Laos country brief
Australia and Laos marked the 60th anniversary of bilateral relations in 2012. Australia is one of Laos's longest-standing regional partners.A number of activities were undertaken to mark this significant anniversary. These included a fun run over the Australian-built and funded Friendship Bridge linking Laos and Thailand; the holding of a bilateral business forum; the publication of a book about the bilateral relationship; and several concerts. Today, Australia and Laos share a strong and diverse relationship encompassing deepening economic ties, community links, education and development assistance. Australian businesses are significant investors in natural resource development in Laos. The Lao community in Australia numbers around 12 000.
There have been a number of recent high level visits in both directions. The Minister for Foreign Affairs, Senator the Hon Bob Carr, travelled to Laos from 17-20 February 2013. Senator Carr met the Lao Prime Minister, Mr Thongsing Thammavong, the Deputy Prime Minister and Minister for Foreign Affairs, Dr Thongloun Sisoulith, and the Planning and Investment Minister, Mr Somdy Douangdy. Senator Carr also met Australian business leaders, representatives of health and non-government organisations, and made a number of announcements:
- Australia supports clearance of landmines and unexploded ordnance in Laos
- Australia congratulates 70 Laos-Australia scholarship awardees
- Australia helps reduce blindness in Laos
- Australia supports trade sector development in Laos
- Australia-Laos talks
The Prime Minister, the Hon Julia Gillard MP, travelled to Laos to attend the 9th Asia-Europe Meeting in Vientiane in November 2012. The Lao Deputy Prime Minister and Foreign Minister, Dr Thongloun Sisoulith, visited Australia in February/March 2012. The Lao Minister of Health visited Australia to attend the Malaria 2012 conference in November 2012 and the Lao Minister for Education and Sports visited Australia in November 2012 to learn about Australia's education system.
The President of the Lao National Assembly, Ms Pany Yathotou, led a parliamentary delegation to Australia from 13-17 August 2012, who visited as guests of the Australian Parliament. The Vice-President of the Lao National Assembly, Dr Xaysomphone Phomvihane, visited Australia in November 2011, and the Lao Vice Minister of Finance, Madame Viengthong Siphandone, led a delegation to Australia in May 2011, with a focus on natural resource revenue management.
The then Deputy Speaker of the House of Representatives, Ms Anna Burke, and the Deputy President of the Australian Senate, Mr Stephen Parry, attended the 7th Asia-Europe Parliamentary Partnership Meeting (ASEP-7) in Vientiane in October 2012. Senator Claire Moore led a parliamentary delegation to ASEAN countries including Laos in August/September 2012.
Development cooperation has been a feature of the bilateral relationship for almost six decades. In 2012-13, Australian Government overseas development assistance to Laos will be an estimated $48.7 million. AusAID's bilateral Laos country program focuses on education, inclusive growth through trade and investment reform, and rural development. Australia is one of the largest bilateral aid donors to Laos.
The Australian Development Scholarships program currently offers between 40 to 50 scholarships to Lao students to study in Australia each year. There are more than 1000 Lao alumni of the program, many of whom are now in positions where they can actively contribute to development. Australian Development Scholarships provide educational, research and professional development opportunities to support growth in the region and to build enduring links at the individual, institutional and country levels.
The Australian Government actively pursues initiatives designed to promote human rights in Laos, including a regular bilateral human rights dialogue. The dialogue provides a forum for open and constructive discussion of human rights issues of interest to both countries. The third dialogue was held from 24-25 April 2012 in Vientiane. Previous dialogues took place in 2006 and 2009
To underpin this bilateral dialogue, the Australian Government is providing funding in 2012-2013 to support the human rights agenda of the Lao Ministry of Foreign Affairs, including in relation to raising awareness and capacity within Laos of core human rights conventions and laws.
Australia funds other projects aimed at the promotion of human rights in Laos under the Human Rights Grants Scheme (HRSGS). In 2011, the Lao local NGO, PADETC (Participatory Development Training Centre) received funding for a project focused on using the media to assist young people become rights advocates on a wide range of important community issues.
