General Secretary Thongloun Sisolith will maintain exceptional power in his new position in Laos. Image: Facebook

It was hardly a changing of the guard when Laos’ rubber-stamp National Assembly elected a new leadership team this week. But the small country’s top-level reshuffle will matter geopolitically as it strives to calibrate its China and Vietnam relations.  

Phankham Viphavanh, 70, a former vice-president, was as expected named the new prime minister. Thongloun Sisolith, 75, the former head of government who was named general-secretary of the ruling communist Lao People’s Revolutionary Party (LPRP) at a party congress in January, was also elected state president.

Xaysomphone Phomvihane, who was in charge of the party’s “mass organizations”, became president of the National Assembly after the legislative body voted on the new appointments on March 22. These appointments were largely a done deal, as top-level personnel decisions are informally made by the communist party ahead of its quinquennial congresses.

At the party’s congress in January, however, outgoing party chief Bounnhang Vorachith read out a political report that reprimanded officials for not thinking creatively enough about new problems. Time will tell whether the situation the new leadership team inherits allows them space to think outside of the box. 

Indeed, lower down the ranks there was a notable measure of generational renewal.

In January, four new members were elected onto the expanded 13-member Politburo, the LPRP’s elite decision-making body, and almost half of the new 71-member Central Committee was elected for the first time. 

Former party chief Bounnhang, who departed in January, represented the last of the “revolutionary” generation that fought alongside Vietnamese forces as part of the communist Pathet Lao in the 1960s and 1970s. 

The current crop of new leaders all came of age after the LPRP had already taken sole power of Laos in 1975, after a lengthy civil war between communists and royalists.  At the seniormost levels, however, the LPRP has stuck with its preference for aging apparatchiks: Thongloun is 75 and Phankham 70.

Thongloun best represents the technocratic shift of Lao politics over recent years, and his promotion as new party chief is a clear indication the rest of the LPRP considers him a safe pair of hands.

Laos’ Prime Minister Thongloun Sisoulith (L) shakes hands with China’s President Xi Jinping (R) at the Great Hall of the People in Beijing on December 1, 2016. Photo: AFP/Nicolas Asfouri

He is also considered one of the most popular Lao politicians in decades, known for his austere lifestyle and attempts to purge the communist system’s endemic corruption. However, the rest of the new leadership team is less noted for integrity and reform.

Prime Minister Phankham previously served as standing secretariat member, an influential position in charge of party personnel appointments.

But his experience within the government administration is scant, serving as the relatively junior minister of education and sports between 2010 and 2014. He also only served two years as a deputy prime minister from 2014 until 2016.

By comparison, Thongloun served an entire decade as foreign minister and was first made a deputy prime minister in 2001 before becoming prime minister in 2016. 

Thongloun may well exert a greater influence over government policy than previous party chiefs, who tended to focus primarily on issues involving the LPRP’s apparatus. 

Thongloun, now also head of state, is also likely to continue his leading role in foreign engagement, with Phankham possibly taking a backseat.

The foreign policy establishment was prioritized at January’s party congress with Foreign Minister Saleumxay Kommasith making it onto the Politburo, jumping from 50th place in the party’s rankings to 13.

Sounthone Xayachack, head of the party’s External Relations Committee – the LPRP’s foreign policy discussion group – also leapfrogged positions in January to make it onto the party’s secretariat, the party’s main implementation body. 

But as the analyst Simon Creek noted in January, speculation about the ascendency of “technocratic socialism” is premature as “revolutionary family patronage networks are unlikely to fade anytime soon.”

Xaysomphone, the new National Assembly president, is the son of the LPRP’s original leaders from the 1950s, namely Kaysone Phomvihane and Thongvin Phomvihane. 

Laos guard of honor marches at Wattay International airport in Vientiane, Laos. Photo: AFP

Deputy Prime Minister and the Minister of Planning, Sonexay Siphandone, son of still-influential powerbroker Khamtay Siphandone, was widely tipped to become prime minister but this fell off the table when he was named only 9th on the Politburo’s rankings in January. 

Although the LPRP did not engage in a sweeping generational shift as some analysts predicted before January’s congress, there is a faint hope that Thongloun could use his five-year stint as party chief to shake up the bureaucracy and allow the most competent of a new generation of officials to rise to the top. 

For now, at least, there appears little space for the new leadership to engage in the sort of critical thinking that Bounnhang recommended. 

One important shift in opinion came at the communist party’s gala in January when Thongloun announced the target annual economic growth between 2021-2026 would be just 4%.

This was an indication that communist economic planners detect major problems afoot or have now realized that in the past hubris had little impact on economic results.  

Laos has so far only recorded 49 cases of Covid-19 and zero deaths since the beginning of the pandemic, but its economy has been badly hit, contracting by around 0.6% last year. 

