Chinese Investors Invade Laos

[Jai Dee]

Chinese investors invade Laos

Laos was once unique in South-East Asia for its remarkably small overseas Chinese business community.

Under colonial rule, the French had a policy of keeping Chinese immigrants out, bringing in Vietnamese instead to run the shops and make the economy tick.

When Laos went communist in 1975, the few Chinese residents there fled the country for greener pastures. And during the Cold War, when Laos was a Soviet satellite, relations with mainland China were cool.

Since 1986, with the crumbling of the Soviet bloc and the forced opening of the Lao economy, Sino-Lao relations have warmed considerably.

China's development aid to Laos now amounts to more than 280 million dollars. Beijing built the Cultural Centre for Vientiane a few years ago and is currently putting up the Sports Stadium (employing 3,000 Chinese workers) in preparation for the South-East Asian Games, which Vientiane will host in 2009.

China is also building the highway that will eventually link Yunnan province to Thailand via Laos.

More than just Chinese aid money is flowing into Laos, a country half the size of France with only 6.5 million people.

Between 2001 to August 2007, Chinese foreign direct investment in projects approved by Laos' Committee for Planning and Investment (CPI) amounted to 1.1 billion dollars, second only to Thailand's projects worth 1.3 billion.

Last fiscal year, ending on September 30, Chinese companies accounted for the lion's share of the 1.1 billion dollars worth of FDI approved. Of the 117 projects approved by the Committee of Planning and Investment, 45 were Chinese projects worth 462 million dollars. About 32 per cent of the Chinese investment was in hydropower.

Besides investments in hydro-electric plants, Chinese companies are also investing in mining, rubber plantations, telecommunications, construction materials, hotels and restaurants.

On August 8, Chinese investors opened the "China Market" near the airport, now one of the biggest shopping malls in the capital. Chinese merchants man the stalls and Chinese goods are on sale.

The huge increase of Chinese investments in mining and hydro-power plants has led to a two-year moratorium on new concessions.

"We have stopped handing out new mining licenses for the past year," said CPI vice president Bounthavy Sisouphanthong. "That was out of concern for the environment, and also a feeling that the government needed to negotiate better."

Laos has handed out more than 140 mining concessions in recent years, many to Chinese looking for gold, copper, iron, potassium and bauxite.

Some of the proposed projects are massive.

For instance, Australia's ORD Rivers Resources has joint ventured with China's Nonferrous Metals International Mining Co., Ltd (CNMIM) to develop a 727-square-kilometre concession on the Bolaven Plateau in southern Laos into one of the world's largest bauxite mines.

Such concessions are hard to secure in Laos without a Chinese partner.

"It's political," said Vinay Inthavong, a Lao entrepreneur and chairman of the Vico Group. "If the leadership wants to stay in power they have to support China and Vietnam."

It may also be monetary.

There are rumours of considerable "leakage" at Chinese government-financed projects.

For example, the EXIM Bank of China provided a 75-million-dollar loan to one hydro-power plant, a joint venture between a Chinese enterprise and the Lao government, that allegedly only cost 45 million dollars to construct, according to a consultant who worked on the project. Nobody knows where the remaining 30 million got to.

More worrisome are the vast tracks of land Laos has farmed out to China on its northern border and Vietnam on its eastern border for rubber plantations.

"The border provinces are not Laos anymore," said one European businessman who travels to the north frequently. "They are under foreign economic control."

There is an element of Chinese migration in the investment surge. According to Chinese embassy sources in Vientiane the number of Chinese officially living in Laos is 30,000. The unofficial number is estimated at ten times that.

Beijing has asked Laos to allow another 2,000 to 3,000 Chinese families to live and work in the country, informed sources said.

Such is the plight of a land-locked, sparsely populated country, surrounded by three bigger neighbours - China with 1.3 billion people, Vietnam with 80 million and Thailand with 65 million.

"Of course we are concerned," said CPI's Bounthavy. "I compare us with a small boat in a rough sea."

Source: DPA - 08 October 2007

[sabaijai]

The towns of northern Laos' Luang Nam Tha, Udomxai and Phongsali provinces are already teeming with Chinese residents, Chinese signage, Chinese restaurants and Chinese karaoke bars.

[cdnvic]

Does Laos have something to offer China, or is this mainly the Chinese merchant class moving into a place they'd previously been excluded from?

[Mid]

^

I'd contend that both are correct cdnvic .

