China’s aid a matter of life and death for Laos

When Xi Jinping last month visited the Lao capital of Vientiane, the Chinese leader broke ground on a new health facility that will replace the decaying French colonial era Mahosot Hospital, built in 1903.

The US$90 million project, scheduled to become the country’s largest and most modern hospital when it opens in 2020, will be paid for with a Chinese grant.

Beijing has also promised to supply doctors for the facility’s first three years of operation, the latest show of solidarity between the two nominally communist nations.

“The cooperation of our two countries should be more focused on improving people’s livelihoods, thus benefiting more local residents,” Xi said, according to Chinese media reports.

Lao Prime Minister Thongloun Sisoulith has worked to rebalance Laos’ diplomacy amid concerns the small landlocked country has become overly reliant on Beijing aid and loans for national development.

That includes loans granted to build a US$6 billion high-speed rail that aims to connect southern China with mainland Southeast Asia, which Vientiane hopes will revolutionize its economy and uplift its still largely impoverished population.

At the same time, Thongloun’s government has recognized the downside of certain Chinese investments. That was most visibly seen in the ban imposed on the establishment of new Chinese-owned banana plantations due to their adverse impact on the environment.

But Thongloun’s government can hardly scoff at Chinese financial assistance for its underdeveloped medical sector, particularly as his ruling Communist Party embarks on ambitious health reform to shore up its grass roots legitimacy.

In July, the Lao government approved additional funding for a national health fund to expand what is known as the “30,000 kip for all diseases treatment” scheme, similar in name to neighboring Thailand’s “30 baht” universal health care plan.

Introduced earlier this year and now available across most of the country, patients under the scheme pay just 30,000 kip (US$3.60) for any medical treatment while the government subsidizes the rest of the cost.

The augmented fund also covers the cost of all medical bills, including surgery, of up to five million kip (US$600). For any treatment that exceeds this amount, the National Health Insurance fund will pay 75% while the patient contributes the rest.

It’s the latest development in the government’s plan to introduce universal health care by 2025, part of the communist regime’s Health Sector Reform Strategy introduced in 2013. The scheme’s 2020 target is 80% national coverage.

The Communist Party has identified health care as a priority, especially as it strives to become a middle income country by 2030.

It won’t be easy. As of last year, only 33% of the Lao population was covered by any health insurance program, according to an Asian Development Bank report.

Most of those covered are public sector workers or the wealthy elite who can afford private insurance. Those without insurance frequently pay debilitating sums for health care or forego treatment altogether.

Laos’ life expectancy at birth was just 63.5 years in 2015, one of the lowest rates in Southeast Asia and eight years below the global average.

The Health Ministry estimates as many as five million people will now be able to access the extended scheme, which was piloted in several provinces last year. In southern Salavan province, more than twice the number of people visited a health clinic year on year under the pilot scheme.

Last month, the National Assembly set out its health targets for 2018 with aims to reduce the number of underweight children, infant and maternal mortality rates, and the number of death of deaths of children under five years of age.

Poor infrastructure in a country that is 70% mountainous makes it difficult for people in remote areas to access healthcare facilities. Laos is geographically the size of France, but has a population of only 6.7 million.

Petty corruption is another concern, exacerbated by the low wages received by public sector workers including doctors and nurses. Civil servants can often go months without collecting a salary. That means medical staff often expect small bribes to give treatment, another deterrent on the poor from accessing health care services.

The lack of funds has made Laos increasingly dependent on foreign aid, largely from China. Laos’ gross domestic product (GDP) per capita is less than US$2,000, one of the lowest rates in Asia, despite recent years of 7% GDP growth.

In 2014, the last year the World Health Organization (WHO) collected figures for Laos, the state spent just US$98 per person on health care, less than even Timor-Leste, Southeast Asia’s poorest nation. Laos’ entire expenditure on healthcare was just 1.9% of GDP, according to the latest WHO figures.

Laos’ best hope for raising the funds needed to increase spending on healthcare come from sectors that typically marginalize the same poor segments of the population the health scheme aims to assist.

The government is confident that the US$6 billion Lao-Chinese high-speed railway, a joint venture of which Laos own roughly 30%, will transform the country into a job-creating modern logistics hub for Chinese trade.

So far the rail line’s development has required the relocation of 4,400 families this year, according to a Radio Free Asia report. The mega-project is only 22% built, according to a Lao state planner who presented at a recent Belt and Road Initiative seminar in Bangkok.

Numerous dams being built along Laos’ stretch of the Mekong River, part of the government’s hope of becoming the “battery of Asia” via hydroelectricity exports, has resulted in dislocation and sparked rare dissent in the authoritarian state.

While the Communist Party hopes that universal health care will alleviate some of these grass roots grievances, balancing economic development with rural livelihoods is proving difficult.

So, too, is the Lao government’s bid to balance its dependence on China for the health of both its economy and people.