Laos Economy

ECONOMY: GENERAL INFORMATION

With a gross domestic product of US $ 5,260 million (2008) and a per capita GDP of US $ 841 (2008), Laos is clearly a very poor country, also because it is limited in its possible developments by the harsh morphology of the territory, the lack of access to the sea and the scarcity of the population. The economy, which has always been precarious, suffered enormous damage during the Vietnamese conflict, remained underdeveloped for a long time and only recently converted to a more open market model. Previously, in 1975 the change of political regime and the proclamation of the People’s Republic – direct consequences of the institutional upheavals that occurred in almost all of Indochina – had had particularly important repercussions in the economic sphere. The attempt to restructure agriculture on a collectivist basis had largely failedin order to increase productivity (the country was far from having achieved food self-sufficiency, indicated by the government as the absolute priority goal) as well as the nationalization of the banks and the introduction of a new currency in 1976 had not prevented the repeated use of devaluation, while inflation had remained at very high values. After the partial abandonment of the socialist economy in the late 1980s, a series of reforms favored privatization land and foreign investments (mainly directed towards hotel facilities and weaving). Taking advantage of these factors, GDP growth in the 1990s remained high. The macroeconomic structure in those years appeared marked by considerable stability, an element that undoubtedly favored a certain inflow of capital, particularly in 1995, in conjunction with the abolition of the US embargo; the sectors concerned were above all tourism (whose contribution increased more than 20 times between 1988 and 1995), textiles and services (especially financial ones, which are expanding rapidly). The privatization started some time ago by the government has involved the tertiary sector in a more decisive way, which has recorded continuous growth; the industrial sector, and in particular the manufacturing sector, has not registered comparable trends but has nevertheless increased its share of GDP. The good performance of this economy in the 1990s, except for the parenthesis due to the Asian financial crisis (1997), continued: since 2001, inflation, which had soared, returned under control and foreign investments in the country resumed. GDP growth remained at around 6%, with a notable contribution from the secondary sector, driven by the energy and mining industry: in 2005 the sector grew by 16% against 2.5% for agriculture. However, that of Laos remains a critical situation:

ECONOMY: AGRICULTURE, LIVESTOCK AND FISHING

Agriculture occupies more than 70% of the active population, even if the cultivated area is only 4.7% of the territorial extension. It is a subsistence agriculture, foreign to the market, with the exception of some products, and strongly conditioned by the trend of the climate. The main crop is that of rice, practiced with irrigation techniques only in the flooded areas of the Mekong valley, while elsewhere the rice fields are fed only by rainwater; production can therefore fluctuate strongly from one year to the next. In the mountainous areas corn, sweet potatoes and cassava are obtained, while the fertile soil of the Plateau des Bolovens it is mainly exploited for the cultivation of tobacco, coffee and cotton; a certain role have also some oil (peanuts, soybeans), various vegetables (melons, mangoes, citrus fruits, bananas, pineapples, etc.) and the poppy from opium, whose cultivation and subsequent processing are – only in theory – subject to strict government control; in 1999 Myanmar, Thailand and Laos (countries defined as the “Golden Triangle”) signed an agreement with the aim of coordinating the fight against the production and export of drugs. Forests represent a significant natural resource, since they cover a large part of the national territory and also contain precious woods for cabinet making, such as teak; the risks associated with heavy deforestation prompted the government to monitor timber production. Livestock farming is another traditional resource of the Laotian economy; poultry prevail, whose market was put in crisis in the early 2000s by avian flu, then pigs, buffaloes and cattle; elephants are used as working animals in the forests. Lastly, freshwater fishing has developed considerably, given the exceptional fish richness of the waterways.

ECONOMY: INDUSTRY AND MINERAL RESOURCES

According to allcountrylist, the presence of various minerals has been detected (iron, copper, tin, gold, zinc, coal, lead, gypsum, etc.), and the related activities have undergone a significant increase since the beginning of the millennium, also favoring exports.. Large quantities of tin are extracted, (of which it is one of the largest producers in the world), gold and copper. The production of electricity was also strongly enhanced; the energy is almost entirely of water origin, largely supplied by the Nam Ngum power plant, near Vientiane, and is largely exported to Thailand. The potential of this sector is not yet fully exploited and projects are underway to be completed by 2010, involving the Nam Ngum power plant as well as other sites such as Nam Theun, in the province of Bolikhamxai, and Xe Kaman, in the southern province of Attapu. L’ industry is mainly artisanal and supplies fabrics, footwear and other articles of clothing, ceramics, etc.; thanks to government incentives and the opening to foreign investments, modern plants are operating in the sectors of wood (sawmills), textiles, mechanics (cars and motor vehicles), food (rice mills, milling complexes, sugar factories, breweries), tobacco, cement and of building materials. The major industrial centers are located in the capital, in Louangphrabang (textiles and mechanics) and in Thakhèk (textiles and building materials). open to foreign investments modern plants are operating in the sectors of wood (sawmills), textiles, mechanics (cars and motor vehicles), food (rice mills, mill complexes, sugar refineries, breweries), tobacco, cement and building materials. The major industrial centers are located in the capital, in Louangphrabang (textiles and mechanics) and in Thakhèk (textiles and building materials). open to foreign investments modern plants are operating in the sectors of wood (sawmills), textiles, mechanics (cars and motor vehicles), food (rice mills, mill complexes, sugar refineries, breweries), tobacco, cement and building materials. The major industrial centers are located in the capital, in Louangphrabang (textiles and mechanics) and in Thakhèk (textiles and building materials).

ECONOMY: TRADE AND COMMUNICATIONS

The tertiary sector, as well as the secondary sector, has experienced significant growth. Tourism is constantly on the rise and the government has launched various programs to promote the natural, historical and archaeological sites that the country is able to offer. Foreign trade, which takes place eminently with Thailand (which occupies half of the market), China and Viet Nam they record a slight deficit in the trade balance; Above all, timber, tin, gold, copper, electricity, clothing and coffee are exported, while machinery, industrial products and fuels are imported. As for the communication routes, the main one remains navigation on the Mekong and its major tributaries, despite the presence of numerous rapids in the waterways. There are no railways and the connection with Viet Nam is still being planned; the streets wind for approx. 31,000 km, only partly asphalted, and connect the main Laotian centers, then continuing on to Cambodia and Viet Nam. Along the Annamite Range extends a complex network of trails and roads, known as the “Ho Chi-Minh Trail”, which played a prominent role during the Vietnamese War. The construction of the “Friendship Bridge” was particularly significant, the first built on the Mekong (thanks to Australian funding), which permanently connects Laos with Thailand, thus reducing the country’s isolation. A certain development has air traffic (the main airport is that of Vientiane); flag carrier is the Lao Aviation, which carries out domestic and international services with Hanoi, Phnom Penh and Bangkok.

Laos Economy

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