Last week Antonella Diana’s post on cross border rubber investment provided us with a close-up insight into China-Laos economic integration. Today a useful article in The Nation provides a broader perspective on Laos’ economic relations with its neighbours. The article, by Pavin Chachavalpongpun, provides a useful overview of the role of both China and Vietnam in Lao economic development. Refreshingly the article does not rely on the old clichés of a vulnerable Laos being overrun by expansive neighbours:

But in this tug of war [for influence in Laos] between China and Vietnam, Laos is not at all passive. Taking the costs and benefits into consideration, Laos is more than willing to play one power against the other. At the end of the day, Laos is opening up to the outside world. It needs foreign aid and investment to boost the economy, to create jobs and to raise living standards.

While international donations often come with attendant pressure to reform legal, financial and political systems, both China and Vietnam provide aid without calling for major transformations that would reduce the LPRP’s control of the political and economic life of the country. China, in particular, has become a model of a successful economy without having to sacrifice political domination.

Laos and China have touted their growing strategic alliance as being based on the mutual economic need of both sides. China is destined to become Laos’s new best friend, major trading partner and source of external funding. Vietnam will have to step up its game just to remain in the shadows as Laos’ mentor and emergency ally, as it has done so often in the past.

What role might there be for traditional (self-appointed) big brother Thailand in the modernising Lao economy? And might traditional donors, like Australia, find their “leverage” (in terms of improved governance etc.) reduced as Vietnam and China take on increasingly prominent regional development roles?