Archive for April 18th, 2010

April 18, 2010

Superpower competition for little Laos

Cached:  http://www.atimes.com/atimes/Southeast_Asia/LC25Ae02.html

Superpower competition for little Laos

By Brian McCartan

VIENTIANE – A recent high-level meeting between United States diplomats and the Mekong River Commission in Laos was held amid growing suspicions of China’s management of the upper regions of the Mekong River, which in recent weeks has run dry in several downstream countries.

The exchange was seen as the latest overture in a renewed US effort to counterbalance China’s rising influence in the region and boost the US’s image in a country where for historical reasons it has maintained a low profile. Neighboring China, meanwhile, has recently made deep inroads through trade, aid and investment initiatives.

US Assistant Secretary of State for East Asia and the Pacific Kurt Campbell made a two-day stop in Vientiane this month as part of a wider Asian tour. Campbell met with Lao Deputy Foreign Affairs Minister Phongsavath Boupha, paid a courtesy call on Foreign Minister Thongloun Sisoulith and attended the third US-Lao comprehensive bilateral dialogue.

Although there was little publicity about the meetings, Campbell said in congressional testimony prior to the trip that he aimed to discuss improving bilateral relations and the ongoing cleanup of unexploded US ordinance left behind from the Vietnam War.

Campbell is notably the highest-ranking American diplomat to participate in the US-Lao Comprehensive Dialogue, which aims to improve relations through discussions of shared global and regional policy aims, as well as bilateral issues. US deputy assistant secretaries attended meetings of the talk shop in October 2006 and January 2008.

In reply to questions about US interests in Laos, a US State Department official told Asia Times Online, “We are committed to high-level engagement with the country of Laos” and that greater engagement “is part of our broader effort to reaffirm our commitment to Southeast Asia, including through such innovative programs as the Lower Mekong Initiative”.

That eight-month-old initiative was likely the focus of talks when Campbell met officials of the MRC, an inter-governmental body that promotes and coordinates sustainable management and development of the Mekong River basin and maintains its secretariat in Vientiane. The Lower Mekong Initiative was launched by the US in cooperation with Laos, Thailand, Cambodia and Vietnam during meetings on the sidelines of the July 2009 ASEAN Regional Forum in Thailand. The US has so far pledged US$7 million for environmental programs on the lower Mekong.

According to a US State Department statement, the program promotes cooperation on issues of regional importance and focuses on environment, health, education and infrastructure. The statement also gives an overview of the components as strengthening water management, including a partnership between the MRC and the Mississippi River Commission, protection of forests, science partnerships and the advancement of clean energy programs.

Other details are scarce, and it appears the initiative is still at the exploration phase of areas for cooperation. Yet the initiative may allow the US to gain traction vis-a-vis China on an important issue in a region the US has been accused of neglecting in recent years. This is certainly the case in the increasingly important strategic regional crossroads of Laos, which shares a land border with China.

Before a regional tour of Asia earlier this month, Campbell told the House Foreign Affairs Committee, “The Asia-Pacific region is of vital and permanent importance to the United States and it is clear that countries in the region want the United States to maintain a strong and active presence. Our policy will ensure that the United States acts as a resident power and not just as a visitor, because what happens in the region has a direct effect on our security and economic well-being.”

Little aid
In Laos, the US’s resident power is meager. A Congressional Research Service (CRS) report on US-Lao relations released in January stated that the “US provides relatively little foreign assistance to Laos”. In 2009, the US provided just $5 million in assistance to Vientiane, and the 2010 Congressional Budget Justification for Foreign Operations said this year it will provide only marginally more at $5.15 million. CRS noted that this was much less than the $65 million given to Cambodia in 2009.

The budget is stretched thinly across programs covering unexploded ordnance (UXO) removal, counter-narcotics operations, programs for improving trade capacity, HIV/AIDS prevention and treatment, the recovery of Americans still missing in action since the Vietnam War and military education and training.

The largest assistance program is the continued removal of remnants of the more than 2.5 million tons of bombs dropped on Laos during the 1960s and early 1970s. According to a State Department official, $3.25 million was given to Laos in 2009 for UXO removal and abatement. While the US may view the program, as noted in the 2010 Congressional Budget Justification for Foreign Operations, as advancing “humanitarian and economic goals” and creating “a climate of cooperation that advances other policy goals”, many Lao view the program as the US belatedly taking responsibility for cleaning up its own mess.

At the same time, the US is engaging Laos economically through an expansion of technical assistance to enhance its capacity to implement trade agreements and modernize its legal and regulatory framework. The US Agency for International Development (USAID), the government’s aid organ, is facilitating a trade reform program aimed at improving Laos’ ability to gain accession to the World Trade Organization, implement the US-Lao Bilateral Trade Agreement and participate in the planned ASEAN Economic Community slated for 2015.

