Lecturer in Sociology, Department of Psychology and Sociology, School of Behaviourial Sciences,

James Cook University of North Queensland, Townsville, Queensland, 4811, Australia.

Background

For much of the twentieth century, Laos has never had a high profile in Australia's foreign political and economic relations. Despite the enhancement of bilateral relations between Australia and Laos in recent years, the Australian media devote only passing attention to events within Laos and aspects of Lao-Australian relations. At the same time, in recent years only two Australian based-scholars have published analyses of Lao-Australian relations (Ngaosyvathn 1993; Stuart-Fox 1994, 1995). This short article seeks to counter this deficiency by providing a general overview of the main aspects of Lao-Australian relations during 1995, based primarily on Australian media reports.

Although Australia established formal diplomatic relation with Laos in 1952, it was not until 21 August 1959 that an Australian Legation was established in Vientiane, which was subsequently raised to Embassy status on 16 January 1963. Significantly, Laos has had uninterrupted diplomatic relations with Australia at the ambassadorial level longer than with any other country. Australian Foreign Minister Bill Hayden's visit to Laos in 1983, and subsequent actions by Hayden and his successor, Senator Gareth Evans, in the resolution of the Kampuchean conflict, illustrated to the Lao government that Australia had a genuine interest in solving this conflict and in creating a secure and stable political environment in Indochina. In addition, as Laos perceived Australia as a middle order power, without a history of colonial involvement in the region, Australia was cautiously welcomed in Laos.

The high point of recent Lao-Australian relations came in 1993-94. Firstly, in December 1993, the Lao Prime Minister, Khamtay Siphandone, made his first visit to Australia, which was also his first visit to any Western capitalist country. However, the event which has most publicised the maturation of Lao-Australian relations was the successful construction, by the Australian construction company John Holland Constructions Pty Ltd, of the Mitthaphab (Friendship) Bridge over the Mekkong River between Laos and Thailand. The Mitthaphab Bridge not only illustrated Australia's desire to enhance Laos' economic development and integration into the South East Asian economies, but also has served as an indication of Australian construction expertise. Just prior to the opening of the Bridge in April 1994, Prime Minister Paul Keating paid a two-day visit to Laos. This visit was only the second by an Australian Prime Minister, with Gough Whitlam paying a short visit to Laos in 1973.

These two recent Prime Ministerial visits and Australia's construction of the Mitthaphab Bridge have laid the foundations for a further enhancement of bilateral relations between the two countries, as the twentieth-first century approaches.

There were no substantial political developments in Lao-Australian relations during 1995. However, on the diplomatic front, four Ministerial delegations moved between Australia and Laos during the year, all during the first half of 1995:

• in February the Lao Minister for Agriculture and Forests, General Sisavath Keobounphanh, paid a short visit to Australia,

• during March the Lao Minister of Labour and Social Welfare, Mr Thongloun Sisoulith, also visited Australia,

• in April Australia's Governor-General, Bill Hayden, paid a short visit to Laos as part of a five-nation Asian tour,

• from 23 April to 13 May, Mr Khammone Phonekeo, Vice-Minister of Industry and Handicrafts, who has primary responsibility for mining and energy issues, visited Australia under the Department of Foreign Affairs and Trade's Special Visits Programme. During the visit, the Vice-Minister travelled to the Australian Capital Territory, New South Wales, Tasmania, Victoria and Western Australia, paying particular attention to Australia's construction and power generation facilities, and

• also in May, the Lao Minister for Justice, Mr Khan Ouane Boupha, paid a short visit to Australia.

In addition, during May, the President of the Lao Women's Union, Ms Onechanh Thammavong, headed a small delegation which visited Australia to discuss small business activities with Australian small business women.

Between 1994 and 1995 there was a five-fold increase in the number of Lao Ministerial delegations visiting Australia, and although two Australian Ministerial delegations visited Laos in 1994, as well as an Australian Parliamentary delegation of the Joint Committee for Foreign Affairs, Defence and Trade, no Australian Ministers paid official visits to Laos in 1995.

The only other important bilateral diplomatic event during 1995 occurred on 8 April 1995, when a bilateral agreement between Australia and Laos on the Reciprocal Promotion and Protection of Investments, which was signed on 6 April 1994 in Vientiane, came into effect.

Laos is not considered as a direct security threat to Australia, and due to its size, Laos is also of minimal indirect security concern to Australia. On the other hand, the Lao government has expressed some concern that ethnic the Hmong and Lao communities in Australia have assisted various anti-Lao government guerilla and resistance groups based in Thailand. However, with the gradual closure of Hmong and Lao refugee camps in Thailand and as the relative magnitude of such assistance from the Hmong and Lao diasporas in Australia is thought to be so small, this issue has not hindered Australia's bilateral relations with Laos.

