Laos (Economic Setting)

Economic Setting::Laos

Reported by:John Mark Tabon

(Crim. 2-B, Group 9)

Economic Setting: Laos

• The traditional Lao economy was based on agriculture, handicraft production, and trade. Indeed, for centuries before Europeans arrived, flourishing local and long-distance trade networks had linked Southeast Asia with


East and South Asia. It was the prospect of controlling the lucrative Asian trade in spices and other luxury goods that initially lured the French and other Europeans to Southeast Asia in the 17th and 18th


centuries. Later they also hoped to exploit the region’s natural resources. However, French efforts to develop Laos economically in the late 19th and early 20th centuries came to little, as they quickly concluded


that Laos’s terrain made commercial agriculture and mining difficult. The civil war that followed independence in 1953 further impeded economic development. Even today, a large majority of Lao still engage in


subsistence agriculture. Industry is limited to small-scale manufacturing of consumer products, though clothing and textile products have become a significant export. Government revenue is insufficient to cover


expenditure and investment in infrastructure development, leaving the deficit to be met by foreign aid. The principal aid donors are Japan, France, Sweden, and Australia. In the late 1980s the government


opened the economy to foreign investment. As a result, the average growth rate between and was percent, and by 2006 Laos’s gross domestic product (GDP) had climbed to $3.4 billion. Average GDP per capita


rose to $596.80, compared to $725.30 in Vietnam and $511.30 in Cambodia. Like the economies of other countries in the region, the Lao economy suffered badly when the value of several Asian currencies fell sharply in the late 1990s.


Laos has a total labor force of 2.4 million, of whom 85 percent are in agriculture, 4 percent are in industry, and 11 percent are in the service sector. Rural underemployment and urban unemployment remain high,


though statistics are not available. There is an official Federation of Trade Unions, but independent unions are banned.


Agriculture is the principal economic activity in Laos, contributing 42 percent of GDP. Only 4 percent of Laos’s total land area is cultivated, but 80 percent of the cultivated land is planted in rice (both glutinous


and white). Other crops include corn, coffee (the only substantial export crop), soybeans, sugarcane, and sweet potatoes. Cotton, tobacco, and cardamom are also grown. The government encourages animal husbandry,


and livestock numbers have steadily increased since the late 1970s. Lao farmers raise water buffalo, cattle, pigs, horses, goats, and poultry.


Timber is a major export for Laos, with production estimated at 6.1 million cu m (217 million cu ft) in 2006. Some timber is processed as sawn boards and plywood, but most is exported in the form of logs. Despite


government attempts to regulate and manage the industry, illegal logging and smuggling of timber remain widespread. Fish is an important item in the Lao diet, but the catch of 107,800 metric tons (in


2005) is sufficient only for local consumption.


Laos was virtually closed to foreign tourists from 1975 until the late 1980s, but then began to actively encourage tourism. Numbers of foreign visitors increased rapidly to more than 100,000 by the late 1990s.


Favored destinations include Louangphrabang, Vientiane, and the southern part of the country.


The unit of currency in Laos is the kip, which until the Asian financial crisis of 1997 was valued at 920 kip to U.S.$1. Laos has a central bank, the Bank of the Lao People’s Democratic Republic, and six state-owned


commercial banks. Foreign banks have been allowed to operate in Laos since 1989. The Foreign Trade Bank handles foreign exchange and trade. Lao exports in 2000 were valued at $315 million, while imports


stood at $521 million. Principal exports included timber, hydroelectricity, coffee, and tin; principal imports included food, petroleum products, vehicles, machinery, and steel. Laos’s most important trading partners


are Thailand, Japan, and China. In 1997 Laos joined the Association of Southeast Asian Nations (ASEAN), which has a commitment to establish free trade among member states by 2008.


Source:

Microsoft ® Encarta ® 2009. © 1993-2008 Microsoft

Corporation. All rights reserved.


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Theme: “Understanding Better the Political, Economic & Socio-Cultural Setting of Southeast Asian Nations

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Laos (Economic Setting)