Op-Ed by the Hong Kong Trade Development Council (HKTDC)
In the post-COVID era, Chinese investment in Laos has surged dramatically, positioning China to overtake Thailand as Laos’ top trading partner. According to the Lao Ministry of Planning and Investment, Chinese companies invested in 17 projects worth USD 986 million in Laos in 2023, a massive increase from the USD 339 million across 30 projects in 2022. This tripling of investments reflects China’s strategic economic ambitions and its long-term plan to deepen ties with Laos under the Belt and Road Initiative (BRI).
The most prominent symbol of this partnership is the USD 6 billion China-Laos railway, which became operational in December 2021. This joint venture, set to extend into Thailand, will create a direct link from Kunming, China, to the southernmost parts of mainland Southeast Asia – Malaysia and Singapore – thus enhancing regional connectivity and solidifying China’s influence in the region. The railway is part of China’s broader expansion strategy to establish a seamless trade corridor through Laos to other ASEAN nations.
In addition to China’s investments, Hong Kong has emerged as a vital partner in Laos’ economic development, focusing on digital transformation and financial innovation. A key milestone in this evolving partnership was the recent signing of a strategic investment agreement between Goldford Group and the Lao National Digital Technology Group (LADT). This Memorandum of Understanding (MoU), witnessed by Hong Kong Chief Executive John Lee and Lao Deputy Prime Minister and Minister of Foreign Affairs Saleumxay Kommasith, was signed by Johnny Ng, Chairman of the Board of Goldford Group, and Sengaloun Souphanouvong, Director of LADT.
Johnny Ng, who also serves as the Chairman of the Web3 Hub Fund under the Hong Kong government and a legislator in Hong Kong’s Legislative Council, has been at the forefront of promoting Web3 and digital finance innovations. His leadership in this MoU exemplifies Hong Kong’s commitment to supporting ASEAN countries, particularly Laos, in their digital transformation efforts.
Divergent Approaches to Virtual Asset Regulation: Laos vs. Hong Kong
While Laos is making strides in digital finance, it grapples with regulatory and infrastructural limitations that can impact the growth of virtual assets and digital payment systems. In contrast, Hong Kong, with its more developed financial infrastructure, faces the challenge of balancing regulatory oversight with innovation, according to Ng.
“Governments can balance fostering innovation with ensuring financial security by adopting a risk-based regulatory framework that aligns oversight with the risks of various virtual asset activities,” Ng wrote in a recent email exchange. “This approach allows for stringent regulation of high-risk activities while nurturing innovation in safer areas.”
The regulatory landscape for virtual assets like Bitcoin starkly contrasts between developing nations such as Laos and developed regions like Hong Kong. In Laos, the regulatory environment is notably flexible, thanks to the early stages of electronic and cross-border payment systems, Ng remarked.
“This flexibility fuels fintech innovation and is bolstered by government efforts to attract foreign investment with favorable tax and regulatory policies,” he said. Ng further highlighted the 2023 collaboration between the Bank of Laos and Japanese company Soramitsu as a prime example, noting their joint effort to develop a Central Bank Digital Currency (CBDC) using blockchain technology.
“Policies must be flexible and adaptive, evolving with the digital asset landscape,” the Web3 Hub Fund’s Chairman stated.
Hong Kong’s legal framework currently struggles with the complexities of decentralized autonomous organizations (DAOs), suggesting a need for tailored regulations for blockchain foundations and DAOs. Additionally, enhancing financial literacy through education and awareness can help reduce fraud and misuse. By adopting these strategies, Ng believes that governments can foster technological innovation while ensuring financial security and investor protection.
Moreover, the recent MoU between Goldford Group and LADT is poised to significantly advance digital finance and technology between Hong Kong and Laos. This partnership aims to create a new payment model that merges Web2 and Web3 technologies, addressing the demand for a more integrated and efficient payment system.
The emerging payment model that integrates Web2 and Web3 technologies promises to reshape transaction processes by combining the ease of Web2 with the advanced capabilities of Web3. This hybrid approach aims to streamline crypto adoption, merging the user-friendly aspects of traditional payment systems with the decentralized, secure features of blockchain technology. Tools that bridge Web2 and Web3, such as APIs for authentication and cross-chain transactions, could simplify the user experience and foster wider acceptance of decentralized financial systems.
Advancing Financial Integration in Southeast Asia
“The Southeast Asian region, particularly countries like Laos, presents significant opportunities for expanding financial inclusion and integrating advanced digital payment solutions,” Ng said, emphasizing the importance of this collaboration. “The growth of infrastructure, such as the Laos-China Railway, has enhanced connectivity and increased demand for efficient cross-border payments.”
The electronic and cross-border payment market in Laos has shown impressive growth, with electronic payment transactions increasing by over 15 percent annually in recent years, and projections indicate a continued compound annual growth rate of 15.19 percent from 2024 to 2028.
The SWIFT system’s dominance in cross-border payments highlights the need for more efficient and competitive alternatives. While SWIFT is widely used, its reliance on intermediaries results in higher costs and slower transactions. In contrast, cross-border QR payment systems in Southeast Asia, such as those in Vietnam and Thailand, offer a promising solution. These QR systems enable real-time transactions, reduce costs, and improve accessibility, particularly for unbanked populations, thereby enhancing financial inclusion in the region.
The partnership also opens up opportunities for exploring blockchain applications for secure and transparent financial services, aligning with global fintech trends. Additionally, this collaboration can help develop local talent and strengthen digital infrastructure, supporting sustainable economic growth in Laos while benefiting from Hong Kong’s technological expertise and investment acumen.
Hong Kong’s role as a “superconnector” is crucial in this context. By leveraging its position, Hong Kong aims to support Lao Small and Medium Enterprises (SMEs) in areas such as banking, digital finance, logistics, and e-commerce.
“This role builds on the success of previous ASEAN missions and emphasizes Hong Kong’s commitment to fostering regional economic integration,” Ng said.
Trade statistics further underscore the growing relationship between Laos and its regional partners. Between April 2023 and 2024, Chinese exports to Laos rose by 38.6 percent to USD 324 million, while imports from Laos increased by 40.7 percent to USD 408 million. Key Chinese exports include electric locomotives, insulated wire, and plastic pipes, while Laos exports potassic fertilizers, chemical wood pulp, and iron and copper ores.
As Laos establishes itself as a key Southeast Asian hub, its partnerships with China and Hong Kong are set to reshape its economic landscape. A recent memorandum of cooperation between the Lao News Agency and the HKTDC, signed at the Belt and Road Forum, underscores Laos’ commitment to transitioning from a landlocked to a land-linked country. Meanwhile, the collaboration between Goldford Group and LADT aims to integrate advanced digital payment systems, enhancing connectivity and boosting financial inclusion.
