Laos Joins Beijing's Push to Strengthen ASEAN Ties
President Thongloun Sisoulith puts economy front and centre. Transport linkages are the key to landlocked Laos' future despite high debts and currency pressure from US inflation and rate hikes.
UPDATE: Laos stands at a pivotal moment in its history. The formerly landlocked nation is now connected to Yunnan province, China, by high-speed rail and will soon be connected by rail to Thailand. Vietnam too, is building rail connections with China, although questions remain about the countries antiquated narrow gauge capacity. The China-ASEAN plan of action and launch of Trade Pact 3.0 includes a focus on digitalisation connectivity and cross-border trade and investment. Cambodia, Laos and Vietnam are cooperating more, but the US seeks centrality in ASEAN, not for ASEAN prosperity, but to counter China. The recent hive of activity surrounding Xi Jinping is part of ensuring that ASEAN and China remain each others largest trade partners and underpin regional security.
What you need to know about Lao President Thongloun Sisoulith
Thongloun Sisoulith general secretary of the Lao People's Revolutionary Party (LPRP) Central Committee and Lao president, will pay a state visit to China from Nov. 29 to Dec. 1 at the invitation of Xi Jinping, general secretary of the Communist Party of China (CPC) Central Committee and Chinese president.
Sisoulith was born in Houaphanh province in northern Laos in 1945. He went to the Soviet Union twice to study abroad and received a master of arts and a doctor of philosophy in history.
From 1985 to 1997, he successively served as director of the Public Research Department of the Prime Minister's Office, vice minister of foreign affairs, and minister of labor and social welfare.
From 1997 to 2016, Sisoulith successively served as a member of the Standing Committee of the Lao National Assembly, chairman of the Foreign Affairs Committee, deputy prime minister and president of the Committee for Planning, deputy prime minister and head of the LPRP Central Committee's commission for external relations, and minister of foreign affairs.
From 2016 to 2021, Sisoulith became the prime minister of the government. In March 2021, he was elected president of the country at the first meeting of the Ninth Lao National Assembly.
Sisoulith is a member of the Fourth to Eleventh Central Committee of the LPRP and a member of the Seventh to Eleventh Politburo of the Central Committee of the LPRP. In January 2021, he was elected as general secretary of the Central Committee at the Eleventh National Congress of the LPRP.
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ASEAN Leaders Head to Beijing
President Thongloun Sisoulith will be the third Asean head of state to visit China this year, as Xi resumes in-person talks after a pandemic pause. Landlocked Laos, one of the world’s least developed economies, has been a staunch regional backer of China but debt concerns are mounting.
China’s move to resume in-person meetings at the highest level comes as relations continue to spiral downwards with the US – which has vowed to renew its focus on the Association of Southeast Asian Nations in countering Beijing’s influence in the region.
Beijing has also stepped up efforts to win over Southeast Asian neighbours, mostly recently with a proposal to fast track negotiations for an upgrade to their giant free-trade zone – dubbed the Asean-China Free Trade Area “Version 3.0”.
This was put forward by Chinese Premier Li Keqiang in a series of meetings with leaders of the 10-nation bloc at the Asean summit in Cambodian capital Phnom Penh last month.
Thongloun, who leads the ruling Laotian communist party, would be the third Asean head of state to visit China this year, after Indonesian President Joko Widodo in July and Vietnamese Communist Party chief Nguyen Phu Trong in October.
With his visit, Xi will have in recent weeks met all but three Asean counterparts – the leaders of Cambodia, Malaysia and Myanmar.
Laos, one of the world’s least developed economies, has been one of the Asean bloc’s most dependent and closest partners of China – the world’s No 2 economic power.
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World Bank Warns of Lao Fragility
Despite signs of economic recovery in early 2022, Laos faces increased challenges from currency depreciation and high inflation, according to the World Bank’s latest economic update for the country.
The Lao Economic Monitor for October 2022: Tackling Macroeconomic Vulnerabilities, released on Monday, identifies ambitious reforms that could help the country restore economic stability and sustain growth.
