Leadership Changes and Upcoming Obama Visit Give U.S. New Opportunities in Laos

Leadership changes announced at a recently completed congress of the ruling Lao People’s Revolutionary Party and President Barack Obama’s planned visit to Vientiane in September, the first ever to Laos by a sitting U.S. president, give Washington an important opportunity to boost ties with this landlocked nation of less than 7 million people along China’s southern flank.

The first high-level U.S. engagement with Laos this year will take place in Rancho Mirage, California, on February 15-16, when Obama and Prime Minister Thongsing Thammavong will jointly chair a summit discussion between Southeast Asian and U.S. heads of state. Laos is the ASEAN chair for 2016.

Secretary of State John Kerry visited Laos on January 25 to hammer out the summit’s format and agenda. Kerry landed in Vientiane just days after the communist Lao People’s Revolutionary Party completed its congress (held every five years) to select the party’s leadership and set political and economic development goals for the next five years. The country’s foreign policy direction is one area that could see some of the most noticeable shifts in the months and years ahead.

Vietnamese communist forces helped their Lao counterparts seize power in 1975, and Hanoi has since retained significant influence in Vientiane. But in recent years, Laos had drifted closer to China as Beijing stepped up its aid to and investment in the country. The party congress’s decision to remove Choummaly Sayasone as the party chief and replace him with current vice president Bounnhang Vorachith is widely interpreted in Vientiane as an effort by party leaders to pull the regime’s foreign policy back toward the middle between China and Vietnam, rather than tilting so firmly toward Beijing. Bounnhang received military training in Vietnam and studied at its party training school.

Deputy Prime Minister Somsavat Lengsavad, who ranked eighth in the Politburo and, like outgoing party chief Choummaly, was instrumental in granting large economic concessions to Chinese companies over the past decade, was also removed. There has been a palpable anxiety within the public as well as among party members that the ousted leaders had made Laos grow too dependent on China in recent years. Chinese companies, many of which are state-owned, have dramatically ramped up their economic footprint in the northern part of Laos.

Chinese companies have at least half a dozen mega real-estate projects in Vientiane today, including shopping complexes and hotels dominating the skyline of this small city. Chinese companies also hold a wide swath of mining and agriculture projects across much of northern Laos. In December, the two countries agreed to start work on a $6 billion railroad project linking southern China to Bangkok through Laos, which economists believe will have minimal benefits for Laos. The cash-strapped government is expected to finance part of the cost with a loan from China.

The expected appointment of Deputy Prime Minister Thongloun Sisoulith to be prime minister soon after the Lao National Assembly elects the new government lineup in March will also help bolster Vientiane’s regional integration efforts. Thongloun has served as foreign minister since 2006 and is viewed as somewhat of an internationalist who wants to promote closer ties not only with Vietnam and Laos’s other ASEAN neighbors, but also with partners including the United States and Japan. Thongloun—whose foreign affairs portfolio is expected to be picked up by Saleumxay Kommasith, the able former ambassador to the United Nations—is not anti-China; he just wants to hedge Laos’s foreign policy with broader regional and international ties.

Thongloun recognizes that with Laos chairing ASEAN this year, Vientiane will have to represent the interests of its Southeast Asian neighbors, some of which, like the Philippines and Vietnam, are facing increasing pressure from China in the disputed South China Sea. Lao officials, in response to concerns within ASEAN and in the United States, have said in recent months they recognize the impetus for not repeating what happened during Cambodia’s chairmanship in 2012, when Phnom Penh blocked a consensus ASEAN statement on the South China Sea at the apparent behest of Beijing.

Kerry told journalists following his discussions with Lao officials that current prime minister Thongsing Thammavong “was very clear that he wants a unified ASEAN and he wants maritime rights protected, and he wants to avoid militarization and avoid the conflict.” A senior Lao official adds, “We will come under pressure from the north and the east,” referring to China’s and Vietnam’s efforts to influence Vientiane’s decision-making. Lao officials will likely try to operate on the principles of ASEAN centrality and consensus.

U.S.-Lao relations have warmed in recent years as part of the larger U.S. rebalance to Asia, following decades of mutual suspicion after the Vietnam War ended in 1975. Kerry said the United States is launching a $6 million nutrition program to relieve stunting among children and touted a U.S.-funded “smart infrastructure” project in Laos under the Lower Mekong Initiative to ease silting and facilitate fish migration, as Laos builds dams on the river to power electricity for export. Kerry also raised ongoing human rights issues about which Washington is concerned, including the forced disappearance three years ago of well-known agronomist Sombath Somphone.

But much remains to be done to boost U.S. ties with Laos in this pivotal year and ahead of the U.S. presidential elections in November. Kerry suggested that Obama could announce a significant boost to the current $19.5 million in U.S. funding to help clear remaining unexploded ordnance when he visits Vientiane.

The Lao economy—which has grown at 7-8 percent in recent years—is forecast to expand by 7.7 percent this year, making Laos the second-fastest-growing economy in Asia in 2016, according to the Economist Intelligence Unit. Much of this growth is driven by natural resource extraction, the export of hydropower to Thailand, and, more recently, tourism. U.S. trade and investment with Laos remains minimal, although Coca-Cola opened a large bottling plant near Vientiane last year to serve northern Thailand.

Although U.S. military ties with both China and Vietnam have grown over the past decade, relations with the Lao military are almost negligible except for cooperation in the search for remains of U.S. pilots missing in action during the war. The Lao military has agreed to work with Washington on some English-language training for its soldiers, but has not accepted the offer to send officers to U.S. staff colleges.

The U.S. government has had an education program in Laos for a number of years, and Vientiane has suggested to the Obama administration that it is keen on a larger training program with Washington. Laos faces a serious shortage of knowledgeable technocrats and skilled labor, a factor that has held back economic development. Washington can consider pursuing with Laos a program similar to the U.S. Fulbright economics teaching program for mid-career officials that it has supported in Vietnam for decades.

Laos has been on the Asia travel itinerary of more senior U.S. officials in recent years. But beyond the visits by the Lao health minister in 2014 and Deputy Prime Minister Thongloun two years before, few senior Lao officials have been exposed to the United States. Once the new government takes office in Vientiane, the U.S. government should invite more of its senior officials to visit Washington to bolster trust between the two countries.

(This Commentary originally appeared in the February 4, 2016, issue of Southeast Asia from Scott Circle .)

Murray Hiebert is senior fellow and deputy director of the Chair for Southeast Asia Studies at the Center for Strategic and International Studies in Washington, D.C.

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Murray Hiebert
Senior Associate (Non-resident), Southeast Asia Program