A reliance on exporting natural resources is destroying Lao's forests and fuelling inequality
THE BAREFOOTED children, hands cupped to the windows of the air-conditioned JoMa cafe, are uncomfortable reminders to the tourists within of Lao's poverty and inequality.
Lattes and carrot cake are comforts expected by the growing numbers of backpackers and Singaporean package groups coming to this hilly southeast Asian state of almost six million.
Unfortunately, the tourist dollar hasn't delivered much comfort for ordinary Laotians. The People's Democratic Republic of Lao (locals resent the "Laos" spelling as a reminder of the country's experience of French colonialism) ranks 133 out of 177 countries on the UN human development index.
Nissan and Mercedes dealerships on the drive into town suggest wealth in the pretty and dozy capital on the Mekong river, Vientiane. Those lucky to live in this neat, green city can access jobs in a thriving local tourism industry or work as translators and administrators in the local offices of NGOs and UN agencies.
The barefooted destitute who emerge like ghosts at night come from outlying villages where children run naked on gravel roads.
Roughly the size of Britain, Lao aims to graduate from UN "least-developed country" status by 2020. Given Asia's economic rise, it seems like a modest ambition. Economists suggest Lao is doing well, reporting 7.5 per cent gross domestic product growth in 2007, according to the World Bank.
Similar growth rates are expected this year. But the growth depends almost entirely on the executives of the world's largest mining firms, who ride out of Vientiane every morning in blacked-out SUVs, headed for the hills, where copper, gold and iron ore is dug out of the rich, red soil.
Mining and hydropower account for the bulk of foreign investment, says Dublin native Jack Sheehan, a tax consultant at the Vientiane office of Ernst & Young. Two Australian-controlled mining projects, Lang Xang Minerals and Phu Bia Mining, pumped $700 million (€453 million) into the economy last year, 90 per cent of foreign investment in 2007.
Lao's ruling party, the nominally communist Pathet Lao, has built few of the factories and highways which soak up workers in Vietnam to the east and China to the north. Shipping out natural resources is a road to ruin, according to NGO workers in Vientiane who talk of jungle hilltops scarred by mining and of farmers displaced for hydropower and mining projects.
Locals are sometimes willing participants in the destruction. Tension has emerged as peasants hack into protected forest lands to grow rubber for Chinese wholesalers, says David Fullbrook, a researcher attached to the government-sponsored Laos Extension for Agriculture Project.
Lao used to be the most forested country in southeast Asia, but a flurry of logs going northwards to China account for 35 per cent of Laotian exports - and that's not counting the huge illegal trade in tropical hardwood, sold to Chinese furniture makers.
Chinese government researchers prefer to see the positive side of resource extraction and cross-border trade. "Lao wants to explore its natural resources but needs foreign capital and technology," says Yang Yun, a professor at the Southeast Asian Institute at the Yunnan Academy of Social Sciences in southwest China. "Lao has land, labour and resources to offer."
China's prosperity bodes well for Laotian farmers (they account for 80 per cent of the working population) who grow watermelons in rice paddies left idle during the rainy season before shipping them north.
China's free trade agreement with the Association of Southeast Asian Nations, of which Lao is a member, is "mutually beneficial" for both sides, says Yang.
Lao's fruit and vegetables are shipped tariff-free into Chinese supermarkets thanks to the deal. China does well too, as the source of most of Lao's imports. Locals buy Chinese fridges, cars and toothpaste because there's little in the way of local manufacturing capacity. That's ironic, given the Pathet Lao development model, like Beijing's, mixes five-year plans for industrialisation with market liberalisation.
The country also suffers more than others from brain drain: 35 per cent of educated Laotians live abroad, according to the World Bank. The brain drain means Vientiane has relied on help from the World Bank and the US Agency for International Development in drafting laws on banking and intellectual property essential to its application to join the World Trade Organisation.
Sickened by violent decades when the country was dragged into the Vietnam war and a subsequent civil war, overseas Laotians are now trickling back.
Returnees speaking Australian-accented English treat family to ice cream and beer at the Patuxay arch, a Vientiane folly built in 1968 to celebrate independence from France.
Vientiane's cosmopolitan dining scene, for those who can afford it, should be buffered next year when the Southeast Asian Games are hosted here. But with Lao depending on little but its natural resources, inequality is likely to be a feature of Laotian life for a long time to come.
"Locals buy Chinese cars, fridges and toothpaste