Laotian Economy

Research in the development and maintenance of ecological balance, modern and traditional ways of life, independence and increasing foreign influence, socialist and democratic demands the deep dualism of Laos also extends to its two largest cities: busy and modern with more ambitions than Vientiane excesses, that from a dusty plain overlooking the banks of the Mekong face the cumbersome and indispensable nearby Thailand; quiet and traditional, Luang Prabang, the city of temples and monuments, the ancient capital that opens out onto the great river of tribal and peasant communities that inhabit the valleys among mountains covered with forest. Between the two extremes, a country teetering on its own future.

Access to the WTO, pursued since 1997 and reached in 2012, enables the small Asian country to benefit from reduced trade tariffs, a bonus for its asphyxiated economy (the annual GDP is less than US $10 billion). An entry facilitated, it must be remembered, by its condition of being a nation among the least developed. In fact, a ‘milestone’ that was the recognition that the road to economic progress will be long and probably difficult, spread by the reforms of the political system and a new economic and social agenda. A road marked – the hope of many – by the commitment to conserve the natural resources that constitute the real wealth of Laos.

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New economic data confirm the difficulties of the Laotian authorities in containing the rise in prices that is having serious consequences for the population. In fact most of the daily needs, whether existential, or professional and trade, are seeing a record increase that worries the authorities and fuels the fear that the country may plunge into a severe economic crisis. Already the decline in tax revenues has prompted the government to cut costs, including the suspension of the significant contributions made each month for housing civil servants.
Despite an increase in foreign investment and the access granted to the exploitation of a part of the rich forest and water resources, and the opening up to tourism, Laos remains in the last places in the ranking of development in Asia, with a percentage of the population suffering from a condition of malnutrition that limits the commitment and ability of individuals.

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The increase in wealth in the country, at 7.5% in 2014, is not expected to exceed 6.4% this year and the grant on June 23 of a new loan of 11.6 million dollars from the World Bank to improve school facilities and access to them, as well as health projects, identifies more clearly than international confidence in the country, that a state of dissatisfaction persists. Finally, centralization, ideology and suspicion, as well as the perceived corruption (ranked fourth in Asia after North Korea, Afghanistan and Myanmar, according to Transparency International) prevent Laotians from enjoying the benefits of positive and coherent economic policies.

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At the moment, the use of natural resources remains a major source of income and the ongoing projects – particularly the hydroelectric ones funded and managed by neighboring countries –  of greater economic perspective.
Four and a half centuries ago, in a bold move, King Setthathirat founded the current Laotian capital Vientiane. The threat of invasion by Burma pushed the king to abandon the northern banks of the Mekong and to create a new center of power further south along the great river. If the experience that followed served to signal the difficulty of maintaining independence in the face of the pressures of powerful and numerous neighbors, today it is the investments of the Chinese, Thai, Singaporeans, Japanese, Europeans that put the country’s independence at risk.

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While new infrastructures serve the immediate interests of investors and local elites linked to the single party above all, the total income does not seem to register the effects of the many projects of foreign origin and the annual per capita remains among the lowest in the continent and the planet. Despite massive investment, the outlook remains uncertain for at least two reasons. The first, the low level of development and income; the second, the consequences that these implementations have or will have in any case on the lives of people in a harsh and fragile land.
“A new era of growth, development and poverty reduction”: with these words the President of the Asian Development Bank, Haruhiko Kuroda, hailed the inauguration in 2010 of the major hydroelectric project completed so far in Laos, that of the Nam Theun 2, with a capacity of 1,070 megawatts. With a warning, despite the triumphalism of the occasion, that “the importance of this project for Laotian economy should not be overestimated”. A caution still valid today.
After five years of work and a cost of over one billion euro, the plant on a tributary of the Mekong began supplying electricity to neighboring Thailand from March 2011, introducing an estimated flow into the state coffers of $2 billion over the 25 year life of the contract with a consortium that includes the Laotian government, Electricité de France and the electric company of the Thai state.

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Today, the attention of the entire area and, in particular regarding concerns and pressures to stop the initiative, is focused on two initiatives. The first, the blockading of the dam of Don Sahong, of Chinese construction, intended to supply a power station of 260 megawatts in the southern province of Champassak, at the Cambodian border. Initial work continues despite the almost unanimous opposition of governments, activists and local communities. At risk are the traditional activities and the limited tourism in the area, but also the Irrawaddy dolphins, in one of the few habitats still granted them.
The even more controversial one of Xayaburi in northern Laos is in an advanced state of construction. Financed and built by the Thais, the series of dams, should allow the production of 1280 megawatts of electricity, 95% of which is destined for across the border. In this case, more than 200,000 persons of the river banks will be directly affected by the work and the future operation, but the devastation to the river ecosystem would – according to opponents – be unprecedented in the region. The majority of those 11 dams on the Mekong foreseen by opponents, designed or under construction, is nine in Laos alone.

la 1 - 3That of respect for the environment has been very refined in recent years, represented by a simple image, a ‘dam’ against excessive external influences and the conservation of  their own resources and lifestyles. A dam that, in a time of increasing energy thirst and constant pressure for regional integration, is giving way. Chinese investments increase and Beijing contributes more than 30% of the international support to development. Obviously with the role of big investor and major donor, mainland China is increasingly integrating its southern regions with its neighbour. The construction of development zones on the border, of bridges, roads and railways, is also crucial to its increasingly close relations with ASEAN (Association of South-East Asia), of which Laos is part since 1997. The inauguration scheduled for the end of 2015 of the common economic area for the ten ASEAN countries, will lead to lreduced barriers of border transit for goods and people, with potential (for example regarding the acquisition of professionalism, knowledge and investments), but also the risks of an uncontrollable rapid assimilation to outside interests. Finally, an integration has been initiated without the country’s local and transnational problems (and in part also for  the other members of ASEAN) having been resolved: full rights for citizens and respect for minorities, representative democracy, the production and marketing of drugs, trafficking and exploitation of human beings and respect for religious practice. (S.V.)



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