Libmonster ID: VN-1204
Author(s) of the publication: L. N. MOREV

L. N. MOREV

Doctor of Philological Sciences

According to the UN classification, the Lao People's Democratic Republic (Lao PDR) belongs to the status of "least developed countries". For a long time, the Lao leadership opposed the inclusion of their country in such a group. This status has its advantages, including grants from international organizations and foreign countries, but they are accompanied by various conditions. At the last congress of the ruling Lao People's Revolutionary Party (2006), the general task was set: to achieve the rank of a "developing" country by 2020.

In the late 1980s, Laos began liberalizing the country's economic and political life. As the socially oriented market system of economic management was established, the country's economic development took on an increasingly stable character, and the progressive movement was only temporarily interrupted by the "Asian crisis" of 1997-1998.

In 2000-2005, the annual growth of gross domestic product (GDP) averaged 6.5%, and at the beginning of the current five-year plan, this figure reached 7.5%. For the 2007/2008 fiscal year, which starts in October, GDP growth was planned at 8%. As experts of the International Monetary Fund (IMF) noted in September 2009, "... the Lao economy has been performing well for the last 5 years. " 1

The global financial and economic crisis caused quite serious damage to the Lao economy, but in general, including thanks to the anti-crisis measures of the state, the country survived. Its management has not abandoned long-term development plans. They are based on the country's potential, first of all, not yet fully explored mineral deposits, the energy potential of the rivers flowing through its territory, and the country's geographical position - in the middle of the Indochina mainland.

AGRICULTURE IS THE BACKBONE, INDUSTRY IS THE BACKBONE

The basis of the national economy of Laos has always been and still remains agriculture. It employs almost 80% of the country's amateur population. Now the share of the agricultural sector in GDP is about 30%, although 5 years ago it was above 40%. In general, the country's population is provided with basic traditional food products. In the last few years, rice harvesting averaged 2.7 million tons, or 300-350 kg per person, which corresponds to the accepted standards. Agricultural production increases by 3-4% annually, which is slightly higher than the natural population growth rate (2.6%).2. Nevertheless, a part of the population, including farmers, whose bins are empty a few months before the new harvest, periodically experiences a shortage of food.

At the beginning of the XXI century, the slogan "industrialization and modernization of the country"was put forward. In accordance with this attitude, the foundations of modern industry began to be laid by mobilizing local resources and, mainly, attracting foreign capital. There were not only individual enterprises, but also whole new industries, such as mining, energy with a cascade of hydroelectric power plants, production of building materials, metallurgy, etc. At present, the Lao industry consists of almost 23,000 enterprises employing 120,000 people.3

Industry grows by about 15% annually and produces 26.7% of the country's gross product4. It could have developed even more rapidly if it had not been constrained by the lack of skilled labor.

However, industrial products are quoted much higher than agricultural products, and the price scissors between them are huge. Laos is still an agricultural country. Moreover, at least a third of the peasants still live in the conditions of naturalization.-

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many of them cultivate the land by slash-and-burn method. This part of the population practically does not participate in the economic life of the country and is located outside the market economy.

The service sector has also expanded significantly. Its share in GDP has risen to 27%, and in recent years the volume of services has increased by an average of 7%. Particularly noteworthy is the fantastic growth of the tourism sector. In 1990, only 14.5 thousand people visited Laos, in 1997 - 463 thousand, in 2004-895 thousand, and in 2007-1624 thousand, which brought $233 million to the treasury, or 8% of GDP.5 In 2008, 1.8 million people were expected, but it was not possible to reach this level. This is attributed to the decline in tourism due to the global crisis, as well as political unrest and unrest in neighboring Thailand, through which the main flows of tourists usually pass. Judging by the interim data, the number of tourists in 2008 remained approximately at the level of 2007.

THE VAGARIES OF THE ELEMENTS-NATURAL AND GLOBAL ECONOMIC

Laos (population-about 6.7 million people) is a small country with an area of 237 thousand square kilometers, but it stretches from north to south for almost 2 thousand km. Almost every year, nature presents him with some surprises: then a drought in a number of provinces, then rains and floods, then hordes of harmful insects, then an invasion of caterpillars that devour everything in their path.

