Identifier
Created
Classification
Origin
07VIENTIANE558
2007-07-11 09:45:00
CONFIDENTIAL
Embassy Vientiane
Cable title:  

CABINET RESHUFFLE INCLUDES NEW FACE AT FINANCE

Tags:  PGOV PINR ECON EFIN ENRG LA 
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RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHVN #0558/01 1920945
ZNY CCCCC ZZH
R 110945Z JUL 07
FM AMEMBASSY VIENTIANE
TO RUEHC/SECSTATE WASHDC 1375
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHCHI/AMCONSUL CHIANG MAI 0578
RHHMUNA/CDR USPACOM HONOLULU HI
C O N F I D E N T I A L SECTION 01 OF 02 VIENTIANE 000558 

SIPDIS

SIPDIS

E.O. 12958: DECL: 07/10/2017
TAGS: PGOV PINR ECON EFIN ENRG LA
SUBJECT: CABINET RESHUFFLE INCLUDES NEW FACE AT FINANCE
MINISTRY

REF: 06 VIENTIANE 492

VIENTIANE 00000558 001.2 OF 002


Classified By: Mary Grace McGeehan, Charge d'Affaires a.i. Reason: 1.5
b and d.

C O N F I D E N T I A L SECTION 01 OF 02 VIENTIANE 000558

SIPDIS

SIPDIS

E.O. 12958: DECL: 07/10/2017
TAGS: PGOV PINR ECON EFIN ENRG LA
SUBJECT: CABINET RESHUFFLE INCLUDES NEW FACE AT FINANCE
MINISTRY

REF: 06 VIENTIANE 492

VIENTIANE 00000558 001.2 OF 002


Classified By: Mary Grace McGeehan, Charge d'Affaires a.i. Reason: 1.5
b and d.


1. (C) Summary: In a cabinet reshuffle announced by the
Prime Minister at the closing of the National Assembly,
Finance Minister Chansy Phosikham was named to replace
Somphet Thipmala as governor of Vientiane Province. Chansy's
former deputy, Somdy Douangdy, became finance minister.
Somphet became a vice minister of defense. The son of former
"Red Prince" Souphanouvong, who served as the Lao People's
Democratic Republic's first president, was appointed as a
minister in the Prime Minister's office. Minister of
Commerce and Industry Nam Viyaketh, one of the youngest and
most progressive cabinet members, told the Charge that he is
pleased by the appointment of the relatively youthful Somdy
at Finance. The Prime Minister mentioned corruption several
times in his opening and closing addresses to the National
Assembly, and foreign newspapers speculated that the
reshuffle was related to corruption concerns. End summary.

Prime Minister Announces Cabinet Reshuffle
--------------


2. (U) Prime Minister Bouasone Bouphavanh announced a
cabinet reshuffle at the closing of the National Assembly's
semi-annual two-week closing session on July 3, with members
of the diplomatic corps, including the Charge, in attendance.
Finance Minister Chansy Phosikham was named as governor of
Vientiane Province, replacing Somphet Thipmala, who was
appointed as a Vice Minister of Defense. Chansy's former
deputy, Somdy Douangdy, becomes Finance Minister. There are
three new ministers in the Prime Minister's office:
Duangsavath Souphanouvong (formerly deputy chief of the
Government Secretariat and a member of Laos's former royal
family); Khempheng Polsena (formerly a vice president of the
Asian Development bank and before that a Vice Foreign
Minister),who oversees a newly established Water and
Environment Authority; and Phouthong Sengarkhom, who will

also keep his position as president of the National Sports
Committee.


3. (U) Following the announcement, a National Assembly
member complained during the session that members were
expected to endorse such personnel changes without receiving
biographic information or having time to reflect on the
nominations. He also commented that the structure
of the new water and energy body was unclear. The vote on
the cabinet reshuffle was 98 in favor, 4 against, and 2
abstentions.

New Blood at Finance Ministry
--------------


4. (C) On the way out of the session, Minister of Commerce
and Industry Nam Viyaketh, who is one of the youngest (born
in 1958) and most progressive members of the Lao government,
told the Charge that he was pleased with the new appointment
at the finance ministry. Somdy, he said, is younger than his
predecessor and will be "better."