Laos is the only land-locked country in mainland South-East Asia and is bordered by China, Vietnam, Cambodia, Thailand and Myanmar. Its total land area, much of which is mountainous and densely forested, is approximately 237,000 square kilometres (roughly equivalent to the State of Victoria). The Mekong River, almost half the length of which flows through Laos, forms most of the border with Thailand. Large population centres (including Vientiane, Luang Prabang, Pakse and Savannakhet) lie on the Mekong.
The population of Laos is approximately 6.3 million people, and is diverse, with 49 broad ethnic groups recognised by the Government of Laos, and four major linguistic groups. The largest language group, the Lao-Tai, consists of eight ethnic groups and forms around 35 per cent of the total population.
The official language is Lao, a tonal language similar to Thai. Among younger Lao, English is now the most widely-spoken second language.
Theravada Buddhism, the dominant religion of Laos, is followed by approximately 60 per cent of the population, and a higher proportion of members of the Lao-Tai language ethnic groups. Animism is still widely practised among a number of minority groups, especially in the more remote rural areas.
Political and social overview
Laos became the Lao People's Democratic Republic (Lao PDR) on 2 December 1975 following the abdication of the King, after many years of civil war and political instability.
The Lao PDR is a Marxist-Leninist state ruled by the Lao People's Revolutionary Party (LPRP). The eleven-member Politburo of the LPRP, drawn from its Central Committee, is the key decision-making body. A National Assembly, which is elected by the people from a list of candidates approved by the Party, meets twice a year and is responsible for scrutinising proposed legislation.
Since 1986 Laos, in line with its larger socialist neighbours, has promoted gradual economic liberalisation through its New Economic Mechanism (NEM). In doing so, the government has moved from a centrally planned economy to a more market-oriented system.
In August 1991, the National Assembly adopted a new constitution which formalised the establishment of a market-oriented economy, guaranteed the right of every Lao citizen to own property, and provided greater protection for foreign and domestic investment. Indicators of the more open society that has emerged over the past decade include freedom to travel, choice of employment, and the development of a private sector.
The ninth Party Congress took place in March 2011, with National Assembly elections held in April 2011. The National Assembly convened on 15 June and re-elected Mr Choummaly Sayasone for a second term as President, with Mr Bounnhang Vorachit returned as Vice President and Mr Thongsing Thammavong as Prime Minister. The four Deputy Prime Ministers, including Minister of Foreign Affairs, Dr Thongloun Sisoulith, were all reappointed. Mrs Pany Yathortou was re-elected as President of the National Assembly. Changes to the cabinet included the appointment of Mr Kampane Philavong as Minister for the Interior (a new portfolio) and the appointment of a new Minister for Planning and Investment, Mr Somdy Douangdy (former Minister of Finance).
Head of State and Government list
- H E Mr Choummaly Sayasone
- Vice President
- H E Mr Bounnhang Vorachit
- Prime Minister
- H E Mr Thongsing Thammavong
- Deputy Prime Minister and President of State Control Authority
- H E Major General Asang Laoly
- Deputy Prime Minister and Minister of Foreign Affairs
- H E Dr Thongloun Sisoulith
- Deputy Prime Minister and Minister of National Defence
- H E Major General Douangchay Phichith
- Deputy Prime Minister
- H E Dr Somsavat Lengsavad
- President of Government Inspection Committee, Head of Anti-Corruption Organisation
- H E Dr Bounthong Chitmany
- Minister of Education and Sport
- H E Dr Phankham Viphavanh
- Minister of Public Security
- H E Mr Thongbanh Sengaphone
- Minister of Labour and Social Welfare
- H E Mrs Onechanh Thammavong
- Minister of Justice
- H E Dr Chaleun Yiapaoheu
- Minister of Energy and Mines
- H E Mr Soulivong Daravong
- Minister of Agriculture and Forestry
- H E Mr Vilayvanh Phomke
- Minister to the Government Office
