Laos appears ready to tilt away from China

New leadership of impoverished nation, which will host an Asian summit next week, more influenced by Vietnamese than Chinese

VIENTIANE • The communist government of Laos, a country with a population of less than seven million, rarely causes a ripple on the diplomatic circuit. And yet its sleepy capital will spring to life next week, when global leaders arrive for an Asian summit.

United States President Barack Obama will be among them, making the last push of his presidency to "rebalance" Washington's foreign policy towards Asia, a strategy widely seen as a response to China's economic and military muscle-flexing across the region.

The might of Laos' giant neighbour is hard to miss in Vientiane: wealthy Chinese driving sport utility vehicles and Chinese-backed hotels sprouting from noisy construction sites in one of Asia's most low-rise cities.

But diplomats say Mr Obama could be pushing on an open door in Laos, thanks to a change of government there in April.

They say the country's new leaders appear ready to tilt away from Beijing and lean more closely towards Vietnam, whose dispute with China over the South China Sea has pushed it into a deepening alliance with the US.

"The new government is more influenced by the Vietnamese than the Chinese," said a Western diplomat in South-east Asia. "It's never too late for a US president to visit."

Mr Obama will become the first sitting US president to visit landlocked Laos, where the US waged a "secret war" while fighting in Vietnam, dropping an estimated two million tonnes of bombs on the country.

About 30 per cent of the ordnance failed to explode, leaving a dangerous and costly legacy.

Laos has strategic importance to both Vietnam and China. Vietnam has a long land border with Laos that gives it access to markets in Thailand and beyond.

For China, Laos is a key gateway to South-east Asia in its "new Silk Road" trade strategy.

Laos, which is developing a series of hydropower plants along one of the world's longest rivers, the Mekong, aims to become "the battery of Asia" by selling power to its neighbours.

It is difficult to read policy in Laos because its leaders are so uncommunicative, but Western diplomats have detected some shifts.

First, Deputy Prime Minister Somsavat Lengsavad - who ran the steering panel for a US$7 billion (S$9.5 billion) Chinese rail project - retired. The project is now believed to be on hold because Laos is unhappy with the terms of the deal.

Officials of Prime Minister Thongloun Sisoulith's new government, many of them educated in Vietnam, have visited Hanoi en masse in recent weeks, their first foreign trip.

At two of the past meetings of Asean, which is currently chaired by Laos, Vientiane has taken a more nuanced stance on Beijing than neighbouring Cambodia.

"The US strategic interest in Laos is to see the country be able to exert a certain degree of strategic autonomy, because you don't want... (to) have something akin to the relationship between China and Cambodia," said Dr Phuong Nguyen of the Centre for Strategic and International Studies in Washington.

Beijing has invested around US$1 billion annually in Laos in 2014 and last year, a step up from the US$4.5 billion invested historically before 2014, according to figures from China's Ministry of Commerce.

But for the US, impoverished Laos is not a strong investment draw. "In Laos, we bring seven to eight companies to the table, compared with 30 to 40 companies that Vietnam brings. But China - that's a totally different ball game," said Mr Anthony Nelson, director of the US-Asean Business Council.

"So there's no coincidence that the countries with the lowest levels of development, Laos and Cambodia, are the most willing to advocate for China's position in international discussions."

REUTERS

A version of this article appeared in the print edition of The Straits Times on August 29, 2016, with the headline 'Laos appears ready to tilt away from China'. Print Edition | Subscribe