2008 started off quite well, but in July and August, heavy rains hit Laos, flooding vast territories with a population of more than half a million people. According to the Lao authorities, the disaster affected more than 200,000 people, disabled more than 500 irrigation facilities and a large number of other agricultural facilities, washed away rice crops on an area of 44,000 hectares, killed many large and small livestock, poultry, etc. Total flood damage is estimated at $50 million.6

Preoccupied with dealing with the consequences of the flood and current affairs, the Lao authorities for quite a long time did not pay due attention to the global financial and economic crisis that was impending on their country, apparently believing that it might not reach Laos. The first working meeting of the Government and business representatives on the crisis was held only in early December 2008.

Meanwhile, the crisis phenomena were gaining strength.

By the end of 2008, orders for Lao raw materials, metals, electricity, clothing and jewelry, and some agricultural products, such as corn, coffee, and tea, began to decline markedly. At enterprises and institutions, even if small, layoffs of employees have begun.

In the first half of the 2008/2009 financial year (October 2008 - March 2009), exports decreased by 5.65% and imports-by 8% compared to the corresponding period of the previous year, and in value terms, the trade deficit amounted to $39 million.7 Budget revenues decreased accordingly. For example, due to a sharp drop in world prices, revenues from copper sales decreased by 60%, electricity sales-by 30%, clothing sales-by 10%, and coffee exports decreased by 18% .8 Due to the refusal of Thai trading partners to buy goods in warehouses, farmers accumulated 100 thousand tons of corn, and the farmers themselves were left without money.

As a result of the collapse of exports during this period, the budget missed about $87 million 9.

Despite the benefits provided to investors, capital investment in the economy declined. International financial institutions forecast that foreign investment would fall from $1,137 million in 2007 to $659 million in 2009, a decline of almost 40% .10

As for the situation of the population, as a local correspondent wrote,"due to the difficulties that the economy is experiencing more and more, food prices have risen accordingly, and the population's incomes are becoming insufficient to meet current needs." 11

At the same time, as in many other countries, due to the fall in world oil prices, prices for gasoline and other petroleum products have decreased. The exchange rate of currencies was generally stable: at first, the local kip (monetary unit) got a little stronger, but then it gave up a little. Inflation in general was quite insignificant - 3.1%, despite the rise in import prices by an average of 7% 12.

The decline in production led to layoffs, reduced working hours, salary cuts, etc. But such phenomena have not become particularly acute. As noted above, Laotian society is peasant in nature and largely patriarchal. The dismissed workers are mostly yesterday's peasants who retain ties to the countryside. Having lost their jobs, they can return to the countryside quite painlessly and survive the worst times in a semi-natural economy. A considerable part of the urban population-

page 32

Lenia has its own subsidiary farms. They have been preserved since the first post-war years, when the "family economy" in the form of individual subsidiary farms flourished in an environment of devastation.

ADJUSTING PLANS

After a series of consultations and negotiations with representatives of the business world, the government developed an anti-crisis program. It provided for a number of measures aimed primarily at stimulating domestic consumption and the production of import-substituting goods. To this end, state-owned banks were instructed to simplify lending to relevant industries and optimally lower interest rates. The State Bank, in turn, passed on similar recommendations to commercial banks. Thus, in 2008, the discount rate was reduced from 12% to 7%, and now it is only 5%13.

Assistance in the form of various benefits and privileges was provided, first of all, to enterprises operating for export, as well as budget-forming enterprises.

In order to maintain the pace of economic development, the Government has taken additional measures to attract foreign and local capital. An even more favorable investment climate was created for foreign capital, and local entrepreneurs were equated with foreign ones that previously had certain advantages. For example, before the local owner of a garment factory paid the state 35% of income tax, and a foreign owner-26%. The Government also decided to delay the implementation of the law on raising the value-added tax rate.

