AN INTRODUCTION TO LAOS

Formal name: Lao People's Democratic Republic (PDR)
Prime Minister: Boungnang Volachit
The President and Head-of-State: Khamtay Siphandone
Map of Laos from Lonely Planet
Laos is a landlocked country in Southeast Asia, bordering on Thailand, China, Vietnam, Burma and Cambodia. Laos's main business opportunities will arise from:
  • Its strategic position on the Mekong River, which is becoming the main tranport route linking China and Southeast Asia.
  • Its under-exploited natural resources, from timber to hydro-electric power.

  • The opening of the local economy.

Economic Data
(Monetary figures in US$)
  • Per Capita Income: 1'700 (2000 est.)
  • Real GDP: 9 billion (2000 est.)
  • Labour force: 1 - 1.5 million
  • Official unemployment rate: 5.7 % (1997 est.)
  • Inflation rate per year: 33% (2000 est.)
  • Budget deficit: 254 million (FY98/99 est.)
  • Exchange rate: 10'100 Kips/1 US$ (July 2002)
  • Official external debt: 2.46 billion (1998 est.)
  • Official development assistance: 345 million (1999 est.)
  • Exports: 323 million (2000 est.)
  • Imports: 540 million (2000 est.)
Since the Lao PDR adopted the so-called New Economic Mechanism in 1986, marking its transition to a market economy, the country has experienced great progress. The key elements for a better-functioning private sector have been put into place; laws have been rewritten in order to provide more security and clarity for domestic and foreign investors. The Lao PDR entered ASEAN as a full member in July 1997; the commitment of full participation in the politics and the economy of the region have made the authorities concerned more responsive to the requirements of becoming a regional and international actor.

Since 1986, the industrial sector has expanded and in 1995 made up 17.5% of the gross domestic product (GDP). The service sector made up another 25%. Within these sectors, construction and tourism will likely maintain rapid growth. Exports, currently only one half of imports, are generally resource-based, such as hydropower or forest products, or are re-exports, like garments and motorcycle assembly parts. It is expected that in the future hydropower will constitute the main source of foreign exchange earnings. For instance, annual foreign exchange inflow from the proposed Nam Theun 2 Dam is projected at around USD 250 million.

Consumer goods constitute almost one half of all imports to the Lao PDR, due to the small size of the domestic market. Agriculture accounts for 56.4% of total GDP. About 80% of the population are engaged in agriculture, including crop cultivation, livestock, fisheries and forestry. About 737,000 hectares of land are under cultivation, of which 81% is used for rice and only 11,000 hectares, or 1.8%, are irrigated.

The potential for growth is tremendous, and remains under-exploited.

Foreign Investment in the Lao PDR
In March 1994, a second set of investment laws was adopted in order to improve the existing laws, which were passed in 1988. The new laws redefined the status of private companies in Lao PDR, established the current taxation system, and set up a central government committee in charge of foreign investment, the Foreign Investment Management Committee (FIMC). Investment laws in Lao PDR are among the most liberal in Asia. In theory, all sectors are open to foreign investment, as long as proper government authorization has been received. Such authorization takes time, as Lao authorities exercise a cautious approach which makes it difficult to follow the administrative time-frame they have set up to process investment proposals.

The total sum of investments from 1988 to 1998 amounted to US$6.92 billion, of which 17.9%, or US$1.24 billion, was domestic investment. Thailand ranks first among foreign investors in Lao PDR, investing in a total of 247 projects, or 42% of all total investment capital. Investments from the United States rank second, comprising 40 projects, USD 1.48 billion, or 21% of total investment. According to the Foreign Investment Management Committee (FIMC), there are 736 projects, representing a total of USD 6.9 billion, currently underway in Lao PDR.

The FIMC's list of current investors. The FIMC provides considerable incentives to attract foreign investors, including:

  • the right to repatriate all capital and dividends
  • protection against uncompensated nationalization or expropriation of assets
  • the right to use and transfer real property
  • the right to import machinery, materials, other inputs and spare parts for investment projects
  • favorable rates of profit tax, labor tax, and import duties
  • exemption from import duties on raw materials and equipment for export production
  • import duties at a flat rate of 1% on equipment and other materials used by foreign companies
  • no export duties on finished products
  • the freedom to employ necessary foreign expatriates
  • the freedom to repatriate profits and capital
  • foreign personal income tax at a flat rate of 10%
  • annual profit taxes at a flat rate of 20%
A Brief History
The country known today as Laos was once called the Kingdom of Lane Xang, or land of a million elephants. More recently, it was established as a single party communist state, the Lao People's Democratic Republic or Lao PDR, on December 2, 1975.

