Week 2: Special Economic Zones in Laos Workshop

In my second week of work (sorry for how late this is being written!), I had the opportunity to participate in The Land Information Working Group’s Workshop on Special Economic Zones (SEZs). As the biggest investor in Laos is China, the conference focused on the intersection of investment and development, specifically with China as an example. After spending the past year working on AidData’s Transparent Development Footprint team quantifying the extent of Chinese investment, I was thrilled to hear from such a wide array of people on the subject (conference attendees included academics, government workers, local lawyers (honestly a rarity in Laos), and directors of international NGOs hailing from Laos, the US, Viet Nam, Thailand, Burma / Myanmar, Cambodia, Philippines, France, & Hong Kong).

For those who don’t spend their free time visiting Chinese construction projects (see week 9 blog post), a Special Economic Zone is a geographical zone that is designed to be business and investment-friendly. Fiscal incentives include relaxed taxes and tariffs, and the zones usually become hot spots for factories where environmental standards and labor practices are looked over.

Laos is striving to leave the LDC category by 2020. For this to happen, it is relying on Chinese investment, causing Laos to further relax already lax loan terms. For China, Laos is a necessary pitstop to reach ports further South. Thus, China is willing to make riskier investments than usual. But this isn’t a new phenomenon, Laos inaugurated its “Turning Land into Capital” policy in 2008. (FYI there are other investors in Laos, China has just become the most important one and is the center of my research)

In Laos, one of the primary effects of Special Economic Zones and other Chinese investment projects (think dams for hydropower) is large scale forced resettlement where people are not properly compensated for their land due to lack of formal land recognition (hence the GLTN project I am working on, see blog post for week 8). A second problem, these companies investing in Laos have decided that Lao workers as a whole are “not skilled” enough and are importing labor from China. The result is, these SEZs resemble China more than Laos, are populated by people who do not speak Lao and are not aware of their rights in Laos, and the Lao economy receives significantly fewer benefits than anticipated. The results extend beyond this China-ization and resettlement; there are huge environmental impacts, Laos is losing sovereign control over these areas, human trafficking and other “social problems” (prostitution, child labor, etc.) are on the rise in these areas, among other things.

Of course, this is an extremely brief summary of the discussions & conclusions reached at the workshop and my thoughts on Chinese investment in Laos. But I’m still thinking about one question brought up in the reflection: “How can we, as civil society members, promote and support development and investment that supports peoples’ aspirations and needs?”

Laos has chosen investment as their primary path to development, they are aware and trying to shape it, but so much of the trajectory remains out of their control. Chinese investment is providing much needed financial flows to the country, but sometimes in a harmful way. In a country that is reliant on financial inflows to continue developing, but is nervous about the high conditionality of the classic Western financial flows (even if their concessionality is substantially higher), how can you develop in a sustainable manner that not only respects, but promotes, the rights of the country’s citizens?