The Japanese cars and sport utility vehicles that clog the streets of Laos's once sleepy capital are testament to the changes quietly under way in a county once seen as a basket case isolated for decades behind Asia's bamboo curtain.
Shopping malls are under construction, mobile phone shops and modern coffee houses with Wi-Fi are popping up in Vientiane, the bicycles that thronged roads lined with golden temples are rarely seen, replaced by imported motorcycles and cars.
These are some of the fruits of a quiet economic boom that's steadily transformed a secretive country little known in the West beyond the tales of backpackers and US War veterans in Vietnam.
The former French colony is courting neighboring China, Vietnam and Thailand to develop resources and infrastructure, and they are piling in, indifferent to the risk aversion that keeps Western firms on the sidelines.
A big Thai-led dam project was suspended this month pending environmental surveys, but other Thai-built hydropower projects are underway across Laos's network of waterways. Vietnamese agribusinesses are proliferating and Chinese firms are pouring into the mining and transport sectors.
Little has changed in Laos' one-party political system and its rulers are trying to emulate the market-based authoritarianism of China and Vietnam with pro-business reforms, with some success. The once fragile economy has grown an average 7.9 percent a year since 2006.
Solid growth
International financial institutions forecast economic growth of between 8.1 and 8.6 percent this year -- one of Asia's highest growth rates -- fuelled by hydropower production, copper and gold mining, tourism and domestic consumption.
Laos's US$7.5 billion economy is dwarfed by its neighbors 790 times smaller than China's, a 14th of the size of Vietnam's, and roughly two percent of Thailand -- but it has more than doubled since 2006, as has GDP per capita, which jumped from $600 to $1,200, according to World Bank data.
But it's still off the radar to Western companies concerned about regulation, labor capacity, a lack of transparency and Laos's very cosy political and business ties to its neighbors.
"Laos is still seen as a frontier market by most foreign investors, but there's strong potential," said a Western diplomat in Vientiane. "Trends in the investment environment are generally in the right direction."
Urban Laos is modernizing fast, with 19 commercial banks and new special economic zones offering tax breaks. The mobile phone sector is thriving, with its five operators boasting a staggering 10 million users among the 6.4 million population, suggesting many customers use several numbers.
A $7 billion Chinese-led high-speed railway linking China with Thailand is planned and national carrier Lao Airlines last month expanded its fleet of eight propeller planes with the $91 million purchase of two Airbus A320 airliners.
Perhaps its most significant leap was a stock exchange launched in January, a $20 million venture with Korea Exchange, Asia's fourth-largest bourse operator.
Only its top lender, Banque Pour Le Commerce Exterieur Lao (BCEL), and Electricite du Laos Generation Company (EDL-Gen) have listed on the Lao Securities Exchange (LSX) and trade is too sparse to interest funds, although private equity funds are starting to take notice.
Internet and cellphone provider Enterprise of Telecommunications Lao (ETL) and cassava and tapioca firm Lao-Indochina Group are expected to list in early 2012.
Lao Airlines, Lao Brewery Company -- a 50-50 joint-venture between a state firm and Danish brewery Carlsberg -- and diversified Lao World Group would also join.
"These enterprises are becoming aware that the benefits of listing on the LSX are greater than the risk they may take," Dethphouvang told Reuters in an e-mail.
A man drives a military style vehicle past a building under construction in central Vientiane November 7, 2011 (Photo: Reuters)
Thais tap energy
But for now, the boom is fuelled by mining and hydropower, accounting for 80 percent of foreign direct investment (FDI) and half of gross domestic product (GDP) growth. Export revenue from copper and gold from Laos's two big mines was projected to reach $1.3 billion and $240 million respectively this year, double the 2009 figure, according to the International Monetary Fund (IMF).
Thai firms dominate hydropower. With dozens of new dams, Laos aims to become the "Battery of Southeast Asia", providing 8 percent of its power by 2025, with the potential to generate 28,000 megawatts (MW). Half of that is committed to neighbors by 2015.
Japanese experts will investigate the potential dangers of Xayaburi, which activists say could impact 60 million people, wipe out fish species and block fertile silt from flowing to Vietnam, the world's second-biggest rice exporter.
Economists are bullish about Laos's potential but say much needs to be done. Corruption, rudimentary regulation and limited skilled labor have put the country second-bottom in East Asia and the Pacific, ahead of East Timor, in the World Bank's Doing Business survey.
The IMF says Laos had made "impressive progress" but needed proper data, banking supervision and streamlining of procedures.
Now, Laos's biggest sources of FDI come from China, Thailand and Vietnam. Official data since 2000 shows Vietnam has invested $2.77 billion, China $2.71 billion and Thailand $2.68 billion, and they have little competition.
Chinese interest
Vietnam has a foot-in because of its close political relationship, but China appears to be using its wealth to muscle in.
China sees Laos as its gateway to Southeast Asia's 600 million people and $2 trillion GDP, and bilateral trade with Laos has grown 40 percent to $1.1 billion annually since 2009. Chinese banks have offered loans to Laos to hire Chinese firms to build infrastructure, including $3 billion from the China Development Bank alone.
China is bargaining hard, not just for influence but for long-term land and agricultural concessions in return for help, sometimes causing friction, with land promised in return for a national stadium not forthcoming and the rail plan put on ice over a concession dispute.
China's growing presence is also contentious, with concern about gang crime linked to Chinese casinos and an influx of migrant workers settling after work is finished.
With Western companies sitting out the boom, Laos seems happy to rely on its neighbors and gain from their competition.
Electricians installing a transmission line Photo: VNA 
More than 200 ancient pottery pieces belonging to 2 private collections are being showcased at Can Tho Museum in Can Tho City Photo: Tuoitre 
A Buddhist monk uses a mobile phone in central Vientiane November 7, 2011. The once fragile economy has grown an average 7.9 percent a year since 2006 to have a GDP of $7.5 billion -- more than doubled since 2006 Photo: Reuters 
