Laos Table of Contents
Although the overall composition of trade did not change significantly throughout the 1980s and early 1990s, the direction of trade did change. Until 1989 major trading partners were from nonconvertible currency areas--mainly China, the Soviet Union, and Vietnam; Laos also traded with Bulgaria, Czechoslovakia, Mongolia, and Poland. From 1984--the first year with accurate data--to 1988, the nonconvertible currency area accounted for over half of all imports. Although the nonconvertible currency area never had a monopoly on exports (mostly because the largest export until 1987, hydroelectricity, was sold only to Thailand) it accounted for over half of the total trade volume through the end of the decade. However, following the easing of some trade restrictions in 1988 and the improvement of relations with Thailand, including a reduction in the Thai list of 273 strategic goods in which trade has been prohibited, the pattern of trade began to shift in favor of the convertible currency area. Bilateral trade with Thailand increased 26 percent over 1987, and imports from the nonconvertible currency area dropped to about 35 percent of total imports.
Eager to avoid Thai domination of its foreign trade, Laos sought to improve relations with China, and in December 1989, the two countries signed their first bilateral agreement in a decade, including notes on cross-border trade. As a result, trade with China grew by roughly 40 percent in 1990. Despite the positive effect of this move on the growth of regional trade, new agreements with members of the former Soviet bloc work against the trend. In 1990, at a Soviet-Lao Cooperation Commission meeting, it was determined that henceforth Soviet exports and loans would be paid for in convertible currencies at world prices. Previously, payments had been made in nonconvertible currencies and often on barter terms. Trade with Vietnam also shifted to a hard currency basis. In addition, the eventual disintegration of the Soviet Union clinched the shift in trade patterns toward the convertible currency area: in 1991 trade with the nonconvertible area accounted for just 2 to 3 percent of total imports and total exports. The convertible currency area was more than able to make up for this loss: trade volume actually increased that year, although by only 4.3 percent.
Major trading partners from the convertible currency area include Britain, France, Japan, Malaysia, Singapore, and Thailand. Of these, Malaysia, Singapore, and Thailand accounted for roughly 45 percent of imports from 1970 to 1978; their share increased to about 51 percent by 1987. Similarly, Japan's share of imports from the convertible currency area increased from 7 percent in 1978 to 19 percent in 1987. The United States accounted for less than 1 percent of imports from the convertible currency area in 1987, although the LPDR's first trade mission to the United States in 1991 signaled its eagerness to expand trade. Three Asian countries- -Malaysia, Singapore, and Thailand--accounted for 65 percent of Laos's exports to the convertible currency area in 1987, up from 43 percent in 1978. This increase in regional trade made up for the decrease in the shares in exports from the United States and Japan: from 33 percent to 6 percent for Japan, and from 9 percent to 4 percent for the United States. Thailand's removal of the ban on trade in strategic goods in late 1989 gave regional trade another boost.
Data as of July 1994