1September 2008

2The Lao People’s Democratic Republic covers an area of 236,800 km² and has a population estimated at 6 million with a population density of approximately 25 inhabitants per km². When looking at the country’s demographics, the diverse languages and cultures can be noticed, as until recently, 47 different ethnic groups were registered in Laos. Despite being the most politically dominant, the Lao ethnic group accounts for barely half the total population. According to research conducted by the Laos Front for National Construction (a leading government organisation), the country currently has 49 ethnic groups, which can be divided into four main ethno-linguistic categories: Lao-Tai, Mon-Khmer, Hmong-Mien and Sino-Tibetan. The National Assembly, however, did not approve the current list of 49 ethnic groups, during the previous July 2008 parliamentary session. It was not a discovery of two completely new ethnic groups in Laos that led to the increase in the number of recognised ethnic groups in the country; it was due to a complex process consisting of criteria and selection methods, some of which were considered arbitrary. Certain members of the ethnic groups felt that they had got the raw end of the deal from this, as their ethnicity was modified without their consent or worse still, some found that they no longer belonged to a particular ethnic group. This simply highlights one of the difficulties encountered when attempting to define the nation; important decisions, even on sensitive subjects, are not exclusively debated and made within the principal policymaking committee (the Politburo) of the Communist party.

3Laos is bordered by Thailand and Burma in the west, China in the north, Vietnam in the east and Cambodia in the south. It is the only country in the Indochinese peninsula that does not have direct access to the sea. Laos had paid a heavy price for its geographical position during the conflict between the United States and north Vietnam. The Americans bombarded the eastern part of the country between 1964 and 1973, without managing to stop the infiltration of northern Vietnamese Communist forces towards southern Vietnam. The “domino” finally fell without bringing Thailand down with it, thus belying the fears of the military and analysts of the pro-capitalist camp in December 1975. Since then, the Lao People’s Revolutionary Party, which receives enormous support from China and Vietnam (its two closest political allies), has seized power of Laos.

4Its leaders are now planning the future of the country at a regional level, as Laos joined ASEAN, the South-East Asian regional organisation on 23rd July 1997. In November 2004, the regime organised the 10^th annual ASEAN summit in Vientiane. More than 3,000 delegates, including 800 foreign journalists, were invited. The organisation of this summit somewhat symbolised the end of a long journey undertaken by the country, having survived over thirty years of war and several years of economic and diplomatic ostracism by the international community. Joining ASEAN has undeniably brought Laos greater visibility, enabling its senior civil servants to acquire valuable skills in an institutionalised cooperation. However, ASEAN does not have the capacity, or the will, to grant its members development aid. In actual fact, the regional integration of Laos is mainly pursued outside major official meetings.

5Two cross-border routes (including roads, bridges, railroads, etc.), or “Economic Corridors”, according to the term employed by the Asian Development Bank (ADB), cross the country: these being the North-South and East-West Corridor. The first route links the north of Thailand, the northwest of Laos and the southwest of China (Yunnan) together, whilst the second route extends from the centre of Vietnam, covering the south of Laos and the northeast of Thailand to join Burma in the west. Both routes were opened this year. During the last century, French colonial administrators had hoped to link both Laos and Vietnam together by road, as well as finding a route alongside the Mekong River towards China. Their attempts, however, failed. The Lao government’s plan, supported by powerful sponsors (including the ADB), to transform the country into a regional economic hub, today benefits from better financial and technical aid. In addition, there is strong support from neighbouring countries, particularly China and Thailand, to strengthen the economic integration of members of the Indochinese peninsula. These “Corridors” are thus symbols of great ambitions. According to the ADB and countries bordering Laos, these routes will improve the freedom of the movement of goods and people (for example, the oriental route from the North-South Corridor to the northwest of Laos, a four-lane motorway measuring 280 km in length, would reduce the transport time between Kunming and Bangkok from five days to just one). From the Lao government’s perspective, these roads are playing a key role in opening up the country to the rest of the world, transforming it from a land-locked state to a land-linked state and allowing it to be strategically repositioned in the heart of the South-East Asian peninsula. To date, these roads have witnessed more priming and preparation for foreign investments (particularly from China, Thailand and Vietnam) than the exchanges between Laos and the outside world. Zones and crossings near Laos’ border as well as areas surrounding the “Corridors” have proven to be popular areas of investment, mainly on the basis of land leases. Examples of these hotspots include Boten on the Chinese border, the province of Savannakhet on the East-West Corridor route and Houei Xai on the North-West route, close to the Thai border), where commercial infrastructures and tourist facilities (such as hotels, casinos and restaurants) have been rapidly built, with the aim of attracting a foreign clientele.

