THE LAST LAP OF LOSER
LAOS IN THE CHINA GAMES
It seems like I have had a lifetime of peripheral involvement in Laos that began in the late sixties by commuting there during the illegal war which the U.S. and the “independent government” of Laos lost. In fact, one can argue that Laos has seldom had an independent government as they traditionally were a vassal state of a larger power. If we looked back a couple of centuries, Laos was part of “Indochine” which was a grouping of French colonies composed of Vietnam, Laos, and Cambodia. Of the three colonies, Laos was generally ignored as the poorest contributor to the French coffers. There was an interregnum in French control during World War II though they did return to plant their flag after the war.
Nonetheless, the French ultimately lost control again following their defeat by the Vietnamese at Dien Bien Phu in 1954 and “Indochine” no longer existed. Both Cambodia and Laos subsequently declared their independence which has continually been a subject of one’s perspective. Laos had traditionally suffered from invasions by the Chinese as well as their Thai southern neighbors shown here in one of their forays into Laos. Today the former royal capital of Luang Prabang is one of our favorite places to visit though one must go to the Temple of the Emerald Buddha in Bangkok to see the most famous Buddha image icon of Laos that the Thai’s pillaged from them.
A recent Nikkei Asia article featured a speech by Laotian President Thangloun Sisoulith at Nikkei’s Future of Asia forum who is shown below. He stated that rising geopolitical tensions around the world “have the potential to escalate into large-scale wars.” He closed his speech stating the next Chair of ASEAN must fulfill its responsibility by seeking peaceful solutions. His comment strikes close to home as Laos will take that ASEAN position in 2024.
On the other hand, the more serious conflict that Laos will immediately face is the potential effective “foreclosure of Laos by China.” China has been overly generous in its “Belt and Road Campaign” to fund infrastructure projects around the world that suit its trade and military objectives. Nonetheless, the grim reaper could appear any day as loan recipients such as Laos have taken their indebtedness to a dangerous plateau.
A year ago, Nikkei Asia published an article by Marwaan Macan-Markar entitled Lao’s Debt Pressure Raises Specter of a China Vasal State. The bottom line is the total debt exposure of Laos to China amounts to approximately $12.2 billion or 64.8% of GDP. The World Bank estimated that total debt and publicly guaranteed debt would raise that debt percentage to just under 90% of GDP, hence Laos is sailing at the mercy of the “mother ship” which Hiroko Aida illustrated below.
For many years, Laos has been in the leaderboard position of their debt position as the graph below illustrates from 2000-2017. However, it has more than doubled in the ensuing six years.
The question remains where did all this money go in a relatively short time? The high-speed, state-of-the-art railroad shown below was financed by Chinese loans with the stated objective of promoting trade with Thailand and Malaysia. On the other hand, it provides a very effective high-speed rail system for China to move goods and, if needed, military troops and supplies into its neighbors’ heartlands. There has been considerable discussion and planning to extend the system southward through Thailand, but the Thai’s have been slow walking a major project that could open their hinterland to a potential invasion.
Laos was forced to gift China an extensive Lao land position to create a special Chinese economic zone as part of a settlement for some of their indebtedness. The specific amounts forgiven were incurred to provide Laos the $100 million National Stadium shown below which was built for the 2009 Southeast Asian Games in the Laos capital of Vientiane.
The stadium provided a one-time illusion of the prosperity of Laos to the world. The concept of trading land and equity in indigenous Lao companies to settle their debts to China is a dangerous step forward. In effect, Laos is foregoing indigenous control over their country to their formidable neighborhood to the north which has a bad track record. It is particularly sad that a former colonial controlled state is welcoming the dragon to the north to take them back to their dark ages.
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