France controlled Indochina (Cambodia, Vietnam, Laos) during the period between World War I and World War II. Particularly in Laos, early anticipation of great wealth to be earned from these territories never materialized despite harsh taxes on the small population. Revenue was never enough to cover administrative costs, and the goals of French administrators revolved around how the country's natural resources could best be exploited in order to balance the colonial budget.

The Tay Ninh area along the Mekong valley was the primary rubber producing region in Indochina at one point. This resource was of strategic importance during WWII. The Japanese entered the area in late 1940, and occupied it in 1941.

The French put forth a great deal of effort to promote the idea that great wealth could be obtained in Laos in an attempt to justify and promote colonial expansion there. The government calculated that the population of Laos in particular would need to be tripled if the resources were to be exploited at a profit, instead of causing a drain on the general fund. This does not mean, however, that the French government was actively promoting French migration. It was stated that 'The European cannot work with his hands in a continuous way; he must take upon himself the role of direction and supervision,leaving heavy manual work to the Asiatics'.

The preferred imported labor for Laos was the Vietnamese, and they were actively recruited. At the same time, the French government felt they needed to protect the Lao from the Vietnamese. 'the hardy, enterprising, combative Annamite (Vietnamese) would make a mouthful of the timid and resigned Lao'. Rural reserves and ethnic quarters in the towns were set aside for the Lao. Vietnamese were encouraged to settle everywhere else, eventually becoming the majority race.

The Vietnamese population grew steadily during the inter war years. In 1935 it numbered 20,500, almost doubling in the next four years to 39,000.

It appears that the French viewed the Lao with a combination of affection and exasperation. Virginia Thompson, an observer of Indochina in the late 1930's, said of Laos that it was a country where the French were happiest: 'For the rare Frenchman who sees in the Laotians a silly, lazy, and naive people, there are hundreds who are charmed by their gentle affability and their aesthetic appearance'. French assessments showed that many believed that the Lao were 'more industrious then the Siamese, possessed of a more adventurous and commercial spirit'.

The French never did achieve the economic successes they had hoped. In 1940 Laos still remained "a charming backwater" of little economic importance, and operations there were subsidized with income from Vietnam.