Laos

Politics:

• Analysis

  Laos politics: Quick View - National Assembly seeks a greater role

  Event

  At its most recent session, members of Laos's National Assembly (NA) criticised the way the government uses the legislature and called not only for greater influence over the bills presented to it for approval, but also for more stringent measures to combat corruption in the administration.

  Analysis

  The NA met in December 2012, passing new laws and amendments in addition to various national projects. The NA usually rubber-stamps government proposals with little debate, but this session was marked by complaints from legislators, as reported by the Lao media.

  Members called for tougher oversight of government issues, questioning why officials outside parliament decide which topics it debates. Other complaints were that state projects often begin before being introduced to the NA and that little time was available to debate issues. A lawmaker for Savannakhet province, Somphet Inthathilath, said that the NA's role was being undermined and that the legislature sometimes receives little notice before important issues are introduced.

  Legislation approved during the session included an anti-corruption law, albeit only after the corresponding NA subcommittee promised to consider members' suggestions to help to fight graft. These included rigorous inspection of government bodies, protection for people exposing corruption, and requiring government officials and civil servants to declare lists of personal assets.

  A lawmaker for Champassak province, Singphet Bounsavatthiphanh, called for greater legislative oversight of government activities, especially railway, hydropower and town-relocation projects. He said that these are sometimes carried out without environmental or social impact studies, and that government officials often backed up investors, forcing villagers to accept dictated compensation without negotiation. Singphet also proposed the creation of a state anti-corruption agency to investigate government land and forestry deals.

  January 28, 2013

• Background

  Laos: Political forces

  Leadership changes in dominant LPRP are smooth

  The LPRP, established in 1955 as the Lao People's Party and supporting the Pathet Lao resistance movement, has held exclusive power since the Pathet Lao ousted the royalist government in 1975. The LPRP remains opposed to political reform along multiparty lines. Differences have periodically surfaced between different wings of the leadership on economic reform, democratisation and even the correct policies to be adopted towards China and Vietnam. However, overall the leadership is not heavily factionalised. Succession issues are primarily decided by the politburo, that is, the top leaders, and leadership transition in the party is almost completely unformalised. However, a smooth transition followed the death in 1992 of Kaysone Phomvihane, the party's general secretary and state president and the leading revolutionary. A second generation of leaders, centred on General Khamtay Siphandone, dominated the party up to the eighth party congress in March 2006, when General Choummaly Sayasone took over the party's top position.

  The military is well represented

  The military has long been well represented in political life. Thirty years after the armed revolution the military remains a powerful economic and political force, hampering efforts to accelerate reform and reduce corruption. The military's activities are diverse, including involvement in construction work and private business, with army companies heavily involved in logging and the timber trade. Previous talk about a withdrawal of the military from business has never been translated into action, and the Ministry of Defence continues to open new companies with the financial backing of Vietnamese and Chinese interests. The Lao People's Army maintains a regular armed force of 29,100 (mainly army) and a local militia that numbers around 100,000.

  Anti-government forces are active

  Since 1999 there has been an increase in anti-government activity, albeit among groups that have different (sometimes conflicting) aims and use different means. According to press reports, known Lao opposition groups are the Lao Student Movement for Democracy, the Lao Neutral Justice and Development Party, the United Lao National Resistance for Democracy (or the United Lao Freedom Fighters), the Council of the Lao Overseas Representatives, the Laotian Executive Council for Independence and Democracy, and the Lao Human Rights Council.

  Within Laos, a number of guerrilla groups exist, notably among the Hmong ethnic group, whose opposition to the communists can be traced back to Hmong links with the US in the 1960s and 1970s. Although this group has not accepted responsibility for violent activities, the government has blamed it for attacks on buses travelling in the northern part of the country in recent years. An upsurge in fighting between the government and Hmong rebels occurred in 2004, but the situation appears to have eased since then, and there have been reports of the widespread "surrender" of Hmong communities wooed by the promise of amnesty and offers of land. This partly supports the view that any remaining rebel groups are weak and are no match for government forces.

  May 18, 2007

• Structure

  Laos: Political structure

  Official name

  Lao People's Democratic Republic

  Form of state

  One-party rule by the Lao People's Revolutionary Party (LPRP)

  The executive

  The Council of Ministers is the highest executive body; the vice-chairmen of the council (deputy prime ministers) oversee the work of ministers; all members of the council are appointed by the chairman of the Council of Ministers (the prime minister)

  Head of state

  The president, Choummaly Sayasone

  National legislature

  A unicameral National Assembly of 132 seats

  National elections

  The last National Assembly election took place in April 2011; the next is due in April 2015

  National government

  The LPRP dominates the government and the bureaucracy

  Main political organisations

  Mass organisations controlled by the LPRP: Lao Front for National Reconstruction (LFNR), Lao Women's Union (LWU), Lao Revolutionary Youth Union and Lao Federation of Trade Unions. Opposition parties are banned

