The Vientiane Saysettha Development Zone (SDZ) is China’s only national-level overseas economic and trade cooperation zone in Laos. Established through a ‘land-for-funding’ arrangement, it was developed in exchange for Chinese assistance in building the national sports stadium for the 25th Southeast Asian Games in 2009. Over the past decade, the SDZ has transformed from a 360-million-USD financial deal into a growing development project, described by Chinese proponents as one of 10 ‘low-carbon demonstration zones’ supported by China’s Global Development Initiative and South–South Cooperation Fund. Yet, the project faces persistent challenges, including labour shortages and skill mismatches within the local labour force, delays in compensating displaced land users, and residents’ concerns about environmental impacts.

Basic Information

Chinese Name: 老挝万象赛色塔综合开发区
Location: Youyi Road, Nano Village, Saysettha District, Vientiane, Laos.
Type of Project: Special Economic Zone/Comprehensive Development Zone.
Project Developers: Lao–China Joint Venture Investment Company Limited (LCJV). LCJV is a joint venture between Yunnan Provincial Overseas Investment Company Limited (YOIC) (with a 75 per cent stake) and Vientiane Municipal Government (with a 25 per cent stake). YOIC is a subsidiary of Yunnan Construction and Investment Holding Group Company Limited (YCIH).
Main Contractors: n/a.
Known Financiers: Export–Import Bank of China; Chinese Ministry of Commerce.
Cost: 360 million USD.
Project Status: Under construction, partially operational.

Project Outline

The 11.5-square-kilometre Saysettha Development Zone (SDZ) is northeast of downtown Vientiane, the Lao capital, an approximately 40-minute drive from the Laos–China Railway’s terminus. It is one of 12 special economic zones in Laos and the only national-level overseas economic and trade cooperation zone established there by China.

Project Origin and Policy Agenda

The SDZ is one of several developmentsSee page 21. approved by the Lao Government in exchange for Chinese assistance in constructing the national sports stadium for the 25^th Southeast Asian Games held in Vientiane in 2009. Back in November 2006, the Lao Government signed the Framework Agreement for Financing the 2009 Southeast Asian Games Venue and Its Comprehensive Development in Vientiane, the Capital of Laos (老挝首都万象2009年东南亚运动会场及其综合开发融资框架协议) with the China Development Bank (CDB), which followed a financial model derived from  Laos’s 2006 Turning Land Into Capital (TLIC) policy.See page 1565. In the Chinese context, this model was framed as ‘project construction plus land compensationSee page 844.’ (项目建设+土地抵偿). Instead of paying Chinese developers directly to construct desired infrastructure, the Lao authorities granted them a separate land lease as compensation. Under this agreement, Yunnan Construction and Investment Holding Group (YCIH) was responsible for constructing Laos’s national sports stadium. In exchange, YCIH was granted a 50-year lease (later extended to 70 years) for 11.5 square kilometres, which was later developed into the SDZ.

In June 2010, then Chinese vice-president Xi Jinping and Lao vice-president Bounnhang Vorachit witnessed the signing of a memorandum of understanding (MoU) between YCIH, the CDB, and the Vientiane Municipal Government. YCIH and the Lao Government agreed to develop the SDZ by jointly establishing the Lao–China Joint Venture Investment Company Limited (LCJV). The Vientiane Municipal Government holds a 25 per cent share in the project, with the remaining share held by the Yunnan Provincial Overseas Investment Company (YOIC), a subsidiary of YCIH. By October of the same year, the LCJV officially started constructing the zone. On 11 July 2012, the Chinese and Lao governments signed an agreement to co-develop the SDZ. In the same year, the Chinese Ministry of Commerce pledgedSee page 20. an annual subsidy of 200 to 300 million RMB along with a total loan of 2 billion RMB to support the development of the SDZ. In 2013, the Export–Import Bank of China (China Eximbank) provided YOIC with a loan of 200 million RMB to cover pre-investment expenses related to the SDZ. China Eximbank went on to provide another loan, of 420 million RMB, for the project, with the first instalment issued by the bank’s Yunnan branch on 12 May 2015.

Over the past decade, the SDZ has gradually transformed from a financial agreement between the Lao Government and a Chinese state-owned construction enterprise into a partially developed zone that has been promoted as a model for China’s South–South cooperation efforts, particularly for climate change–related initiatives. In 2015, China’s Ministry of Finance established the China Climate Change South–South Cooperation Fund (中国气候变化南南合作基金)—later overseen by the Ministry of Ecology and Environment and upgraded in 2022 into the ‘Global Development and South–South Cooperation Fund’ (全球发展和南南合作基金)—with a budget of 20 billion RMB to help developing countries address climate change. Under this framework, it proposed the ‘10–100–1,000 Initiative’, which aims to implement 10 low-carbon demonstration zones, 100 climate change mitigation and adaptation projects, and 1,000 training opportunities for climate change responses in developing countries. The SDZ was the first low-carbon demonstration zone designated under the ‘10–100–1,000 Initiative’.