6Despite an average annual growth of 6.5%, the Lao economy has many areas of structural weakness, including a strong dependence on international aid, a poorly developed industrial sector and a low proportion of its population having any qualifications, thereby reducing the country’s potential manpower. These factors therefore mean that Laos is unable to take full advantage of the opening of its borders. On the other hand, Laos is rich in natural resources, boasting vast uncultivated farmland and forest cover (although this is now continually declining due to both legal and illegal tree felling for timber, the conversion of forest areas into agricultural land and the development of infrastructures, particularly roads and dams). Laos is also sitting on a wealth of mining resources such as copper, gold and carbon, to name but a few. From the Lao government’s point of view, the continuation of developing these areas seems to be the most logical solution for the time being in order to improve the growth of exports and the GDP. An example of this is the potential for Laos to generate hydroelectric power. Since the 1990s, the Lao government, supported by international lending organisations and private investors, has accelerated its policy for constructing hydroelectric dams. Laos, alongside the Yunnan Province, has the greatest potential out of all the affluent countries lining the Mekong river for generating hydroelectric energy. Its leaders hope that the country will become the “battery of South-East Asia”. The challenge that is put forward is immense, how does one convert Laos’s “unexploited” natural resources into a source of revenue for both the country and its citizens? How does one implement a sustainable and fair national development strategy based on the exploitation of natural resources, on which rural communities (which make up three quarters of the population) largely depend for their survival?

7The commercial rubber culture illustrates the risks of drifting away from the strategy to convert natural resources, which is in this case, the converting vacant cultivable lands into capital. Without official statistics, it is difficult to know the total amount of agricultural land that has been converted into commercial plantations. In February 2007, the Planning and Investment Committee estimated that the amount of land dedicated to cultivating rubber was 200,000 hectares, split between 17 different companies (mostly Chinese, Vietnamese and Thai). The large demands of the Chinese economy for raw materials has generated the global production of rubber, as its own rubber cultivation industry has been stagnating since the beginning of the 1990s, which partly explains this very rapid growth in the industry. The boom had only started in Laos in 2004 with the arrival of Chinese companies in the north of the country (Luang Namtha, Oudomxay, Phongsaly). This relationship with China also strengthens the Lao government’s economic strategy to encourage rural development. Laos aims to reduce a part of its poverty by focusing on rural and mountainous zones, whereby current economic and self-sufficient agriculture can be transformed into “market agriculture”. Finally, investment in individual and rural households should not be completely ruled out, as they are eager to take a share of the profits too, albeit small.

8The conditions in which private companies operate vary. In the north, in Luang Namtha for example, most agreements are between investors, who are mostly Chinese, and villagers. The villagers provide the land and the manpower, whilst the companies provide the capital, technical skills and opportunities. After the harvest, the villagers receive 70% of the profit, and the companies receive the remaining 30%. Although, the “2 + 3” formula is in the villagers’ favour, the “1 + 4” formula is more common and preferred by the companies because it gives them greater control. The villagers are given the land, but the rest is taken care of by the companies and the profit share is reversed, with 70% going to the investors. Moreover, the terms of these contracts are often inexact, vague, even contradictory or downright untruthful in some cases. The risks of disputes between the villagers, local authorities and private companies are consequently high, especially as the villagers are rarely consulted during the negotiation phase of the contracts.

9Foreign NGOs working in the country were quick to criticise these changes to the agricultural landscape. There have also been protests from villagers, who are victims of unscrupulous practices that stem from the inadequate and flexible legal framework, and the self-indulgent attitude of certain local authorities. According to decentralisation laws, the provinces are authorised to sign investment contracts with private companies not exceeding 3 million US dollars (5 million for bigger provinces) and 100 hectares of surface area. Certain projects outside the capital fail to comply with such limits, but in some cases, the provincial authorities turn a blind eye or are simply not fully informed of the situation.

10Tensions between villagers and private organisations ran particularly high in the south of the country at the beginning of 2007 in the districts of Laogname (Saravane) and Bachieng (Champassak). The villagers accused the private organisations of encroaching on their agricultural land to expand their rubber plantations. The severity of the situation – especially as the clashes were far from being an isolated case – gave the government the nudge they needed to take action. Thus, on 9^th May 2007, the Prime Minister, Bouasone Bouphavanh, announced the decision to set up a permanent moratorium on the extensive land leases in both the profit-making mining and agricultural sectors. Unlike the north, most of the private companies in the southern provinces (Savannakhet, Khammouane, Saravane, Champassak and Sekong) rely on leasing farmland to develop their commercial crops. The areas of farmland can cover up to several thousand hectares over a period of 30 to 50 years. They can practically escape all control, exclude the participation of the local population and undermine the land rights of households by increasing land privatisation.

11Adopting this moratorium shows that some lessons were learnt, even if reform remains urgent and necessary in a sector suffering from numerous shortcomings. These include an absence of systematic data collection on cultivated and non-cultivated agricultural areas, a lack of clarity in the prerogatives of politico-administrative bodies at different levels (ministries, provinces, districts), inadequate legal frameworks; incomplete enforcement of land rights, and a lack of qualified personnel and technical support to the villagers. Far from the clichés of the country’s slow progress, the aforementioned examples – be it the opening up of Laos to the outside world or issues within the agricultural sector – display the rapid changes to Laos’s economy and society that have taken place. Without a better strategy to manage the country’s natural and man-made riches that is both equitable for the entire population and sustainable for the environment, these changes are only likely to benefit a minority.