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New Lao PM inherits multiple poison chalices



JANUARY 2, 2023

Sonexay Siphandone hails from a powerful political clan and has ties to China but his success in the role is far from guaranteed

Sonexay Siphandone takes over at a time of extreme economic duress. Image: Twitter

The scion of a major political dynasty and a key conduit for Chinese investment, Sonexay Siphandone took over as Laos’ prime minister last week after the unexpected early resignation of his predecessor.

After weeks of rumors about whether he would go, Phankham Viphavanh offered his resignation as on December 30, the last day of a National Assembly sitting. He goes down as the shortest-serving prime minister in the communist era, in the job just shy of 24 months.

Under his tenure, Laos had a particularly poor Covid-19 response in 2021 and then was hit by economic crises on multiple fronts last year. He’s also at the center of several scandals that have tainted the image of a formerly straight-cut apparatchik.

“I am 72 years old, and am no longer in good health,” Phankham said before the assembly. “Because of this, I feel that I can no longer carry the heavy burdens our country is facing.”

Sonexay, a former deputy prime minister and investment minister, received a near-unanimous vote from the National Assembly to become the next prime minister. Aged 56, he is one of the youngest premiers in recent history.

“I understand deeply that this will be a difficult and challenging role,” he told the National Assembly.

Indeed, Laos has one of Asia’s highest rates of inflation, a fast depreciating currency, and there’s no certainty it won’t default on its external debts, much of which is owed to key partner China, not least for a high-speed railway project connecting the two countries.

Sonexay’s most important and immediate task will be to convince Beijing to give debt deferrals on loans owed at a time it can barely afford interest repayments. Beijing, for its part, won’t want another key Belt and Road Initiative partner to default.

A promotional poster for the 414-kilometer Laos-China railway project that promised to transform Laos from landlocked to land-linked. Photo: Facebook

Sonexay hails from one of Laos’ two most important political dynasties. His father Khamtay Siphandone was a former prime minister and state president in the 1990s, and aged 98 still exerts big influence over the party.

“Sonexay, as a next-generation leader entrusted by the senior party leaders, is expected to lead those technocrats in crucial cabinet positions who are also from mainstream clans and close to dynasties,” says Toshiro Nishizawa, a University of Tokyo professor and a former adviser to the Lao government.

“Sonexay’s ascension might reflect accelerated leadership rejuvenation attempts with the party’s inner circle consensus led by Thongloun Sisoulith,” the state president and communist party chief, Nishizawa added.

Given the dynastic source of power, some analysts doubt whether Sonexay is much of a “technocrat”, although he has occupied key government posts and was made chair of a special economic task force set up in mid-2022.

It “may represent a step backwards for any ‘good governance’ initiatives in Laos, such as they are,” says an analyst who requested anonymity.

Indeed, the Siphandone family is known for being close to corrupt officials and involvement in the shady world of Laos’ extractive resources. An analyst noted that Khamtay “oversaw the peak of the logging boom in Laos in the 1990s.”

The mood in Laos is mixed, even though rumors had been circulating for weeks that Phankham would retire.

Outgoing Lao Prime Minister Phankham Viphavanh struggled to keep a grip on the economy and manage intra-party rivalry. Image: Global Times

One Lao resident told Asia Times that they’re hopeful Sonexay can shake up the government and was pleasantly surprised that the ruling Lao People’s Revolutionary Party (LPRP), which would have directly managed the power transfer, had even accepted it.

Some analysts had doubted rumors in recent weeks that Phankham would resign because they believed it would be an explicit admission of personnel and policy failure by the party. Even though Phankham used the excuse of poor health, which may or may not be true, many Laos reckon he was forced out.

But another resident of Vientiane says that “most people are just resigned to how things are now. Most of the rural youth have already left for work in Thailand, the educated try for scholarships.”

Sonexay’s assumption of the premiership is a major victory for the Siphandone clan, whose power base lies in the south of the country.

His sister, Viengthong Siphandone, rose quickly through the ranks at the party’s last National Congress in early 2021 to become the new chair of the Supreme Court. She was formerly head of the State Audit Organization.

Viengthong is married to Khampheng Saysompheng, a former minister of Labor and Social Welfare, and then minister of Industry and Commerce (he was replaced in June). He is “widely seen as one of many corrupt high-level government officials,” stated an analyst writing in 2015.

As well as Viengthong, ranked 18th in the Central Committee, two other members of the Siphandone clan sit on the party’s decision-making body: Viengsavath (ranked 52nd) and Athsaphangthong (64th).

Sonexay first made it into the Central Committee in 2006 after serving as governor of Champasak province, in southwestern Laos. A decade later he was elected onto the Politburo for the first time and made a deputy prime minister and head of the prime minister’s office, a position that put him in close contact with Thongloun Sisoulith, the prime minister at the time.

Thongloun is now state president and general secretary of the communist party.