Governed by the Lao People's Revolutionary Party (LPRP), the current regime has its roots in the liberation movement of the 1940s when anti-colonialist groups began advocating for a multi-ethnic and non royalist nation state. This movement, known as the Pathet Lao, was concentrated in the highlands near China and Vietnam.

French colonial rule began in 1893 when all of what of what is today known as the Lao PDR was seized and incorporated into the Union of Indochina. Independence was secured after France's defeat at Dien Bien Phu and a neutralist royal parliamentary regime took power in Vientiane with French and US backing.

The LPRP was formally established in 1955 and continued its revolutionary efforts. Armed struggle lasted from 1963-1973 when nationalists formed a coalition with the existing regime. Two years later along with communist victories in Phnom Penh and Saigon, the LPRP held nation wide demonstrations and seized full power from the faltering coalition government.

Generous economic assistance from the then-powerful Soviet-Union flowed into Laos but faltered with the fall of the Eastern Bloc communist regimes in the late 1980s. With serious economic problems and the absence of food security, Laos began liberalising reforms in 1986, instituting the New Economic Mechanism (NEM), as slow process of switching from central to market economy which continues today.

Leader of the LPRP, Kaysone Phomvihane, served as Prime Minister until his death in 1992 and memorials to him have been established in each province throughout the country.

The current Prime Minister is Boungnang Volachit. The President and Head-of-State of the Lao PDR is the former Prime Minister, Khamtay Siphandone.

Timeline
1893 France colonises area east of the Mekong now known as Lao PDR
1945 Laos is declared independent with France's defeat at Dien Bien Phu. A "neutralist" royal parliamentary regime backed by France and the US is established in Vientiane
1955 Laos joins the United Nations
1955 Lao People's Revolutionary Party (LPRP) is formally established
1963 Armed struggle of the Pathet Lao starts and lasts until 1973 when a coalition government is formed
1964-1973 Heavy aerial bombardments of Laos
1975 LPRP seizes full power and LAO PDR is founded
1986 New Economic Mechanism adopted
1997 Lao PDR joins the Association of South East Asian Nations (ASEAN)

The Legacy of the "Secret War"
From 1964 to 1973, Laos was a battlefield unknown to most of the world. The country suffered some of the heaviest aerial bombardments in history. It is estimated that Laos was bombed the equivalent of once every eight minutes for the entire nine-year Vietnam conflict.

More than 2 million tons of bombs and millions of anti-personnel bomblets were dropped on this small country. Many failed to detonate and now litter the land, and still kill or maim more than 200 men, women and children each year. Lao PDR is now trying to rid itself of unexploded ordnance (UXO) contaminating at least half of its landmass. Provinces most heavily affected include Houphan and Xieng Khouang in the north, and Attapeu, Savannkhet, Champassak and Sekong in the south, which are the areas traversed by the famous Ho Chi Minh Trail during the Vietnam War.

With the help of experts and training teams from abroad, and support from UNDP, and UNICEF, the government is instituting the UXO LAO program, a long-term sustainable plan to destroy the bombs and raise awareness about their danger, especially among Lao children.

The Lao PDR in the 1990s and the 21st Century
Lao PDR is an active member of the Mekong River Commission and, since July 1997, has been a full member of the Association of Southeast Asian Nations (ASEAN). Even though the Lao PDR still faces significant development challenges, the Government has set a goal to rise out of the ranks of Least Developed Countries (LDCs) by the year 2020. Projections based on recent economic performance shows this is an attainable goal.

The central government in Vientiane includes 11 line ministries, the Bank of Lao PDR, the Committee for Investment and Cooperation and the mostly important body, the Prime Minister's Office. Also influential nationally and locally are the mass organizations, which include the Lao Women's Union and the Lao Youth Union.

In 1991, Lao PDR established a National Assembly with 85 elected members. Population bases voting on representation. At provincial level, all provinces have appointed governors and district chiefs. At the village level, the communities elect their chiefs for five-year terms.

