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DE RUEHVN #0646/01 1910915
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P 100915Z JUL 06
FM AMEMBASSY VIENTIANE
TO RUEHC/SECSTATE WASHDC PRIORITY 0116
INFO RUEHBK/AMEMBASSY BANGKOK 6692
RUEHHI/AMEMBASSY HANOI 2695
RUEHGO/AMEMBASSY RANGOON 2144
RUEHPF/AMEMBASSY PHNOM PENH 1806
RUEHBJ/AMEMBASSY BEIJING 1992
RUEHCHI/AMCONSUL CHIANG MAI 0432
RHHMUNA/CDR USPACOM HONOLULU HI

C O N F I D E N T I A L SECTION 01 OF 02 VIENTIANE 000646 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT FOR EAP/MLS, INR 
 
E.O. 12958: DECL: 07/10/2016 
TAGS: PGOV PINR PREL LA
SUBJECT: LAO PRESIDENT PAYS HOMAGE TO CHINA 
 
REF: VIENTIANE 565 
 
Classified By: Ambassador Patricia M. Haslach, reason 1.4 (b) and (d). 
 
Summary 
------- 
¶1. (C) During his June 27-July 2 visit to China, Lao 
President Choummaly met with the senior Chinese leadership 
and signed an agreement for a low-interest loan for 280 
million Yuan (about $35 million) that we understand will be 
used in part to fund the purchase of construction equipment. 
The Chinese played welcoming hosts to the President and his 
entourage, with the two sides signing a joint communique 
stressing China's commitment to assist Laos in its economic 
growth and to improve ties across the board.  In contrast to 
the uncritical Chinese, the Vietnamese may be losing patience 
with the GoL's lack of commitment to reform; during 
Choummaly's Vietnam call last month (reftel), the Vietnamese 
exerted pressure on his government to tackle corruption or 
risk serious problems down the road. If the fruits of these 
two visits are a guide, the Lao relationship is drifting 
toward China, away from traditional patron Vietnam. End 
summary. 
 
A "friendship visit" 
-------------------- 
¶2. (C) President Choummaly's China trip followed almost 
immediately on the heels of his June 19-22 courtesy call to 
Vietnam; together the two visits conveyed a clear signal that 
Laos' recent leadership changes would not affect the 
Communist Party's relations with long-time ally Vietnam and 
with its new development partner China. Officially making the 
trip at the invitation of Chinese President Hu Jintao, 
Choummaly traveled with a large retinue, representing the 
senior ranks of the government's foreign and economic 
ministries, including the Deputy Prime Minister and Minister 
of Foreign Affairs Thongloun Sisoulith.  During their six-day 
stay, the President and his entourage met with the National 
People's Congress Chairman Wu Bangguo, Premier Wen Jiabao, 
and Vice President Zeng Qinghong, and toured sites in 
Beijing. 
 
¶3. (C) At the close of the visit the two presidents issued a 
joint communique, expressing their intent to cooperate 
closely across a range of areas and making mention of a new 
plate of assistance the Chinese government would provide 
Laos. The largest item on the plate would be China's 
provision of a low-interest loan to the GoL.  MFA contacts 
told us the loan would be for 280 million Yuan (about $35 
million); the purpose of the loan had not yet been decided. 
We have heard from other sources, however, that part of the 
loan would be set aside to fund the purchase of Chinese-made 
road-building and mining equipment by companies operating in 
Laos, and was therefore money that would directly benefit 
Chinese manufactures. 
 
¶4. (C) In addition to the loan, President Hu agreed to 
provide agricultural equipment for the Lao farming sector, 
and increased training for Lao officials. The two leaders 
also discussed in vague terms other areas of possible 
assistance, including Chinese help to fund construction of a 
long-delayed railroad link from the Friendship Bridge on the 
border with Thailand to the Lao shipping port of Tha Nalaeng. 
 The Chinese President promised to increase activity in 
economic endeavors where the Chinese have been most active in 
recent years, such as the mining, hydropower, agriculture and 
tourism sectors. In their joint communique, the two sides 
agreed to work closely together on border issues, expand 
border trade, and generally increase cooperation in defense, 
education and public security. 
 
