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LAOS
Economy

Economy

General

Laos is among the poorest countries in the world with a per capita GDP of $7,400 (2017). It is generally assumed that about a quarter of the population lives at or below the subsistence level.

Since the communist revolution of 1975, the organisation of the economy in Laos has changed considerably. A socialist economy automatically means a lot of government interference. However, there was a lot of resistance among the population, which made the economy even worse. Reforms were very necessary and these were introduced from 1980 onwards.

Thus, the currency system was reformed, private initiative was again possible, the collectivisation of agriculture was partially reversed and the active intervention of the government in wage and price policy came to an end. This process of more openness and market instead of central planning is called "chintanakan mai", the "new thinking".

All these measures led to some improvement, but in the early 1990s Laos was plagued by natural disasters, which again hit the economy. Since 1992, things have improved with an average growth rate of 7% per year, but the Thai/Asian currency crisis in 1997 caused the economy to lose ground again. In the meantime, economic growth is slowly picking up again.

However, the promised economic reforms have been very slow to materialise and have been particularly delayed in the fiscal, monetary, banking and state-owned enterprise sectors. However, the country is making progress with trade liberalisation in view of its ambition to become a member of the ASEAN free trade area AFTA in 2008 and through its preparations for accession to the WTO. Laos is showing steady economic growth. However, it is mainly the urban upper class that benefits from this. Inflation has fallen sharply in recent years. (In 2017 0.8%) Economic growth was 6.9% in the same year.Agriculture

Approximately 73% of the labour force is employed in agriculture. In 2017, agriculture provided almost 21% of GDP. About 5% of the land is used for agricultural purposes and about 40% of the land consists of forest area. Rice, both in 'wet' (glutinous rice) and 'dry' forms, is the main agricultural product, but yields are low and often cannot cover domestic needs. Dry rice is mainly grown in the hills and mountains by the Lao Theung and the Lao Sung through shifting cultivation. This method of cultivation is the main cause of massive deforestation, which is why the government is trying to put an end to shifting cultivation by preparing lower farmland. But the mountain peoples are not keen on this because they can forget about growing the lucrative opium.

Other agricultural and forestry products are: maize, sweet potatoes, opium, vegetables, soya beans, fruit, sugar cane and various types of wood (teak, walnut, palisander, ebony). Logging, often illegal, has also caused the number of hectares of forest to decline. Approximately 25% of Lao exports consist of wood and wood products.

In the mountains of northern Laos, opium is widely grown, especially by the Hmong people. Laos is the third largest opium producer in the world after Afghanistan and Thailand. The international community is trying, through aid programmes, to persuade Lao farmers to grow other crops, but this has not yet been very successful.

Small-scale livestock farming includes pigs, cattle and poultry. The Me-kong River provides plenty of fish and a large number of non-native fish species are being stocked in the many reservoirs to boost the fishing industry.

Mining

Laos has many mineral resources (tin, zinc, copper ore, lead, manganese, coal, limestone and petroleum), but profitable mining is not yet possible, except for gypsum and tin. No profitable oil or gas fields have been found yet.

Industry

Only 6% of the Lao labour force is employed in industry, which contributes more than 30% of GDP (2017). The development of industry suffers greatly due to a lack of skilled and managerial personnel and the too small domestic market. Nevertheless, industry is becoming increasingly important to the Lao economy. Between 1998 and 2003, industry's contribution to GDP increased. Major" industries are wood processing, garment and textile industries, tin concentrates and power generation (Laos still exports a large part of its electricity to Thailand).

There are also small-scale industries, including cigarette and beverage production. Industrial activities are concentrated in the capital Vientiane and to a lesser extent in the cities of Savanakhet and Pakse.

Trade

The main trading partners are Japan, Thailand and China. The trade balance has shown a deficit for years. This will not change for the time being, as Laos imports twice as much as it exports.

Imports are mainly rice, fuel and machines. Important export products are electricity, factory goods, wood, coffee and tin.

Traffic

Laos is one of the few countries in the world without railways and the road network is poor; it is 14,130 km long, of which less than 20% can be used year-round. Many villages, and therefore a large part of the population, are not connected by road to the outside world. The gap between the countryside and the cities is therefore widening.

The main shipping route, the Mekong, has only a few navigable stretches due to rapids. Laos was briefly in the news when the 1240-metre-long 'Friendship Bridge' across the Mekong connected Laos and Thailand. Laos has few suitable river ports and also lacks cargo ships.

Lao Aviation is the state airline. Wattay is the international airport of Vientiane. There are also several dozen smaller and larger airports.


Sources

Boon, H. / Laos : mensen, politiek, economie, cultuur, milieu
Koninklijk Instituut voor de Tropen

Cummings, J. / Laos
Lonely Planet

Te gast in Laos & Cambodja
Informatie Verre Reizen

Waard, P. de / Laos
Elmar

Zickgraf, R. / Laos
Chelsea House Publishers

CIA - World Factbook

BBC - Country Profiles

Last updated May 2024
Copyright: Team The World of Info