LAOS



Lao People's Democratic Republic

Sathalanalat Paxathipatai Paxaxon Lao

CAPITAL: Vientiane (Viangchan).

MONETARY UNIT:

Lao kip (K). There are no coins, and there are notes of 1, 5, 10, 20, 50, 100, 500, 1,000, 2,000, and 5,000 kip. With considerable inflation over the last several decades, kip notes under 500 are rarely seen or used now. The Thai baht and U.S. dollar are also commonly used, especially in larger transactions, though official policy calls for the exclusive use of the kip.

CHIEF EXPORTS:

Wood products, garments and textiles, electricity, coffee, tin.

CHIEF IMPORTS:

Machinery and equipment, vehicles, fuel.

GROSS DOMESTIC PRODUCT:

US$7 billion (purchasing power parity, 1999 est.).

BALANCE OF TRADE:

Exports: US$271 million (1999 est.). Imports: US$497 million (1999 est.).

COUNTRY OVERVIEW

LOCATION AND SIZE.

The Lao People's Democratic Republic, or Lao PDR, is a land-locked nation bordered on the north by China, the east by Vietnam, the west by Burma (Myanmar), and the south by Thailand and Cambodia. The Mekong River forms much of the boundary between Laos and Thailand. The country's total land boundaries are 5,083 kilometers (3,159 miles). Its geographic area is 236,800 square kilometers (91,428 square miles), making it just slightly larger than the state of Minnesota. Its capital, Vientiane, the largest city in central Laos, is located on the Mekong River. The other 3 major cities are Luang Prabang, Savannakhet, and Pakxé.

POPULATION.

The Lao PDR differs from many other Asian countries in that it has an extremely low population density of only 23.2 persons per square kilometer (60 per square mile). Its population density is almost the same as the state of Minnesota. In July of 2000 its population was estimated as 5,497,459. This compares with a population of 3,586,083 in 1985; 2,886,000 in 1976; and 1,789,000 in 1953. The current population growth rate is a relatively high 2.5 percent. If this rate were to continue, the country's population would double to over 10 million by the year 2028. The major cause of this high population growth is the high fertility rate of Lao women. The Lao women on average currently have 5.21 children.

Thus, it is not uncommon to find families of 4 to 10 children, even in urban areas.

The ethnically diverse Lao PDR population is comprised of 3 major ethnic groups: Lao Lum, lowland; Lao Theung, upland; and Lao Sung, highland. Among prominent highland groups are the Hmong and Yao. Ethnic minorities comprise 47.5 percent of the total population, according to the 1995 census, which distinguished 47 main ethnic groups and 149 sub-groups. Thus, the Lao PDR is one of the most ethnically diverse countries in Asia.

With the country's low population density and the need to import labor (often Vietnamese guest workers ), the government has been reluctant to adopt a strict birth control or family planning policy. Instead the policy has been the more moderate one of birth spacing (delaying natural pregnancies so that women have fewer children than the biological maximum).

With such high fertility, the Lao PDR has a very young population. Roughly 54.2 percent of the population is under the age of 20. With poor health conditions, particularly in rural areas and related high mortality rates, only 2.2 percent of the population is over 70 years of age.

FORESTRY AND LOGGING.

The Lao PDR has extensive tropical forests containing many valuable hardwoods such as teak. With a total ban on logging in Thailand, there is considerable demand for Lao wood products from other Asian countries such as Thailand, Malaysia, and Japan. Malaysia has projects for teak cultivation in southern Laos. The Lao military is involved in timber exploitation. In 1991, timber and furniture exports totaled 39.2 percent of all exports, while in 1996 such exports dropped to 28 percent. In 1998, export of all types of wood products brought in US$115.4 million to the Lao economy.

Deforestation and the need for sustainable forestry are major environmental issues facing the Lao PDR and its agricultural/rural sector. The Lao are very conscious that much of Thailand's northeast was deforested as the result of expanded rice field acreage. Also, upland agricultural production can result in serious deforestation. The reduction of upland rice production and the expansion of irrigated rice lands to allow more crops on a given piece of land should help preserve Lao forests by reducing the need to expand acreage at the expense of forests.