In summary, although there were no major political enhancements of Lao-Australian relations during the year, the visit of four Ministerial delegations from Laos suggests a strengthening of bilateral political relations between the two countries.

The value and volume of trade between Laos and Australia has never been substantial, and in recent years the trade balance has been firmly in Australia's favour. In 1994, the value of Australian exports to Laos was $38.6 million, and the value of imports from Laos a mere A$29 000. However, in 1995, the value of Australian exports to Laos had declined to only $28.0 million, and at the time of writing (March 1996) the exact value of Australian imports from Laos was not available, but was below half a million dollars (and probably no more than $50 000).

During the mid-1990s, Australia's main exports to Laos were gold, silver and platinum, while the principal imports from Laos were simply-worked wood, jewellery, art and antiques. Until Laos develops a more substantial manufacturing sector, it is unlikely that there will be a substantial change in the nature of Lao imports to Australia in the coming years.

The level of foreign Western investment in Laos is relatively small, compared to that experienced in most other South East Asian nations. This is due to a number of factors, including (i) the scant attention the global media devotes to Laos, (ii) Laos' underdeveloped infrastructure, and (iii) Lao government caution towards foreign investors.

In 1986, Laos adopted a New Economic Mechanism to facilitate foreign investment, and subsequently foreign investment laws were substantially updated in 1994. Despite the caution of the Lao government, relative to its other socialist neighbours, foreign investment regulations in the Lao economy are flexible, and the possibility exists for fully owned foreign ventures. Another attractive feature of investing in Laos is that foreign investment procedures are streamlined, and are substantially more transparent and simple than the complicated contradictory procedures which exist in neighbouring Viet Nam, for example.

At the beginning of 1995, Australia was the fourth largest foreign investor in Laos, after Thailand, the United States of America (USA) and Taiwan, with investments valued at about $41.1 million being made since September 1988. By November 1995, Australia had slipped to be the fifth largest investor in Laos, behind Thailand, the USA, South Korea and France. Of the $6.9 billion invested in Laos up until November 1995, Australia had invested $145.5 million in 42 projects. Overall, 76 per cent of the total foreign investment in Laos had been in the energy sector, seven per cent in tourism development and six per cent in the mining sector.

One of the main Australian companies active in Laos is Transfield Holdings Pty Ltd. The company hold a 10 per cent shared in the $1.4 billion 600 MegaWatt Nam Theun 2 Hydro-electric power project on the Theun River, Borikhamsay Province. The major stakeholders in this project are a Thai consortium (35 per cent share), Electricite de France (30 per cent share) with the Lao government retaining a 25 per cent share in the project. Construction work on the project was expected to begin in early 1996, with hydro-electricity production anticipated to commence around the turn of the century.

Another Australian company, John Holland Constructions, is also currently involved in constructing a small hydro-electric dam in Xieng Khuang. Unfortunately progress on this project has been delayed as the company was forced to spend eight months clearing unexploded bombs and other ordnance, left over from the Second Indochina War, from the work site. An estimated one-quarter of the almost three million tons of bombs dropped on Laos during the 1960s and 1970s failed to explode, and today they are lying dormant throughout the country.

In addition to the above companies, the Hydro-electric Commission of Tasmania Enterprise Corporation, Maunsell Sinclair Knight, Snowy Mountains Engineering Corporation, Thiess Contractors International and Transfield are also involved in infrastructure construction projects in Laos.

During the early part of 1995, Thiess Contractors International took over the operation of the Lao-Australia Heavy Plant Maintenance Workshop. Under an agreement with the Lao government, Thiess will develop the facility for the operation and repair of heavy equipment, while concurrently providing in-country vocational training in plant maintenance. Australian mining companies dominate the foreign mining sector in Laos, with CRA, Normandy Poseidon and Western Mining Corporation being the most active Australian participants. It is estimated that both Normandy Poseidon and CRA are presently spending approximately $10-20 million per annum on development activities in Laos.

The Australian telecommunications company Telstra is active in the communications sector in Laos, and, in conjunction with the Lao government, is undertaking a study to formulate a strategy for the development of broadcasting in Laos.