The anti-crisis program also reflects social issues. In coordination with trade unions, Prime Minister Buason Buphawan raised the minimum daily wage of an unskilled worker from $1 to $1-1.15 (based on Lao kipps). This is the current market price of labor in Laos. Some time ago, entrepreneurs sometimes paid even less, so the government took anti-market measures and adopted a decree setting the minimum daily wage at $1.

In order to save money, the Government decided to suspend funding for some projects. A number of measures have been taken to retain foreign currency in the country. Travel agencies and Lao representative offices abroad have been instructed to strengthen their efforts to attract foreign tourists.

Finally, Vientiane asked the club of 22 donor countries that regularly provide aid to Laos to increase subsidies to the Lao budget (in 2007). they amounted to $433 million, or 11% of the country's GDP 14). As part of the Strategy to Reduce poverty and achieve the goals set out in the UN Millennium Declaration, the World Bank decided to allocate an additional $10-20 million to Laos, Japan - 1500 million yen*, and the European Union - $6 million 15.

Despite all the crisis phenomena that led to a deterioration in the situation of the population, the situation in the country remained normal, no excesses were recorded. At the same time, the authorities have repeatedly warned that they will not allow violations of public order and that all attempts to destabilize the situation will be resolutely stopped.

The negative consequences of deep involvement in global economic relations revealed during the crisis served as an additional argument for those circles in Lao society who oppose the hasty integration of Laos into the world economy, against active participation in the global marathon for survival, which leads to the undermining of Lao identity, the destruction of national culture and the loss of traditional values. But, apparently, the Lao leadership does not intend to deviate from the chosen course. It agrees that integration and globalization are fraught with dangers, but believes that these processes offer a chance that should not be missed. Chairman of the National Commission for Developing Measures for Integration into the Global Economy, Deputy Prime Minister Thonglun Sisulit, responding to his unspoken opponents, said:: "The party and the Government confirm their determination to integrate the country's economy into the economy of the region and the whole world. This opens up access to new markets, capital and modern technologies for landlocked Laos. " 16

Despite the crisis, the Lao leadership does not intend to abandon long-term plans, limiting itself only to their adjustment. According to the revised socio-economic development plan for the 2008/2009 financial year, GDP growth was supposed to be reduced from 8% to 7%17. Nevertheless, thanks to fairly effective measures, donor assistance and the beginning recovery of the global economy, Laos managed to maintain this indicator in 2009 at 7.5 %, compared with 7.9% in 2008.18

The country's main hopes for further development are primarily related to the development of natural resources, the electric power industry and the transformation of Laos into a regional transport hub.

EARTH'S STOREROOM

Until a few decades ago, Laos was considered a country deprived of mineral resources. But this idea, fortunately, turned out to be deeply erroneous. Gold-and silver-bearing ores have been discovered and actively developed, and there are reserves of copper, iron, tin, lignite, potash salts, gypsum, etc. In 2003 - 2005.-


* In November 2009, $ 1 was about 86-85 yen (ed.).

page 33

capital investment in the extractive industry reached $718 million, 19 with Australia, China, and Thailand as the main investors.

The mining industry has already become a powerful component of the Lao economy. It is represented by 150 enterprises that dig, dig, drill, blow up to take copper, gold, iron, tin, zinc, coal, gypsum, potash, etc. from the earth in 2007. they produced 70 thousand tons of copper, 6.5 tons of gold, 3.5 thousand tons of tin, etc. 20 Although most of the profits from the sale of these products go to foreign owners, the Lao treasury also receives a solid income in the form of mining rent, value-added tax, profit tax, excise duties, etc. In 2007-2008. revenues from the extractive industry accounted for 17.3% of the budget revenue and 2/3 of the total export revenue.21 In addition, this industry is the most technologically advanced, which is very important for Laos. At its enterprises, Lao workers master modern professions.

"ELECTRIC GENERATOR" OF INDOCHINA

Most of the rivers that flow into the Mekong in its middle reaches flow through Laos. According to experts, they can be used to build dozens of power plants and produce a significant amount of electricity not only for Laos, but also for other Indochina countries. Laos has the prospect of becoming the largest electricity producer in the region in the not-so-distant future, a kind of "electric generator" of Indochina.

