🇱🇦 Letter from Laos: Development, Interrupted

Hello friends!

I’ve always wanted to send a weekend edition of Dari Mulut ke Mulut, but email orthodoxy says no way on a Saturday. But now time is less a flat circle and more of the shape of a particularly unsatisfying Twistie and something’s up with where Gmail is sticking newsletters, so let’s experiment!

This dispatch from our Friend In Laos is a fantastic start. How does time look like in Laos now, which has so far avoided the public health crises we’ve seen elsewhere in the region but certainly isn’t immune to the economic shocks?

We’ve heard a lot about ‘debt-trap diplomacy’ and for the part of the world we cover, Laos is a stand-out. For the 7 million who call Laos home, the story is a bit more complicated than that.

Read on and please share!

See you MondayErin Cook

Development along the mighty Mekong is changing the face of Laos (c/o Mikel Lizarralde)

Laos is always quiet, but these days the gorgeous north of the country is much quieter than usual. There are no planes streaking in with foreign tourists. Motor traffic is gone. On the main drag of Luang Prabang, the country’s top tourist attraction, most businesses have gone into hibernation. Tour guides sound startled when you get them on the phone. “I haven’t done a tour in six months,” one told me. He’s thankful for the odd bit of work.

Yet throughout the north there is one busy sound you will notice. It’s the sound of heavy machinery.

Just upriver of Luang Prabang is a soaring, state-of-the-art bridge crossing the Mekong. Massive cranes, trucks and ships, all marked in Chinese, are laying the final touches. The China-Lao railway, according to official figures, is 90 percent done and on track for completion in 2021. Laos couldn’t be much more thankful for it. It is one of the only things going in the reeling national economy.

Six months into the pandemic, Laos’ borders remain shut to almost all visitors. Whatever one makes of the official coronavirus numbers, it is clear the country has avoided major breakouts. Now the problem is the economy. Before COVID-19 Laos had been speeding along at 6-8 percent annual growth. Border closures have tripped that up, damaging all sectors but taking a particular toll on the fast-growing tourism and hospitality industries. What was once rapid development now looks like development disrupted.

Consider Luang Prabang, a UNESCO Heritage site that gets half a million visitors each year. Or Vang Vieng, a onetime partier haven that’s more recently become a magnet for Chinese and Korean eco-tourists. There is no energy on their streets; the visitors are gone and the storefronts have shut up accordingly. Local Lao kids are cruising about, enjoying the towns to themselves. Those who are a bit older have families to feed. They fret over the drying-up of their incomes.

There are real stakes here. Anyone who lives in this country knows how crucial these jobs are to rural youth and especially the still-small middle class. Take it from the World Bank:

“A sharp drop in the performance of the travel, tourism and hospitality sectors – which account for 11 percent of total employment and 22 percent of employment in urban areas – has caused widespread job losses. Between 96,000 and 214,000 additional people are estimated to fall into poverty as a result of the pandemic, jeopardizing past gains.”

Contrast that picture with that of the sparkling new rail line. Racing all up and down the country’s northwest, seemingly around every turn in the mountain passes, is China’s state-of-the-art project. It’s meant to propel trains to Thailand at 160 kilometres per hour. Its raised tracks sit on top of a broad, cement pyramid. Its sides are shingled with bright-green turf. Crossing the Mekong it is buttressed by enormous T-beams.

It is a lovely piece of engineering. But in a country where millions of people rely on dirt roads and wooden bridges, it makes a jarring and dissonant sight. It looks like someone picked up a piece of Munich and dropped it into Laos.

It is no secret that Laos has, in recent years, profited handsomely from megaprojects like these. The first were in mining and dams; now they’re in rail. China was at first one among many foreign investors (Japan, Korea, Thailand et al.); now it’s dominant. These represent huge capital injections for a small economy. They give heft to the headline GDP numbers.

But there is a flip side. In the process, Laos has accrued a scary amount of debt. Bills will soon come due. Moreover, the highest-value jobs on the megaprojects have gone not to Lao, but foreign experts.

There is a yawning gap between that world and that of Laos’ still-forming middle class. Their incomes are far more dependent on local businesses in industries like hospitality, tourism and manufacturing — the ones that need open borders to thrive.

What does this look like? Friends are getting laid off. Others are lucky enough to have employers who make up odd jobs for them. In my part of town, the air is usually buzzing with the sounds of construction. Now those new homes and restaurants are sitting there half-built.

Before the pandemic car sales were rippling — particularly the pickups so popular in Thailand. Sales have dropped, says a friend in the business. People are missing payments; cars are getting repossessed.

Lao people seem to me a rugged, resilient sort. In good times and bad, they are anchored in family and believe in taking care of each other. Already Lao are adapting by borrowing from family, eating cheaper food and selling stuff off.

This crisis will put everyone’s resiliency mechanisms to the test, from the top ranks in Vientiane right down to the village chief level and family home.