Outsiders fight for Laos 'pie'
- Published: 31/01/2013 at 11:07 AM
- Online news:
VIENTIANE - Laos joins the World Trade Organisation on Saturday, a major step for the small communist country but one that experts say may not break its powerful neighbours' stranglehold over its economy just yet.
Industry and Commerce Minister Nam Viyaketh (left) is handed a placard with his country's name by World Trade Organisation (WTO) director general Pascal Lamy during a signing ceremony last October which confirmed Laos as a new member of the international organisation. (AFP Photo)
Fifteen years after it first sought membership of the global trade mediator, Laos finally wrapped up negotiations late last year, having adopted dozens of new laws on investment, regulation and intellectual property.
The unprecedented flurry of legislative activity in a country governed by communists since 1975 will create a "slightly more stable legal environment", said Guy Apovy, president of the European Chamber of Commerce in Laos.
It will also attract more overseas investors, he said.
"The Western presence is looking to expand and entry into the WTO is positive" from this point of view, Apovy added.
But observers expect the journey by Laos onto the international economic stage to be slow and watched closely by Beijing, Hanoi and Bangkok, who for many years have been dividing up the Laos pie between themselves.
"Accession to the WTO in itself is not likely to reduce significantly the influence of Laos's powerful neighbours," said one foreign expert who did not want to be named.
But Vientiane is eager not to be stuck "behind a closed door with Thailand, Vietnam and China".
Between 2000 and 2011, the three countries were the largest foreign investors in Laos by far - $4.7 billion from Vietnam, $3.4 billion from China, and $2.8 billion from Thailand, according to official figures.
No other country invested more than $600,000.
While Communist Party officials and their business allies have benefited from the influx of investment, the country remains one of the world's poorest and activists have accused the Laos neighbours of pillaging the natural resources on which its economic future depends.
"While the three countries have varying degrees of influence over Laos, they do not have dominant influence to the extent that they can steal natural resources," said Guo Yu, a senior Asia analyst at Maplecroft.
But due to the "opaque" contract bidding process, their companies "can and do subvert Laos's national governance processes and economic priorities by bribing key ministers and officials," he said.
In this context, China and Vietnam are particularly able to pull strings.
"China and Vietnam in particular consider Laos, a fellow communist nation, as being within their sphere of influence and aggressively compete for economic dominance", he added.
In addition to the origin of investments, Laos is facing challenges relating to the scale of new projects, said Christian Taillard, an expert at the Southeast Asia Centre in Paris.
"The country has gone from small and medium development projects to large and mega-projects", but it handles them all like small ones, he said.
That means it "is exploited by foreign investors," Taillard added.
The projects include a controversial railway which would link Vientiane to the Chinese border, and eventually to a regional Southeast Asian train network.
The 420 kilometre (260 mile) line, with 76 tunnels and 154 bridges, was conceived by China and will be constructed by Chinese companies at a cost of $7 billion -- which Laos will fund by borrowing from a Chinese state-run bank.
It is not clear why Laos wants to run up an "enormous" debt for a train line when "rural road connectivity... is still so weak," said Asian Development Bank economist Jayant Menon.
But he said that becoming the 158th member of the WTO would have certain benefits for Laos as it seeks to chart its own path of development.
"Having a seat at the table is valuable, and you have a more equal seat in the WTO than in a regional group or an FTA negotiation, it is a better opportunity for fairer deals for small countries like Laos," said Menon.
Laos will also secure itself access "to a very efficient dispute settlement mechanism," he said.
The move may also help foreign investors do fairer battle with the ambitious neighbours of Laos in the quest for natural resources - a sector which according to European Chamber of Commerce's Apovy is "one of the main development axes of the next decade".
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- Writer: AFP
Position: News agency