The 2010 budget cited these initiatives as “probably the most important action the US government can currently take to influence the future direction of Laos’ policy”. US trade and investment in Laos is meager compared with China, Vietnam and Thailand, which respectively account for 8.5%, 15% and 35% of Laos’ total trade. US trade with Laos quadrupled to $60 million in 2008 from $15 million in 2006, led by Lao exports of garments, but the US still ranks as Laos’ seventh-largest trading partner.

To facilitate greater trade, President Barack Obama in June removed Laos and Cambodia from a blacklist that had prohibited the US Export-Import Bank from financing US companies seeking to do business in Laos. The demonstrated commitment by Laos to opening its markets was the cited reason for the policy shift. The removal of Laos from the trade blacklist may encourage some US companies to invest in Laos, but investment is unlikely to rise soon to the levels of Vientiane’s main investors, Vietnam, China, Thailand and South Korea.

US programs in Laos also suffer from a low profile compared with the aid efforts of other countries, especially China. USAID and other American agencies, including the Department of Defense, Department of Health and Human Services, Department of Agriculture and Department of State, all have various programs in place across the country. USAID programs cover creating alternative livelihoods for former opium poppy farmers, medical and quality-of-life assistance to UXO victims, and promotion of environmental protection, among others.

Many programs, however, are in remote areas and are rarely seen or appreciated by the average Lao. Moreover, USAID still suffers from an image problem in Laos, where some members of the Lao government and general population believe it still functions as a cover for Central Intelligence Agency (CIA) activities and information gathering. Those views are a holdover from the 1960s and 1970s, when much of the US’s “secret war” in Laos was run through the CIA, whose agents allegedly often took USAID covers.

The US has also moved to expand relations with Laos’ military. Following the first exchange of defense attaches in 30 years in 2008, the US opened in December a defense attache’s office at its Vientiane-based embassy. The US is also teaching English language and military professionalism to Lao soldiers through its International Military Education and Training (IMET) program and has slots for the training of eight officers in the US.

A long-running sticking point in US-Lao relations was largely removed in December when Thailand forcibly repatriated some 4,371 ethnic Hmong refugees from a camp in its Petchabun province and another 158 from an immigration detention center in Nong Khai. Lao and Thai government officials claimed the Hmong were economic migrants, but human-rights activists and American Hmong claimed at least some were refugees with real fear of persecution if returned to Laos.

The Hmong claimed to be members of a resistance movement made up of former fighters recruited by the CIA during the Vietnam War. US support for the Hmong during the war and perceived tacit approval for the ongoing activities of Hmong in America led by former General Vang Pao and others has long made Lao officials skeptical of US intentions.

Vang Pao and his supporters were dealt a blow in 2007 when the elderly general and several of his lieutenants were arrested in a US government sting operation, allegedly for plotting to overthrow the government in Vientiane. Although Vang Pao was later dropped from the indictment and serious legal questions remain about the methods used in the sting operation, the arrests sent the message that the US would no longer tolerate Hmong anti-government activities.

The Lao government has promised to allow the returnees to apply for resettlement in foreign countries, and the US, Australia, Canada and the Netherlands have offered to take them in. However, the Lao government now claims that the Hmong no longer want to leave and no requests have been made. Officials from the US embassy and several congressman have been able to visit the returnees now housed in two resettlement sites.

A State Department official told Asia Times Online that the US government is pleased that the international community is being granted access to the Hmong and encourages Vientiane to continue allowing regular international access. The US is also planning to provide “supplemental food and basic needs assistance to the returnees and is prepared to do more, if the Lao government agrees”.

Geostrategic aims
Vientiane appears receptive, if guardedly, to US overtures. Laos’ leaders likely see the utility of having the US as a counterbalance to China’s growing influence in the country. While many Laos are pleased with the growing links to China and the increased number of goods available and the money to be made from trade, a growing fear of Chinese domination exists. In particular, there is a perception that the growing number of Chinese arriving to work and live in Laos constitutes a sovereign threat that has been accentuated by the government’s granting of large-scale, long-term land leases to Chinese companies.

China’s policies towards the Mekong are also worrisome considering Laos’ main population centers are along the river. Although China claims the situation is the result of a drought in its southwest, some are not convinced and blame Beijing’s large-scale dam construction on the upper Mekong. Laos and the MRC have a weak bargaining position when it comes to China, but increased US interest in the form of the Lower Mekong Initiative may provide some muscle to their complaints.

Vietnam, which has long been Laos’ main patron and ally, is also keen to see Laos forge better relations with the US as a means of maintaining its own interests in the country as well as blunting China’s influence. Chinese largesse has meant Hanoi’s once dominant position in Laos has lost ground. Vietnam’s historical animosity towards China has been enhanced in recent years due to continued disputes over the possibly oil-rich Spratly and Paracel Islands in the South China Sea. Should Laos improve its relations with the US, Vietnam’s western flank would be better protected and Hanoi would have a stronger position in both Laos and in negotiations with China.

