Laos’ natural resources under threat as nation battles economic headwinds 

The government has adopted a green growth strategy, making a strong promise to use natural resources efficiently, but growing economic problems are making it difficult to adhere to this sustainable development path.

It is late morning in the picturesque mountainous village of Daen Din in Kasy district, Vientiane province, about 200km from the capital Vientiane, where a 19-year-old man is sitting next to a fire with a few neighbours, engaged in friendly chit-chat.
Despite occasional disruptions because of the sound of blasting and the dust churned up by passing trucks carrying mineral ore, Mr Ad Soulivanh and his neighbours are able to continue their discussions.

A mine in Kasy district, Vientiane province.

“When the trucks come, we stop talking and after they’ve passed we continue our conversation,” the young man said with a smile as he helped his family cook breakfast by the side of the road.
Mr Ad was one of the people in the village who were happy to share their feelings about the impact of the mining boom in Kasy district, one of the main areas in Laos that is witnessing rapid growth in the industry.
In 2021, the government launched a policy to promote nationwide investment in natural resources, primarily focusing on the excavation of iron ore for export. This initiative aimed to generate revenue to address economic challenges and prevent the country from falling into an economic crisis.
Since 2021, Laos has experienced severe economic issues. The value of the kip has fallen by more than 100 percent against the US dollar and Thai baht, partly due to the increasing demand for foreign currency to pay for imported goods. High public debt also poses challenges for the government in maintaining economic stability.
Laos’ economic challenges
Over the past decade, Laos has experienced a high trade deficit due to low productivity, causing even higher demand for foreign currencies. In addition, high public debt due to the borrowing of funds for public infrastructure has added more fuel to the fire.
According to a report from the Ministry of Finance published in 2023, Laos’ public debt stood at US$14 billion as early 2023, accounting for 97 percent of GDP. China is the country’s biggest lender, having lent about 50 percent of the total, while other loan providers include the Asian Development Bank (ADB), the World Bank, and Thailand.
Laos must pay about US$1.3 billion a year from 2023 to 2027 to repay its debts, the report titled Public Debt and Publicly Guarantee Debt Statistic Bulletin Volume 04 shows.
Dr Kanya Souksakoun, who participated in a research project titled “Chinese Infrastructure Loans and Lao Sovereign Debt”, said most of the money borrowed came from China to fund state owned infrastructure projects, mainly hydropower plants and power grids.
“The loan provided by China to build the Laos-China Railway is not the main reason for the high level of public debt; rather it is debt related to state owned electricity generation facilities,” said Dr Kanya, who is a lecturer at the Faculty of Environment Science, National University of Laos.
He said that since China provided 70 percent of the investment costs to build the railway, the country has not had a significant impact on Laos’ public debt.

A villager grows crops next to the mine in Kasy district.	The road from Kasy to Vangvieng has been severely damaged, partially due to heavy trucks transporting mineral ore.

Pilot mining schemes: A short-term solution
The Director General of the Macroeconomic Research Institute, Ms Latdavanh Songvilay, said the government is attempting to tackle its economic woes through the National Agenda, under which pilot mining schemes were authorised to create a much-needed income steam.
“The purpose of the pilot mining scheme is to cut some of the investment approval processes, so that the government can generate revenue more quickly and better maintain economic stability,” she said.
Laos does not have a diverse economic base, so natural resources are among the few resources the government can use in the short term to boost economic stability, she added.
According to a government report presented at the National Assembly in 2023, under the pilot mining scheme, authorities approved about 90 mining operations in the hope they would generate significant revenue.
Due to the impact of this scheme, lawmakers attending a sitting of the National Assembly last year demanded that the government reassess the impact of mining operations and ensure that the damaging consequences are eliminated.
Local impacts: Opportunities and challenges
For the community in Daen Din, the mining boom in Kasy has provided both opportunities and challenges.
Mr Mac said he had benefited by being offered a job at the mine, enabling him to earn money to feed his family in the lean years after the rice harvest.
“I am employed as a steelworker and earn about 3 million kip a month from the mining operation,” he said.
But not everyone in the community is benefiting. Mr Ad said one of the worst impacts of the mining boom, caused by irresponsible mining activities, is damaged roads. In addition, heavily laden trucks create a huge amount of dust, which is unhealthy for everyone in the area.
“The roads are badly damaged, making it difficult for us to travel for business and healthcare purposes,” he said.
Another man from the village, Mr Pan, said that in the past it took about 30 minutes to get to Vangvieng town, but this is no longer the case.
“It took us almost one hour to get there recently,” he said, adding that a woman gave birth while being driven to Vangvieng because she could not reach the hospital in time.
Community concerns: Environmental and health risks
Houyhok village chief Mr Khamfai Tamong said local residents are concerned about the impacts of the mine, which is located in the village, because of poor regulations around environmental protection.
One of the concerns is that there might be a shortage of drinking water because a lot of water is used in mining operations. Another worry is that there might be chemical run-offs into the river, which could harm crops.
He said locals had filed a complaint with higher authorities, asking them to investigate whether there was a link between damaged crops and chemical spills.
“The authorities sent officials to investigate, but so far we have received no satisfactory answers,” he said.
Another villager, Mr Bua Vilaysom, said half a hectare of his cash crops was damaged last year, and he suspected this could be due to a chemical leak from the mining plant.
“The cost of the damage was about 20 million kip,” he said, adding that he had demanded compensation but got no response from the company operating the mine.
He said that after mineral extraction began, his crops did not grow as well as previously. “But even though the crops did not grow well, we carried on planting because we had no other source of income,” he said.
Mining’s threat to tourism
Mr Inthy Deuansavanh, who operates a tour company in Vangvieng, said he was concerned about the impact of both the widespread formal and informal mining industry on tourism in the area.
He said the most obvious impact of the mining industry was road damage due to the transport of ore, adding that unpleasant travel conditions could be off-putting for tourists.
Unregulated mining in Vangvieng and neighbouring towns would damage the natural beauty of Vangvieng, which relies on its scenic attractions as a tourist drawcard, he said.
The authorities need to create tourism zones that are off limits to mining companies in order to protect tourism, as this is a huge revenue earner for Vangvieng, he added.
“The Master Plan for Vangvieng stresses the need to create a business development zone. What we must do now is comply with the plan,” he said, adding that enforcement would protect the tourism industry from the mining boom.
Mr Inthy said tourism is a major source of income for businesses and the local community and that without tourism, Vangvieng would be dead.
According to Vangvieng authorities, about 75 percent of the population is reliant on tourism.
Green growth vs. economic necessity
Ms Latdavanh said the government has made a strong commitment to pursue green and sustainable growth. However, the desire to exploit natural resources is posing a significant challenge in realising this goal.
To ensure the sustainable use of natural resources and sustainable development in the long term, the government must use the revenue earned from mining to improve education and healthcare, which are key to the revitalisation of the economy, she added.
“The government must have a clear vision about how to diversify the economy and end heavy reliance on natural resources,” she said. “But the government can only achieve this vision if it has a strong political will and puts it into practice.”

--This story has been supported by Internews’ Earth Journalism Network.

By Ekaphone Phouthonesy
 (Latest Update May 16, 2024)