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Southeast Asia's only landlocked country, Laos has tended to be rather insular. But a number of recent and impending developments are likely to see Laos adopt a more outward-looking stance in the near term.
First, at the beginning of July, Laos assumed the role of Chairman of the ASEAN Standing Committee. As a result, Vientiane will formally host the 10th ASEAN Summit in late November this year. Almost certainly the biggest event of its kind to be held in Laos, this will be a landmark event for the country. For example, dozens of foreign journalists will undoubtedly seek to cover the summit in Vientiane, despite the fact that there have been no permanent foreign press bureaux permitted in Laos for several decades. As Laos has relatively little experience in preparing for an event of this kind, the government will need to draw upon the guidance and logistical support of other ASEAN members, as well as countries beyond the region, such as Japan.
Secondly, external trading links are improving, as evidenced by the increasing number of road bridges being built across the Mekong River, thereby better linking Laos with Thailand. At an unprecedented joint cabinet meeting of the Lao and Thai governments, held in March 2004, the latter formally announced it was willing to co-fund with France the laying of a 3.5km railway track right across the Mitraphab Bridge at Nong Khai to a new cargo terminal on the Lao side of the river. (The track currently ends abruptly, half way across the bridge from the Thai side.) Although the line will not extend to Vientiane, it will allow for the shipment by rail of goods to and from Laos for the first time. This follows an agreement between Bangkok and Vientiane, reached in late 2003, to liberalise both cargo and passenger traffic across the Lao-Thai border. This should end the virtual oligopoly that a handful of Thai transport companies had previously enjoyed on goods being exported from Laos through Thailand, resulting in excessively high shipping costs for Lao exporters.
Thirdly, in September 2003, Laos signed a bilateral trade accord with the US, in anticipation of being granted normal trading relations (NTR) status by Washington in 2004. However, attaining NTR status is proving to be more problematic than anticipated, despite the support of the White House. Unfortunately for Vientiane, US legislators have faced intensive lobbying from groups opposed to the NTR, alleging human rights abuses (particularly against the Hmong) and a lack of religious and political freedom in Laos. As a consequence, a decision on NTR does not appear imminent, particularly in the run-up to US Presidential elections. A strong proponent of granting NTR has been the US ambassador to Laos, Douglas Hartwick, whose tour of duty ended in July. Should Laos ultimately attain NTR status, Vientiane is then likely to set its sights on gaining entry to the WTO.
Fourthly, Vientiane recently signed bilateral agreements with Hanoi and Bangkok that will allow Lao tourists visa-free travel to Vietnam and Thailand. And finally, in terms of recent lacklustre foreign investment activity, there has been a slight pick-up in both investor sentiment and activity. The apparent success of the Oxiana gold and copper mine has prompted renewed interest in the mining sector from various quarters. Similarly, Vietnamese companies have expressed interest in developing a small number of hydropower plants, principally for the export of electricity to Vietnam. Meanwhile the co-developers of the long-awaited US$1.1bn Nam Theun II dam and power plant have begun the process of raising funds needed to finance their mega-project.
WATCHPOINT: Normally tranquil Vientiane life has been interrupted by occasional, small-scale bombings since 2000. Expect to see heightened security in and around Vientiane in the coming months, as the government seeks to ensure that no attacks occur during the impending ASEAN summit.
About our company:
AFG Venture Group is an Asia and Australia based corporate advisory and consulting firm with over 20 years experience in creating alliances, relationships and transactions in Australia, South East Asia and India; including a 15 year history of corporate and equities advisory in Australia, undertaking merger, acquisition, divestment, fund raising and consulting for private and public companies.
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