ASIA: Gentle Laos Favourite Among Mekong Would-Be Tigers

By IPS Correspondents Reprint | | Print |

Leah Makabenta

BANGKOK, Feb 27 1995 (IPS) - Laos lacks a developed legal framework for investment, but even that is being looked at as an advantage for the gentle, unhurried, Indochinese nation.

At recent meeting on the Greater Mekong Subregion that includes Burma, Cambodia, Vietnam, Thailand and the southern Chinese province of Yunnan, most participants had only positive comments for Laos — the landlocked nation once considered the laggard in mainland South-east Asia.

Experts at the meetings held at Thailand’s eastern Laem Chaebang seaport said Laos is making steady but sure progress in opening up its economy.

Part of the reason is that during Laos’s period of central planning, the private sector was allowed to operate and large- scale collectivisation did not take place. The experts rated Laos as a very relaxed place for doing business, with accessible public officials.

“Laos is different from other countries in that it is not greedy but determined to develop step by step, not in a big rush,” said Virabongsa Ramangkura, an adviser to the Bangkok Bank of Commerce, at the workshop last week.

Thailand hosted the five-day series of investment fora for would-be investors in the so-called Greater Mekong ‘economic hexagon’ — a loose investment and trade cooperation arrangement among countries bordering the River Mekong.

The workshops marked the beginning of discussions for cooperation among the six countries, said Savit Bhotiwihok, office minister in the Prime Minister’s Office, who opened the sessions.

He said countries of the subregion were headed toward the same goal: developing a system internationally accepted and providing a ‘hospitable’ environment to foreign investors.

But while Thailand as the most developed among the Greater Mekong nations was obviously keen to take centre stage, it had to play second lead to Laos, which was the clear crowd favourite.

Sompop Charoenkul, who was among the many businessmen who attended the crowded meetings, said everything has to be negotiated case by case in Laos, which still has to develop a legal framework for foreign investment.

But even this could be considered an advantage compared to the layers of laws and public entities through which an investor has to negotiate to get project approval in Vietnam, he said.

Workshop panelists said the high expectations of Vietnam as an investment destination are in fact being adjusted to a more realistic level as investors encounter mounting problems.

They said bureaucratic red tape and the exorbitant real estate prices are among the most serious hindrances in doing business there. Complained Integra Group chairman Raymond Eaton: “Land price in Vietnam is anti-foreign investment. It’s a rip-off.”

Nguyen Ngac, vice-chairman of Vietnam’s State Committee for Cooperation and Investment said his country plans to merge various state agencies into a one-stop shop for investors who say they waste so much time at so many ministries.

In comparison, very little obstacles are placed before foreign investors in Cambodia, which has the region’s most liberal investment laws and a very democratic political structure.

Christopher Bruton of Dataconsult said Phnom Penh allows businesses to hire whoever they want with no state interference, unlike other emerging Mekong economies. Firms can also set pay rates in the same way because there is no minimum wage laws.

But Cambodia’s continuing problems with the Khmer Rouge have made its potentials pale in comparison with those of Laos.

Leaune Sombounkhan, vice-chairman of the Laotian Committee for Planning and Cooperation, said the country’s open economic policy has been successful beyond expectation.

“We estimated foreign investment to be a minimum of 120 million dollars by 2000 but committed investment proposals now amount to 200 to 140 million dollars,” he said.

The Laotian official also noted that next-door Thailand had become the country’s most ardent investor, leading interests there with 214 projects worth 518.3 million dollars in end-1994.

Meanwhile, potential investors in China’s Yunnan province face problems similar to Vietnam. Beijing does not want to be a minority partner and requires foreign projects to generate foreign currency and bring advanced technology.

Yunnan officials invited foreign investors to tap the hydropower potential of the province’s many rivers. Yunnan also wants highway and railway links to Laos, Burma and Thailand.

Burmese ambassador to Thailand U Tin Winn seemed to have a harder time making his case as the siege on ethnic rebels by Rangoon troops continued to make news outside Burma.

The envoy tried to dismiss concerns expressed about the safety of a natural gas pipeline from off shore fields across Burma to Thailand’s Kanchanaburi province because of fears of sabotage posed by ethnic rebels. He insisted: “There are no such rebels. They are just ungrouped people who cannot pose such a threat.”

Burma’s military rulers have embarked on a series of economic reforms in the past few years to encourage foreign investment, liberalising agriculture, legalising the border trade with China and Thailand and allowing the establishment of private banks.

And while Glen Robinson, director of the Australia-based consultancy, Asean Focus Group, said communications facilities were seriously lacking and very expensive, he added that some might see this problem as an investment opportunity.

A little more than half of Burma’s total land area is also still covered by forests, and the Burmese ambassador said Rangoon favoured joint investment with state agencies in agricultural projects.