The Japanese cars and sport utility vehicles that clog the streets of Laos’ once sleepy capital are testament to the changes quietly under way in a county once seen as a basket case isolated for decades behind Asia’s bamboo curtain.
Shopping malls are under construction, mobile phone shops and modern coffee houses with Wi-Fi are popping up in Vientiane, while the bicycles that thronged roads lined with golden temples are rarely seen, replaced by imported motorcycles and cars.
These are some of the fruits of a quiet economic boom that’s steadily transformed a secretive country little known in the West beyond the tales of backpackers and Vietnam War veterans.
Nominally communist since the overthrow of a US-backed government in 1975, the former French colony is courting neighboring China, Vietnam and Thailand to develop resources and infrastructure, and they are piling in, indifferent to the risk aversion that keeps Western firms on the sidelines.
A big Thai-led dam project was suspended this month pending environmental surveys, but other Thai-built hydropower projects are underway across Laos’s network of waterways. Vietnamese agribusinesses are proliferating and Chinese firms are pouring into the mining and transport sectors.
Little has changed in Laos’ one-party political system and its rulers are trying to emulate the market-based authoritarianism of China and Vietnam with pro-business reforms, with some success. The once fragile economy has grown an average 7.9 percent a year since 2006.
Asian Development Bank country director Chong Chi Nai said the mountainous, jungle-clad country was becoming an economic success story, but growth should not be its sole focus.
“The challenge for Laos is not the amount of funds coming into the country, but whether these funds are invested in a responsible and environmentally sustainable manner,” he said. “But there’s no doubt Laos is on the right track.”
International financial institutions forecast economic growth of between 8.1 percent and 8.6 percent this year — one of Asia’s highest growth rates — fueled by hydropower production, copper and gold mining, tourism and domestic consumption.
Laos’ US$7.5 billion economy is dwarfed by its neighbors. It is 790 times smaller than China’s, a 14th of the size of Vietnam’s and about 2 percent of Thailand, but it has more than doubled since 2006, as has GDP per capita, which jumped from US$600 to US$1,200, according to World Bank data.
However, it is still off the radar to Western companies concerned about regulation, labor capacity, a lack of transparency and Laos’ very cozy political and business ties to its neighbors.
“Laos is still seen as a frontier market by most foreign investors, but there’s strong potential,” a Western diplomat in Vientiane said. “Trends in the investment environment are generally in the right direction.”
Urban Laos is modernizing fast, with 19 commercial banks and new special economic zones offering tax breaks. The mobile phone sector is thriving, with its five operators boasting a staggering 10 million users among the 6.4 million population, suggesting many customers use several numbers.
A US$7 billion Chinese-led high-speed railway linking China with Thailand is planned and national carrier Lao Airlines last month expanded its fleet of eight propeller planes with the US$91 million purchase of two Airbus A320 airliners.