Vietnam’s tug of war with China over Laos

In March, Vietnam announced it had gifted a new parliament building worth US$111 million to Laos. The move reflects Hanoi’s unease over Beijing’s growing influence over its closest ally. 

China has overtaken Vietnam as the largest investor and lender in Laos. Keeping Laos by Vietnam’s side is a top foreign policy priority for Hanoi. The question is how without engaging in costly competition with China.

Laos is Vietnam’s most trusted friend. The two communist states fought together against the United States during the Vietnam War. It would have been difficult for the Pathet Lao to come to power in 1975 without the support of Hanoi. Without the support of Lao communists, the Ho Chi Minh trail — which played a vital role in North Vietnam’s victory — would not have been possible. The connection of the two regimes is special: socialism training in Vietnam is a must for Laotian politicians who aspire to be national leaders. Laos is one of the two countries that the Communist Party of Vietnam (CPV) calls anh em (brothers), with the other being Cuba. The Vietnamese ambassador to Laos is among the few career diplomats to hold the rank of vice minister of foreign affairs.

Hanoi’s geopolitical survival is also linked to Laos. Vietnam has land borders with only China, Cambodia and Laos. Given the complex history and perpetual distrust of Beijing’s intentions, forming a unified ‘Indochina’ political bloc to safeguard against possible northern encroachment has always been a priority in Hanoi’s strategic thinking. The last time they failed in the late 1970s, North Vietnam had to fight wars on both sides of the country and was on the brink of total collapse. In addition, since China’s support for Cambodian Prime Minister Hun Sen’s government has drawn Cambodia securely into its orbit, Vietnam cannot afford to lose Laos.

Since China’s regional presence has grown, there have been disagreements between Laos and Vietnam. Laos is striving to become the ‘battery of Asia’ by building a series of hydroelectric projects along the Mekong River, many of which are funded through Chinese loans. Vietnam has voiced its opposition to these dams to protect the Mekong Delta region. Hanoi is also eager to put the South China Sea issue on ASEAN’s agenda, while Laos has no interest in the topic for fear of displeasing its biggest lender, China.

Beijing’s Belt and Road Initiative (BRI) has been warmly welcomed in Vientiane, but it has been given a cold shoulder by Hanoi. Some Vietnamese scholars fear that BRI projects, including the Kunming–Singapore railway that runs through Laos, are designed to isolate Vietnam from the rest of the region. As China extends its influence southwards through the BRI, Vietnam is struggling to maintain its traditional sphere of influence. Hanoi cannot compete financially with Beijing in providing loans and investment. This concerns Hanoi as financial resources were the determining factor in deepening China–Cambodia ties and Hanoi does not want to see Laos go the same way.

But Hanoi still has some cards to play. First, Vietnam’s relationship with Laos rests on a close political relationship developed over more than 40 years, as well as deep economic and cultural ties between the two countries. Vietnamese companies have operated successfully in Laos over past decades, particularly in southern provinces such as Savannakhet and Attapeu. Daily economic activities between the two countries have almost no barriers and many Vietnamese have taken this opportunity to immigrate to Laos, working in a variety of jobs from small shop owners to construction workers. These people-to-people interactions have deepened Vietnam–Laos relations and it will be some time before China has similar ties.

Second, Laos also has a strategic interest in maintaining a warm relationship with Vietnam. Being landlocked, Vietnam provides the best route for Laos to access the sea for trade. Infrastructure projects to connect Laos with Vietnam’s key economic centres, including a proposed railway from Vientiane to the central Vietnamese deep-water port of Vung Ang, are being considered. Chinese infrastructure financing has also left Laos with a heavy burden of debt and vulnerable to Beijing’s manipulation. Vietnam offers a counterweight to this trend. The best strategy for Laos is to walk the line between its two bigger neighbours and benefit from both.

Leadership transitions in Laos and Vietnam earlier this year may offer some insight into future Vietnam–Laos–China relations. In Laos, Prime Minister Thongloun Sisoulith, a fluent Vietnamese speaker, was elected as the new head of the Lao People’s Revolutionary Party and he has promoted a childhood schoolmate of Chinese President Xi Jinping, the daughter of a Lao diplomat who spent time in Beijing, to become his top aide.

In Vietnam, CPV General Secretary Nguyen Phu Trong presides over a leadership team with the confidence to raise Vietnam’s status in Asia. In particular, President Nguyen Xuan Phuc did an admirable job in managing the country’s relationship with the unpredictable Trump administration, while the recently inaugurated Prime Minister Pham Minh Chinh has extensive foreign policy experience, including experience working in foreign embassies as an intelligence officer.

Hanoi’s foreign policy priority will be to shore up its own security environment. For this reason, Vietnam is likely to aim to reinforce its relationship with Laos, particularly through deepening economic cooperation. Road, port and railway projects that connect Laos with Vietnam will be a priority — although not up to the scale and pace of Chinese projects. Hanoi knows that even with friends, national interest has the final say.

By Nguyen Khac Giang – East Asia Forum – May 12, 2021