The report notes that the kip lost 68 percent of its value against the US dollar over the year to October, undermining recovery and fueling inflation, which in turn has squeezed private consumption and investment. Meanwhile, public and publicly guaranteed debt is projected to surpass 100 percent of GDP by the end of the year. The World Bank has lowered its 2022 economic growth forecast for the country to 2.5 percent, down from an earlier projection of 3.8 percent.
Although employment had risen by mid-2022, Lao people’s earnings have not kept pace with inflation. Year-on-year consumer price inflation had risen to 37 percent by October 2022, with food price inflation at almost 39 percent. This particularly affects the urban poor, with some families forced to reduce their consumption of food and fuel. In a World Bank survey, two-thirds of households reported spending less on health and education, which could undermine long-term human development.
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ASEAN-China Free Trade Area and the Competitiveness of Local Industries: Lao PDR
This paper provides an assessment of the effect of the ASEAN–China Free Trade Agreement (ACFTA) on three industries—wood processing, cement, and motorcycle assembly—in the Lao People's Democratic Republic. The paper finds that the ACFTA will have sizable but varying degrees of impact on the three industries. Prices in the three industries become less competitive when tariffs are completely removed. Early preparations to adapt to the ACFTA scheme prior to the full implementation of the agreement are necessary. Improving product quality will be crucial for all of the three industries under review, while brand reputation building is especially a priority for the motorcycle assemblers.
Download the full ADB paper on Laos here.
Asean-China Free Trade Area ‘Version 3.0’
Beijing says it will approach leaders in the Association of Southeast Asian Nations bloc this week about accelerating the Asean-China Free Trade Area ‘Version 3.0’. China is looking to upgrade its Southeast Asia trade ties as the US government squeezes it economically through tariffs and curbs on its hi-tech sector.
China is expected to start talks with Southeast Asian nations about an upgrade to their giant free-trade zone in a potential boost to the stability of Beijing’s manufacturing supply chains amid mounting rivalry with the United States.
Officials in Beijing have told state-run media they will approach leaders in the Association of Southeast Asian Nations (Asean) bloc this week about accelerating negotiations for what they call the Asean-China Free Trade Area “Version 3.0”. Chinese Premier Li Keqiang is in Phnom Penh this week to meet with the bloc’s 10 members during a series of summits.
In September, the foreign ministry said establishment of Version 3.0 “is about to start”. China is looking to expand the trade zone to keep supply chains and markets open in a part of the world it considers crucial.
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ASEAN-China Free Trade Area’s 3.0 version echoes the development needs of both sides: envoy
ASEAN-China Free Trade Area (ACFTA) is one of the largest FTAs in the world, covering one-fourth of the world population, and the building of the 3.0 version of ACFTA actively echoes the development needs of both sides and is line with the trend of global economic development, Shi Zhongjun, secretary-general of the ASEAN-China Centre (ACC), told the Global Times in an exclusive written interview.
The launch of negotiations on the 3.0 version of ACFTA was announced during the recent East Asia Cooperation Leaders' Meetings held in Cambodia setting a new tone for the future focus of regional development. In speaking about what the 3.0 version of ACFTA will bring to the development of regional cooperation and the joint response to the current international situation, experts said that the proposal of version 3.0 of the Free Trade Zone was mainly based on the current needs and development direction of China-ASEAN cooperation, highlighting the digital economy led by innovation and the green economy led by sustainable development.
"The 3.0 version of ACFTA will focus on trade and investment liberalisation and facilitation, digital economy, green economy and industrial cooperation, where digital economy and green economy represent new areas of cooperation that deserve special attention," Shi said. "The building of the 3.0 version of ACFTA actively echoes the development needs of both sides and the trend of global economic development," the secretary-general said.
Version 1.0 of the China-ASEAN Free Trade Area was established in 2010, and zero-tariffs covers more than 90 percent of the tax items of both parties. In 2019, the upgraded version 2.0 was launched, and the two sides further opened up market access. At the ASEAN-China Special Summit to Commemorate the 30th Anniversary of ASEAN-China Dialogue Relations in November 2021, Chinese leaders proposed the construction of version 3.0 of the China-ASEAN Free Trade Area.
ACFTA contributes to the achievements of trade and economic development between ASEAN Member States (AMS) and China. In the 1.0 and 2.0 versions of ACFTA, AMS and China opened up trade in goods, services and investment, and the economic and trade cooperation has become closer, Shi said.