Potential foreign investors in Laos should be aware that the current per capita income in Laos is in the order of $310 per year and about four-fifths of the population live in rural areas. Thus market for most Australian produce in Laos is fairly limited, and careful market research is required to sell Australian products in Laos. This is also especially the case in light of the fact that much of the foreign produce in Laos come from Thailand, Viet Nam and Yunnan (in China). Currently, the Australian Department of Foreign Affairs and Trade suggests that the best investment prospects for Australian companies in Laos exist in the engineering, hydro-electricity, mining and transportation sectors.

Only a small number of Australian companies are currently engaged in providing services in Laos. For example, the Australian Kevron Pty Ltd is undertaking aerial survey photography for major commercial and aid-funded projects in Laos, as well as offering private air charter services. Also in the survey field, the Australian joint venture firm Lao Survey and Exploration Company recently signed a memorandum of understanding to form a joint venture, with the Lao government's National Geographic Department, to supply aerial mapping, measurement, photography and survey services. In addition, Westcoast Helicopters is also engaged in air transportation in Laos, and Lao Aviation lease an ATR-42 aircraft from Australia. This aircraft forms part of the Lao Aviation's eight aircraft strong fleet.

Also in the area of service provision, SBC Australia provides project financial advice to the Lao government and ACIL furnishes agricultural project management expertise in Laos.

In the late 1970s, only four capitalist countries were providing aid to Laos - Australia, Japan, the Netherlands and Sweden - and Australia's on-going contribution of development aid to Laos over more than four decades has been much appreciated in Laos. Currently, Australia's aid contributions to Laos focus primarily on the areas of human resource development, infrastructure development and poverty alleviation. In the mid-1990s, Australia is the third largest source of bilateral foreign development aid to Laos.

In 1994, while on his visit to Laos, the Australian Prime Minister, Paul Keating, announced that Australia would be providing $47.5 million in aid to Laos over a four year period (1994-95 to 1997-98), amounting to an average of about $12 million per year. (This compares to a total of $17.1 million in Australian aid to Laos in 1993-94, of which $14.5 million was bilateral aid - in other words, the former Keating Government had actually planned to decrease the level of Australian developmental aid to Laos in the coming years.) Most of this aid has been earmarked for infrastructure construction projects and human resource development; the latter component primarily in the form of bring Lao students to study at Australian universities. Other components of the current aid programme are directed at HIV/AIDS education, poverty alleviation for disadvantaged groups and agriculture assistance to upland agriculture.

As part of Australia's aid commitment to Laos, in early 1995, Professor Dean Forbes (Flinders University of South Australia) and Dr Peter Burns (University of Adelaide) were awarded a $0.1 million grant by the Australian Agency for International Development (AusAID) to conduct research and provide advice to AusAID on economic developments in Laos, Cambodia and Viet Nam, with the principal focus of the project being Laos and Cambodia. As part of this undertaking, the researchers will investigate the relationships between economic development and the environment, and how Australian firms may assist in this aspect of Lao development.

On 31 May, Mr Gordon Bilney, Minister for Development Cooperation and Pacific Island Affairs, announced that Australia would be providing $2.0 million in food assistance to Laos, as a result of food shortages due to extensive flooding in Khammouane and Borikhamxai Provinces. This flooding caused major crop losses, amounting to about one-third of the low land rice farm crop. In addition, $0.2 million was provided in response to an outbreak of cholera in Laos, which was in part also due to the flooding. The food aid component was channelled through the World Food Programme, while the funds for the cholera outbreak were in response to an appeal launched by the United Nations Department of Humanitarian Affairs.

Although not necessarily a part of formal Australian aid to Laos, the Australian company Milsearch has been involved in commercial bomb-disposal in Laos since late 1993. The company is committed to the disposal of thousands of tons of unexploded bombs, left over from the Second Indochina War, that are scattered throughout Laos and which disable or kill hundreds of Lao citizens every year.

There has been only a short history of Lao emigration to Australia, with the first main wave of Lao immigrants settling in Australia during 1975–76, after the fall of Phnom Penh and Sai Gon in April 1975. However, most of the Laos-born community resident in Australia have settled here since the beginning of the 1980s. At the beginning of 1996, there were about 14 000 people of Hmong, Lao, Chinese–Lao and Vietnamese-Lao origin in Australia, of whom about 24 per cent were born in Australia. During 1993–94, 61 Laos-born people settled in Australia, and in 1994–95 the figure increased to 87 people; these figures represented 0.09 per cent and 0.10 per cent of Australia's total immigration intake during 1993–94 and 1994–95. These figures exclude a small number of people of Lao origin who were born in Thailand, and subsequently settled in Australia.

