BANGKOK—A Chinese-Lao joint venture has pulled out of a deal to develop a Suzhou-style “model city” on the outskirts of the Lao capital, Vientiane, according to senior Lao officials.
The "New City Development Project," which involved a 50-year lease for 1,000 hectares of land in and around the That Luang Marsh, required the group to pay roughly 7,000 households a total of U.S. $400 million in compensation for relocating their homes.
Sinlavong Khoutphaythoune, a former mayor of Vientiane and current minister of planning and investment, said the concession had been canceled because the Chinese developer didn't want to pay the compensation.
“Previously, the government had an agreement with the Chinese company to build a new city. But this has already been canceled,” Khoutphaythoune said.
“Due to the high cost of compensation to residents in the area surrounding the location, there are no longer any companies interested in developing it.”
The joint venture comprised three Chinese firms and one Lao firm and was managed by the Suzhou Industrial Park Overseas Investment Co.
Khoutphaythoune said the Chinese company will revert its planned development to the original 1,000 hectares it had targeted near a Chinese-built stadium Laos used to host the 2009 Southeast Asia Games (SEA Games) in December.
Sombath Yialiheu, Vientiane’s current mayor, signed an agreement with Chinese officials to that effect on behalf of the Lao government, just one of 18 deals sealed during Chinese vice president Xi Jinping’s visit to Laos in mid-June.
Khamouane Boupha, the Lao minister in charge of land management, said the That Luang Marsh has now been designated a protected area by Lao Prime Minister Bouasone Bouphavanh and that only environmentally friendly development projects would be considered going forward.
“The management plan for the That Luang Marsh involves preservation because it needs to serve as drainage for the city waste water,” Boupha said.
“Some people want to build houses over there, but if people do that they will have to balance the interests first. We have to think about mutual interests. We need to preserve [the marsh] and we have to think about the interests of the Lao people.”
Boupha said the government is considering ways to promote That Luang Marsh as a tourist destination and also as a reservoir that would help irrigate Vientiane in times of drought.
Plan with all parties
David Mann, program officer for the U.N. Food & Agriculture Organization (FAO) in Laos is overseeing planning for the marsh.
“Participatory in nature, it would bring the different stakeholders to the table. This would include developers who have a stake in the area, the population, the appropriate Lao ministries, and international cooperation agencies,” Mann said.
“[They would] come to the table and understand what are the strengths and weaknesses of the That Luang [Marsh], what are the proposed developments there, what are the potential impacts of these, and how can we come up with a coordinated plan for the development.”
Mann wouldn't rule out the development of a city site, similar to what the Chinese developer had proposed, but said it would include many more environmental precautions and ensure adequate compensation to relocated families.
But he cautioned that both the benefits and costs must be fully understood before the government hands out a long-term concession.
“The Lao people [must] understand—and this doesn’t just include the farmers on That Luang Marsh, but middle-class people and people in ministries—that something like U.S. $1.1 billion ... doesn’t mean that it is going to benefit the Lao people,” he said, alluding to the earlier proposed Chinese investment.
He said investment schemes such as the Chinese plan are unlikely to be fully funded even within the first five years of the project, affecting the quality of the development and the likelihood that displaced farmers would be provided with jobs in the new businesses brought with it.
Local residents are encouraged, Mann said, by the government’s decision to abandon the Chinese development plan, Mann said, and have been vocal in their suggestions for alternative projects.
The decision on new development plans will ultimately be made by the Lao government, he said, and the FAO hopes to have a complete concept paper ready for official signature by October in time for the 450th anniversary of Vientiane.
Under initial terms of the 2007 agreement, China planned to hold several hundred hectares around the That Luang Buddhist monument on a 50-year lease with a 25-year option, with permission to develop the surrounding marshlands.
The project called for the development of a new city similar to Suzhou in eastern China’s Jiangsu province, renowned as a tourist draw for its bridges and lush panoramas, creating a sort of Chinatown in Vientiane directly next to the That Luang Temple, a symbol of Lao nationalism.
China’s presence in Laos has intensified rapidly since it organized a financial bailout of the impoverished country in the wake of the Asian financial crisis. Beijing provided U.S. $1.7 billion in export subsidies and interest-free loans, allowing Laos to stabilize the value of its currency during a crisis in 1998-99, according to official Chinese media.
Since 2000, Beijing has poured money into Lao infrastructure, including a “land bridge” through which Chinese goods can flow into Thailand.
China has expressed a strong desire to increase imports of natural resources from Laos, including timber, iron ore, copper, gold, and gemstones.
The new relationship was cemented with the visit by then President Jiang Zemin to Laos in November 2000, the first by a Chinese head of state, and Beijing agreed to cancel much of the Lao debt in 2003.
Original reporting by Viengsay Luangkhot for RFA’s Lao service. Lao service director: Viengsay Luangkhot. Translated from the Lao by Bounchanh Mouangkham. Written for the Web in English by Joshua Lipes. Edited by Sarah Jackson-Han.