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. Laos Geography
Location: Southeastern Asia, northeast of Thailand, west of Vietnam
Geographic coordinates: 18 00 N, 105 00 E
Area: 
total: 236,800 sq km
land: 230,800 sq km
water: 6,000 sq km
Land boundaries: 
total: 5,083 km
border countries: Burma 235 km, Cambodia 541 km, China 423 km, 
Thailand 1,754 km, Vietnam 2,130 km

 
Coastline: 0 km (landlocked)
Climate: tropical monsoon; rainy season (May to November); dry season (December to April)
Terrain: mostly rugged mountains; some plains and plateaus
Elevation extremes: 
lowest point: Mekong River 70 m 
highest point: Phou Bia 2,817 m
Natural resources: timber, hydropower, gypsum, tin, gold, gemstones
Land use: 
arable land: 3% 
permanent crops: 0%
permanent pastures: 3% 
forests and woodland: 54% 
other: 40% (1993 est.)
Irrigated land: 
1,250 sq km (1993 est.)
note: rainy season irrigation - 2,169 sq km; dry season irrigation - 750 sq km (1998 est.)
Natural hazards: floods, droughts, and blight
Environment - current issues: unexploded ordnance; deforestation; soil erosion; a majority of the population does not have access to potable water
Environment - international agreements: 
party to: Biodiversity, Climate Change, Desertification, Environmental 
Modification, Law of the Sea, Nuclear Test Ban, Ozone Layer Protection

signed, but not ratified: none of the selected agreements
Geography - note: landlocked; most of the country is mountainous and thickly forested; the Mekong forms a large part of the western boundary with Thailand
. Laos People
Population: 5,635,967 (July 2001 est.)
Age structure: 
0-14 years: 42.75% (male 1,212,577; female 1,196,795)
15-64 years: 53.94% (male 1,494,927; female 1,544,851) 
65 years and over: 3.31% (male 85,632; female 101,185) (2001 est.)
Population growth rate: 2.48% (2001 est.)
Birth rate: 37.84 births/1,000 population (2001 est.)
Death rate: 13.02 deaths/1,000 population (2001 est.)
Net migration rate: 0 migrant(s)/1,000 population (2001 est.)
Sex ratio: 
at birth: 1.03 male(s)/femal
under 15 years: 1.01 male(s)/female
15-64 years: 0.97 male(s)/female 
65 years and over: 0.85 male(s)/female 
total population: 0.98 male(s)/female (2001 est.)
Infant mortality rate: 92.89 deaths/1,000 live births (2001 est.)
Life expectancy at birth: 
total population: 53.48 years
male: 51.58 years
female: 55.44 years (2001 est.)
Total fertility rate:
 5.12 children born/woman (2001 est.)
HIV/AIDS - adult prevalence rate: 0.05% (1999 est.)
HIV/AIDS - people living with HIV/AIDS: 1,400 (1999 est.)
HIV/AIDS - deaths: 130 (1999 est.)
Nationality: 
noun: Lao(s) or Laotian(s)
adjective: Lao or Laotian
Ethnic groups: 
Lao Loum (lowland) 68%, Lao Theung (upland) 22%, Lao Soung (highland) including
the Hmong ("Meo") and the Yao (Mien) 9%, ethnic Vietnamese/Chinese 1%
Religions: Buddhist 60%, animist and other 40%
Languages: Lao (official), French, English, and various ethnic languages
Literacy: 
definition:   age 15 and over can read and write 
total population: 57%
male:          70%
female:       44% (1999 est.)
. Laos Economy
Economy - overview:

The government of Laos - one of the few remaining official communist states - began decentralizing control and encouraging private enterprise in 1986. The results, starting from an extremely low base, were striking - growth averaged 7% during 1988-97. Reform efforts subsequently slowed, and GDP growth dropped an average of 3 percentage points. Because Laos depends heavily on its trade with Thailand, it was damaged by the regional financial crisis beginning in 1997. Government mismanagement deepened the crisis, and from June 1997 to June 1999 the Lao kip lost 87% of its value. Laos' foreign exchange problems peaked in September 1999 when the kip fell from 3,500 kip to the dollar to 9,000 kip to the dollar in a matter of weeks. Now that the currency has stabilized, however, the government seems content to let the current situation persist, despite limited government revenue and foreign exchange reserves. A landlocked country with a primitive infrastructure, Laos has no railroads, a rudimentary road system, and limited external and internal telecommunications. Electricity is available in only a few urban areas. Subsistence agriculture accounts for half of GDP and provides 80% of total employment. For the foreseeable future the economy will continue to depend on aid from the IMF and other international sources; Japan is currently the largest bilateral aid donor; aid from the former USSR/Eastern Europe has been cut sharply.
GDP: purchasing power parity - $9 billion (2000 est.)
GDP - real growth rate:
4% (2000 est.)
GDP - per capita: purchasing power parity - $1,700 (2000 est.)
GDP - composition by sector: 
agriculture:    51%
industry:       22%
services:       27% (1999 est.)
Population below poverty line: 46.1% (1993 est.)
Household income or consumption by percentage share: 
lowest 10%: 4.2%
highest 10%: 26.4% (1992)
Inflation rate (consumer prices): 33% (2000 est.)
Labor force:
 1 million - 1.5 million
Labor force - by occupation: agriculture 80% (1997 est.)
Unemployment rate: 5.7% (1997 est.)
Budget: 
revenues:      $211 million
expenditures:$462 million, including capital expenditures of $NA (FY98/99                      est.)
Industries: tin and gypsum mining, timber, electric power, agricultural processing, construction, garments, tourism
Industrial production growth rate: 7.5% (1999 est.)
Electricity - production: 792 million kWh (1999)
Electricity - production by source: 
fossil fuel:  2.78%                    
hydro:      97.22%
nuclear:     0%
other:        0% (1999)
Electricity - consumption: 173.6 million kWh (1999)
Electricity - exports: 705 million kWh (1999)
Electricity - imports: 142 million kWh (1999)
Agriculture - products: sweet potatoes, vegetables, corn, coffee, sugarcane, tobacco, cotton; tea, peanuts, rice; water buffalo, pigs, cattle, poultry
Exports: $323 million (f.o.b., 2000 est.)
Exports - commodities: wood products, garments, electricity, coffee, tin
Exports - partners: Vietnam, Thailand, Germany, France, Belgium
Imports: $540 million (f.o.b., 2000 est.)
Imports - commodities: machinery and equipment, vehicles, fuel
Imports - partners: Thailand, Japan, Vietnam, China, Singapore, Hong Kong
Debt - external: $2.46 billion (1998 est.)
Economic aid - recipient: $345 million (1999 est.)
Currency: kip (LAK)
Currency code: LAK
Exchange rates: kips per US dollar - 10,000.00 (July 2002), 7,578.00 (December 2000), 7,102.03 (1999), 3,298.33 (1998), 1,259.98 (1997), 921.02 (1996)
Fiscal year: 1 October - 30 September
. Laos Communications
Telephones - main lines in use: 25,000 (1997)
Telephones - mobile cellular: 4,915 (1997)
Telephone system: general assessment: service to general public is poor but improving, with over 20,000 telephones currently in service and an additional 48,000 expected by 2001; the government relies on a radiotelephone network to communicate with remote areas

domestic: radiotelephone communications

international: satellite earth station - 1 Intersputnik (Indian Ocean region)

Radio broadcast stations: AM 12, FM 1, shortwave 4 (1998)
Radios: 730,000 (1997)
Television broadcast stations: 4 (1999)
Televisions:
 52,000 (1997)
Internet country code: .la
Internet Service Providers (ISPs): 3 (2002), 1 (2000)
Internet users: 4,000 (2002) 2,000 (2000)
. Laos Transportation
Railways:
 0 km
Highways: 
total:          14,000 km
paved:          3,360 km
unpaved:     10,640 km (1991)
Waterways:

4,587 km approximately

note: primarily Mekong and tributaries; 2,897 additional km are intermittently navigable by craft drawing less than 0.5 m

Pipelines:

 petroleum products 136 km
Ports and harbors: none
Merchant marine: total: 1 ship (1,000 GRT or over) totaling 2,370 GRT/3,000 DWT
ships by type: cargo 1 (2000 est.)
Airports: 51 (2000 est.)
Airports - with paved runways: 
total: 8

2,438 to 3,047 m: 1
1,524 to 2,437 m: 5
   914 to 1,523 m: 2 (2000 est.)

Airports - with unpaved runways: 
total: 43

1,524 to 2,437 m: 1
914 to 1,523 m: 17
under 914 m: 25 (2000 est.)
 
. Laos Military
Military branches:
Lao People's Army (LPA; includes riverine element), Air Force, National Police Department
Military manpower - military age: 18 years of age
Military manpower - availability: males age 15-49: 1,319,537 (2001 est.)
Military manpower - fit for military service: males age 15-49: 710,627 (2001 est.)