Dialogue on Laos and Vietnam

Ronald Bruce St John and Andrew Wells-Dang | December 28, 2006

Response from Ronald Bruce St John

When comparing the Lao People’s Democratic Republic with the Socialist Republic of Vietnam, one is immediately struck by the socioeconomic differences separating these two Southeast Asian neighbors. Geographically, Vietnam is 40% larger than landlocked Laos and enjoys five times as much arable land, including some of the richest rice-growing areas in the world. With a population of around 85 million people, Vietnam has over 13 times as many people as tiny Laos; and Vietnam’s GDP, in terms of purchasing power parity, is estimated to be almost 20 times larger than Laos.

On the other hand, Laos and Vietnam have marched in political lockstep since the end of the Second Indochina War in 1975 when both countries implemented “socialist” revolutions. Enjoying a close personal relationship before war’s end, the Communist leaderships of Laos and Vietnam maintained their “special relationship” in the postwar period. The late Lao president and Communist leader Kaysone Phomvihane in the colorful language he often employed, once suggested the Laotian-Vietnamese relationship was as close as lips and teeth. But it was never an equal relationship. Vietnam is the traditional patron, with Laos in the subordinate role, seeking political guidance together with financial and military aid from its dominant neighbor to the east.

As Andrew Wells-Dang points out, Vietnam has experienced surprisingly strong economic growth since it concluded a bilateral trade agreement with the United States in 2001. With ratification of the country’s entry into the World Trade Organization (WTO) and the recent U.S. congressional vote to grant permanent normal trade relations (PNTR) to Vietnam, this high level of growth looks set to continue. In contrast, economic growth in Laos, which started from a significantly lower base, has been less impressive. Moreover, Laos continues a pattern of aid dependency that dates back to independence in 1953. The U.S. Congress granted Laos normal trade status in November 2004, but it is likely years away from either PNTR status or WTO membership.

Despite these differences, the process of economic development in Laos and Vietnam is similar in important ways. In both states, we see a growing disparity between urban and rural, haves and have-nots, rich and poor, power brokers and the powerless. And in both states, Communist Party members are the most egregious offenders, responsible for much of the corruption and waste prevalent in both systems.

Politically, Laos and Vietnam remain societies marked by sharp contrasts between economic openness and political repression, modernity and tradition, capitalism and communism. In Laos, the central problem remains a rigid, elitist political system that has made poor economic decisions over the last three decades out of ignorance and a determination to retain political power. Vietnam is different only in that a rigid, elitist political system, determined to retain political power, has made better economic decisions in the last two decades. In denial on human rights issues, both states face the challenge of implementing sociopolitical reforms concomitant with economic reforms in place or on the horizon. Given their “special relationship” since 1975, where Laos has generally followed Vietnamese policy initiatives, it is up to Vietnam to lead the way.

Response from Andrew Wells-Dang

Having been a frequent visitor to Laos over the last decade, I concur with much of Ronald Bruce St John’s mixed analysis of the Lao reform experience. I also agree that economics and politics are intrinsically related elements of social reality. St John’s emphasis on the Lao PDR’s one-party, authoritarian structure, however, does not go far enough to explain why Laos has not benefited from economic reforms to the same extent as its neighbors with similar political systems.

One salient feature is Laos’s human geography. With 6 million people, it is a small fraction of Vietnam (at 82 million), let alone China, without the according economies of scale, transport connections, or domestic market opportunities. The diverse array of ethnic groups in Laos is a potential development asset but also a limiting factor to national cohesion. It is further worth remembering that the portions of Laos inhabited by ethnic minorities are precisely those areas that the United States bombed into oblivion during the “Vietnam” War, with significant and ongoing postwar development effects in the form of unexploded ordnance. Also as a result of the war, the vast majority of the (small) pre-revolutionary elite left the country after 1975—unlike Vietnam, where this was only true for a portion of the urban southern elite.

Lao culture, however, has remained intact. I am hesitant to generalize about cultural differences, but many Lao (and Vietnamese) are willing to offer up such useful distinctions as “the Vietnamese die of overwork, while the Lao die of pride,” or “the Vietnamese plant rice, while the Lao listen to the rice grow.” In one view, perhaps, the sabai-sabai (take-it-easy) Lao lack ambition; in another, they are enjoying their “Gross National Happiness,” remaining polite and friendly, and not worrying too much about economic problems. How critical can we really be of a country where the only state enterprise that makes a profit is Beer Lao?

I don’t mean to imply that Laos isn’t changing. It is, drastically—but more at the borders than at the center. Along the Mekong, the economy and society are increasingly influenced by (military, authoritarian, capitalistic) Thailand, right across the river. In the east, Vietnamese influence is paramount; in the north, Chinese. From many places in Laos, it’s easier to trade, travel, receive TV signals, and even buy basic services like electricity from across the border than from a neighboring province. Rather than producing and exporting on its own, Laos is largely providing transit services for others along the new regional “economic corridors.”

Given this situation, it shouldn’t come as any great surprise that the Lao PDR government is concerned about keeping control over society. But this reflects the relative weakness of the state, not an excess of power. Beyond Vientiane and key provincial capitals, state capacity is frequently too low to provide basic social services, let alone serve as an engine for equitable economic growth. In spite of close political links with the Vietnamese Communist Party, the Lao PDR authorities haven’t been able to achieve the same level of development outcomes as Vietnam, and as a result find themselves still heavily dependent on foreign assistance—as was, to an even greater extent, the multi-party Royal Lao Government that preceded them.

A broader question is whether Laos’s lackluster performance provides sufficient evidence of “real limits to a development model that combines single party rule with market economics.” Like it or not, I don’t see immediate limits to this combination in countries such as China, Singapore, or Vietnam. Historically, some of the strongest economic growth in Asia has taken place under dictatorships of various political stripes, such as Park’s South Korea, Chiang’s Taiwan, or Suharto’s Indonesia—while repressive regimes under Ferdinand Marcos, Ne Win, and Pol Pot performed poorly. (All of these states had more serious human rights issues than Laos today.) At best, one can claim that dictatorships with better economic records are more likely to be replaced by democratic governments later. But democratic systems have a mixed economic record of their own, from Japan’s prosperity to Bangladesh’s penury with many results in between. Another variable is corruption, which can occur in fast- and slow-growing economies, as well as in both democratic and authoritarian political systems—with single-party, authoritarian, prosperous, market-oriented Singapore at the cleanest end of the corruption spectrum.

At a minimum, regional variation across Asia supports the conclusion that market capitalism and democracy do not always go neatly hand in hand. A stronger, more controversial thesis is that there might even be some positive correlation between state involvement and economic growth. If this is true, it should lead us to question the entire growth-first development model in favor of a more nuanced understanding of the quality and distribution of development, as I attempt for Vietnam. These country-specific social realities matter more to the outcomes of reform than any single political variable.

Ronald Bruce St John, an analyst for Foreign Policy in Focus (www.fpif.org), has published extensively on Southeast Asian issues for almost three decades. He is the author of Revolution, Reform and Regionalism in Southeast Asia: Cambodia, Laos and Vietnam (Routledge, 2006). FPIF contributor Andrew Wells-Dang is Deputy Country Representative of Catholic Relief Services in Hanoi. The views expressed in this article are his own.