  Main members of Council of Ministers

  Prime minister: Thongsing Thammavong

  Deputy prime ministers:

  Somsavat Lengsavad

  Thongloun Sisoulith

  Asang Laoly

  Douangchay Phichith

  Key ministers

  Agriculture & forestry: Vilayvanh Phomkhe

  Defence: Douangchay Phichith

  Education: Phankham Viphavanh

  Energy & mines: Soulivong Daravong

  Finance: Phouphet Khamphounvong

  Foreign affairs: Thongloun Sisoulith

  Home affairs: Khampane Philavong

  Industry & commerce: Nam Vinhaket

  Information, culture & tourism: Bosengkham Vongdara

  Justice: Chaleuan Yiapaoheu

  Labour & social welfare: Onechanh Thammavong

  Natural resources & environment: Noulin Sinbandhit

  Planning & investment: Somdy Douangdy

  Post, telecoms & communications: Hiem Phommachanh

  Public health: Eksavang Vongvichit

  Public security: Thongbanh Sengaphone

  Public works & transport: Sommat Pholsena

  Science & technology : Boviengkham Vongdara

  Central bank governor

  Somphao Phasith

  March 21, 2013

Economy:

• Background

  Laos: Population

  Population structure, 2005
  (% of total)
  0-14 years	39.4
  15-64 years	56.7
  65+ years	3.9
  Source: National Statistics Centre.

  Download text file (csv format)

  Population growth is fairly stable

  The 2005 national census put the Lao population at 5.62m (March 2005 figure), a lower than expected rise from the 1995 figure of 4.58m. IMF estimates show the population rising by an annual average of around 2.3% in 2001-05, lower than the average of 2.5% recorded in the 1990s, but still relatively high. The population is fairly young, with 39% aged below 15 years in 2005, according to census data, and more than 62% below the age of 25, according to the UN Population Division's World Population Prospects (WPP). This makes for a high fertility rate, which keeps the population growth rate rapid despite a high mortality rate. The government has promoted "birth spacing" and contraception in an attempt to control population growth.

  The population is small and poor

  The population of Laos is considerably smaller than that of its neighbours, and this limits its attractiveness as a consumer market. According to WPP, around 21.6% of the population lives in urban areas, which is a growing proportion but one which still reflects an overwhelmingly rural society. The country is sparsely populated, with an estimated average of 24 persons/sq km in 2005, according to the national census, compared with around 256 persons/sq km in Vietnam. According to the World Bank, annual average income per head in 2003 was US$380, compared with a regional average of US$1,870, and almost 39% of the population are estimated by the UN Development Programme (UNDP) to be below the national poverty line. The south is much poorer than the central and northern parts of Laos.

  Ethnic tensions are widespread

  The government recognises the existence of at least 48 distinct ethnic groups. Around 60% of the population belongs to Lao Lum ("lowland Lao") groups, the politically dominant majority, and historical tensions with minority groups persist. One of the most alienated groups is the Hmong, some of whom received US military training before the 1975 revolution and continue to oppose the government. A growing number of Chinese and Vietnamese immigrants own a disproportionately large number of private companies in the country's towns.

  There are labour shortages

  In 2005 Laos had a labour force of 2.8m, equivalent to nearly one-half of the population. Around 80% of the labour force are assumed to work in the agricultural sector. Despite growing numbers of rural migrants to the cities, firms are struggling to find enough workers, with 15 garment factories closing throughout the country between 2005 and 2006 owing to labour shortages. Industry representatives blame the shortage on the expansion of industry and the increasing numbers of workers seeking legal and officially sanctioned employment in Thailand. In 2006 a total of 3,400 registered labourers were sent to Thailand, with the government saying that no limits would be placed on this number in the future.

  May 18, 2007

• Structure

  Laos: Economic structure

  Economic structure: Annual indicators

  	2008a	2009a	2010a	2011a	2012b
  GDP at market prices (K bn)	47,603	49,673	59,310	66,866	75,277
  GDP (US$ bn)	5.4	5.8	7.2	8.3	9.4
  Real GDP growth (%)	7.8	7.5	8.5	8.0	7.9
  Consumer price inflation (av; %)	7.6	0.0	6.0	7.6	4.3a
  Population (m)	6.0	6.1	6.2	6.3	6.4
  Exports of goods fob (US$ m)	1,092	1,053	1,746	2,131b	2,280
  Imports of goods cif (US$ m)	1,403	1,461	2,061	2,336b	2,645
  Current-account balance (US$ m)	77.5	-60.9	29.3	59.8b	7.4
  Foreign-exchange reserves excl gold (US$ m)	629	609	703	741	755
  Exchange rate (av) K:US$	8,744	8,516	8,259	8,030	8,013
  a Actual. b The Economist Intelligence Unit estimates.

