Country Listing

Laos Table of Contents


Economic Factors

The retarded economic diversification and development of Laos constrained its foreign policy opportunities and generated its dependency in succession upon France, the United States, and the Soviet bloc. Following the economic collapse of the Soviet Union, Laos has become heavily dependent upon the advice and contributions of UN agencies and the readiness of regional states such as Australia, Japan, and Thailand to invest in its economy. Sweden has also made significant economic contributions.

There has been a dramatic shift away from maintaining basic solidarity with a military/political bloc of mentors--first, the United States regional security alliance and then the "special relations" of Vietnamese-influenced Marxism-Leninism--to maximizing donor-recipient relations with UN agencies, state donors, and private investors. Although the universe of relations has not essentially grown, especially with Russia cutting back on its assistance, the expectation of genuine economic progress has begun to creep into economic dealings with outsiders. By moving resolutely and responding to Thai and Chinese gestures, Laos has broadened its range of donors, trading partners, and investors. The presence of Thai traders and investors has dramatically increased.

The degree to which Laos has depended upon outside donors and investors, and which ones, has been a function not only of need but also political choice, a dependence that was carefully controlled during Kaysone Phomvihan's tutorship. Without his pervasive leadership, foreign economic relations might have fallen victim to internal rivalries between ministries and factions within the party.

However, through legislation enacted by the National Assembly in 1991 of a basic criminal and investment code and the creation of a judiciary, Laos opened its doors wider to serious investors. In addition, the stabilization of foreign exchange rates and inflation signaled major steps toward engaging constructively with countries outside the ideological blocs within which it used to confine itself. The new institutions require a few years of serious testing, but a Burma-like return to stagnation seems unlikely, even with Kaysone's departure from the helm. The tantalizing images of Thailand's growth and prosperity, conveyed by television along the Mekong border, and increasingly easier travel across the river--in both directions--makes the economic policy of openness seem all but irreversible.

Data as of July 1994