Why Is China-Laos Cooperation So Fruitful?

By Wang Qin

Geographically, Laos and China are adjacent.They maintain mutual trust politically, a complementary relationship economically, and mutually intelligible practices culturally. In 2009,Laos and China established a comprehensive strategic cooperative relationship. Leaders of both countries have visited each other often since. Cooperation has been strengthened gradually in various areas. Fruitful achievements have been made in sectors such as economics,trade and infrastructure.

About the author:The author is a professor, doctoral supervisor and director of the Center for Southeast Asian Studies at Xiamen University.

According to statistics from the Ministry of Industry and Commerce of Laos, between 2007 and 2016,Chinese foreign direct investment in Laos totaled about US$5.8 billion. As calculated by China, by the end of 2016, Chinese direct investment in Laos was US$5.5 billion, which ranked Laos third among the 10 ASEAN countries and the sixteenth among all of the recipients of China’s foreign direct investment globally.Some major investment projects have already been completed or implemented. For instance, the LaoSat 1 communications satellite, a cooperation project between China and Laos, was launched from Xichang,China in November 2015. It was the first satellite to be exported from China to ASEAN countries. The China-Laos Railway has been under construction since December 2016 and is expected to open to traffic by 2021. By February 2018, several Chinese corporations had invested in at least 52 mine projects, with 20 more under feasibility study.

China-Laos Cooperation is so fruitful for the following reasons:

Laos is actively docking its own development strategy with the Belt and Road Initiative. In April 2016,Laos passed the 8th Five-year Social and Economic Development Plan (2016-2020), Ten-year Social and Economic Development Strategy (2016-2025) and 2030 Goals for Future Plans. This means that over the next 10 years, Laos will achieve at least a 7.5 percent economic growth rate. By 2020, Laos will no longer be considered a least developed country. By 2030, Laos will become an upper-middle-class-income country. General Secretary of the Lao People’s Revolutionary Party and President of Laos Bounnhang Vorachith once indicated that Belt and Road Initiative has been actively contributing to the promotion of Laos’ social and economic development.

Synergizing the Belt and Road Initiative with Laos’ own development strategy has helped Laos accelerate the transformation from a landlocked state to a linked-up state.In September 2016, China and Laos signed a memorandum of understanding to formulate a“Planning Outline for Jointly Advancing the Belt and Road Cooperation”, which strengthened the two countries’ resolve to maintain firm cooperation and evidenced Laos’ enthusiasm for participating in projects related to the Belt and Road Initiative.

China and Laos emphasize shared advantages,especially in infrastructure construction. Despite its abundant land and natural resources, Laos’ infrastructure long lagged behind the rest of the world and even the region. Without a shoreline and with limited international flights, Laos relies heavily on road and inland river transportation. Laos has been strengthening its infrastructure by building highways, planning new airports and improving the Lancang-Mekong River channel. However, all of these improvements are far from enough. Compared to Laos, China certainly has advantages in capital, talent and technology.

For such reasons, China and Laos can cooperate in infrastructure connectivity to promote the emergence of an industry-intensive region featuring comprehensive services, bonded logistics and open commerce, finance and tourism. The Mohan-Boten Economic Cooperation Zone can be viewed as an important accomplishment in this cooperation.

Laos is actively improving its investment environment. As economic and trade cooperation between China and Laos develops fast, China is gradually expanding investment in Laos. Currently, China is Laos’ number one investment source with Chinese corporations investing heavily in the country’s mining,electricity, agriculture, manufacturing, handicrafts and services. With an eye on synergizing Laos’ economic development strategy with China’s Belt and Road Initiative, the Laos government is steadily amending and improving investment laws and regulations,improving government efficiency and optimizing the investment projects approval process to provide better investment services to Chinese corporations and guide them in investing in emerging industries.