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Laos Table of Contents



By the start of the 1990s, Laos had obtained some impressive results from the implementation of economic reforms under the New Economic Mechanism. The experiment in cooperative farming had ended as an ideological failure, and although rice harvests had reached self-sufficiency levels, they still depend to a large degree on favorable weather conditions. New decrees guarantee farmers the right to long-term use and transfer of property. In response to the encouragement of the manufacturing and services sectors through privatization, investment promotion, and other means, these sectors have slowly begun to supplant agriculture's share of GDP. The private retail sector has blossomed. Removal of restrictions on interregional transit and improvement of foreign relations with Thailand have fueled growth in the transport subsector, simplified trade activities, and are likely to reduce the prices of many goods. The potential for tourism as a foreign exchange earner has brightened as foreign investors join with Laotian companies to provide improved aviation and tourism services. The opening of the Friendship Bridge between Thailand and Laos symbolizes the new relationship with countries outside the former Soviet bloc: trade with and aid from both developed and neighboring countries have increased. Despite an inflationary surge in the late 1980s, the reduction of credit to money-losing state-owned enterprises and a tight monetary policy helped to bring inflation down to more manageable levels in the early 1990s. Tax reform has also worked to slow the increase in the fiscal deficit.

Despite these successes, however, many of the troubles that saddled Laos at the beginning of the 1990s remain. Perhaps the two most crucial constraints continue to be a poorly educated and trained labor force and a limited, poorly maintained transportation network with endemic problems. Many of Laos's most experienced and educated citizens had fled the country in the late 1970s, and the poorly run and underfunded educational system is inadequate to make up for this important loss of managerial and technical skill. Similarly, insufficient investment in operations and maintenance over the years has resulted in a road system poorly equipped to handle the increased traffic that liberalization precipitated. Without a better educated and trained labor force and an improved infrastructure, measures to increase foreign investment and encourage export-oriented production are not likely to yield sustainable economic progress. Even the push to privatize stateowned enterprises and encourage efficient, profit-oriented production depend upon the availability of trained managers to direct production. Thus, the sustainability of reforms implemented by the start of the 1990s depends, at least in part, upon the ability of the government to turn its attention to the long-term infrastructure and human capital requirements of a market-based economy.

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Writing about the LPDR economy presents special challenges because the measurement of crucial variables such as population, size of the labor force, GDP, trade and aid flows, and other economic indicators differs from source to source. In addition, information is often out of date; most of the few important books that cover the economy, such as Martin Stuart-Fox's Laos: Politics, Economics, and Society, were published before the New Economic Mechanism was introduced.

Among the most useful sources available are various World Bank publications, including World Tables, and especially Historically Planned Economies, A Guide to the Data, as well as the IMF's Balance of Payments Statistics Yearbook. Frequently conflicting statistical information is given in such publications as the Organisation for Economic and Co-operation and Development's Geographical Distribution of Financial Flows to Developing Countries, and the UN's The Least Developed Countries Report. Three extremely useful publications with a wide variety of statistics that frequently coincide with those of other sources are the UN's Statistical Yearbook for Asia and the Pacific and Economic and Social Survey of Asia and the Pacific, and the Asian Development Bank's Asian Development Outlook. Of these publications, the first is perhaps the only up-to-date publication with reasonably detailed sectoral and production time series. For a more historical perspective on the growth of various economic sectors, the Asian Economic Handbook and the Laos government's 10 Years of SocioEconomic Development in the Lao People's Democratic Republic are very informative, if not always in agreement with other sources.

For information on specific sectors, a number of publications provide very useful data. The World Resources Institute's World Resources statistical tables contain otherwise scarce information on forestry and agricultural activities, deforestation, energy, and pollution. Two publications are indispensable for information on trade and investment: the UN's Traders' Manual for Asia and the Pacific: Lao People's Democratic Republic, and Laurence J. Brahm and Neill T. Macpherson's Investment in the Lao People's Democratic Republic. A collection of papers from the Asian Development Bank and the Thai-Canada Economic Cooperation Foundation's Thai-Lao Forum on Investment and Trade Opportunities in Lao PDR provides some excellent sectoral background information.

A number of excellent, although brief, surveys of the economy are available, including Martin Stuart-Fox's article "Laos in 1991: On the Defensive" and the section on Laos in The Far East and Australasia; the latter publication also contains some useful statistical tables. For the most wide-ranging, up-to-date information, the Economist Intelligence Unit's Country Profile and Country Report series for Indochina are essential; also Asian Survey's annual summary and the annual Asia Yearbook series. The increase in foreign investment in Laos and the general upswing in private activity in the marketplace may result in the dissemination of more accurate, comprehensive, and timely information about the economy. (For further information and complete citations, see Bibliography.)

Data as of July 1994

Country Listing

Laos Table of Contents