Thongloun Sisoulith attends talks with Chinese Premier Li Keqiang (not pictured) at the Great Hall of the People in Beijing, China, November 28, 2016. Photo: Agencies

As well as a deputy prime minister, Sonexay also in 2019 became Minister of Planning and Investment, one of the most powerful positions in the cabinet as it confers close cooperation with influential investors from China and Vietnam, as well as direct access to the governments in Beijing and Hanoi.

Because of his family pedigree and fast rise through the party ranks, some analysts suspected that Sonexay might have been named prime minister at the last quinquennial power reshuffle in early 2021.

But months before the National Assembly made its announcement, he only received the ninth rank in the Politburo during the party’s National Congress, a sign he wasn’t about to land the premiership.

Instead, that post went to Phankham, who arguably took over at the wrong possible moment. After experiencing hardly any cases of Covid-19 in 2020, infection and death rates spiked in the months after Phankham became prime minister in March 2021.

At one point last year, Laos sat at the bottom of the Nikkei Asia Covid-19 Recovery Index.

Then came the economic crisis of 2022. Inflation has topped nearly 40%. The local currency, the kip, crashed in value by as much as 68% against the US dollar, as of October. About a fifth of the workforce is unemployed, reckons the Ministry of Labor and Social Welfare.

Worse, Laos’ debt-service obligations will average US$1.3 billion per year from next year until 2026, roughly the same amount the state had in official foreign reserves in June.

It isn’t clear if Laos can continue making these payments or if it will receive further debt deferrals from China, its main external creditor. A default could be on the cards, many analysts reckon.

Phankham may have been the public face of these crises, but Sonexay played an active role after being appointed head of the government’s special economic task force in June. He delivered the economic report at the latest sitting of the National Assembly in December.

Laos wait in a fuel line in the capital of Vientiane as shortages hit the landlocked nation. Image: Facebook

Phankham was also dogged by scandals. He has come under criticism for allegedly granting too many concessions for mining exploitation in the north of the country and over his government’s failure to adequately tackle corruption, Radio Free Asia reports.

During his resignation speech, Phankham claimed that he was stepping down because of reaching the retirement age and “health problems”, although there is much skepticism about the claim.

In addition, there are rumors that the Siphandone family advanced their power move because Khamtay, the 98-year-old patriarch, is currently in poor health.

But a Lao source told Asia Times that Sonexay’s promotion may have come earlier than desired since Lao prime ministers are rarely re-elected. Sonexay is a “compromise figure” within the ruling communist party, the source added.

It isn’t clear that Sonexay will entirely benefit from this early reshuffle, and that it might have been politically wiser for him if Phankham had continued for another 12 months or so in the job and then staged a reshuffle when the worst of the economic crisis is expected to be over.

Most analysts expect a slightly better economic situation next year although the major problems will persist, as Asia Times reported last week the World Bank expects gross domestic product (GDP) growth of around 3.8%, compared to just 2.5% in 2022.

Sonexay’s premiership could be helped in that his promotion comes as China races down the path of reopening from “zero-Covid.”

Greater numbers of Chinese tourists are expected to visit Laos this year, boosting the important but depleted sector and delivering more foreign currency reserves to the state coffers. More Chinese investment and trade with Laos is also expected in 2023.

Sonexay’s father, Khamtay, was the leader of the party’s military wing in the 1970s and 1980s, and is suspected of having opposed many of the pro-market reform ideas being led by party founding secretary-general Kaysone Phomvihane.

However, Khamtay oversaw many economic reforms during his premiership in the early 1990s, although he strongly opposed political reform. Laos remains one of the most repressive states in Asia, with no free press or allowances for dissent.

Then-Lao prime minister Khamtay Siphandone (left) on a four-day business visit to Singapore. Image: Singapore National Archives

Sonexay isn’t expected to lead any major shift in foreign policy for Laos, which tries to balance between China and Vietnam, its main trade and political partners. Phankham was seen by some as being closer to the Vietnamese side, as he was the former president of the Laos-Vietnam Friendship Association.

In November 2000, President Jiang Zemin became the first Chinese head of state to visit Laos, following an invitation by then-Lao president Khamtay Siphandone.

As investment minister, Sonexay was deeply involved in several Chinese-led projects, including the $6 billion China-Lao railway. He also has ties with Vietnam and Thailand. In October 2017, he led a delegation to Hanoi to meet Nguyen Phu Trong, general secretary of the Vietnamese Communist Party.

Vietnamese prime minister Pham Minh Chinh was one of the first world leaders to congratulate Sonexay on his ascension to the premiership.

US Ambassador to Vientiane Peter Haymond also offered his congratulations. “The United States is committed to our Comprehensive Partnership with the Lao PDR, and we look forward to working with the Prime Minister and his government to support Laos’ continued economic recovery,” he said in a statement.

Copyright 2023 @ ASIA TIMES. All Rights Reserved.

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