I would further contend that in a decade there will be a lot more

Chinese residents, Chinese signage, Chinese restaurants and Chinese karaoke bars

.

through all of SE Asia .

Edited October 8, 2007 by Mid

[Captain Chaos]

^

I'd contend that both are correct cdnvic .

I would further contend that in a decade there will be a lot more

Chinese residents, Chinese signage, Chinese restaurants and Chinese karaoke bars

.

through all of SE Asia .

Probably agree but think Laos is particularly vulnerable due to its location, small population and relative lack of development compared to its neighbours.

Seem to remember a few years ago reading an article about how Chinese immigrants were being nudged across into northern Laos due to population / land pressure at home, porous border controls and sparse native Laotian population. Story went on about a business-minded Chinese immigrant who had bought out 3 farms and now paid the locals to manage them for him whilst he took the profits. Shall see if I can find the link.

Edited October 8, 2007 by Captain Chaos

[cdnvic]

These kinds of things can backfire when the locals start to feel like guests in their own country.

[technocracy]

To be quite honest - it's pretty old news this.

China has been a major backer here for a long time. The new Chinese market in Vientiane is nothing more really than a bigger version of the one there already was! I actually welcome it - it's a nice place to wonder around - if you ever visit you see that there is many shops selling the same things as each other!

I'd say 90% of the stocks in most shops let alone the Chinese market comes from China! Chinese products are the norm - we have great 'Nokia' phones complete with touchscreens!

China want the electric, gold, copper, coal etc etc that Lao has tucked away.

Both Vietnam and China want a piece of the Lao pie, but so do Japan!

Lao need to make some kind of decision in which direction it will go, either way which ever country it is they will need to stump up a large amount of cash to get the country full on it feet.

My only problem with the Chinese is when they try speak Lao . . . can't understand a bloody work they say!!

[cdnvic]

I'd say 90% of the stocks in most shops let alone the Chinese market comes from China!

So they are getting more American everyday

[cdnvic]

How well connected politically are the ethnic Chinese in Laos? Can they become citizens or hold offices in the government?

[technocracy]

How well connected politically are the ethnic Chinese in Laos? Can they become citizens or hold offices in the government?

Citizens - yes, Government . . . hmmm don't know, but if they are a citizen (or have enough cash! ) then in theory yes.

There is actually a whole Chinese side to my wifes family since one of her Great Grand parents was Chinese. So I think it's fair to say the Chinese have been in or around Lao for some time!

The thing with the Chinese (& particularly Viet) who come to Lao is they aren't scared of a bit of hard work - something many Lao folks run a mile from! This is commonly accepted by most Lao people they have let say a lax way of working!

In terms of the integration of the people the Chinese seem to be far more welcomed and accepted in most quarters - I think many Lao people have more of an affection for Chinese than either Viet and most certainly Thai. With the war and the past you would imagine the Viet would be more welcomed however as people they have an image that they aren't trustworthy, will try cheat anyone and don't treat employees well.

The Chinese on the other hand, sure in all shops they'll massively over inflate there prices (very well known here) - but they'll barter to reasonable prices, my wife has numerous Lao friends who work for chinese and haven't heard any complaints unlike the Viet employees.

There is Chinese stores everywhere in Vientiane if you ever drive the main road from Friendship Bridge to Vientiane just look at the number of stores selling tools that are on this road all are Chinese.

Many assumptions and opinions based on a few people I know, but that the way I see things here.

[cdnvic]

It will be interesting to see if this new wave of Chinese assimilate as well as the long time residents have. I'm also curious to see if many large Chinese companies start moving manufacturing into countries like Laos as labour costs start to climb in China.

[technocracy]

Just notice a quoted in the original article:

"Chinese merchants man the stalls and Chinese goods are on sale."

Not entire accurate - yes there is the Chinese boss in the shops but virtually ALL the shops employ Lao people. If you've ever tried to understand Lao spoken with a thick Chinese accent you'll know why!

Also there is quite a few Lao shops in there - it was set out that 90% of the product sold there would be chinese.

Edited October 8, 2007 by technocracy

[cdnvic]

If the proposed ASEAN Highway ever gets developed, Laos and Cambodia look set to benefit the most by being on a direct route from China to the Gulf of Thailand. In the map shown in this document, Thailand seems to be almost left out.

http://www.jica.go.jp/english/resources/pu.../200403_14e.pdf