soviet Union rather than Hanoi.

In apparent realization of this changing dynamic, China has adopted a
long term diplomatic strategy for Laos. Rather than overly leveraging
its commercial might, Beijing is simultaneously cultivating younger Lao
leaders through programs that bring them to China for vocational,
ideological and military training. These moves are being made in
anticipation of an already dawning era when Vietnam-orientated old guard
cadre fade from the political scene.

In an interview with Asia Times Online, Lao spokesman Yong Chanthalangsy
showed the pragmatic side of Lao thinking. Noting that China is the new
emerging power in the region, he said, "Openness and integration in the
region is far better than the Cold War in the past imposed by some
power. When Laos was a part of a security belt, it resulted in thirty
years of war."

Although he was referring to the broader Indochina War with the US, and
earlier France, he could have just as easily been referring to the era
of cool relations between Laos and China in the period between 1975 and
1988. Now, as the region's former communist countries reform their
centrally planned economies with more market-driven policies, commercial
imperatives are redefining how the region interacts, including with Laos.

*Commercially positioned*
Laos is now eager to promote itself as "land-linked" instead of
"landlocked", emphasizing its potential role as a trade crossroads
between China and Southeast Asia. According to spokesman Yong, "Laos has
been suffering because it is landlocked and isolated. Connectivity in
the region can only bring good things to Laos."

This view means that Laos sees the value in diversifying its diplomacy
away from its traditional reliance on Vietnam. The balancing act has
also extended to its erstwhile Western donors: while keen to accept
investment and aid to boost the economy, create jobs and raise living
standards, at the same time the government would rather avoid the
conditions for political change and more official transparency often
accompanying such aid.

Investments from China and Vietnam, on the other hand, come without
pre-conditions. According to a 2005 monograph by noted Lao scholar
Martin Stuart-Fox, it is not in the strategic best interests of China or
Vietnam for the LPRP to lose its monopoly on political power and with
both countries' commercial support there is little incentive for the
LPRP to initiate political reforms.

Vietnam's strong relationship with Laos stems from the origins of the
two countries' communist parties through the Indochinese Communist Party
in the 1930s. This relationship was further cemented in the thirty years
of struggle against the colonial French and then an American-backed
regime, which was finally overthrown in 1975.

Communist Lao and Vietnamese forces fought side-by-side throughout those
wars; then-North Vietnam's supply pipeline - the Ho Chi Minh Trail -
famously used in its fight against the US-backed South Vietnam, ran
through eastern Laos. Lao communist cadre received ideological and
military training in Hanoi, while Chinese involvement in the struggle in
Laos was confined to road building in the northern regions.

Laos and Vietnam entered into a formal twenty-five year Lao-Vietnam
Friendship and Cooperation Treaty in 1977, underpinning what the two
sides referred to as a "special relationship". Vietnam's siding with the
Soviet Union against China in a doctrinal dispute meant that relations
between its ally Laos and China also cooled. Relations worsened when
Vietnam invaded Cambodia in late 1978 and China made a limited invasion
of northern Vietnam in early 1979.

Bilateral relations between Laos and Vietnam are still strong, although
the 1977 alliance was allowed to lapse in 2002. Personal ties between
Lao and Vietnamese leaders remain strong enough politically for the
"special relationship" to endure. Lao state-run media contains almost
weekly news of bilateral socio-economic, cultural and military
cooperation between the two countries. Billboards across Laos last year
hailed the 45th anniversary of diplomatic ties and the 30th anniversary
of the Lao-Vietnam Friendship and Cooperation Treaty.

Meanwhile, Vietnam remains Laos' second largest trading partner. The
Vietnam-Lao Committee for Cooperation said in July that two-way trade
hit US$240 million for the first half of this year, an increase of 58%
year on year. The two countries have stated a shared goal of reaching $1
billion in bilateral trade by 2010 and $2 billion by 2015.

*Investment competition*
Vietnam is also clearly competing with China for investment influence.
Figures released at an August 12 conference on Vietnam-Lao investment
cooperation held in Vientiane showed that Vietnam's investment had grown
to 177 projects valued at $1.28 billion. If accurate, this would raise
Vietnam to the second-largest foreign investor in Laos behind Thailand
and would move China down into third place.

Targeted investment areas include mining and expert-oriented agriculture
and processing. Recent years have seen heavy Vietnamese investment in
rubber plantations in southern Laos, particularly in Savannakhet and
Champassak provinces. Laos is also increasingly being seen as a
potential source of hydropower and state-run PetroVietnam and
Electricity Vietnam are reported to be planning new projects in the
country.

To facilitate trade and investment and access to markets in Thailand and
the rest of Southeast Asia, Vietnam has been busy constructing roads in
eastern Laos as part of the Greater Mekong Subregion's East-West
Corridor road project, which aims to link Vietnam, Laos, Thailand,
Myanmar and India. The most important link is the road connecting the
Vietnamese central port of Danang with the so-called "Second Friendship
Bridge" across the Mekong connecting Savannakhet, Laos, with Mukhdahan,
Thailand.

While commercial ties are fast expanding, the two countries security
links are perhaps better-established. Until at least the late 1980s,
40,000-50,000 Vietnamese soldiers were estimated to be based in Laos.
Although Vietnam pulled its troops out in the 1990s, it still maintains
training cadre, and according to some sources, military intelligence
stations in the country. The Lao military continues to turn to Vietnam
for military advice, especially 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 at comcast.net <mailto:brianpm at comcast.net>.

http://www.atimes.com/atimes/Southeast_Asia/JH30Ae01.html