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Laos promotes PM Thongloun as leader of communist party

Under new secretary-general, impoverished nation expected to pivot futher to China

Laos Prime Minister Thongloun Sisoulith has been elected as the country's secretary-general. (Photo by Manami Yamada)

BANGKOK -- The Lao People's Revolutionary Party has elected Prime Minister Thongloun Sisoulith, 75, to the communist country's top post of secretary-general, in a move that is expected to increase the party's power at a time when the economy is cooling and public dissatisfaction is growing due to the coronavirus.

The vote came during the one-party state's five-yearly National Party Congress, held in the capital Vientiane from Jan. 13-15, and will see Sisoulith replace Bounnhang Vorachit.

The new five-year socio-economic development plan presented at the party convention includes the goal of 4% annual economic growth and increasing foreign currency reserves to three months or more of imports. The party also announced a policy of attracting investment from home and abroad so as to rise out of the United Nations' least developed countries list. The National Assembly is expected to approve the plan in March, allowing the country to proceed with these efforts.

Laos hopes to pull up from its status as one of the most destitute countries by 2024. But its economy has been dampened in part due to its laborers losing jobs in Thailand and other neighboring countries after nations closed their borders under the pandemic. The Asian Development Bank estimates that Laos's GDP contracted by 2.5% in 2020.

Under the new leadership, the impoverished Southeast Asian nation is expected to further tilt toward its neighbor China. Thongloun's predecessor Bounnhang Vorachit was seen as a balanced politician, maintaining close ties with China, but also with neighbor Vietnam, which is engaged in a territorial dispute with China in the South China Sea.

When Vorachit visited Beijing last year, he signed a bilateral cooperation "master plan", which included the promotion of Beijing's Belt and Road Initiative. Vorachit told the party congress this year that the country's strategic partnership with China had been upgraded to a "partnership of common destiny", Lao state media reported.

Laos is rapidly building a high-speed railway to connect its capital Vientiane to Kunming in the southern Chinese province of Yunnan under China's Belt and Road Initiative in an attempt to prop up its economy, which has slowed due to the COVID-19 pandemic. The first Laotian high-speed railway is likely to start running by the end of this year, passing over a huge bridge bearing China Railway Group's red logo.

"More than half of the track on the Laotian side has been laid," said Li Zhigong, China's consul-general in Luang Prabang, northern Laos, at the end of last year. The $6 billion rail link project is expected to begin operating in December as planned.

Laos is also promoting other huge development projects, including the construction of a hydroelectric dam made possible by big investments and loans from China.

The country has big ambitions, aiming to become "Asia's battery" by selling electricity from dams in the Mekong Basin to neighboring countries, in order to earn foreign currency.

To rebuild its economy, Laos is expected to further promote large-scale infrastructure development projects such as the construction of dams, railways and express highways. While countries like Thailand and Vietnam are stepping up investment and loan programs for Laos, China is playing the biggest financing role, as it sees the country as a strategic location in its gigantic infrastructure development program.

Laos's debt to China has been rising steadily. Loans from China account for some 80% of its sovereign external debt on a bilateral basis, according to the World Bank. In 2019, loans from China increased 19% from the previous year to $5.2 billion, a rise of 4 percentage points in their ratio to Laos's bilateral external debt over the five years from 2015.

Given the heavy repayment burden, analysts warn that Laos may default on some of its obligations.

The Financial Times reported in September last year that Laos had asked China to restructure its debt. Concern is growing that Laos will fall into a debt trap, in which the country will face demands from Beijing to transfer the rights to use and manage its infrastructure as security for repayment.

Laos is also heavily dependent on China to deal with the coronavirus. At the end of last year, the Laotian Ministry of Health said it had begun inoculating health care workers, using vaccines supplied by China. Laos relies on China's policy of supplying vaccines primarily to Southeast Asian nations.

A China-led bridge construction project in Laos. (Courtesy of Luang Prabang Province)

"Laos will continue to rely on China, with [its] overwhelmingly strong financial [status]," said Norihiko Yamada of the Institute of Developing Economies at the Japan External Trade Organization. "An extension of repayment and certain kinds of favorable treatment represent one reason for greater reliance on China."

An increasing number of countries in Southeast Asia are struggling to repay debt to China. Sri Lanka leased its southern Hambantota Port to China in 2017 for 99 years as a result of repayment difficulties, while Pakistan gave China 43-year rights to use its port of Gwadar in 2015.

The new Laotian leadership wants to avoid the debt trap but unavoidably needs China's power to achieve its target of national development. The country's leaders will need to tread carefully to achieve economic development while maintaining a degree of distance from China.

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