Economy of Laos
Encyclopedia
The economy of Laos
is rapidly growing, as it began to decentralise control and encouraged private enterprise in 1986. It opened a stock exchange
in 2011, and has become a rising regional player in its role as a hydroelectric power supplier to neighbors such as China
, Vietnam
and Thailand
. Although the country remains one of the poorest countries in South-East Asia. A landlocked
country, it has inadequate infrastructure and a largely unskilled work force. The country's per capita income in 2009 was estimated to be $2,300 on a purchasing power parity
-basis.
-style command economy system, replacing the private sector with state enterprises and cooperatives; centralizing investment, production, trade, and pricing; and creating barriers to internal and foreign trade.
Within a few years, the Lao government realized these types of economic policies were preventing, rather than stimulating, growth and development. No substantive reform was introduced, however, until 1986 when the government announced its "new economic mechanism" (NEM). Initially timid, the NEM was expanded to include a range of reforms designed to create conditions conducive to private sector activity. Prices set by market forces replaced government-determined prices. Farmers were permitted to own land and sell crops on the open market. State firms were granted increased decisionmaking authority and lost most of their subsidies and pricing advantages. The government set the exchange rate
close to real market levels, lifted trade barrier
s, replaced import barriers with tariff
s, and gave private sector firms direct access to imports and credit.
In 1989, the Lao government reached agreement with the World Bank
and the International Monetary Fund
on additional reforms. The government agreed to expand fiscal and monetary reform, promote private enterprise and foreign investment, privatize or close state firms, and strengthen banking. In addition, it also agreed to maintain a market exchange rate, reduce tariffs, and eliminate unneeded trade regulations. A liberal foreign investment code was enacted and appears to be slowly making a positive impact in the market. Enforcement of intellectual property rights is governed by two Prime Minister's Decrees dating from 1995 and 2002 http://www.ecap-project.org/how_to_enforce_your_ipr/laos.html.
In an attempt to stimulate further international commerce, the Lao government accepted Australia
n aid to build a bridge across the Mekong
River to Thailand
. The "Thai-Lao Friendship Bridge", between Vientiane Prefecture and Nong Khai Province
, Thailand, was inaugurated in April 1994. Although the bridge has created additional commerce, the Lao government does not yet permit a completely free flow of traffic across the span.
These reforms led to economic growth and an increased availability of goods. However, the 1997 Asian Financial Crisis, coupled with the Lao government's own mismanagement of the economy, resulted in spiraling inflation
and a steep depreciation of the kip, which lost 87% of its value from June 1997 to June 1999. Tighter monetary policies brought about greater macroeconomic stability in FY 2000, and monthly inflation, which had averaged about 10% during the first half of FY 1999, dropped to an average 1% over the same period in FY 2000.
The economy continues to be dominated by an unproductive agricultural sector operating largely outside the money economy and in which the public sector continues to play a dominant role. Still, a number of private enterprises have been founded and some are quite successful in industries such as handicrafts, beer
, coffee and tourism. With United Nations, Japanese
, and German support, a formerly state-controlled chamber of commerce
aims to promote private business: the Lao National Chamber of Commerce and Industry and its provincial subdivisions.
. Domestic savings are low, forcing Laos to rely heavily on foreign assistance and concessional loans as investment sources for economic development. Agricultural products include sweet potatoes, vegetables, corn, coffee, sugarcane, tobacco, cotton, tea, peanuts, rice; water buffalo, pigs, cattle, poultry. In FY 1999, for example, foreign grants and loans accounted for more than 20% of GDP and more than 75% of public investment.
: purchasing power parity - $14.2 billion (2009 est.)