IRRIGATION PROJECTS.

A major recent policy is an ambitious irrigation project. Given the spread of the contagion of the Asian economic crisis to Laos, organizations such as the IMF strongly urged restrictive monetary and fiscal policies . The Lao PDR ignored the policy dictates of the IMF and instead they moved boldly ahead with a major rural irrigation infrastructure project. For doing this they were severely criticized by the international financial community, and no doubt this expansionary program contributed to both inflation and the devaluation of the Lao kip. In continuing their agricultural irrigation program, the Lao government was both demonstrating its economic sovereignty and also clearly putting the interests of the Lao agricultural sector ahead of those in urban communities which are most severely affected by inflation.

The French scholar Catherine Aubertin argues that Lao agricultural policy favors the lowland Lao over the upland Lao because of its resettlement schemes to decrease slash and burn agriculture in mountainous areas. The Lao government feels such policies are essential for forest conservation.

MANUFACTURING.

The following are the principal products manufactured in the Lao PDR: oxygen-acetylene, battery acid, industrial alcohol, detergent powder, soap, shoes made of animal skin, leather, medical drugs, fans, vaccines, plastic goods, timber, lumber, plywood, flood lumber, rattan furniture, books, fabrics, clothing, bricks, blocks, cement, tiles, chalk, lime, electric poles, agricultural tools, tin plates, nails, electric wire, and barbed wire. For the economy, the most significant of these are clothing/fabrics and rattan furniture. Manufacturing represented 16.5 percent of the GDP in 1999, up from 13.9 percent in 1995. Except for fabrics and clothing, most of these manufactured products are for local consumption. Laos' manufacturing export potential is currently limited by its status as a "non-market economy" restricting its access to U.S. and other developed country markets. Admission to the WTO and completion of a trade agreement with the United States are essential to enable Laos to have more secure access for its exports.

ELECTRICITY AND WATER.

Electric power generation is one of Lao's most significant industries. In 1998, the country produced 1.34 billion kWh of electric power. About 43 million cubic meters of water were produced and distributed, primarily in the 4 major urban areas for household and industrial use. Electricity and water production represented 2.3 percent of the GDP in 1999. As of the mid-1990s, only 1 percent of the country's vast electric potential had been exploited.

MINING.

The Lao PDR has an abundant supply of minerals. Gypsum, for example, is exported to Vietnam. Tin, coal, lignite, and limestone are also mined. In the Vanvieng area, there is a major cement works, established with the assistance of the Chinese. Mining and quarrying, however, represented only .051 percent of the GDP in 1999, and minerals are not yet a significant export. The major problem in exploiting Lao mineral resources is their inaccessibility.

CONSTRUCTION.

In recent years there have been a number of new construction projects mainly in the capital of Vientiane. International funding has assisted many of these projects. Among notable recent projects have been the Lao-Nippon Bridge, the new International Airport, the Lao Plaza Hotel, and the National Cultural Hall (with funding provided by the PRC). Construction in 1999 represented 2.6 percent of the GDP.

TOURISM.

In the Lao service economy, tourism has been a major growth area. Between 1991 and 1995, tourism grew approximately 60-fold, and from 1995 to 2000 it has more than doubled. On a per capita basis, Laos has even more tourists than Thailand. The major tourist attractions of the country are its rich culture and many Buddhist temples; Luang Prabang, the former royal capital in the north and a world cultural heritage site; the majestic Mekong River which flows through the country; and shopping for Lao textiles and handicrafts in Vientiane. Laos is also noted for its genuinely friendly people who warmly welcome tourists. By April 1999, tourism was the country's highest revenue earner, contributing US$79.9 million to the Lao economy. Despite such economic contributions, tourism employs at most only 3 percent of the non-farm workforce. Tourist facilities have improved significantly in recent years. There are now large numbers of hotels, guesthouses, and restaurants in major cities. Both Vientiane and Luang Prabang now offer some up-scale tourist facilities.