In April 2019, during the second Belt and Road Summit, China and Laos signed a cooperation framework (2019–30) to advance the development of the Laos–China Economic Corridor, and highlighted the SDZ as a model of bilateral cooperation. The two governments also signed the Agreement on Key Projects of China–Laos Production Capacity and Investment Cooperation—which has included the SDZ in its second round—and the Action Plan for Building a Community of Shared Future between China and Laos. In July 2020, the governments of China and Laos signed an MoU on cooperation in construction of the Vientiane Saysettha Low-Carbon Demonstration Zone. China’s Ministry of Ecology and Environment has since been supplying electric vehicles and trucks, grid-connected photovoltaics, solar-powered streetlights, and portable environmental monitoring equipment to the SDZ, framing it as a demonstration zone of China–Laos South–South cooperation in addressing climate change.

Promised Benefits

According to the zone’s official brochure, and consistent with its treatment of other zones in Laos, the Lao Government has implemented preferential policies within the SDZ (see Table 1). Businesses and public service institutions are granted tax exemptions for a set period, followed by reduced profit taxes in later years. Workers in the SDZ also enjoy a lower individual income tax rate. Additionally, land-use rights in the zone are valid for 70 years, according to the legal procedures formulated by the governments of China and Laos, with the possibility of being extended for another 25 years after expiration, compared with the 30-year and 50-year limits in other parts of Laos.

Table 1: Preferential Policies in the Saysettha Development Zone. Translated by author. Source: Vientiane Saysettha Development Zone Official Website.

The SDZ provides a set of services for investors, from early-stage project assessment to final implementation, construction, and operation. A whiteboard displayed in YCIH’s office listed new investors in 2023 from a wide range of sectors, including food, agriculture, garment production, pharmaceuticals, logistics, manufacturing, technology, and energy. Financial services and platforms supported by Chinese banks, including the CDB and China Eximbank, along with assistance from YCIH in communicating with the Lao Government, are in place to make the SDZ attractive to Chinese investors. In exchange, Chinese President Xi Jinping claimed in an article published in Laos’s state-run media that the SDZ will ‘help Laos upgrade its industries, attract FDI [foreign direct investment], create jobs, and boost the growth of its small and medium-sized enterprises’. According to the SDZ brochure, both the Lao and the Chinese governments envision the SDZ as a means of transferring technology, providing local skills development and training, and promoting industrialisation in the country.

Governance Structure

It is worth noting how both sides jointly administer the SDZ. In 2012, the governance structure of the zone was established under Article 6 of the Agreement on the Vientiane Saysettha Comprehensive Development Zone. The arrangement comprises three levels: the Intergovernmental Coordination Committee, the Development Management Committee, and the Development Company—primarily YCIH. Most of YCIH’s board and supervision committee members are appointed by the Yunnan Provincial Government. The Intergovernmental Coordination Committee, including representatives from China’s Ministry of Commerce, the Government of Yunnan Province, the Lao Economic Zone and Economic Special Zone Management Committee, and relevant departments of the Vientiane Municipal Government, serves as a platform for communication between the Chinese Government, developers, and the Lao Government. The Development Management Committee, under the Intergovernmental Coordination Committee, comprises representatives from the Lao and Chinese governments to undertake internal management tasks for the SDZ. Finally, the third level, YCIH, handles the day-to-day operations of the SDZ, including attracting investment.

However, challenges have arisen in the interactions between YCIH and Lao officials, with the latter often seeing YCIH as a subordinate rather than an equal partner in the management of the zone; as stated by other scholars, Lao authorities tend to see the Chinese central or provincial governments as the real decision-makers and therefore prefer direct communication with their counterparts in Beijing or Yunnan.

Progress

According to the brochure provided by the YCIH staff to visitors, the SDZ follows a ‘Chinese model’ of urban development strategy known as ‘industry–city integration’ (产城结合) with a geographic layout of ‘one axis, two lakes, and three districts’. As shown in the master plan below, the project is being developed in three phases: Phase I, marked in brown, purple, and yellow, is currently under way and focuses on industrial development along with some residential construction; Phases II (starting soon) and III will centre on trade, services, new energy, commercial and residential areas, and tourism. The plan aims to complete all phases by 2030, but interviews in August 2024 suggested that progress has been delayed due to the slow increase in capital investment and population in the area. Although 80,000 square metres of factory space and eight staff residence buildings with a capacity to accommodate more than 5,000 people have been completed, the same visit revealed that most of the residential area remained empty, similar to observations made by others in 2019.

