What is the EU doing in Laos?

Cristian Gherasim - Reporting from Vientiane capital of Laos

“EU has a place at the table here”, says a western diplomat talking to EU Reporter in Vientiane, capital of Laos. When asked whether the EU can compete with the likes of China and the US in the region, the diplomat highlighted that the European Union is working to improve the business and investment climate here.

Laos is a small landlocked nation in South-Eastern Asia sandwiched between Vietnam, Thailand, Cambodia and China.

Laos's strategies for development are based on generating electricity from rivers and selling the power to its neighbours, namely Thailand, China and Vietnam, as well as its initiative to become a "land-linked" nation, as evidenced by the construction of four new railways connecting Laos and neighbours, the most recent linking it to China. The country has been referred to as one of Southeast Asia and Pacific's fastest growing economies by the World Bank but now it has run into considerable economy trouble. Inflation remains high and the country's debt is ever growing.

The European Union is running the Team Europe Partnership with Laos aimed at boosting sustainable trade and investment in agriculture, wanting to reduce deforestation and promoting sustainable land.

“Team Europe is about the coordination of development assistance between EU and Lao PDR”, says the Vientiane based diplomat speaking to EU Reporter.

One of the more interesting sides of Team Europe is that “now coffee is being grown where opium once used to be produced”, said the diplomat.

Trade, Investment and Connectivity in the Agriculture and Forestry (TICAF) are the main sectors targeted by the Team Europe investment programme worth 550 million EUR.

The European Union works as a major donor helping “Laos improve its economic situation and be a happier place”, according to the diplomat EU Reporter spoke to. According to the European Union Delegation to Laos website “The TICAF program aims to support the development of sustainable and inclusive value chains of coffee, tea and forest-based products which the Lao PDR is trading with the EU. To facilitate access to national, regional and global markets, TICAF will also support better connectivity to regional and international markets through the rehabilitation of a national road leading to Thailand and Vietnam. The program is co-financed with grants from the EU (€28 M) France (€4.65 M), Germany (€11 M), and concessional loan from the European Investment Bank (€50 M)”. Alongside the likes of Germany, France, Switzerland, Luxembourg the program also includes Hungary which also gives a considerable number of scholarships to Lao citizens wanting to study in Budapest.

The main sectors EU has been focusing on in Laos are government and rule of law, development, trade and environment. The goal would be that on the long term the outcome should be narrowing the worldwide investment disparity, boosting the clean energy sector, growing the transport infrastructure and strengthening health, education and research.            

Laos is not doing too well economically but the country hopes to grow its economy through tourism as there might hope that other sectors like exports and the service industries will bounce back. According to the Lao economic monitor put together by the World Bank Lao is facing several economic woes that the EU should take into consideration such as the sharp currency depreciation which leads to an increase in the domestic labor market. There are currently 250.000 Laotians working in Thailand at the time of writing, an increase of 15% between June 2023 and February 2024. Also an increase in public spending and a public debt growing to critical levels aren’t making things any easier.

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