The US-Lao relationship: Don’t you forget about me

US President Barack Obama speaking to a crowd of Lao youth in Vientiane. Photo: USAID Flickr page

US President Barack Obama speaking to a crowd of Lao youth in Vientiane. Photo: USAID Flickr page

When considering US foreign policy in Laos, we cannot help but wonder whether President-elect Donald Trump has ever thought about small Southeast Asian country. It would be a mistake for the incoming administration to ignore the significance of the new opportunities for US-Lao engagement that President Obama’s September visit helped to catalyze. While in Laos, Obama acknowledged the US “moral responsibility” to help Laos recover from the ruinous legacies of the war with the US. Recognizing this complicated shared past, the President announced several new initiatives aimed at paving the way for enhanced US engagement with Laos, including a new Comprehensive Partnership between the two countries, increased funding for UXO removal , a new USAID office in Vientiane. His visit also ushered in the opening of new General Electric and Microsoft offices in Vientiane. Sustaining the momentum for positive US engagement in Laos will require continued support for government-led programs, increased private sector engagement, a greater NGO presence, and more people-to-people exchanges.

In the last two decades, Laos has pursued a strategy of attracting foreign investment to boost economic growth and development. Currently, China contributes about 40% of all FDI, making it Laos’s largest investor, followed by Thailand and Vietnam. Most of this investment is in natural resources such as hydropower, agriculture, forestry, and mining. Investment in natural resources extraction and development has come at a high environmental cost. Officials within the Lao government often lack the resources or the political will necessary to determine the full environmental and social impacts of a new development projects before a concession agreement is signed. Many foreign developers in Laos fail to abide by environmental and social safeguards. Plus, a lack of space for civil society to criticize or protest development projects means that potentially destructive projects such as dams, mines, or plantations, often go ahead without proper consideration of the social and environmental costs. All of these factors have contributed to a situation in which critical land and aquatic ecosystems in Laos are degraded at an alarming rate.  Often, the rural citizens who depend on these ecosystems for their livelihoods are left worse off as a result of new development projects. Meanwhile, despite the wealth gained from the development of natural resources, poverty and inequality in Laos remain widespread.

The U.S. currently invests very little in Laos. Between 1989 and 2014, the U.S. accounted for only 1.1% of FDI in Laos, and although the US is the single largest investor in ASEAN as a whole, it is the 14th largest investor in Laos. Historically, doing business in Laos has been quite difficult for foreigners. In 2010, Laos was ranked the 171st out of 183 countries in “ease of doing business” by the World Bank Group. In Transparency International’s Corruption Perception Index the same year, Laos was ranked 154th out of 180 countries.[1] However, the barriers to US trade and investment in Laos have been lowering. In 2013, Laos joined the World Trade Organization, and in February 2016, the U.S. and Laos signed a Trade and Investment Framework Agreement. The Agreement set up a Joint Trade and Investment Committee that meets at least once a year to enable trade and investment between the countries by identifying and addressing barriers.

The U.S. can play a key role in helping Laos to develop the capacity for more sustainable and inclusive economic growth. Rather than competing with China and other regional powers for the rights to develop natural resources in Laos, which the US is not likely to do, the US can invest in developing human resources and improving capacity to better manage and regulate the use of its natural resources. This is the idea behind the Smart Infrastructure for the Mekong program, an inter-agency US government-led program that provides technical assistance to line agencies in Mekong countries to support sustainable infrastructure development.

One promising area for investment in Laos is in renewable energies such as solar and wind. During Obama’s visit, he announced that the U.S. would provide funding for a feasibility study for a 20 MW solar power plant in Laos, which if completed, could power up to 30,000 households. With its significant solar power potential and relative lack of energy production and distribution infrastructure, Laos has the opportunity to leapfrog dirtier energy production technologies, taking advantage of the rapidly dropping prices for renewable technologies.

Another sector with significant potential for growth in Laos is in tourism.  Laos has spectacularly beautiful natural landscapes as well as unique sights that tell the story of a rich and layered history. After opening its borders to international tourists in 1989, inbound tourism has been steadily increasing. However, as Robert Travers argues, tourism infrastructure in Laos is being developed in an uncoordinated fashion, [2] and as a result, Laos has become a short-term stop on the backpacker trail through Southeast Asia. Through a strategic and coordinated approach to tourism development that highlights its unique culture, Laos could attract more long-term visitors and generate considerable revenues from tourism. Just as the US is promoting tourism to Vietnam, it can do the same with Laos.

Effective U.S. engagement in Laos, whether at the government or grassroots level, will only be possible through continued people-to-people relationship building between Americans and Lao people in order to develop mutual understanding and greater trust between the two countries. The US government should continue to pursue a Peace Corps program with Lao PDR and should offer increased funding for educational exchanges for Lao and American students.

Through strategic engagement with Laos, the U.S. can continue to build upon the momentum for improved relations cultivated over the last few years. Now is the time for enhanced US engagement that is guided by a commitment to helping Laos take a more sustainable and equitable approach to development.

Gabriella Neusner is currently an intern at the Stimson Center’s Southeast Asia Program.

[1] US Department of State. (March 2011) “2011 Investment Climate Statement – Laos.”

[2] Travers, R. (2008). Economic Corridors and Ecotourism: Whiter Tourism in Laos. Asian tourism: Growth and change, 105-116.

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