White elephants in Laos
VIENTIANE - The last of Laos' white elephants, a sacred symbol of both Buddhism and royalty, perished long ago under communist rule. As the number of real white elephants in Southeast Asia declines, metaphorical white elephant property developments can be seen across Laos, particularly in Vientiane, its once sleepy, now bustling, riverside capital.
Previously an elegant human-scale city, Vientiane boasted avenues lined with mahogany trees, Lao and French heritage buildings, and, enviably in these global times of carbon consciousness, city-based farming. Now, congested with vehicles jostling for road space and parking, Vientiane is increasingly dominated by the grandiose utilitarian architecture of the ruling communist dictators and their allied Chinese investors. As in China, the economic potential of many of these property developments is dubious.
Prior to a large European Asia summit (ASEM) in Vientiane, a whole market gardening community was forcibly removed from Don Chan in the southwest edge of the city to make way for a huge Soviet-style hotel and rows of elite townhouses. Ironically, perhaps, white stone elephants are positioned at the development's security gates. They were built by China's CAMC Engineering, a company that since 1996 has been granted many infrastructure projects in Laos, including extension of the Vientiane airport.
Lao's Deputy Prime Minister and Minister of Foreign Affairs Thongloun Sisoulith lauded the ASEM development as "a new era" of Lao-Chinese cooperation. China has invested over US$3 billion in Laos over the last two decades, according to state media. Chinese firms, from dam builders to construction firms, to mall developers, are boosting investment in Laos, a new member of the World Trade Organization with an economy that's forecast by the International Monetary Fund to grow 8% in 2013.
In the property market, that fast growth looks increasingly ill-advised. The CAMC-built ASEM development was advertised as being supported by Lao's Krittaphone Group, likely to reduce domestic opposition to a China-led project that displaced local residents with paltry compensation. The $100 million hotel and residential complex, designed to sell as luxury residential units after ASEM, is virtually empty nearly a year after the event.
Ivan Wood, a visiting investment banker from Singapore was offered by one of Laos' elite ruling families with whom he was working, was offered one of the luxury villas for $1.8 million shortly after the ASEM meeting. Woods, an experienced observer of the region's finance and property industries, reckons the development was driven more by money laundering than actual commercial potential.
Many of the projects have high-level political backing. Bloomberg reported that The Yunnan Provincial Overseas Investment Company, a Chinese government investment arm, is developing another property project in the city valued at $40 million. The Chinese company enjoys close relations with several Lao leaders, including deputy prime ministers Asang Laoly and Somsavat Lengsavad, both of whom are known to frequently visit and entertain China's southern Yunnan province leaders.
The incongruous ASEAN (Association of Southeast Asian Nations) Mall, a monument to regional economic integration and consumerism in a nominally communist nation with meager spending power, is a vast echoing space of struggling vendors and no customers. Three years after completion, many shops already show signs of closing down. The investment in shopping complexes across the city has not been matched by underlying consumer demand.
Perhaps the most thunderous of Vientiane's emerging white elephants is the $1 billion That Luang Special Economic Zone development, a massive shopping mall and housing complex currently being built by China's Wanfeng Shanghai group. Evocative of Singapore's or Australia's Gold Coast, the development boasts all the white elephant essentials: a luxury shopping mall, convention centers, diplomatic zones, entertainment complexes and high-end residences. All of this development is centered around what Wanfeng Shanghai Group refers to as a lake. In fact, the SEZ has been built on wetlands that dry up when the rains cease, revealing rather un-luxurious mudflats.
Asia Times Online frequently visited the wetlands in 2010 when they were previously under threat of development. Interviews with residents revealed that the wetlands provided vital income support from farming, harvesting wildlife and cultivating lotus flowers for sale in local temples for the city's marginal and landless people, including a conclave of elderly widows. Few, if any, of those relocated from the area have received compensation because they lack land certificates.
"Vientiane could have been a model of the modern Asian city: low energy, local fresh food supplies, small population, heritage-rich with low-rise development," said Steve Barrack, a consultant town planner based in Jakarta. "But it's as though they got a list of all the mistakes made by all other cities and said we will repeat all of them."
Imperialism by stealth
The last Lao monarch, before he was executed by the revolutionary communist regime, frequently attended the annual end of Buddhist Lent celebrations by sailing down the Mekong River to a wharf located near where the Beer Lao factory is currently situated. From there, the monarch would take a highly decorated pirogue to the revered That Luang temple for prayers.
Some elderly former Don Chan residents can remember witnessing that event, remarking that it was a wonderful time when the marshes were full and water reflected the clouds. It is claimed the new Chinese-built development will attract tourists and galvanize economic growth, but even with the recent surge in tourism few travel to underdeveloped Laos to visit a third-rate, soulless shopping mall.
Hard-line authorities have issued an order informing hold-out residents in the area that they are not to sell their land as it now belongs to the site's Chinese developers. Radio Free Asia reported general concerns of government mismanagement and corruption in disputes between residents and investors in the project. With China's growing economic influence in the country, ranging from long-term land concessions to outright property purchases to rampant in-migration, some Laos view Beijing's rising influence as "imperialism by stealth."
Some lament Chinese investors are exporting their well-documented poor environmental standards to Laos. The environmental impacts of the That Luang Special Economic Zone development will result in significant economic losses, experts predict. The International Union for the Conservation of Nature (IUCN) and World Wildlife Fund for Nature (WWF) reported earlier that the That Luang marsh helps to keep Vientiane's head above water as a flood control reservoir. In the absence of proper sewage or city waste systems, the wetlands have also served to purify wastewater from the surrounding urban area.
In the rainy season, Vientiane's increasingly clogged roads frequently become impassable due to flooding. Existing urban infrastructure and the lack of universal sewage treatment means that the government is unable to provide a comparably vast sink. Many countries now legislate against building on wetlands due to the environmental and economic costs.
An engineer working on the new United States embassy being built in Vientiane who requested anonymity remarked that the That Luang SEZ's design is economically questionable due to the extra engineering needed to ensure the site does not become clogged with methane-emitting stagnant water.
The promotional video for the That Luang development indicates that some areas will be set aside for embassies and other foreign delegations - seemingly unaware that most major nations have already built new embassies in recent years and would unlikely be allowed to lease the complex's China-built structures due to security regulations. That will be especially true for surveillance-sensitive Western countries.
The That Luang development leads Laos' growing herd of white elephant property developments. Because communist authorities brook no dissent, there is no debate about the various real estate ventures popping up across Laos' once elegant capital. Despite all of the environmental and economic warnings, the China-backed That Luang development and many others will proceed with high level government support and low prospects for commercial success.