- H E Dr Sinlavong Khoutphaythoune
- Minister of Industry and Commerce
- H E Dr Nam Viyaketh
- Minister of Public Works and Transport
- H E Mr Sommad Pholsena
- Minister of Planning and Investment
- H E Mr Somdy Douangdy
- Minister of Information, Culture and Tourism
- H E Prof Dr Bosengkham Vongdara
- Minister of Public Health
- H E Prof Dr Eksavang Vongvichit
- Minister of Interior
- H E Mr Khamphanh Philavong
- Minister of Science and Technology
- H E Prof Dr Boviengkham Vongdara
- Minister of Natural Resources and Environment
- H E Mr Noulinh Sinbandith
- Minister of Post Telecommunications
- H E Mr Hiem Phommachanh
- Governor of Bank of Lao PDR
- H E Mr Somphao Phaychit
National Assembly (Seventh Legislature)
- Mrs Pany Yathotou
- President of Supreme Court
- Mr Khamphanh Sitthidampha
- Supreme People's Prosecutor
- Mr Khamsane Souvong
Members of the Politburo of the Lao PDR (in order of precedence)
- Mr Choummaly Sayasone
- Mr Thongsing Thammavong
- Mr Bounnhang Vorachit
- Mrs Pany Yathotou
- Mr Asang Laoly
- Dr Thongloun Sisoulith
- Lieutenant General Douangchay Phichith
- Mr Somsavat Lengsavad
- Dr Bounthong Chitmany
- Dr Bounpone Bouttanavong
- Dr Phankham Viphavanh
The most politically important of Laos's bilateral relationships is with Vietnam. The 1977 Treaty of Friendship and Cooperation between the two countries covers defence arrangements, delineation of the border and Vietnamese economic assistance to Laos.
China's profile and influence in Laos is rising. As with Vietnam, close relations with China reflect ties between the countries' Communist Parties, as well as China's proximity, size and regional importance.
Thailand is another important bilateral partner, due to proximity and cultural and linguistic affinity, as well as strong trade and investment links. Parts of the border with Thailand are still undergoing formal demarcation.
Laos was admitted to ASEAN (the Association of South-East Asian Nations) in July 1997, and was Chair in 2004-05. Laos is a member of the Mekong River Commission and hosts its headquarters.
On 2 February 2013, Laos became the 158th member of the World Trade Organization (WTO). Australia supported Laos's bid to join the WTO, serving two terms as Chair fo the Working Party for Laos's accession. Australia also provided technical assistance during negotiations. The WTO )General Council passed Laos's accession package on 26 October 2012. Laos applied to join the World Trade Organization (WTO) in 1997. The first meeting of the WTO Working Party on the Accession of Laos was held in October 2004, when examination of its foreign trade regime commenced. The seventh Working Party meeting took place in June 2011, in the margins of which Australia signed an agreement concluding bilateral market access negotiations related to Laos' accession.
Performance and outlook
Laos is classified as a Least Developed Country (LDC) and relies heavily on donor assistance. It has a target date of 2015 to achieve the Millennium Development Goals, and aims to graduate from LDC status by 2020. The World Bank has recently upgraded the status of Laos from a low income to a lower middle-income country.
Real GDP growth has averaged more than 7.5 per cent since 2004. Particularly strong growth has been maintained over the past decade, driven largely by the resources sector. The IMF forecasts economic growth of 8.1 per cent in 2013. Per capita average annual income was around US$1,355 in 2012. The resource sector (mining and hydropower) and related services account for more than half of total investment and exports.
The economy is dominated by subsistence agriculture (on which 80 per cent of the population relies), and the cash economy has made little inroad into remote areas. Notwithstanding significant improvements in recent years, infrastructure constraints limit the efficiency of agriculture.
Lao taxation revenues had until 2007 been absorbed mainly by provincial governments. Compared with other developing countries, the national government has a low ratio of revenue to GDP. The inflation rate, which reached a peak in 2011, subsided in 2012. Laos's inflation rate is affected in part by Laos's reliance on food imports from Thailand.