No substance 
------------ 
¶5. (C) The Director-General of MFA's Asia-Pacific Department, 
briefing us on the visit, assured us there were "no secrets" 
to Choummaly's trip, and billed it as a "courtesy call" as 
part of the new President's round of calls subsequent to 
taking office. With the exception of the Chinese loan and a 
few other small aid items, he told us, the two leaders did 
not broach any new issues.  The content of the joint 
communique reflected a visit that was more concerned with 
emphasizing the status quo than with breaking new ground. 
Although President Hu stressed the need to encourage Chinese 
trade and investment in Laos and in increasing exchanges and 
 
VIENTIANE 00000646  002 OF 002 
 
 
training opportunities at all levels, the DG told us there 
was no detailed discussion of how to arrive at these goals. 
 
Vietnam gets serious with the Lao 
--------------------------------- 
¶6. (C) Choummaly's China visit may have been more pleasant 
than his trip to Vietnam the previous week.  Embassy's NAS 
Director learned from the UNODC Representative in Vientiane 
last week that UNODC had received reports of mass arrests, up 
to 300 individuals, as part of a government crackdown on 
corruption.  While the majority of those detained are 
reportedly village chiefs, the dragnet also purportedly 
included the Customs Director at the Thai-Lao Friendship 
Bridge, a particularly prestigious (and lucrative) position. 
According to UNODC, this crackdown came at the behest of the 
Government of Vietnam, which raised the issue during 
Choummaly's visit.  Reportedly, the Vietnamese admonished the 
GoL for its poor performance in fighting corruption, and 
pointed to Vietnam,s relative success in this area during 
the past three years.  The Lao counter-corruption campaign, 
if it is in fact occurring, may be a hasty attempt by the GoL 
to placate the Vietnamese.  Possibly as a follow-on to the 
Choummaly trip there, FM Thongloun will return to Vietnam, 
and travel on to Cambodia, later this month. 
 
Comment 
------- 
¶7. (C) The Chinese made a point of finding a deliverable for 
Choummaly -- their low-interest loan -- while the Vietnamese 
appear to have been more interested in rousing the Lao to 
deal with their serious internal problems.  The Vietnamese 
see corruption for what it is, a disease eating away at the 
vitals of their regime, and may be worried about the similar 
implications for corruption in the country that guards its 
western flank.  Until very recently, the Lao had failed to 
grasp the import of the message. That may be changing, 
possibly at the behest of the Vietnamese. We understand from 
government contacts that the Vietnamese were in large part 
responsible for getting the Lao to reestablish the office of 
Party Secretariat at the 8th Party Congress in March, as a 
tool for dealing with internal corruption. This recent round 
of arrests, although unconfirmed, is another signal that the 
Lao may be turning around on corruption.  The new Prime 
Minister, Bouasone, has already made anti-corruption a mantra 
of his administration. 
 
¶8. (C) We have never had the sense that the Chinese are so 
concerned about Laos' internal problems. "Non-interference" 
is more than a slogan to the Chinese, who are happy to leave 
the Lao to their own internal affairs.  The Chinese are much 
more concerned with Laos' support on external affairs, 
convincing them to toe the line on several issues dear to 
China's heart. Laos' foreign policy more and more tracks with 
that of China, such as on the one-China policy.  The Lao are 
beginning to echo the Chinese even in ASEAN.  A contact in 
the Singapore Embassy said that Lao Deputy FM Bounkeut has 
recently spoken up in ASEAN meetings about the proposed East 
Asia Community, arguing China's position and taking issue 
with that of Vietnam. Those subtle differences hint that the 
days of Laos-Vietnam as close as "lips and teeth" may be 
ending. End comment. 
HASLACH