Laos Communist Party holds leadership congress amid economic pain

The poor Southeast Asian country of 7 million people has faced unprecedented fiscal challenges in recent years. "The COVID-19 outbreak has intensified the growth slowdown, plunging Lao PDR's economy into its first recession since the Asian financial crisis in 1998," the World Bank said in a report earlier this week.

Laos started a five-yearly congress of its long-ruling Communist Party on Wednesday to decide on the country's leadership and agree on a new economic strategy, as it faces challenges from the coronavirus pandemic and a potential debt default. More than 700 officials of the Lao People's Revolutionary Party will hold meetings in the capital Vientiane until Friday, during which a new central committee and politburo will be named, state media reported.

President and party chief Bounnhang Vorachit, one of the last remaining members of the revolutionary generation, prefaced the meeting by laying a wreath for fighters that defeated a Western-backed government to form the Lao People's Democratic Republic in 1975, according to the Vientiane Times. The Communist Party has been in power ever since, and Laos has traditionally mirrored neighbouring Vietnam's political system, although China's sway has grown in recent years.

Any signs of a new generation of leaders coming forward will be under careful scrutiny, as will perceived views toward China and Vietnam. The poor Southeast Asian country of 7 million people has faced unprecedented fiscal challenges in recent years.

"The COVID-19 outbreak has intensified the growth slowdown, plunging Lao PDR's economy into its first recession since the Asian financial crisis in 1998," the World Bank said in a report earlier this week. It estimated a contraction of 0.6% in 2020, and public debt to rise to 69% of GDP in 2020, with external debt-service payments standing at $1.2 billion.

The government struggled last year to make its scheduled payments, largely owed to China - Laos' biggest creditor - and also Thai bond markets. Amid the debt burden, state-owned Electricite du Laos (EdL) last year signed a deal giving a Chinese company majority ownership of its electric grid, people with knowledge of the agreement said.

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