China made extensive inroads into Southeast Asia after the 1997 Asian economic crisis due to a policy shift that emphasized development aid, economic incentives and cultural exchanges over hard strategic power. These moves were made easier by a general perception among ASEAN states that the US was focused elsewhere, largely on the “war on terror” in Iraq and Afghanistan. It was certainly not lost on regional leaders that then US Secretary of State Condoleezza Rice skipped two ASEAN summits in three years.

In contrast to the slow improvement in relations between Laos and the US, China’s presence has grown rapidly after a period of cool relations in the 1970s and 1980s. Beijing provided generous assistance to Laos following the 1997-98 economic crisis and has since risen to become Vientiane’s principal source of economic largesse through grants, low-interest loans, foreign investment and technical assistance.

CRS’s January 2010 report stated that Laos receives approximately $400 million in bilateral and multilateral assistance annually. China’s portion of that assistance is hard to gauge since its foreign aid programs typically entail a much broader range of activities than what is normally considered as overseas development assistance. This assistance includes concessional loans, grants, debt relief, public works projects, energy development, agricultural training, investments on preferential terms and the construction of schools, medical facilities and infrastructure.

China has placed considerable emphasis on creating a positive image in Laos through the construction of high-profile projects such as Vientiane’s National Culture Hall and the central Lan Xang Avenue, leading to its famous Patouxy monument. A Chinese company was responsible for building the main stadium for the December 2009 Southeast Asian Games, held for the first time in Vientiane. China also trains hundreds of Lao military and government officials in its schools and offers numerous scholarships for promising Lao students to study in Chinese universities. It has also set up schools providing subsidized education for Laos eager to learn Chinese.

Beijing’s foreign aid comes with a commitment of non-interference, different from the strings often attached to US and European aid that requires demonstrable progress in areas such as human rights improvements and corruption eradication.

The day before Campbell’s recent visit to Vientiane, the State Department released its 2009 Human Rights Report. Under the entry for Laos, while indicating that human rights had improved somewhat, it noted that political freedom was limited, freedom of speech and freedom of the press were not respected, prison conditions were harsh and corruption in the government and judiciary continued. The report also noted that Laos had made some progress in enforcing its anti-human trafficking law, while also noting its increasing role as a transit country.

Those criticisms aside, US participation in the Lower Mekong Initiative and other efforts to counterbalance China’s influence will likely win favor in Laos. While the US may not any time soon compete dollar for dollar with China’s generous assistance, better publicized bilateral programs could start to narrow the gap in public perceptions and set the stage for a heartier competition for diplomatic influence.

Brian McCartan is a Bangkok-based freelance journalist. He may be reached at brianpm@comcast.net.

(Copyright 2010 Asia Times Online (Holdings) Ltd. All rights reserved.

April 18, 2010

Laos seeks foreign investors in power sector

Cacched:  http://www.mb.com.ph/articles/253257/laos-seeks-foreign-investors-power-sector

April 18, 2010, 11:32am

SINGAPORE (Dow Jones)–Laos aims to attract more foreign investors to the country’s electricity export projects in a bid to power up its underdeveloped economy and infrastructure, but risks related to cross-border politics and marketing may limit its partners to groups formed around large utility companies in neighbouring countries.

The landlocked country has already signed memorandums of understanding with governments to sell more than 12,000 megawatts by 2020 to Thailand, Vietnam and Cambodia, but is currently installing only about 3,500 MW for this demand, leaving a large wish-list of mostly hydropower projects involving heavy financial, environmental and social costs.

“We generally prefer experienced utilities companies as lead developers, but also need all kinds of specialists in engineering, construction, and on financial and legal sides from everywhere,” said Xaypaseuth Phomsoupha, Director General of Department of Energy Promotion and Development in the Ministry of Energy.

Laos has massive potential in hydropower, as the country takes in more than 35% of Mekong River basin inflows, and a 1,878-MW lignite-fired plant with a feeder mine is also under construction, Phomsoupha told Dow Jones Newswire in an interview.

Attracting new foreign investors may prove difficult, however, as companies without links to neighboring countries will face greater legal and political risks.

“The power generator is in one country, while the buyer is in another…that is a challenge for investors,” Phomsoupha said.

So far, the main investors in the Laotian power sector include Thai listed power generators Ratchaburi Electricity Generating Holding PCL (RATCH.TH) and Electricity Generating PCL (EGCO.TH) and the Vietnamese government. Some Chinese and Japanese firms have shown interest, and the international arm of Electricite de France SA (EDF.FR) has hooked up with the Thai companies to ensure market access.

Developers also face challenges in mitigating the impact of these complex projects on the environment and society, as Laos strongly emphasizes sustainable development, Phomsoupha said.

Chinese government-backed firms are moving into hydropower projects in Myanmar, avoiding much scrutiny despite allegations of brutal battles to secure development areas by cleansing them of ethnic groups, as under its military government the country is even more closed and underdeveloped than communist Laos.

In Laos, however, development has largely been conducted with greater transparency, as listed companies require loan guarantees from bodies like the World Bank to assume the immense risks, and the World Bank has been under great pressure to set high environmental and social standards for mitigation and resettlement efforts.

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