The official brochure states that more than 150 enterprises have reserved a space in the zone, with 75 already in production and employing over 7,000 workers. However, field observation suggests a more complex reality. Both authors walked through the SDZ at different times—first in the winter of 2023, and again in the summer of 2024. The zone spans vast areas with scattered buildings—typically one large cluster belonging to a single company or factory every few hundred metres to a kilometre. More commonly, empty overgrown plots, marked only by company billboards indicating landownership, lie idle along the access roads. On either side of the roads stand newly installed solar-powered streetlights, with some sections lined with massive construction vehicles. Much of the zone, especially areas designated for industrial use, is filled with the noise of construction and heavy machinery, with workers and their temporary housing forming most of the visible presence. The central part of the SDZ remains completely vacant. Only at mealtimes do factory workers—those employed by companies in the SDZ—emerge and gather in groups at the far edge of the zone, where residential buildings and restaurants are located. However, overall, most of the newly built residential buildings remain unoccupied.

Since its inauguration in 2018, the SDZ has attracted investment primarily from China and other Southeast Asian countries. According to its official brochure, as of 2024, more than 80 per cent of these companies are from China, with the remainder from Japan, Singapore, the United States, South Korea, Switzerland, Malaysia, Thailand, and Laos.

In 2020, Laos’s first oil refinery was opened in the SDZ through Lao Petroleum & Chemical Company Limited (LAOPEC), a joint venture between YCIH and Lao State Fuel Company. In 2023, the Chinese solar photovoltaic product manufacturer Solarspace launched the first phase of a 5-GW high-efficiency solar cell plant in the SDZ, making it Laos’s first solar photovoltaic product manufacturing project. This facility is Solarspace’s second in Southeast Asia, with another plant in Cambodia. Fieldwork in July 2024 found that Suniverse, another Chinese firm, had begun its monocrystalline silicon wafer project in the SDZ. Conversations with SDZ-based businesses suggest the zone could be particularly attractive for Chinese industries with excess capacity, such as renewable energy and resource manufacturers, who primarily export to EU and US markets. By relocating to Laos and other Southeast Asian countries such as Cambodia, Thailand, Vietnam, and Malaysia, these producers hoped to bypass trade barriers targeting Chinese exports. However, in 2024, the United States removed the tariff exemption on solar cells and modules from these Southeast Asian countries, undermining the rationale for relocating Chinese industries.

Project Impacts

• Employment and labour rights: Chinese companies in the SDZ face challenges recruiting local workers due to skill mismatches and language barriers, resulting in limited progress in integrating the Lao workforce into high-tech opportunities.
• Local communities: The construction of the SDZ displaced six surrounding villages. Delays and funding shortfalls in government compensation have left many families struggling to rebuild their lives years after resettlement.
• Environment and sustainability: The SDZ markets itself as a ‘low-carbon demonstration zone’, but its efforts remain more symbolic than substantive, as it relies heavily on external energy sources and generates pollution during construction.

Employment and Labour Rights:

One of the main snapshots of employment and labour dynamics in the zone comes from Wu and Ye’s (2024) interview-based study. The SDZ’s primary developer, YCIH, has faced criticism for the difficult working conditions experienced by its employees. Wu and Ye characterise the company as a ‘quasi-governmental organisation’ that imposes strict controls, such as confiscating passports and enforcing tight travel and budgetary restrictions.

Alongside the increase in foreign investment, a notable mismatch exists between the talent pool desired by Chinese corporations and the current local labour market. Many Chinese firms in the SDZ have reported See page 12.ongoing issues recruiting staff, citing the country’s relaxed working culture and a labour force predominantly oriented towards agriculture and services and lacking advanced language and technical skills. In high-tech sectors such as electronics manufacturing, pharmaceuticals, and solar technology, Chinese companies often prefer to recruit See page  12.and import workers from China, Cambodia, and Vietnam who are perceived to have higher efficiency and skills and are willing to work longer hours, rather than investing in training local workers. They often employ Lao people in unskilled roles, such as security personnel, and express frustration with Lao policies restricting the import of foreign workers.

A Radio Free Asia (RFA) report published in March 2024 cites Lao workers as saying that monthly salaries offered by the companies in the SDZ amounted to the minimum wage plus overtime pay (adding to 3.6–4.6 million LAK per month, or 162–207 USD), which is barely enough to make ends meet. Better-paid jobs often require Chinese-language skills and technical knowledge that most Lao people do not have. Media reports also suggest that some companies employ only Chinese-speaking workers and Lao workers tend to be able to access only temporary positions in the SDZ.

