Why Vietnam should be concerned about Laos’ economic crisis – The Diplomat

Laos before one of the worst economic crises in years. inflation last month hit This is a 22-year high of 23.6 percent, according to official reports. Consequently, the prices of fuel, gas and gold increased by 107.1%, 69.4% and 68.7%, respectively, compared to the price in June 2021. Long queues at gas stations veins is no longer a rarity, which in turn has hampered the country’s recovery from the COVID-19 pandemic. The value of the local currency, the kip, has dropped from $9,300 in September 2021 to around $15,000 today. With only $1.2 billion in gold reserves, Laos is on the verge sovereign bankruptcy as the state is unable to meet its debt obligations, which require it to pay $1.3 billion a year until 2025. Of the $14.5 billion foreign debt of Laos, about half must to China to finance projects, including recently open The $5.9 billion Sino-Lao Railway connecting Vientiane to the Chinese border.

Against the backdrop of the crisis, Vietnam and Laos this month celebrated 60th anniversary of the establishment of bilateral relations (1962-2022) and 45th anniversary of the signing of the Treaty of Friendship and Cooperation (1977-2022). leaders or both countries confirmed their “special relationship”, that Vietnam and Laos are not just neighbors, but “brothers and comrades” engaged in the common cause of national and socialist construction. Nguyen Phu Trong, General Secretary of the Communist Party of Vietnam described Vietnamese-Lao ties are considered “priceless” and “one of a kind” in world history. Lao vice president Bauntong Chitmani said Vientiane was determined to develop “the all-encompassing unity of the great Vietnamese-Lao relationship.”

There is no doubt that Laos is Vietnam’s most trusted friend. Indeed, Laos soles treaty ally that Vietnam has had since the end of the Cold War, despite official policy of non-alignment. The Vietnam-Laos Treaty of Friendship and Cooperation serves ridge alliance in which Laos can call for military support of Vietnam when there is a threat to its security.

Since the signing of the treaty in 1977, Hanoi counts the alliance is vital to defending Vietnam from afar and negating the influence of other rivals in Laos. This mindset is rooted in Vietnam’s geographic vulnerability. Laos borders Vietnam’s narrowest point is only 40 kilometers long, which foreign enemies can use to cut the slender nation in half. Vietnam also understands that if China could control Laos, Vietnam would be surrounded by Beijing on three fronts: the South China Sea to the east, the Sino-Vietnamese border to the north, and Laos and Cambodia to the west. Thus, the survival of Vietnam is tied to the survival of Laos. If Vietnam claims the media Well in short: “The security of Laos is the security of Vietnam.”

For this reason, Vietnam did its best to keep Laos under its tutelage in the face of objections from China. During the Vietnam War, despite the fight against the common enemy of the United States, Vietnamese and Chinese advisers innings for influence in Laos. After 1975 Vietnam relied on Soviet military and economic assistance to strengthen its dominance in Indochina at the expense of China. Shortly after the Chinese invasion of Vietnam in February 1979, cents troops to the Lao-Chinese border after the Lao government reported that China had invaded a small section of its northern border. Hanoi would station over 40,000 troops in Laos in the following years to protect his ally from China and internal unrest while he waged a counter-insurgency war against the Khmer Rouge in Cambodia and prepared for another Chinese invasion along the Sino-Vietnamese border. Throughout the 1980s, Vietnam was unquestionably Laos’ main security. as well as economic patron.

Do you like this article? Click here to sign up for full access. Only $5 per month.

The end of the Cold War and normalization Lao-Chinese relations in 1991 became a new challenge to Vietnam’s dominance in Laos as Vientiane was more open to Chinese investment. In a low security threat environment competition between Vietnam and China over Laos moved to the economic sphere, forcing Laos to play a cautious balancing between its military ally Vietnam and its now most important economic partner, China. No wonder Vietnam perceived Chinese investment in Laos as a threat to them undermine Hanoi’s economic position in the country.

As China sought to expand its influence in Southeast Asia through the Belt and Road Initiative, Vietnam saw his position in Laos is further deteriorating. Many Lao politicians, despite being trained in Vietnam, Attention China as a favorite model of economic development. Vietnam has continuation to help Laos to the best of its ability, such as donation laos new national assembly house building new public park in Vientiane and financing a number of cross-border infrastructure projects such as the Hanoi-Vientiane Expressway and the Vientiane-Vung-Ang Railway, a direct response to the Laos-China Railway. Hanoi even wanted helping Japan build infrastructure connecting Vietnam and Laos to compensate for its weaker economic power vis-à-vis China. However, the long-term trend is clear. Vietnam dismiss his power over Laos.

To further counter China’s attempts to drive a wedge between Vietnam and Laos through economic gains, Hanoi stressed the importance of defense cooperation between the two countries. He wants to demonstrate that Vietnam is still Laos’ most important security guarantor, even though it is no longer the country’s most important economic partner. At a recent high-level meeting between the Ministries of Defense of Vietnam and Laos on bilateral relations, both sides confirmed that “under any circumstances, the military of the two countries will stand shoulder to shoulder, overcome all challenges and hardships and protect the revolutionary achievements of their predecessors.”

Lao Major General. Khamlieng Uthakaison stated that Laos will always cherish “great friendship, special unity and comprehensive cooperation” with Vietnam and believed that such force would “repel all conspiracies dividing the two countries”. Vietnamese Prime Minister Pham Minh Chin again underlined bilateral defense cooperation as an important pillar of Vietnamese-Lao relations and a priority for Hanoi. Chin added that the recent economic difficulties due to inflation and exorbitant fuel prices, as well as the uncertainty of the international environment, should guarantee closer cooperation so that both Vietnam and Laos can actively cope with possible negative developments. state media of Vietnam noted that continued cooperation led by two communist parties is vital to the longevity and prosperity of the Vietnamese and Lao peoples.

However, the current economic situation in Laos could complicate Hanoi’s efforts to limit Beijing’s influence. Vietnam could keep Laos under its wing only as long as Laos kept social and political stability and China does not use the last word in Laos survival economy, both of which are under threat due to the economic crisis. Hanoi tried to help alleviate the economic burden of Laos. increase their investments by 33 percent between 2020 and 2021. For the first three months of 2022, bilateral trade graph 19 percent compared to the same period in 2021. Hanoi also noted that Vietnamese businesses in Laos have paid more than $1 billion in taxes to Vientiane over the past five years. However, it is worth remembering that no matter how much Vietnam invests in Laos, it will not be able to beat the price of China. Vietnam’s money is also not a silver bullet for solving Laos’ economic problems if the country cannot deal with endemic corruption and mismanagement.

Thus, the outcome of the economic crisis may decide whether Laos can maintain a balance between Vietnam and China. With a low security threat, the Lao leadership may decide that economic survival is more important than security, and that the country needs economic assistance from China to maintain domestic stability in the short term. In the long term, China could become Laos’ main defense. as well as an economic guarantor if such an arrangement strengthens Chinese influence in Indochina at the expense of Vietnam and relieves Laos of the need for balancing, thereby ending the Vietnamese-Laotian military alliance. It is important to note that as a one-party communist state, China can also ensure the survival of the Lao communist regime, like Vietnam. didto smooth out the transition.

As well as long before the COVID-19 pandemic, the rise of China has undermined Vietnamese influence in Laos. Further weakening of the Lao party-state would only allow China to use its favorable position of power towards Vietnam and finally win the country over to its side, after having successfully done so with Cambodia. The last time China and Vietnam fought a major ground war was in 1979; I was talking about Cambodia. The next conflict between China and Vietnam may not be over the South China Sea, but over Laos.