During the early to mid-1990s, several dozen Laos-born people annually emigrated from Australia, half of whom returned to Laos to live. In 1994–95, about one dozen Laos-born people permanently departed Australia to reside in another country. Nearly all of the Lao who have returned to Laos to live have been elderly Lao who have grown dissatisfied with their lives in Australia.

In addition to permanent emigration from Laos to Australia, and the short term movement of students, in 1994–95 several hundred Lao citizens visited Australia, nearly all of whom came to visit relatives in Australia. The cost of this tourist movement from Laos to Australia is almost always met by their Australian relatives, and thus Australia receives little, if any, direct economic benefit from Lao tourism to Australia. The magnitude of this movement may be expected to gradually increase over the short-term.

A growing proportion of Lao immigrants currently migrating to Australia are arriving directly from Laos under humanitarian programmes, although 55.2 per cent of the Laos born immigrants settling in Australia during 1994–95 entered as refugees. On the other side of the migration equation, there are approximately 300 Australian nationals living or working in Laos, which is very high considering Laos' population size and the intensity of formal relations between the two countries.

The overall level of cultural, educational and scientific relations between Laos and Australia remains low, although there has been a recent expansion in educational relations between the two countries. For example, groups such as Coffey MPW Pty Ltd, the Crescent Group-Hunter Valley College, Monash University and Victoria College are currently engaged in various educational projects in Laos.

It is also interesting to note that there are currently more tertiary education students from Laos studying in Australia than in any other country. The Department of Foreign Affairs and Trade estimates that almost 300 Lao graduates from Australian universities are now working in Laos.

Economic development in Laos is currently increasing at about 8 per cent per annum, with most of the advances being in the manufacturing sector, which has been expanding at around 13 per cent per annum during the early 1990s. This level of economic growth is expected to be maintained into the next century.

Laos is rich in natural resources, though many of these are located in areas which are currently highly inaccessible. For example, recent geological surveys suggest that Laos has over one billion tons of high content iron ore, which, if exploited, would make Laos the largest iron ore producer in South East Asia. Laos' geographic location means that this iron ore could be readily exported to neighbouring countries, once appropriate infrastructure is completed. However, as has been noted earlier, Laos' infrastructure is poor, with very limited all-season transportation networks, and most parts of the country are inaccessible by road. Australian companies have internationally-recognised expertise to assist the development of Laos' transportation and communication systems, as well as facilitating the exploitation of Laos' rich resources.

The future direction of Lao-Australian relations may be considered from the perspectives of the two countries concerned. From the Australian side, the pattern over the past couple of years suggests that the Australian government desires to reduce its involvement in Laos - evidenced by a reduction in the number of Australian government delegations going to Laos, the magnitude of Australian aid to Laos and the level of trade between the two countries. On the other hand, private Australian companies and organisation have increased their physical presence and financial commitment to Laos over the past couple of years. From the Australian perspective it is probable that both these patterns will persist over the next few years The new Liberal-National Party coalition government in Australia is required to make substantial reductions in federal government expenditure in 1996-1999 to reduce the budget deficit; foreign aid and welfare programmes have traditionally been the first areas to experience cut-backs in such situations, and it is probable that Australian aid to Laos will thus be reduced. On the other hand, some sectors of Australian private enterprise believe that they can make adequate profits by being active in Laos, and it is expected that more Australian companies will be become actively involved in the development of Laos, subject to conditions created by the Lao government.

The Sixth Congress of the Lao People's Revolutionary Party was planned for early 1996. Commentators in Laos have expected that the Party Congress may adopt new policies on the future direction of Laos, especially in relation to economic and social development. Although the Party is not expected to give up its monopoly over Lao political power, changes are expected with respect to the transformation of the market economy, especially in light of successful developments over recent years. As the current Lao leadership appears to be pleased with recent Australian economic and political relations with Laos, it is probable that the Lao government would welcome greater Australian interest in the development in Laos, especially as some Lao leaders are concerned with what they perceive as the inordinate level of Thai activity in Laos.

In conclusion, as the twenty-first century approaches, Australian companies may be expected to increase the level of their involvement in Laos, with the consent of the Lao government. This in turn may lead to an increase in the level of trade between the two countries, with Australian exports to, and imports from, Laos both increasing. The level of cultural educational and scientific relations are also expected to expand in the coming years, although the Australian government may reduce the number of AusAID-sponsored Lao overseas students studying at Australian universities. Overall, current indications are that the new Howard Government may be expected to reduce the level of foreign aid that Australia gives to Laos.

Copyright 1998/99, Lao Studies Society.