Hydropower is the most attractive sector of the Lao economy. Over the past 5 years, foreign investment in it has reached almost $4 billion.22 Currently, there are 11 large and several dozen small hydroelectric power plants operating in the country with a total capacity of 670 thousand kW. They produce approximately 3.5 billion rubles. kWh of electricity. A significant part of it is exported. So, in 2007, 12 thousand cars were sold to Thailand and Vietnam. MW worth $98.3 million 23.

According to the five - year plan (2006-2010), it is planned to increase the capacity of power plants to 3 thousand MW. Currently, 5 stations are under construction, including Nam Teng-2, 95% of which will go to Thailand. In the next 5 years, it is planned to put into operation several more hydroelectric power plants with a total capacity of 2,324 MW.

Companies from many foreign countries, most often Thai, Chinese and Vietnamese, participate in the construction of power plants. In joint energy projects, Laos is usually represented by the state corporation "Electricity of Laos", which reserves 10-20% of the shares.

In parallel with the creation of the energy industry, a program of electrification of the country is being implemented, which Laotians who studied in the Soviet Union jokingly call "Lao GOELRO". Currently, about 2/3 of the country's households can already use electricity. Lao power engineers expect to electrify most of the country by 2015 and create a unified energy system similar to the Soviet one, which will make it possible to regulate electricity flows and transfer them from one part of the country to another in a timely manner. Russian energy companies are expected to participate in the implementation of this project.

INDOCHINA TRANSPORT HUB

Another promising project of the Lao society involves using the geographical location of Laos - in the center of the Indochina Peninsula - to turn the country into a communication hub connecting the Indochina countries with each other and with China. Such a project would allow goods from Thailand to be delivered to Vietnam and other Pacific Rim countries faster and cheaper via Laos through Vietnamese ports, and cargo between China and Indochina countries to be transported directly, without resorting to sea routes around the Indochina Peninsula.

If this project is implemented, Laos will receive payment for the transit of goods through its territory, for the provision of various services, etc.

At one time, France planned to build a road network in Laos consisting of two dozen roads: one running through the whole of Laos from south to north, and the rest crossing the country from east to west. This network was supposed to be an organic part of a huge web of roads covering the entire French Indochina.

But road No. 13, which connects the South of the country with the North, remained unfinished: in the north it was laid only to Luang Prabang, in the central part it was left without bridges over the numerous rivers flowing towards the Mekong, etc. Other roads were in an even worse situation, and some remained only on paper.

In 1983, there were only 11,125 km of roads in the country, of which only 766 km were paved and 5,309 km were paved.

page 34

and with unpaved - 5050 km. The density of the road network was 47 m per square km of area, or 3 m 10 cm of roads per inhabitant 24. This was one of the lowest indicators of road safety among underdeveloped countries. By 2005, the length of roads in the country had increased almost 3-fold, reaching 31205 km, including 4,500 km with asphalt pavement, 10,000 km with crushed stone and 16,600 km with unpaved 25.

Taking into account the huge economic and socio-political significance of roads, the largest part of the funds received from budgetary and extra-budgetary sources is allocated for road construction. So, in the first 5 years of this century, almost 52% of all capital investments26 were spent on these purposes. In the current five-year plan, it is planned to invest approximately $420 million in road construction.

The road network created so far covers most of the country. All provincial centers have access to main highways, moreover, in the near future all district centers should become accessible to any type of transport at any time of the year. But there are still many so-called hard-to-reach areas in the country that can only be reached on foot. The construction of roads there will make it possible to involve these areas in the general national economic complex, to include them in market relations and thus encourage the population of these areas to produce marketable products.

The creation of a road network in Laos is not only a Lao project, it is also part of the ASEAN Group's program to create a road transport network in Indochina. Therefore, its construction and development is carried out with this perspective in mind. In Laos, roads running from west to east are connected to roads in Vietnam, and roads in the northern provinces of the country have access to the transport arteries of China.

