Absolute power

Geopolitical tensions over Laos are on the rise, particularly given its unflinching approach to the construction of dams on the Mekong River

Written By:
June 4, 2015
Absolute power
On the move: trucks transport timber toward the Laos-China border in 2011. China’s influence in Laos is growing – it was the country’s largest foreign investor in 2013

On January 28, representatives from the four members of the Mekong River Commission – Cambodia, Laos, Thailand and Vietnam – met in Vientiane to discuss the controversial Don Sahong Dam, which is slated to be built in southern Laos.

Not for the first time, each of the three National Mekong Committees of Cambodia, Vietnam and Thailand voiced their opposition to the project. Groups including International Rivers and the WWF , as well as dozens of local NGOs,   have speculated that the dam would cause monumental environmental damage and threaten the livelihoods of thousands who live downstream.

Lao authorities stuck to their guns. “For the development of the Mekong River, we don’t need consensus,” Daovong Phonekeo, director general of Laos’ Department of Energy Policy and Planning, told Voice of America after the meeting. In 1995, the four countries signed a treaty that requires consultation before constructing dams on the Mekong.

Laos’ unflinching approach has put it “on a collision course with its neighbours”, according to an article in the Vietnamese state-run newspaper, Thanh Nien News.

Yet controversy over Laos’ damming projects is nothing new. In 2012, Laos surprised many politicians and commentators when it announced during the Asia-Europe Summit, which it was hosting, that construction on the Xayaburi Dam would begin the day after the summit, despite strong opposition. Lao authorities contend that such dams are crucial to its own development as the hydropower produced can bolster electricity supply, and selling excess power to its neighbouring countries will be a boon to its underdeveloped economy.

However, the situation is now more complex than ever due to rising geopolitical tensions over the dams.

“At the core of the controversy… is China’s role in supporting and financing dams in Laos,” Phuong Nguyen, a research associate for Southeast Asian studies at the US-based Centre for Strategic and International Studies (CSIS) wrote in a 2014 report. She went on to state that China will have a hand in the construction of 19 dams on the Mekong, nine of which are being built in Laos.

According to Nguyen, this comes at the same time as Laos is seeking to expand its network of friendly countries. For much of the past four decades, since the communist Pathet Lao, with Vietnamese assistance, ousted a US-backed government, Vientiane has predominantly turned to Vietnam for political and financial support. But for the past decade or so, experts say Hanoi’s influence in Laos has been curtailed by China. In 2013, it displaced Vietnam as the largest foreign investor in Laos.

Some commentators also believe that Laos’ position and relationships are evolving. For example, investment and trade between Japan and Laos has increased substantially. In 2013, investment from Japan totalled $405m, a 15% increase from the previous year, according to Lao government figures. In the same year, the Wall Street Journal reported that the largest non-state company in Laos was the South Korean Kolao Holdings, a Hyundai and Kia manufacturer.

Nguyen added in her report that, at the same time, “a remarkable yet little-noticed development” has occurred, with the US increasingly seeing Laos as an important country in the region. Before, it was “isolated and often overlooked by US officials”.

Today, trade and investment between the two nations remains limited, but better relations can be found in the US’ use of soft power. One of the centrepieces of its engagement in mainland Southeast Asia is the Lower Mekong Initiative (LMI), established in 2009 by the US alongside Vietnam, Thailand, Cambodia and Laos. Supported by the US Agency for International Development (USAID), it has invested money in educational, healthcare and capacity building in the region.

In February, Secretary of State John Kerry waded into the Lao dam debate in an op-ed for Foreign Policy, in which he described the Mekong as being “under threat” from the dams.

“I think what the US is doing is trying to stop China from gaining more power in Southeast Asia, and this is just another tactic,” said Wu Xinbo, director of the Centre for American Studies at Fudan University in China. “It is politically motivated, and is aggressive towards China. The Lao government wants to build dams and China is helping them.”

According to some, this is part of the much larger struggle between the US and China for influence in Southeast Asia. Around the late 2000s, the US embarked on a policy to restore its influence in the Asia-Pacific region in what has been called the ‘pivot to Asia’. Many in China have understood this as a move to contain Chinese expansion in the region.

One outcome of this pivot has been renewed good relations between the US and Vietnam. On a visit to Washington in 2013, the Vietnamese president, Truong Tan Sang, told reporters that both countries would work together “to ensure the long-term health and sustainability of the Mekong Delta”.

Martin Stuart-Fox, a retired professor and author of numerous books on Laos, agreed that the Vietnam-US relationship could, to some extent, be a factor in the latter’s stance on Laos’ dams. However, he believes that the role of the US has been overplayed and that the current tensions are based more on the historic competition between Vietnam and China for influence over Laos.

These factors come at a time when the future of Laos’ foreign policy is being debated. Next year, the Lao People’s Revolutionary Party – the sole legal political party in the country – will hold its 10th party congress, an event that takes place every five years and during which government policy is decided. As is often the case in the year leading up to each congress, speculation is rife over the potential reshuffling of the leaders in the central committee and the 11-person politburo – the country’s highest decision-making bodies.

Adisorn Semyaem, a senior researcher at the Institute of Asian Studies Chulalongkorn University in Thailand, believes that there is currently a split in the party between a pro-Vietnamese faction – typically the older politicians from the revolutionary days – and a pro-Chinese faction. But he expects several pro-Vietnamese officials to retire at next year’s congress, leading to the possibility that a pro-Chinese faction might take the upper hand in the Communist party. If this happens, Semyaem believes that it will be the tipping point, with Vietnamese influence waning and that of China growing.

However, there is a side to the story that is often overlooked in writing about Laos. As Oliver Turner, a research fellow in political economy at the University of Manchester, put it: “[Foreign commentators] tend to look at countries such as Laos as pawns in a global chess game. But they are more important than that and sometimes have the ability to steer developments in the region rather than just be passing observers.”

While geopolitical tensions over Laos may be on the rise, especially over its dam projects, it is by no means a passive and inactive player. For example, although China is investing a lot of money into the construction of the dams, its northern neighbour is certainly not forcing the landlocked nation into the situation, according to Stuart-Fox. Laos’ dam aspirations are largely a simple matter of economic necessity. As a landlocked state with the smallest economy in the region, and arguably less attractive for foreign investment compared to Vietnam, Thailand and Myanmar, Laos has identified hydropower as the route to a more prosperous future.

This is made all the more important given that Laos’ other major industry, mining, has seen its profits shrink in recent years, explained Jonathan McGrain, publisher of the online business magazine Laos Investment Review. “Growth in hydropower over the next few years is likely to more than offset the fall-off in mining profits. The government has said it plans to quadruple generation capacity between now and 2030 to realise its vision of becoming the ‘battery of Southeast Asia’,” he said.

Carlyle A. Thayer, an expert on Southeast Asia at the University of New South Wales, went one step further and suggested that Laos’ “Catch-22 situation” – between construction of dams, at environmental and political cost, and economic weakness – has, to some extent, been forced on it in the absence of any real alternatives from the international community: “The question is: What’s in it for Laos not to continue with the dams?”

Read more articles