5. (C) Former Finance Minister Chansy was selected for that
position in 2003 in part because of the financial management
skills he had displayed as governor of Luang Prabang Province
from 1991 to 2002. His appointment as governor of Vientiane
Province could be considered a demotion, but this is
nonetheless a powerful position. Despite efforts to
centralize revenue collection, provincial governors continue
to wield considerable political and economic power.
Vientiane province, which includes most of the former
Saysomboune special zone (but does not include the city of
Vientiane),is the site of major mining and hydropower
projects. Chansy's new job is also politically sensitive.
There has recently been renewed fighting in Vientiane Provine
between government forces and members of the dwindling but
still active Hmong insurgency. In addition, the province is
the home of a large number of ethnic Hmong living peacefully
among the rest of the Lao population. Somphet had been
governor of Vientiane Province since 2005; before that, he
was governor of the Saysomboune Special Zone from 1998 to

2005. He is a retired general who maintains close ties with
the military, making his appointment as a Vice Minister of
Defense a logical move if not a step up.


6. (C) The Embassy's relations with Somphet have not always
been smooth. In a courtesy call on him in May 2006,
then-Ambassador Haslach expressed concern about reports from
Amnesty International and others that members of the security
forces had killed 26 ethnic Hmong civilians in the province

VIENTIANE 00000558 002.2 OF 002


on April 6, 2006 (reftel). Afterwards, Ministry of Foreign
Affairs spokesperson Yong Chanthalangsy called a press
conference in which he accused Ambassador Haslach of
fabricating the massacre charges and threatening the
governor. The threat accusation apparently reflected a
misunderstanding or distortion of Ambassador Haslach's
statement to Somphet that, if U.S. soldiers killed civilians,
military officials would take action against them.

Biographic Information on Minister Samdy
--------------


7. (U) According to a resume provided by the Lao
government, Finance Minister Samdy was born in Savannakhet
province in 1952. He is from the Lowland Lao ethnic group.
He served as Vice Minister of Finance from 2003 to 2007.
From 2002 to 2003, he was Vice President of the Committee for
Planning and Cooperation (now the Committee for Planning and
Investment, the government body responsible for foreign
investment). From 1999 to 2002, he was Director General at
the Department of General Planning of the State Planning
Committee. From 1983 to 1993, he was a technical officer in
the Department of General Planning of the State Planning
Committee. His education includes a master's degree in
economics and politics from the International Administration
Institute in Paris (1990-91) and another master's degree in
economics and planning from the National University at
Danetsk in the former Soviet Union (1976-83). He was
appointed in 2007 as the Party Committee's secretary in the
Finance Ministry. He speaks Lao, French, and Russian. He is
married with children.

Other Cabinet Moves
--------------


8. (SBU) Among the less high-profile cabinet moves, the
promotion of Douangsavat Souphanouvong is of interest because
he is a son of Prince Souphanouvong, a major figure in the
history of the Pathet Lao. Souphanouvong, known as the "Red
Prince," led the movement in opposing the government of his
brother, Prince Souvanna Phouma. Following the Pathet Lao
takeover in 1975, Souphanouvong became President of Laos, a
position he held until 1986.
He died in 1995. Prince Souphanouvong's oldest son, Khamsay,
left Laos for New Zealand in 2000 while serving as minister
for public enterprises and was granted political asylum there.


9. (U) As Minister in the Prime Minister's office
responsible for a new Watern and Environmental Affairs
Authority, Khempheng Pholsena will be responsible for
overseeing hydropower projects, a major and growing source of
revenue in Laos. She had been Vice President for Finance and
Administration at the Asian Development Bank since April

2004. Previously, she served as Vice Foreign Minister
responsible for international cooperation. Other previous
positions include Vice President of the Committee for
Planning of Cooperation (2001-03) and Vice Minister in the
Office of the Prime Minister (1997-2001). She speaks French,
English, and Russian.

Comment
--------------


10. (C) In both his opening and closing remarks to the
National Assembly, Prime Minister Bouasone referred to the
need to eradicate corruption, and several foreign newspapers,
including Bangkok's "The Nation," have speculated that this
was the reason for the cabinet reshuffle. If so, former
Vientiane Province governor Somphet and Finance Minister
Chansy would be the logical targets. Lao officials accused
of corruption are frequently shifted rather than punished.
In Chansy's case, though, a shift to the potentially
lucrative position of Vientiane provincial governor would
appear to be an unlikely response to corruption concerns. It
may be that Prime Minister Bouasone, who at 53 is himself one
of the youngest members of the Lao government, is looking for
new blood at the Finance Ministry. The current government
has displayed a pattern of appointing relatively young and
progressive ministers to economic portfolios. In addition to
Nam Viyaketh and now Somdy Duongdy, this group includes
Soulivong Daravong, the President of the Committee for
Planning and Investment. We see Nam Viyaketh's enthusiasm
about Somdy as a good sign. Of course, in the secretive
world of the Lao government bureaucracy, it is difficult to
know for sure why things happen. We will engage with our
contacts to find out more about the new appointees and the
reasons behind the reshuffle.
MCGEEHAN