Laos

THE LANDLOCKED and multiethnic Lao People's Democratic Republic, with a population of 5.6 million (2001), is one of the least developed countries of the world. Since the establishment of the Lao People's Democratic Republic on December 2, 1975, the country has been beset with problems. The new regime faced a shortage of technician personnel, an abundance of dissident movements, and a deteriorating economic situation. The country has one of the lowest annual per capita incomes in the world ($300), with about 31 percent of the population living below the poverty line. The corresponding estimate of poverty incidence in rural regions is a bit higher. About 75 percent of people live on only $2 per day. Agriculture is the main occupation, with about 70 percent of the population engaged in farm-related activities. The main task of the government was to provide relief from poverty through economic reforms, along with receiving assistance from nongovernmental organizations, regional associations, and international organizations.

The Phak Pasason Pativat Lao (Lao People's Republican Party, LPRP) introduced a series of reforms from 1986 onward, like the removal of trade barriers, relaxation of state economic control, and allowance of a private-market sector. This Chintanakan Mai (New Economic Mechanism) resulted in a free-market system and foreign investment. The country achieved significant macroeconomic performance with annual economic growth of seven percent.

Although Asia's regional economic crisis of 1997 hurt Laos severely, with its currency, the kip, dropping and consequent inflation, by the middle of 2000 its economy had stabilized. Laos witnessed moderate economic growth in 2001 because of past economic reforms. At the start of the 21st century, its currency hovered at between 7,500 and 8,000 to $1. Foreign currency reserves remained steady in 2001. Industry achieved an annual growth rate of nine percent. Laos built industrial zones also to attract foreign investment.

The tourism sector is also growing. Exports increased by about nine percent during the last few years. The reforms in tax structure raised government revenue to about 15 percent of Gross Domestic Product (GDP) in 2003. Investment in the hydropower and mining sectors gives hope for the economic recovery of Laos, and GDP growth has increased steadily from four to six percent. The undernourished percentage of the total population decreased from 29 percent during the 1990s to about 20 percent in 2004–05. There was also women's empowerment, with an increase in the female literacy rate, and women's seats in the legislature increased from about 9.4 to 22.9 percent in seven years.

In the age of globalization, Laos receives help on bilateral, regional, and international levels. On July 23, 1997, it formally joined the Association of Southeast Asian Nations (ASEAN), paving the way for long-term economic benefits. As a member of the Mekong River Commission Council (MRCC) since 2001, Laos boosted rice production. It has achieved self-sufficiency in rice [Page 627]production with a reserve surplus. Laos is cooperating in the Mekong-Ganga Cooperation Plan, which links India with five countries—Thailand, Vietnam, Laos, Cambodia, and Myanmar.

Under construction in 2005, the Asian Highway Project will join the capital of Vientiane with important cities in south and other parts of southeast Asia. Laos, along with Vietnam and Cambodia, also came under the $18 million Mekong capital fund of the Asian Development Bank (ADB), which is making investments in private businesses. The International Monetary Fund approved a three-year loan worth $40 million in April 2001.

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