The situation is more complicated with Thailand, whose border with Laos mostly runs along the high-water Mekong. To overcome this obstacle, 3 bridges have been built in recent years.

The first such bridge was built in the late 90s of the XX century in the south of the country, in the province of Pakse. It effectively connected the two parts of the country separated by the Mekong River with the interior of Laos and Thailand. In 2003, the Lao-Thai Friendship Bridge was opened, connecting the two countries in the area of the capital of Laos - Vientiane. It is considered "political" because it symbolizes a return to good neighborly relations.

Finally, in 2008, a third bridge was opened between Mukdahan in Thailand and Savannaket in Laos. Journalists and political scientists called it "economic", as in the near future it is destined to become an important link in the development of economic ties between Thailand, Laos and Vietnam. It is expected that large cargo flows from Thailand to Vietnam and back will pass through it. Currently, a 30-kilometer "Savan - Sephon special zone" is being created on the Lao section of the transnational road, that is, in essence, an "offshore zone" with the appropriate infrastructure.

It is planned to add two more bridges to the three existing bridges across the Mekong-in the center of the country between the provinces of Khammuan in Laos and Nakhon Phan in Thailand and in the north-west of the country, which will open the way from the Lao province of Bogue to the Thai province of Chiengrai. Thus, it can be stated that the road transport network of Indochina is gradually taking concrete shape.

THE FIRST KILOMETERS OF RAILWAYS

The planned communication network also includes railway and air routes. Railways are destined to become a new phenomenon in the life of the country. However, this is not entirely true.

In the 1980s, the Lao government applied to the Council of Mutual Economic Assistance (COMECON) of Socialist countries with a request to build a railway in Laos from Vientiane to Pakse to connect the central and southern regions. But the COMECON refused the request, as it was economically impractical at the time. An expensive road would have turned out to be unprofitable, and the use of motor vehicles in those conditions was more preferable.

But now the geopolitical and economic situation in the region has fundamentally changed, the division into political blocs has disappeared, the economic integration of the region is taking place, and ties with China are expanding. In general, the idea of building a railway in Laos has been launched and is currently under discussion. China is most active. According to press reports, the agreement on the construction of a railway from China to Laos, along with other documents, was signed in 2008 in Nanning (the main city of the Chinese province of Guangxi) during the visit of the Lao government delegation headed by Prime Minister Buphawn.27

After the construction of the Friendship Bridge over the Mekong, Laos and Thailand agreed to build a railway from Nong Khai, in Thailand, across the bridge to Vientiane, thus opening a direct railway connection between the capitals of the two countries. Thailand stretched the road to the bridge first. In 2008, the first 3.5 km section was laid across Laos from the bridge to Dong Phusi village, where the first Naleng railway station in Laos was built.

On May 27, 2008, the first test train crossed the Thailand-Laos border and passed the first kilometers of Laotian land to the cheers of a large crowd. Two weeks before this event, the Lao official newspaper Pathet Lao wrote: "The long-awaited dream of the Lao people is finally close to being realized. First historic train crossing the bridge, Ostano-

page 35

It is built on Lao soil. Just a little bit more and Laotians will be able to say with pride and dignity: we, like other countries, also have a railway. " 28 When the test train was launched, technical problems were discovered. Now they are being eliminated and at the same time work is underway on the construction of the next section with a length of 9 km, after which the railway track will approach almost close to the main urban part of the capital. But these kilometers are being built very slowly - 1 km per year.

In the future, the network of land routes is planned to be supplemented with air traffic, and several more international airports are planned to be built, which would make Laos the most important transport hub in Indochina.

HOW TO JUMP OVER MILLENNIA?

Having signed the Millennium Declaration adopted by the heads of State at the UN special session, Laos is drawing up its plans in accordance with this document, which called on the world community to reduce global poverty by half by 2015.

According to the program adopted by the National Assembly of the Lao PDR, this goal should basically be achieved within the time limits set by the Declaration.

But the execution of the program is very difficult.