"In the process of implementation, the two sides also look forward to institutional arrangements such as a more open market, a shorter negative list and freer and easier market access," Shi said. "I believe the initiation of the negotiation is an inevitable result of the close economic and trade cooperation in the region and the detailed division of labor...the 3.0 version of the ACFTA is the common aspiration of AMS and China for future development, and it will make the economic and trade ties between the two sides closer than ever," Shi said.
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Download the 2022 ASEAN-China Plan of Action (POA) to Implement the ASEAN-China Strategic Partnership for Peace and Prosperity (2021 – 2025)
China-Laos Railway Extending Through To Thailand
The China-Laos Railway which opened late last year, is being extended through to Thailand. The Laos section has proven so popular that the frequency of train service has had to be increased several times due to demand.
Six months after it opened, China’s State Railway Group said the route has delivered more than 4 million tonnes of freight as at the end of May. The route also handled over 3.2 million passenger trips. Since December 2021, 21 Chinese regions have designated cross-border trains for freight transport along the railway, with goods including fertilizers, daily necessities, electronics and fruits. The 1,035-km China-Laos Railway connects China’s Kunming with the Laotian capital Vientiane.
That has raised expectations for Thailand, with former Thai Deputy Prime Minister Pinit Jarusombat saying that the China-Laos railway has provided a new logistics option for Thailand’s trade with China. “It totally exceeded expectations. The Sino-Thai railway is currently under construction and Thailand expects it to be operational very soon.”
Once it is completed, a transportation corridor through all three countries will significantly increase the speed of movement of people and goods between Southeast Asia and China, he added.
The China-Laos-Thailand (CLT) route runs south from Vientiane, crosses the border to Thailand at Nong Thai, and its Free Trade Zone, and continues to Bangkok. The route passes through some of Thailand’s primary agricultural regions, although Free Trade Zones are also dotted along the route – prime areas of interest for foreign investors wanting to diversify away from China, yet retain consumer market access to it. Thailand is a member of ASEAN which has a Free Trade Agreement with China, meaning goods can be shipped both ways, tariff free.
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Standard-gauge Railway to connect Vietnam with Eurasia market via China and boost Trans-Asian railway development
As cargo trade between China and Vietnam has witnessed a rapid growth in recent years, the decision by the two neighbouring countries to speed up railway connectivity is set to bring a tremendous lift to cross border as well as transit goods trade between the duo and countries beyond, said Chinese railway experts and industry insiders. Railway cargo trade between China and Vietnam had seen a rapid growth in the first 10 months of this year. A total of 607,000 tons of goods travelled across the border, up 58.6 percent year-on-year, said reports on Saturday, citing data released by customs authority in Nanning, South China's Guangxi Zhuang Autonomous Region.
In terms of value, the bilateral cargo trade grew by 1.5 times to 16.58 billion yuan ($2.33 billion) and the number of cross border train services expanded by 26.9 percent to 1,936. The rapid trade growth came as China and Vietnam announced joint efforts to speed up the Lao Cai-Hanoi-Haiphong railway project in a November statement, which experts said signals an end to Vietnam's decades-long hesitation over whether it would be preferable to connect with China by using a standard-gauge railway system, which is different from the country's meter-gauge railway.
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China actively promotes digital paradigm, follows win-win and inclusiveness rule to help ASEAN progress
With China's vast experience in the digital economy and digital transformation, the country can effectively boost international cooperation, especially with the Association of Southeast Asian Nations (ASEAN) and the developing countries. Expanding digital cooperation is crucial to the world's development, analysts said.
Indonesia looks forward to China's role in the development of ASEAN's digitalization, Indonesian ambassador to China Djauhari Oratmangun said in an interview with the Beijing Daily. It is hoped that by 2025, ASEAN's digital economy scale will exceed $200 billion, he said.
China has already taken action. It will launch China-ASEAN Digital Talents Training Project to train 1,000 professionals for ASEAN in the next three years, and support leading Chinese provinces in the digital economy, such as East China's Zhejiang, to harness their strengths and enhance cooperation with ASEAN members.
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