US Aid Cuts and Travel Ban Will Impact Laos

The US has cut off overseas aid assistance to Laos. This will affect the developing country across a number of areas. Laos will need to try and find other development partners to fill the vacuum.

On the day of Donald Trump’s inauguration as US president on 20 January, an executive order was issued to immediately suspend and review all of the United States Agency for International Development’s (USAID) activities around the globe. The results of that review were contained in a letter that USAID sent to the US Congress in late March. It reported that 898 projects in its portfolio of “awards” (spanning grants, contracts, and cooperative agreements) — with a total estimated cost of US$78 billion — would remain active. Another 5,341 projects — with a total estimated cost of US$75.9 billion — would be terminated.

With regard to Laos, the Center for Global Development calculates that 72 per cent of USAID’s total portfolio of projects in the country, with a combined value of US$20.5 million, are being terminated. An initial scan of the list of USAID projects to either be kept or terminated suggests only one, pertaining to maternal child health and nutrition, will survive the cuts. Other projects focused on disability sector support, tackling human trafficking, capacity strengthening of people’s assemblies, energy security, and private sector development have been shut down.

Laos will be affected on other fronts as well. As a less developed country, Laos is heavily dependent on overseas development assistance. Within Southeast Asia, the country is the largest recipient of official development finance on a per capita basis. If this support is reduced, the impact on Laos and its poorer citizens will be felt across a number of areas. For example, the US has also been the single largest funder of unexploded ordnance (UXO) clearance in Laos (as well as Cambodia and Vietnam).  Since 1995, the US has invested over US$390 million in UXO work, spanning de-mining teams, public safety education, and financial support for victims and survivors. This is conducted through the State Department rather than USAID. But this, too, was suspended in January. It is currently unclear whether this funding will resume.

In Laos, the hope is that funding for UXO clearance will continue, as will efforts to support those affected by dioxin-contaminated herbicides that were used in southern Laos during the Vietnam War.  Between 1964 and 1973, the US dropped over 2 million tonnes of ordnance on Laos — the most concentrated bombing of a country in history, as measured on a per capita basis. The US State Department is also terminating a number of its development projects. For Laos, this includes supporting women entrepreneurs, drug treatment, strengthening court procedures, and preventing high-consequence pathogens.

The US has also effected policies that will affect Laos on the travel front. In mid-March, The New York Times published an article concerning a draft US travel ban purportedly developed by the State Department. Eleven countries are on a “red” list, whose citizens will not be permitted to enter the US under any circumstances. Another 10 countries on an “orange” list will see their citizens facing sharp visa restrictions to enter the US. Twenty-two countries are on a “yellow” list that will be given 60 days to address US concerns.

As a less developed country, Laos is heavily dependent on overseas development assistance.  Within Southeast Asia, the country is the largest recipient of official development finance on a per capita basis. 

While the precise rationale for each country’s inclusion is not known, they are likely to stem from three areas of concern: the proportion of visa overstays recorded in recent years, the willingness of these countries to accept nationals who are deported from the US, and/or visa-processing deficiencies that pose a security risk to the US. This follows another executive order “protecting the US from foreign terrorists and other national security and public safety threats”.

Within Southeast Asia, Laos and Myanmar are on the draft document’s orange list, while Cambodia is on the yellow list. To be clear, the list has not been formally issued, and changes may occur prior to its issuance. However, if Laos and Myanmar remain on the “orange list”, then their citizens wishing to travel to the US to visit family (over 200,000 Laotian-Americans reside in the US) or for education may find this is no longer feasible. The Department of Homeland Security’s most recent visa overstay report notes that Laos has an elevated number of its citizens overstaying (almost 35 per cent) on US visas issued for business or pleasure. This goes a long way towards explaining why it has been included on the orange list. 

The reduction in USAID funding and the potential travel ban show that Laos is not immune to the policy changes currently underway in the US. This was underlined on 2 April when Washington announced a 48 per cent reciprocal tariff on Laotian exports to the US. There could also be further impact after the US administration’s separate review of its funding support for various international development agencies. Any future cuts to funding of the World Bank, Asian Development Bank and other multilateral bodies, for example, may have an adverse impact on the scale of their activities in Laos. Such a scenario may have ramifications for Laos’ economic reform programme and its relations with its immediate neighbours, most notably China and Vietnam.

The US is not the only country reducing development spending. France, Germany, Sweden, and Switzerland have already announced relatively substantial decreases in their development budgets, with the UK, Belgium, and the Netherlands poised to follow suit. The European Union plans a 2 billion euro cut in its aid budget in 2025-26. 

In this context, the Vientiane government might be well advised to start contingency planning for a less benign donor environment in the years ahead. In the near term, this would entail making overtures to alternative providers of technical and financial development assistance. In the longer term, Laos should consider redesigning its next five-year national socio-economic development plan (2026-30) to focus on a more modest set of goals that it can realistically implement. The recent decision to streamline the government and generate efficiency gains is timely.

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