BANKING.

In the early 1990s banking reforms were introduced which diversified Laos' banking system. These reforms led to the National Bank being separated from 7 state-owned commercial banks such as the Lao Foreign Trade Bank (BCEL) and 5 regional banks. The reforms also opened the sector to international banks from Thailand, Vietnam, and Malaysia. In 1999, 6 of the 8 state-run commercial banks were merged into just 2 entities. Thus, the Bank of the Lao People's Democratic Republic (the national bank) now monitors a total of 14 banks consisting of 4 government banks, 3 joint banks (for example, the Lao-Viet Bank), and 7 foreign banks (6 Thai and 1 Malaysian). This network of local and international banks provides standard banking and financial services for both the average citizen and the commercial community. This banking component represents 5 percent of Laos' service sector. A major current issue facing the industry relates to questions about the solvency of the banking system as a result of the Asian regional economic crisis.

DEPENDENCIES

Laos has no territories or colonies.

BIBLIOGRAPHY

Anderson, Kym. Lao Economic Reform & WTO Accession: Implications for Agriculture and Rural Development. Adelaide: Center for International Economic Studies, 1999.

Annual Report 1999. Vientiane: Bank of the Lao PDR, 1999.

Aubertin, Catherine. "Institutionalizing Duality: Lowlands and Uplands in the Lao PDR." IIAS Newsletter. Vol. 24, February 2001.

Basic Statistics of the Lao P.D.R. 1975-2000. Vientiane: StatePlanning Committee, National Statistics Center, 2000.

Bounthavy, Sisouphanthong, and Christian Taillard. Atlas of Laos: Spatial Structures of the Economic and Social Development of the Lao People's Democratic Republic. Copenhagen, Denmark: Nordic Institute of Asian Studies, 2000.

Bourdet, Yves. The Economics of Transition in Laos: From Socialism to ASEAN Integration. Northampton, MA: Edward Elgar Publishing, 2000.

Chazée, Laurent. The Peoples of Laos: Rural and Ethnic Diversities. Bangkok: White Lotus Press, 1999.

Economist Intelligence Unit. Country Profile: Laos. London: Economist Intelligence Unit, 2001.

Freeman, Nick. "Laos: Economy." Far East and Australasia 2001. 32nd ed. London: Europa Publications, 2001.

Fry, Gerald W. "The Future of the Lao PDR: Relations withThailand and Alternative Paths to Internationalization." New Laos, New Challenges, edited by Jacqueline Butler-Diaz. Tempe, AZ: Program for Southeast Asian Studies Monograph Series, Arizona State University, 1998.

Fry, Gerald W., and Manynooch Nitnoi Faming. "Laos." The Southeast Asia Handbook, edited by Patrick Heenan and Monique Lamontagne. London: Fitzroy Dearborn Publishers, 2001.

Hopkins, Susanna. "The Economy." Laos: A Country Study, edited by Andrea Matlas Savada. Washington, D.C.: Library of Congress, 1995.

"Laos." Asia 2001 Yearbook. Hong Kong: Far Eastern EconomicReview, 2000.

Murphy, Dervla. One Foot in Laos. London: John Murray, 1999.

National Human Development Report 1998. Vientiane: StatePlanning Committee, National Statistics Center, UNDP, 1998.

Osborne, Milton. The Mekong: Turbulent Past, Uncertain Future. New York: Atlantic Monthly Press, 2000.

Pham, Chi Do, editor. Economic Development in Lao P.D.R.: Horizon 2000. Vientiane: IMF and Bank of the Lao People's Democratic Republic, 1994.

U.S. Central Intelligence Agency. World Factbook 2000. <http://www.odci.gov/cia/publications/factbook/index.html> . Accessed August 2001.

—Gerald W. Fry



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