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Roads to Riches
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VILABOULY DISTRICT, LAO PDR. After traveling almost the breadth of the Lao People’s Democratic Republic (Lao PDR) on a newly upgraded highway, the trucks turn off and continue another 45 kilometers on a dirt road to carry equipment and supplies deep into the jungle. This is an area ravaged by war some 3 decades ago.
These trucks, and their cargo, are helping sustain one of the country’s largest foreign investment projects, an Australian gold and copper mining venture, and its 3,000 workers, many of whom are involved in construction.
Before the narrow and dilapidated Road 9—described as a “moon surface” by a long-time resident—was transformed into an all-weather highway, it could take up to 3 days to drive from the capital of Vientiane to Vilabouly. Now the journey can be completed in 9 hours.
Since the late-1980s, the Government of the Lao PDR has been opening up to foreign investors in the transition from a planned to a market economy. But the lack of paved roads—and other key infrastructure, such as bridges and airports—has been a major constraint for foreign investors seeking to set up shop here.
Now all this is changing. The refurbished highway is a key part of the East- West Economic Corridor that traverses the Lao PDR from Thailand and Myanmar in the west to Viet Nam in the east. It makes it far easier for companies, foreign and domestic, to bring in imports and take out exports.
Within the next 2 years, a new bridge over the Mekong River at the Thai border and a tunnel through the Hai Van mountain in Viet Nam will also give exporters in the Lao PDR better access to markets and ports in neighboring countries. In addition, an upgraded airport at Savannakhet, in the Lao PDR, could strengthen regional air links.
Importantly, all this new infrastructure, much of it financed by international development agencies, including the Asian Development Bank (ADB), will also develop the Lao PDR as a land bridge between Viet Nam on one side and Thailand, Myanmar, and India on the other.
DYEING TRADE Learning skills under a community program
Foreign investors looking at the Lao PDR are closely monitoring the experience of the Melbourne-based metals producer, Oxiana (known locally as Lane Xang Minerals).
For its part, the Government of the Lao PDR views it as a “win-win” project. The Government expects to earn about $15 million a year in taxes and royalties, a significant proportion of its annual budget, once the Oxiana mine is in full production.
Oxiana, on the other hand, “needed to produce gold to finance the more complicated and expensive copper development, and all has gone according to plan,” says Russell Hooper, the company’s gold production manager. “Lots of visitors come to see us as a demonstration project.”
Some are doing more than that. Farther north, another Australian company has started a similar copper and gold venture. In Sepon District, a Viet Nam telecoms company aims to set up a factory near Oxiana to source copper and reap locational advantages.
Oxiana’s schedule is on track. Its gold mine was established in world-class time and, beginning production in 2002, the company produced 166,000 ounces of gold during its first year. It expects to start copper production in 2005 and raise profit for the year to more than A$60 million (from A$8 million in 2004).
Underpinning the showcase operation is the transport infrastructure. “The new corridor is critical to our business,” Mr. Hooper disclosed. “We bring in very large loads that would have been difficult without the improved infrastructure that’s gone in over the past couple of years.”
Moreover, once Oxiana starts exporting copper to its major Asian markets—such as the People’s Republic of China, India, and Japan—it will need ready access to ports. By the time it reaches annual production of 60,000 tons in 2006, major bottlenecks to ports in Thailand and Viet Nam will have been eased with a new bridge across the Mekong at Savannakhet and a tunnel through the Hai Van Pass near Da Nang.
"The new corridor is critical to our business. We bring in very large loads that would have been difficult without the improved infrastructure that's gone in over the past couple of years"
- Russell Hooper
Oxiana Gold Production Manager
Benefits are also spilling over to the local community. Lao form 85% of Oxiana’s workforce and, working as drivers, electricians, or maintenance personnel, many are developing the skills and confidence to start their own small businesses, says Mr. Hooper.
A community program sponsored by the company includes helping farmers diversify away from unsustainable slash-andburn agriculture toward cash crops and mulberry trees to support a fledgling silk industry.
Another program has trained 72 women in 10 villages in the art of weaving and dyeing. Currently, their products are sent via the East-West Economic Corridor to be sold in Vientiane and Savannakhet.
In nearby Phonsaat village, Na, a whitehaired woman in her 60s, is working a simple weaving machine beneath her wooden house. She says she earns 300,000 kip (about 27.57) a month.
“I’m too old to work in the fields, and the money helps provide food and school materials for the grandchildren,” she says.
Clearly, new infrastructure, such as the East-West Economic Corridor, is already helping foreign investors and domestic cottage industries alike.
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