In mid-2009, according to Prime Minister Buphawan, the per capita income reached $922,29.

Growing annually by several tens of dollars, it still remains low. In addition, this is the national average, achieved in large part due to the popularity among foreign tourists of the capital Vientiane and the "world heritage city" Luang Prabang, and in many provinces it is much lower. Thousands more people are malnourished or, simply put, starving.

There are many other social problems. But the main reason, in my opinion, is historical backwardness. The initial base was extremely low. After all, many small ethnic groups of Laos were just yesterday at the tribal stage of development, used primitive tools, were treated and learned from shamans. Many Laotians do not yet know what latrines are, which are still the subject of accounting by the Lao State Statistical Service.

No one can overcome several historical epochs within a few decades.

Having come to power in 1975, the ruling Lao People's Revolutionary Party (NPRP), to give it its due, did not promise the people any immediate prosperity.

But loud victory speeches, solemn marches, beautiful rhetoric, fetishization of "socialism" and other official paraphernalia have created high expectations in society, and when these expectations are not met, apathy, disbelief, and detachment appear in society. Lao leaders admit that real difficulties have exceeded their expectations, and that poverty and misery in the country have lingered much longer than expected. "Prolonged poverty, "wrote the party magazine Alun Mai, an organ of the NPRL," threatens the country's political security and public peace. If we fail to overcome poverty in the next 10 to 20 years, the people will refuse to trust our party."30.

But the state is not able to allocate more for social needs than it does now. Its revenue base is too narrow. You can't take more out of agriculture than it does today, because the peasantry is already poor. Industry, which seems to be the most successful industry , is almost entirely in the hands of foreign capital, while the share of the Lao government (including state-owned companies) is only 10-20%. Thus, most of the profits go abroad. For example, of the 6 tons of gold extracted from the Lao subsoil by an Australian company in Sephon, Laos received only 1 ton. Now, after the acquisition of the assets of this company by Chinese entrepreneurs, the next 5 tons will go to China, and Laos will still have the same 1 ton.

And yet Laos took place without being on the sidelines of the historical process. Despite all the difficulties, the country is slowly but surely moving towards modernization and independent development.


1 IMF Country Report N 09/284, September 2009. LPDR Staff Report for the 2009. Article IV Consultation, p. 3.

2 Background Document. Round Table Implementation Meeting Vientiane. 24 November, 2008, p. 12.

3 Pathet Lao, 30.4.2009.

4 Ibidem.

5 Pathet Lao, 9.12.2008.

6 Pathet Lao, 1.12.2008.

7 Vientiane Times, 20.4.2009.

8 Ibidem.

9 Pathet Lao, 3.3.2009.

10 U.S. Department of State. Laos. Foreign Direct Investment Statistics.

11 Pathet Lao, 12.3.2009.

12 Pathet Lao, 23.6.2008.

13 Statement by the Hon. Phouphet Khamphonvong, Governor of the Fund. October 6 - 7, 2009. Board of Governors, World Bank Group, International Monetary Fund -www.imf.org/external/am/2009/speeches/prl7e.pdf

14 Background Document...

15 Statement by the Hon. Phouphet Khamphonvong, Governor of the Fund. October 6 - 7, 2009...

16 Vientiane Times, 2.4.2009.

17 Pathet Lao, 30.4.2009.

18 Statement by the Hon. Phouphet Khamphonvong, Governor of the Fund. Op. cit.

19 IMF Country Report N 09/285, September 2009. LPDR Statistical Appendics.

20 Background Document.., p. 15.

21 IMF Country Report N 09/285...

22 Background Document.., p. 15.

23 Ibidem.

24 Phumisat Lao (Geography of Laos). Ministry of Education of the Lao PDR, 1985, p. 310.

25 30 years of the Lao PDR. Lao News Agency, 2005, p. 57.

26 Pasason, 17.1.2006.

27 Pathet Lao, 13.3.2009.

28 Pathet Lao, 12.5.2008.

29 Pathet Lao, 23.6.2009.

30 Alun mai, 2002. N 7.


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