Series: The Mekong Region and Japan Part 1: Laos (1)
Visit to Japan by the Lao PDR Prime Minister Mr. Thongsing Thammavong
Visit to Japan by the Lao PDR Prime Minister Mr. Thongsing Thammavong
Professor Motoyoshi Suzuki, PhD.
Ministry of Planning and Investment
The Lao People's Democratic Republic (PDR)
Boasting abundant natural resources, a cheap labor force, and a market scale of over 230 million people, the Mekong region in the Mekong River Basin is currently attracting huge attention for its future prospects. In this series, we look at new developments in Japan’s relations with Cambodia, Laos, Myanmar and Vietnam, which are undergoing major transformations. Professor Motoyoshi Suzuki, appointed Executive Adviser to the Lao PDR Ministry of Planning and Investment in December last year and currently the leading expert on economic cooperation relations between Japan and Laos, will launch the series with three articles on the situation in the Lao PDR.
The Lao People's Democratic Republic is a landlocked nation bordered by five other countries—China to the north, Thailand and Cambodia to the south, Myanmar to the west and Vietnam to the east. In terms of size, it parallels Honshu in Japan at 236,800 square kilometers. The Lao PDR has a relatively small population of 6.12 million, around the same as the cities of Yokohama and Osaka put together. More than half the population are of Lao ethnicity, but with minorities included, Lao PDR is home to a total of 49 ethnic groups.
The Lao PDR enjoys a stable political order under single-party rule by the Lao People's Revolutionary Party, and has maintained steady economic growth in recent years. The country is well-suited to hydropower generation, and many hydropower dams have been built, enabling the Lao PDR to earn foreign revenue through power exports. Over the 2000-2011 period, Japan was only the Lao PDR’s seventh largest foreign direct investment partner on a cumulative basis. Following the 2011 flood damage in Thailand, a growing number of companies are expected to look at setting up operations in the Lao PDR in a ‘Thailand+1’ move. The Lao PDR’s attractions in terms of an investment destination include a cheap labor force, a population that understands Thai, and pro-Japanese sentiment. Government procedures can, however, be time-consuming, and there is room for further improvement in business conditions.
Amidst growing Japanese business interest, the Lao PDR Prime Minister Thongsing Thammavong paid a working visit to Japan over 14-18 March at the invitation of the Japanese government. I joined a government party including Minister of Planning and Investment Somdy Douangdy and Minister and Head of Government's Office Sinlavong Khouphaythoune, five deputy ministers and 20 young Lao entrepreneurs that left by government plane from Vientiane.
During his visit, Prime Minister Thongsing held summit talks with Prime Minister Noda and exchanged views with Diet members, representatives from the Chamber of Commerce and Industry of Japan and Nippon Keidanren, and the head of the Japan International Cooperation Agency (JICA), etc.
At the summit talks, Prime Minister Noda said that Japan wants to contribute to The Lao PDR's development also via private-sector investment in mining, electric power, agricultural and other industries in which The Lao PDR has potential, and will utilize official development assistance (ODA) to provide indirect support to investment by Japanese corporations, including small and medium enterprises (SMEs). He also expressed his expectation of further exchange on the tourism front this year, which is Visit Laos Year, through the operation of charter flights and so on. In response, Prime Minister Thongsing noted that private investment will be vital to The Lao PDR’s economic development, and said that he would work to promote more typically high-quality and reliable investment from Japan. He also said that he would endeavor to promote tourism and cultural exchange to increase friendship and mutual understanding between the two countries.
At the summit, the two leaders also signed an Exchange of Notes on the Southern Region Power System Development Project (for a maximum of 4.173 billion yen). Japan suspended project-type yen loans to The Lao PDR back in 2004, so this project represents the first loan following Japan’s decision to relaunch these loans for the first time in seven years. Laos is blessed with an enormous amount of usable water, but because the distribution network is underdeveloped, it has long been impossible to distribute power among regions. As a result, while power is exported to Thailand, domestic power has not been able to be supplied to the provinces of Khammouane and Savannakhet, which instead have had to import power from Thailand at higher prices. There is also concern that these provinces might suffer power shortages by around 2015. The Southern Region Power System Project will build two new 115kV transmission lines across the approximately 200 kilometers from the Pakbo substation in the south to the Saravan substation. This is expected to make a major contribution to linking up The Lao PDR’s domestic bulk power system. Implementation of this project in the south should stabilize the domestic power supply and promote the electrification of the southern provinces, as well as helping to promote future investment and industrial stimulation there.
The summit saw an exchange of notes in relation to non-project grant aid to help prevent flooding, and Prime Minister Thongsing also asked for financial assistance for expansion of the Nam Ngum No. 1 Power Plant, industrial park development, follow-ups to the master plan for the development of Vientiane City, expansion of the Wattay Airport terminal, SME financing and the Sekong bridge. It was extremely significant for such a request to be made directly from the Lao PDR leader to the Japanese leader.
A Lao investment seminar was held at JETRO on 16 March with the participation of Prime Minister Thongsing and Minister of Planning and Investment Somdy Douangdy, with many Japanese firms attending. The seminar highlighted the way in which factors such as ongoing yen appreciation, the floods in Thailand and the raising of the minimum wage there to 300 baht are rapidly increasing interest in The Lao PDR. In my own presentation, I showed pictures of current conditions in The Lao PDR and outlined the attractions of the country as well as the challenges it faces. When the first Lao PDR investment seminar was held in Tokyo a decade ago, there was a dismal show of only around 30 people, most of them Japanese and Lao PDR government officials, in sharp contrast to the enthusiasm for last month’s event, for which all places were reserved before the cut-off date.
On 17 April, the Kawasaki Chamber of Commerce and Industry invited Deputy Prime Minister Somsavath Lengsavad along to another Lao investment seminar. On the same day, a memorandum of understanding was signed between the Kawasaki Chamber of Commerce and Industry and the Lao National Chamber of Commerce and Industry on promoting mutual exchange and cooperative ties. A business-matching meeting between Japanese and Lao companies was also held for the first time, making for a very lively day for all concerned.
(original article : Japanese)