Country Report Laos June 2009

The political scene: China and Vietnam pour in investment

The government remains politically aligned to its two communist-ruled neighbours, China and Vietnam, and it continues to receive large sums of investment from those countries. Laos expects to be a primary beneficiary of a US$10bn investment fund and a US$15bn credit line announced by China as a stimulus to "needy" countries in the Association of South-East Asian Nations (ASEAN). China has also promised an additional US$39.7m "special aid" package for Cambodia, Laos and Myanmar, the poorest members of the group. Vietnam is consciously targeting economic expansion into both Laos and Cambodia. Its influence in Laos is expected to increase in the next few years as mining and electricity projects receive approval. Vietnam was the biggest investor in Laos in fiscal year 2007/08 (October-September), channelling about US$1bn into 32 projects. Ties remain close between the communist parties of both countries, and Vietnam recently showed further solidarity by eliminating import tariffs on various Lao agricultural goods, notably rice and tobacco.

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