In some ways, the pandemic has masked already bad news. Between 2016 and 2021, the economy grew only by an annual average of 5.8%, lower than the 7.2% approved by the National Assembly in 2016.

Laos’ economic options, however, remain limited. Land-locked and with few trading links other than to China, Thailand and Vietnam, its economic future is restricted to debt-accruing infrastructure development and hydropower production, the key sources of its economic growth. 

With little wiggle-room, it is probable that the economic woes that have hit Laos in recent years – high levels of debt, especially to China, and a creaking education system that is preventing the economy from moving up the supply chain to more profitable manufacturing – will be exacerbated.

Speaking at the National Assembly on March 23, newly-announced Prime Minister Phankham read out a list of seven major economic issues as part of the five-year National Socio-Economic Development Plan.

Lao Prime Minister Phankham Viphavanh (L) shakes with then-Vietnamese Prime Minister Nguyen Xuan Phuc (R) in 2017. Photo: Vu Dung/VOV

It was pretty much the same list Thongloun read when he was made prime minister in 2016: cut state spending and increase revenue; curb corruption; move away from reliance on natural-resource extraction; and improve the education and healthcare services. 

Since 2016, attempts have been made to tighten government spending and reform revenue collection including from taxation. But the urgent need for significant investment in all areas of the economy has either hampered austerity measures or forced Vientiane to become even more dependent on Chinese credit. 

The added pressure on the new leadership is that many of the costly infrastructure projects are expected to finish and start operations over the next five years, which will refocus attention on whether they were worthy investments. 

This includes most notably the US$5.9 billion Laos-China railway that will connect China’s southern Yunnan province to northeast Thailand through northern Laos when it is completed later this year. 

With around 70% of the project funded directly by China, and Laos’ share of 30% is funded in large part by credit from China, raising considerable risks for a country whose GDP in 2019 was just $18 billion. 

Many economists are cautiously optimistic, with the World Bank reporting last year that the railway “could provide [Laos] with a land link to global and regional supply chains, which could make the country more attractive to investors, create new jobs, and accelerate economic growth.”

For years, however, critics of the development project have argued that it will quickly become a costly “white elephant” once the trains start running, especially since plans for a railway connecting China to maritime Southeast Asia passing through Laos have now stalled.

Accusations that Beijing set an intentional “debt trap” for Laos are exaggerated. Chinese creditors have also found themselves stuck between calling in debts and assuaging one of Beijing’s most loyal allies in Southeast Asia.  

A promotional poster for the 414-kilometer Laos-China railway project that promises to transform Laos from landlocked to land-linked. Photo: Facebook

Even if it so desired, it seems improbable that Laos could markedly improve economic ties with the West, not only because that would invite foreign scrutiny of its one-party system, but also because it would no doubt frustrate Beijing.

Trade with the US and the European Union was worth just $165 million and $450 million, respectively in 2019, according to official data. By comparison, bilateral trade with China was worth $3.5 billion that year. 

There is a slight possibility, however, that the new leadership will be able to balance foreign interests between its new and oldest best friends: China and Vietnam.

Vietnam, the traditional partner of the Lao communist party which helped put it into power in 1975, has seen its influence in Vientiane shrivel in recent years as China has become Laos’ main benefactor and international ally. 

Between 1989 and 2013, Vietnam pumped more than $4.9 billion worth of investment into Laos, making it the country’s largest investor. But by 2020, China had topped this, investing $12 billion into Laos, much of it over the last few years. Although Thailand remains Laos’ largest trading partner, China is likely to soon overtake it.

Hanoi will attempt to make use of its connections with the new leaders in Vientiane. Prime Minister Phankham previously served as chairman of the Lao-Vietnam Friendship Association.

National Assembly chair Xaysomphone used to head the Lao Front for National Development, the communist party’s umbrella body that manages its “mass organizations.”

The Lao Front has even in recent years enjoyed a closer relationship with its Vietnamese counterpart, the Fatherland Front, than its Chinese equivalent, the United Front. 

Last Saturday, Vietnam’s Ministry of Construction formally handed over to the Lao government a new National Assembly building in Vientiane, a $111 million edifice paid for and built by Hanoi. 

Workers on the China-Laos Railway in a file photo. Photo: Twitter

But achieving parity between China and Vietnam is difficult for Laos. Because of economic necessity, Laos cannot reject Chinese investment or trade in order to appease Hanoi.

Instead, parity will only come if Vietnam commits considerably more funding to Laos, which Hanoi is not in a position to do because of its own financial needs and debt load.  

Laos’ new leadership, which will remain in place until 2026, will likely be indistinguishable from the previous administration in large part because both face the exact same difficulties.

However, the next five years could prove to be instrumental if party chief Thongloun can enforce sweeping changes in how the party picks its personnel, with a greater focus on competence and less so on ideological or factional fealty.

By the time Thongloun steps down in 2026, aged 80, the LPRP might then be in a position for a genuine changing of the guard.