Laos is increasingly open to international trade. The country is on track to reduce its tariffs on imports from other ASEAN nations to less than five per cent, as required under the ASEAN Free Trade Agreement, and tariffs on most product groups for trade with non-ASEAN countries are less than 20 per cent. However, the regime lacks transparency, and in practice trade and investment are more heavily regulated, including through import and export licensing. A Law on the Promotion of Investment approved in 2009 is delivering some benefits to foreign investors by facilitating, standardising and streamlining application processes, although its implementation is not always comprehensive.
Laos has a number of economic advantages. It is situated in an economic growth area, sharing borders and common interests with Thailand, Vietnam, Cambodia and China. While the domestic market is very small, millions of people within 100 kilometres of Lao borders should generate new market opportunities as transit routes are further developed. Laos is well-endowed with mineral resources.
Further reforms will be necessary if Laos is to achieve its goal of graduating from LDC status by 2020. Stronger private sector growth should follow as land titling – and the rule of law more generally – are strengthened. Broadening the country's economic base, through accelerated private sector growth in the non-resources sector, is a central policy priority of the Lao Government.
Bilateral economic and trade relationship
Australia's total merchandise trade with Laos stood at $80 million in 2012, with Australian goods exports to Laos valued at $36 million. Major Australian exports included pumps for liquids and parts, taps, valves, civil engineering equipment and parts. During 2012, merchandise imports from Laos, dominated by gold and coffee, - totalled $44 million.
The dynamo in the economic relationship is investment in mining. An agreement on the promotion and protection of investment between Australia and Laos has been in place since 1995 and a number of Australian companies have mining investment and exploration interests in Laos.
Australia's trade and investment strategies
As part of its efforts to assist growth in the Lao economy Australia has, since July 2003, provided duty-free and quota-free access for Lao goods exported to Australia. Australia also supported Laos' accession to the WTO, including through training Lao officials for WTO accession. In June 2011, Australia and Laos concluded bilateral negotiations on market access, in support of Laos' WTO accession bid.
2009 marked the 15th anniversary of the Australian-built and funded 'Friendship Bridge' linking Laos and Thailand, which opened in 1994. The bridge remains a focal point for trade and a symbol of Australian commitment to Laos and its integration with other economies. On 5 March 2009 a Lao-Thai railway link was opened on the bridge, further enhancing accessibility to and from Laos.
Australia and Laos are parties to the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) which entered into force on 1 January 2010 in Australia and 1 January 2011 in Laos.
Foreign investment in extractive industries in Laos was impeded by the Lao Government's imposition in 2007, and reimposition in early 2012, of a moratorium on the issue of mineral exploration licences.
Donor-funded projects offer significant commercial opportunities. Multilateral agencies such as the World Bank and ADB are active in education, health, energy, agriculture and other infrastructure development. Opportunities include advisory consultancies, tenders and the supply of equipment.
The private education market in Laos is very small but growing, and Australia is a favoured destination for those Lao students who can afford to study abroad.
Through its Lao-registered subsidiary, Phu Bia Mining (PBM), PanAust Limited is the largest Australian investor in Laos. The company's flagship Phu Kham Copper-Gold Operation commenced production in 2008. Annual production at the Phu Kham Operation is around 65,000 tonnes of copper in concentrate, 55,000 ounces of gold and 500,000 ounces of silver. The Ban Houayxai Gold-Silver Operation, located around 25 kilometres west of the Phu Kham Operation, commenced production in 2012 and is forecast to produce 100,000 ounces of gold and 700,000 ounces of silver annually over a nine-year mine life. PanAust has other prospective exploration targets within its 2,631 square kilometre contract area in Laos. PanAust is a major contributor to the Lao economy through direct investment, employment, royalties, taxes and internationally-awarded community development initiatives.
ANZ Vientiane Commercial Bank (ANZV) commenced operations on 24 September 2007 after ANZ acquired a 60 per cent stake in the Vientiane Commercial Bank and majority representation on the board of the joint venture. ANZ has since expanded its operations to a second office in Vientiane and a third in Pakse, and is also expanding its network of ATMs throughout Laos. ANZ moved to 100 per cent ownership in August 2010.
Australia's investment interests in Laos continue to diversify, including into areas such as legal services, tourism and wine imports.
Updated February 2013