Exchange Rate
- kips (LAK) per US dollar - 8,556.56 (2009), 8,760.69 (2008), 9,658 (2007), 10,235 (2006), 10,820 (2005)
Laos
Laos Lao: ສາທາລະນະລັດ ປະຊາທິປະໄຕ ປະຊາຊົນລາວ Sathalanalat Paxathipatai Paxaxon Lao, officially the Lao People's Democratic Republic, is a landlocked country in Southeast Asia, bordered by Burma and China to the northwest, Vietnam to the east, Cambodia to the south and Thailand to the west...
is rapidly growing, as it began to decentralise control and encouraged private enterprise in 1986. It opened a stock exchange
Lao Securities Exchange
The Lao Securities Exchange is the primary stock exchange in Laos, located in the capital, Vientiane.-History:In 2010, the Lao government sought technical and financial support from South Korea , as well as advice from neighbouring Thailand, to help build the exchange. The glass-building cost $10...
in 2011, and has become a rising regional player in its role as a hydroelectric power supplier to neighbors such as China
China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
, Vietnam
Vietnam
Vietnam – sometimes spelled Viet Nam , officially the Socialist Republic of Vietnam – is the easternmost country on the Indochina Peninsula in Southeast Asia. It is bordered by China to the north, Laos to the northwest, Cambodia to the southwest, and the South China Sea –...
and Thailand
Thailand
Thailand , officially the Kingdom of Thailand , formerly known as Siam , is a country located at the centre of the Indochina peninsula and Southeast Asia. It is bordered to the north by Burma and Laos, to the east by Laos and Cambodia, to the south by the Gulf of Thailand and Malaysia, and to the...
. Although the country remains one of the poorest countries in South-East Asia. A landlocked
Landlocked
A landlocked country is a country entirely enclosed by land, or whose only coastlines lie on closed seas. There are 48 landlocked countries in the world, including partially recognized states...
country, it has inadequate infrastructure and a largely unskilled work force. The country's per capita income in 2009 was estimated to be $2,300 on a purchasing power parity
Purchasing power parity
In economics, purchasing power parity is a condition between countries where an amount of money has the same purchasing power in different countries. The prices of the goods between the countries would only reflect the exchange rates...
-basis.
History
Following its accession to power in 1975, the communist government imposed a SovietSoviet Union
The Soviet Union , officially the Union of Soviet Socialist Republics , was a constitutionally socialist state that existed in Eurasia between 1922 and 1991....
-style command economy system, replacing the private sector with state enterprises and cooperatives; centralizing investment, production, trade, and pricing; and creating barriers to internal and foreign trade.
Within a few years, the Lao government realized these types of economic policies were preventing, rather than stimulating, growth and development. No substantive reform was introduced, however, until 1986 when the government announced its "new economic mechanism" (NEM). Initially timid, the NEM was expanded to include a range of reforms designed to create conditions conducive to private sector activity. Prices set by market forces replaced government-determined prices. Farmers were permitted to own land and sell crops on the open market. State firms were granted increased decisionmaking authority and lost most of their subsidies and pricing advantages. The government set the exchange rate
Exchange rate
In finance, an exchange rate between two currencies is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country’s currency in terms of another currency...
close to real market levels, lifted trade barrier
Trade barrier
Trade barriers are government-induced restrictions on international trade. The barriers can take many forms, including the following:* Tariffs* Non-tariff barriers to trade** Import licenses** Export licenses** Import quotas** Subsidies...
s, replaced import barriers with tariff
Tariff
A tariff may be either tax on imports or exports , or a list or schedule of prices for such things as rail service, bus routes, and electrical usage ....
s, and gave private sector firms direct access to imports and credit.
In 1989, the Lao government reached agreement with the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
and the International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
on additional reforms. The government agreed to expand fiscal and monetary reform, promote private enterprise and foreign investment, privatize or close state firms, and strengthen banking. In addition, it also agreed to maintain a market exchange rate, reduce tariffs, and eliminate unneeded trade regulations. A liberal foreign investment code was enacted and appears to be slowly making a positive impact in the market. Enforcement of intellectual property rights is governed by two Prime Minister's Decrees dating from 1995 and 2002 http://www.ecap-project.org/how_to_enforce_your_ipr/laos.html.
In an attempt to stimulate further international commerce, the Lao government accepted Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
n aid to build a bridge across the Mekong
Mekong
The Mekong is a river that runs through China, Burma, Laos, Thailand, Cambodia and Vietnam. It is the world's 10th-longest river and the 7th-longest in Asia. Its estimated length is , and it drains an area of , discharging of water annually....
