| Economy of Laos | |
|---|---|
A street market in Luang Prabang |
|
| Currency | Lao Kip |
| Fiscal year | 1 October - 30 September |
| Trade organisations | ASEAN |
| Statistics | |
| GDP per capita | $2,300 (PPP; 2009 est.) |
| GDP by sector | services (37%), industry (33.1%), agriculture (29.9%) (2009 est.) |
| Inflation (CPI) | 0% (2009 est.) |
| Population below poverty line |
26% (2009 est.) |
| Labour force | 3.65 million (2009 est.) |
| Labour force by occupation |
agriculture (42.6%), industry (20.2%), services (37.1%) (2005 est.) |
| Unemployment | 2.5% (2009 est.) |
| Main industries | copper, tin, gold, and gypsum mining; timber, electric power, agricultural processing, construction, garments, cement, tourism |
| Ease of Doing Business Rank | 165th[1] |
| External | |
| Exports | $1.104 billion (2009 est.) |
| Export goods | wood products, garments, electricity, coffee, tin, copper, gold |
| Main export partners | Thailand 29.18%, China 15.04%, Vietnam 14.96%, UK 4.29% (2009) |
| Imports | 1.308 billion (2009 est.) |
| Import goods | machinery and equipment, vehicles, fuel |
| Main import partners | Thailand 66.2%, China 11.45%, Vietnam 5.3% (2009) |
| Gross external debt | $3.085 billion (2009 est) |
| Public finances | |
| Public debt | $3.179 billion (2006) |
| Revenues | $941.5 million |
| Expenses | $1.129 billion (2009 est.) |
| Economic aid | $345 million (1999 est.) |
| All values, unless otherwise stated, are in US dollars | |
The economy of Laos is rapidly growing, as it began to decentralise control and encouraged private enterprise in 1986.[2] It opened a stock exchange in 2011, and has become a rising regional player in its role as a hydroelectric power supplier to neighbors such as China, Vietnam and Thailand.[3] Although the country remains one of the poorest countries in South-East Asia. A landlocked country, it has inadequate infrastructure and a largely unskilled work force. The country's per capita income in 2009 was estimated to be $2,300 on a purchasing power parity-basis.
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Following its accession to power in 1975, the communist government imposed a Soviet-style command economy system, replacing the private sector with state enterprises and cooperatives; centralizing investment, production, trade, and pricing; and creating barriers to internal and foreign trade.
Within a few years, the Lao government realized these types of economic policies were preventing, rather than stimulating, growth and development. No substantive reform was introduced, however, until 1986 when the government announced its "new economic mechanism" (NEM). Initially timid, the NEM was expanded to include a range of reforms designed to create conditions conducive to private sector activity. Prices set by market forces replaced government-determined prices. Farmers were permitted to own land and sell crops on the open market. State firms were granted increased decisionmaking authority and lost most of their subsidies and pricing advantages. The government set the exchange rate close to real market levels, lifted trade barriers, replaced import barriers with tariffs, and gave private sector firms direct access to imports and credit.
In 1989, the Lao government reached agreement with the World Bank and the International Monetary Fund on additional reforms. The government agreed to expand fiscal and monetary reform, promote private enterprise and foreign investment, privatize or close state firms, and strengthen banking. In addition, it also agreed to maintain a market exchange rate, reduce tariffs, and eliminate unneeded trade regulations. A liberal foreign investment code was enacted and appears to be slowly making a positive impact in the market. Enforcement of intellectual property rights is governed by two Prime Minister's Decrees dating from 1995 and 2002 [1].
In an attempt to stimulate further international commerce, the Lao government accepted Australian aid to build a bridge across the Mekong River to Thailand. The "Thai-Lao Friendship Bridge", between Vientiane Prefecture and Nong Khai Province, Thailand, was inaugurated in April 1994. Although the bridge has created additional commerce, the Lao government does not yet permit a completely free flow of traffic across the span.
These reforms led to economic growth and an increased availability of goods. However, the 1997 Asian Financial Crisis, coupled with the Lao government's own mismanagement of the economy, resulted in spiraling inflation and a steep depreciation of the kip, which lost 87% of its value from June 1997 to June 1999. Tighter monetary policies brought about greater macroeconomic stability in FY 2000, and monthly inflation, which had averaged about 10% during the first half of FY 1999, dropped to an average 1% over the same period in FY 2000.
The economy continues to be dominated by an unproductive agricultural sector operating largely outside the money economy and in which the public sector continues to play a dominant role. Still, a number of private enterprises have been founded and some are quite successful in industries such as handicrafts, beer, coffee and tourism. With United Nations, Japanese, and German support, a formerly state-controlled chamber of commerce aims to promote private business: the Lao National Chamber of Commerce and Industry and its provincial subdivisions.[4]
Agriculture, mostly subsistence rice farming, dominates the economy, employing an estimated 85% of the population and producing 51% of GDP. Domestic savings are low, forcing Laos to rely heavily on foreign assistance and concessional loans as investment sources for economic development. Agricultural products include sweet potatoes, vegetables, corn, coffee, sugarcane, tobacco, cotton, tea, peanuts, rice; water buffalo, pigs, cattle, poultry. In FY 1999, for example, foreign grants and loans accounted for more than 20% of GDP and more than 75% of public investment.
Tourism is the fastest growing industry in the economy and plays a vital role in the Lao economy. The government opened Laos to the world in the 1990s, and continues to be a popular destination amongst tourists.[5]
GDP: purchasing power parity - $14.2 billion (2009 est.)
Exchange Rate - kips (LAK) per US dollar - 8,556.56 (2009), 8,760.69 (2008), 9,658 (2007), 10,235 (2006), 10,820 (2005)