On the other hand, some companies have reported hiring hundreds of local workers for their production, with examples from the garment and agricultural sectors. Taken together, this suggests that while the SDZ is generating jobs, particularly in labour-intensive sectors, significant gaps remain in employment opportunities within higher value-added industries and for the local workforce.

Impacts on local communities: Media reports have highlighted the broader resettlement issues rural Laotians face due to the development of the SDZ and the construction of nearby roads and highways. According to RFA, the SDZ initially acquired 11.5 square kilometres of land, which was later expanded by an additional 13.6 square kilometres. This required the resettlement of six villages—Houaphan, Sanghouang, Sapangkan, Nanon, Sok Noy, and Sok Yai—in the Xaythani and Saysettha districts. Initially, the Lao Government pledged to complete all compensation by the end of 2016. However, compensation had been provided for only 570 hectares by then, at a total cost exceeding 100 billion LAK (4.5 million USD), according to a senior official from the National Committee for Special Economic Zones (NCSEZ). In 2017, the Vientiane Times reported that even after seven years and completed relocations, some families had not received compensation for the land and property they lost—compensation on which they were relying to build a new home.

Environment and sustainability: The SDZ’s implications for the environment should be considered from multiple angles: along with the six villages resettled, the zone’s construction has destroyed the natural and productive landscapes. Meanwhile, the low-carbon, eco-friendly designations largely refer to the zone’s efforts to attract low-carbon technology manufacturing to ‘green’ its infrastructure (for example, solar panels on streetlamps and vehicles). An advertising brochure for the SDZ highlights its development vision as ‘Green, Ecology, Serenity, Modern’. After signing the MoU in 2020, China’s Ministry of Ecology and Environment, via China’s foreign aid program, supplied 28 new electric vehicles and trucks, grid-connected photovoltaics, and 3,000 solar-powered streetlights and portable environmental monitoring equipment to support construction of the SDZ.

In their brochure, the developer also claims that the SDZ is the first project in the history of South–South cooperation to receive a second phase of approximately 40 million USD in aid within a year. By showcasing a ‘low-carbon lifestyle’ (低碳生活) and ‘leveraging its geographical position to achieve green and sustainable development’ through the SDZ, the Chinese Government aims to help Laos meet its goal of achieving a 60 per cent reduction in greenhouse gas emissions by 2030 and net-zero emissions by 2050 in response to the Paris Agreement. The Lao Minister of Natural Resources and Environment, Bounkham Vorachit, also expressed the hope in 2023 that the SDZ can ‘gain valuable experience in green development for other parts of Laos’.

To maintain its reputation as a national-level eco-friendly demonstration zone and protect profitability through the project’s third phase, the SDZ has strict investment screening See page 29.procedures to prevent and control industrial pollution and enforce regulations designed by the zone’s management committee. The measures include detailed inquiries into project information, comprehensive research on project backgrounds, and evaluating feasibility reports, alongside conducting professional environmental impact assessments. Additionally, a mechanism See page 29.is in place to regulate industries operating within the zone, with tenant industries undergoing monthly supervision by the management committee. According to an anonymous interviewee, these measures have been taken to exclude several potential investments in smelting, papermaking, and recycling factories likely to bring detrimental environmental effects.

The SDZ’s decarbonisation and sustainable development efforts have received some positive appraisal. The World Resources Institute (WRI) notes in a 2023 report that the SDZ’s low-carbon performance ‘stands out among most’ of China’s 60 overseas industrial parks based on their evaluation. The SDZ has also received technical and financial support from the ‘10–100–1,000 Initiative’ (‘十百千’倡议) under China’s Climate Change South–South Cooperation Fund (中国气候变化南南合作基金) proposed in 2015. This fund is designed to provide financial support in the Global South for low-carbon developments. However, progress has been slow; the SDZ seems to be one of the few projects frequently highlighted by the Chinese Government to have been supported under this scheme, given its status as the first low-carbon demonstration zone launched since the initiative’s announcement.

During Phase I, the SDZ attracted a significant number of energy-intensive industries. As a result, the solar power infrastructure supplied by the Chinese Government has proven insufficient to meet their energy demands, and the zone has relied heavily on energy supplies from external sources.

Meanwhile, production in the zone has generated considerable waste and other adverse impacts. According to an RFA report in 2023, residents of Vientiane have expressed concerns over the deteriorating air quality resulting from factory operations, vehicle emissions, and construction activities in the SDZ. The relevant Lao Government authorities have yet to issue warnings about PM2.5 particulate matter or take other steps to respond. Moreover, despite Lao laws that require all SEZs, including the SDZ, to establish wastewater treatment facilities, wastewater from the SDZ has been discharged offsite rather than being processed onsite, adding burdens to surrounding municipal facilities, including in Chinaimo, Kaoleio, Dongmakkhay, and Dongban.

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