River to Thailand
Thailand
Thailand , officially the Kingdom of Thailand , formerly known as Siam , is a country located at the centre of the Indochina peninsula and Southeast Asia. It is bordered to the north by Burma and Laos, to the east by Laos and Cambodia, to the south by the Gulf of Thailand and Malaysia, and to the...
. The "Thai-Lao Friendship Bridge", between Vientiane Prefecture and Nong Khai Province
Nong Khai Province
Nong Khai is the northernmost of the north-eastern provinces of Thailand. Neighboring provinces are Bueng Kan, Sakon Nakhon, Udon Thani and Loei...
, Thailand, was inaugurated in April 1994. Although the bridge has created additional commerce, the Lao government does not yet permit a completely free flow of traffic across the span.
These reforms led to economic growth and an increased availability of goods. However, the 1997 Asian Financial Crisis, coupled with the Lao government's own mismanagement of the economy, resulted in spiraling inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
and a steep depreciation of the kip, which lost 87% of its value from June 1997 to June 1999. Tighter monetary policies brought about greater macroeconomic stability in FY 2000, and monthly inflation, which had averaged about 10% during the first half of FY 1999, dropped to an average 1% over the same period in FY 2000.
The economy continues to be dominated by an unproductive agricultural sector operating largely outside the money economy and in which the public sector continues to play a dominant role. Still, a number of private enterprises have been founded and some are quite successful in industries such as handicrafts, beer
Beerlao
Beerlao is the name of a range of beers produced by the Lao Brewery Company of Vientiane, Laos.- Beerlao :...
, coffee and tourism. With United Nations, Japanese
JICA
KF3 is a kart racing class for top drivers aged 12 to 15 .This class used to be called Junior Intercontinental A and has changed since January 2007 when CIK-FIA decided to replace the 100 cc air-cooled two-stroke engines with 125 cc Touch-and-Go water-cooled two-stroke...
, and German support, a formerly state-controlled chamber of commerce
Chamber of commerce
A chamber of commerce is a form of business network, e.g., a local organization of businesses whose goal is to further the interests of businesses. Business owners in towns and cities form these local societies to advocate on behalf of the business community...
aims to promote private business: the Lao National Chamber of Commerce and Industry and its provincial subdivisions.
Agriculture
Agriculture, mostly subsistence rice farming, dominates the economy, employing an estimated 85% of the population and producing 51% of GDPGross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
. Domestic savings are low, forcing Laos to rely heavily on foreign assistance and concessional loans as investment sources for economic development. Agricultural products include sweet potatoes, vegetables, corn, coffee, sugarcane, tobacco, cotton, tea, peanuts, rice; water buffalo, pigs, cattle, poultry. In FY 1999, for example, foreign grants and loans accounted for more than 20% of GDP and more than 75% of public investment.
Tourism
Tourism is the fastest growing industry in the economy and plays a vital role in the Lao economy. The government opened Laos to the world in the 1990s, and continues to be a popular destination amongst tourists.Other Statistics
GDPGross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
: purchasing power parity - $14.2 billion (2009 est.)
Exchange Rate
Exchange rate
In finance, an exchange rate between two currencies is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country’s currency in terms of another currency...
- kips (LAK) per US dollar - 8,556.56 (2009), 8,760.69 (2008), 9,658 (2007), 10,235 (2006), 10,820 (2005)
- Oil - production:
- 0 bbl/d (2009 est.)
- Oil - consumption:
- 3000 oilbbl/d (2009 est.)
- Oil - exports:
- 0 bbl/d (2007 est.)
- Oil - imports:
- 3080 oilbbl/d (2007 est.)
External links
- Rice research in Lao PDR http://www.nafri.org.la/05_news/news/IRRI/15_years_of_Research.htm
- Rice Biodiversity in Lao PDR http://www.sdc.org.vn/index.php?navID=21483&langID=1, http://www.irri.org/publications/annual/pdfs/ar2000/Race.pdf