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Development Flourishing in Landlocked Laos
by Miyagawa Choshun
Tourism & Hotels
Laos expects 500,000 tourist arrivals by year's end, a 25% increase over 1996. (Tourist arrivals in 1990 numbered a mere 14,400.) In dollars, a half-million tourist arrivals can produce over US$37 million in revenue; 1996 revenue was US$31 million; 1995 revenue was US$24 million. At last count, hotels and guesthouses number 3,948. Typically, major investments in hotels are situated in Vientiane (Novotel and Felix Hotels & Resorts) and Luang Prabang (M. Grand Hotel Co., Ltd., Bangkok, with a chain of eight hotels stretched along the Mekong from Yunnan to the Mekong Delta). Incidentally, Luang Prabang was designated a World Heritage Site last year. In this sector, last year Laos saw the launch of six foreign-owned projects worth US$217 million. The government has slated "Visit Laos Year" for 1999, by which time the new international terminal will be finished in Vientiane. (A much-appreciated US$2 million gift from Thailand, a new international terminal opened in Luang Prabang in mid-January.)
Land routes
The Friendship bridge between Nong Khai and Vientiane was officially opened three years ago this past Songkran/Pii Mai. Now US$40 million will be spent building a rail line from the center of the bridge into Vientiane itself. The line on the Thai side is almost complete. Japan is making US$56 million available in grants (to Laos) and loans (to Thailand) to build a second international bridge across the Mekong between Mukdahan and Savannakhet, the second largest city in Laos. Savannakhet is the major Laotian city at the western end of the Route 9 corridor to Vietnam. Route 9, under the priority of ADB (Asian Development Bank), will promote trade between northeastern Thailand and Laos and Vietnam. This overland connector to the deep-sea port at Danang will provide access to markets in East Asia and the Pacific. ADB is also looking into local benefits from the so-called Economic Circle Cooperation. The plan would link northeastern Thai provinces bordering Laos and Cambodia with neighbors in southern Laos and northern Cambodia. Similar overland schemes are already in place linking northern Laos with northern Thailand, northeastern Burma and northern Vietnam.
Aviation
Lao Aviation has scheduled flights to Kunming (once weekly), Hanoi (twice weekly), Ho Chi Minh City (once weekly), Phnom Penh (twice weekly), Bangkok (six times per week), Chiang Mai (twice weekly). Flights to Rangoon (two per week) are scheduled to resume this June or July. Air traffic rights are already in place with Singapore and Kuala Lumpur, and are pending government approval with Hong Kong and Taipei. TG (Thai Airways) flies daily to Vientiane. MAS (Malaysian Air), Silk Air, Vietnam Airlines and China Southern Air have flights too, most more than one per week. (Two and three years ago nearly half of these flights were just being dreamed about.)
Electricity
Laos is seen as the main source for electricity for countries in the lower Mekong River basin. The Mekong River Commission proposes linking the four countries in the lower Mekong--Vietnam, Laos, Thailand and Cambodia--early next century. First, a 500 kilovolt transmission line would export electricity from southern Laos to Ubon Ratchathani in Isan. A second line from southern Laos would export electricity to Pleiku in Vietnam. Central generating plants in Laos would export electricity to Mukdahan. The same plants would export electricity to Ha Tinh in northern Vietnam. With a population approaching five million, Laos is rich in water resources and has the potential to produce 20,000 MW of hydro-electric power. Across the border, Thailand has a population of 60 million and an economy with fast increasing needs for power. As a result, on June 4, 1993, Thailand and Laos signed an agreement under which Thailand will buy 1,500 megawatts (MW) of power from Laos from the year 2000. Under this agreement four projects have been launched and are now in various stages of development representing a combined capacity of 1,540 MW. Then on June 19 last year Thailand signed a new memorandum to double its power purchase from Laos to 3,000 MW. Since 1988, foreigners have underwritten commitments worth US$5 billion in Laos, three-quarters of that going into hydroelectric power projects. Incidentally, local demand for electricity is four times what it was in 1995.
Telecommunications
It is the Shinawatra Group which will be allowed to exclusively develop and co-invest in a telecommunications service in Laos. October saw the signing of two agreements for exclusive rights--barring satellite communication. The first agreement requires Shinawatra to develop a telecommunication service in Laos while the second requires both sides to establish Lao Telecommunication Co. as a joint venture company to operate both domestic and international telephone services. The investment is expected to peak at US$400 million. The construction of a satellite earth station is almost complete as part of development of the telecommunications sector.
ASEAN and AFTA
Laos will join ASEAN in July; the country's trade structure has already gone a long way to conforming with requirements of AFTA--Asean Free Trade Area. More than 50% of its foreign trade is with ASEAN member countries and trade with Thailand accounts for 67% of Laos' imports (8.17 billion baht in 1995) and for 30% of its exports (2.11 billion baht in 1995). Last year, Laotian exports to Vietnam reached US$118 million, while imports totaled US$18 million (Vietnam is the only country with which Laos has a trade surplus). Because every major Thai bank has set up shop in Vientiane to support/benefit from all this intra-region trade, experts say Laos is "over banked." Still, per capita income nearly trebled from US$135 in 1988 to US$350 in 1996 and the economy steamed ahead with 7% growth last year. (With Cambodia, Laos will host the Mekong River Commission "secretariat" on a five-year rotating basis beginning two years from now.)
Fiscal prudence
Year-on-year inflation at the end of December 1996 was 7.3% compared with 25.7% a year earlier, and the IMF estimates the government will keep inflation to 8% this year. Most state firms have been privatized, virtually all sectors are open to private businessmen, and Laos boasts one of the most liberal foreign investment laws in the region. The government has achieved revenue in excess of current expenditures for several years. Revenue for fiscal 1997 is expected to reach US$270 million. Revenue for 1996 was about US$230 million.