  Download the numbers in Excel

  Origins of gross domestic product 2011	% of total
  Agriculture & forestry	28.1
  Industry (incl construction)	27.5
  Services	38.1
  Statistical discrepancy	6.3
  Principal exports 2011a	% of total	Principal imports 2011a	% of total
  Copper	36.5	Investment goods	50.4
  Agriculture & forestry products	9.3	Consumption goods	37.2
  Garments	8.7	Gold & silver	6.9
  Gold	6.0	Garment raw materials	3.2
  Main destinations of exports 2011	% of total	Main origins of imports 2011	% of total
  Thailand	33.0	Thailand	65.2
  China	23.4	China	11.1
  Vietnam	13.4	Vietnam	6.5
  UK	3.1	South Korea	3.6
  Japan	2.8	France	3.1
  a Bank of the Lao People's Democratic Republic.

  Download the numbers in Excel

  Download text file (csv format)

  March 21, 2013

• Outlook

  Laos: Country outlook

  Laos: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  OVERVIEW: There is little likelihood that the ruling Lao People's Revolutionary Party (LPRP) will face a serious challenge to its authority in the 2013-14 forecast period. Political stability will be underpinned by strong economic growth. Legislators in the National Assembly (the legislature) will become more assertive in 2013-14, but given that all but four lawmakers are from the LPRP this will pose little threat to the ruling party's grip on power. The next general election is not due until April 2015. The LPRP is expected to be returned to power with another massive majority. Economic expansion will remain rapid, at an average of 8.5% a year in 2013­14. It will be supported by strong growth in investment, particularly in infrastructure and export-oriented manufacturing. In 2013-14 annual consumer price inflation is expected to average 4.8%, lower than the average in the previous ten years of 7%. Price pressures will be dampened by exchange-rate appreciation and supply-side investments. The value of the local currency, the kip, against the US dollar will strengthen from an estimated annual average of K8,013:US$1 in 2012 to K7,575:US$1 in 2014, boosted by strong foreign investment inflows.

  DOMESTIC POLITICS: Rapid economic growth, together with the maintenance of the country's extensive internal-security apparatus, will cement the LPRP's position. The party's effective management of a process of political change in 2011 strengthened its grip on power. The LPRP's ninth party congress, which was held in March of that year, witnessed the traditional reshuffles of the politburo and the central committee. Jockeying for position took place behind closed doors, and there was no public evidence of factional conflict. The next party congress will be held in 2016. Although the LPRP's grip on power will be unchallenged, there could be tensions between different centres of power within the political system. In late 2012 some lawmakers at a session of the Assembly were vocal in calling for more influence over legislation. However, there is unlikely to be a significant strengthening of the legislature in 2013-14. Strains will be caused by an awareness among provincial LPRP members of the growing divide between rural and urban incomes, and by concerns over corruption. The government's unpopular practice of leasing land to overseas companies may also cause political tensions. The government has vacillated on its policy of renting out vast areas of land, much of it agricultural, for use in plantation, mining, logging and hydropower projects. In mid-2012 it announced that it was once again imposing a moratorium on the granting of new land concessions until at least 2015, following complaints from villagers. Should the government recommence the leasing of new areas of land, protests (which have so far been small and isolated) could escalate. Concerns about food security have intensified since rice crops were damaged by severe flooding in Laos and neighbouring Thailand in late 2011. The government is aware of the sensitivity of the Lao people to rising food prices, but has often found itself unable to match its rhetoric with action on plans to increase food production and protect arable land. The government allocated around K1trn (US$125m) towards agricultural aid, development projects and poverty-reduction initiatives in rural areas in fiscal year 2011/12 (October-September). However, the construction of residential and commercial buildings on rice paddies in and near urban areas has continued, reducing the supply of arable land. Domestic food output remains dependent on imported inputs, increasing its vulnerability to fluctuations in international commodity prices and raising the potential for political unrest. Despite these risks, the Economist Intelligence Unit's central forecast is that the LPRP will continue to exert full control in the country, with the consequence that it will lack the motivation to introduce a democratic political system. Bouasone Bouphavanh permitted a degree of reform during his time as prime minister (2006-10), but the government has yet to take further steps in this direction. The Bouasone administration passed a law permitting the formation of civil-society organisations, thereby providing a legal framework for Lao citizens to organise groups independent of control by the LPRP. But such organisations are unlikely to voice overt criticism of the political system for fear of a crackdown by the authorities. Despite continued ethnic tensions, there have been no recent reports of attacks by ethnic Hmong rebels or other insurgents on government or civilian targets. The government will continue to face allegations of human rights abuses until the Hmong issue is resolved. Our 2012 democracy index ranks Laos 156th of 167 nations, placing it firmly in the "authoritarian" regimes category.

  INTERNATIONAL RELATIONS: Since seizing power in 1975, the LPRP has typically taken its cue from the ruling Communist Party of Vietnam. However, increasing foreign investment and support from new allies, most notably China, appear to have given the LPRP a greater sense of confidence. In particular, the government has been unusually strident in its support for the Xayaburi dam, a controversial hydropower project on the lower Mekong river, which is opposed by the authorities in neighbouring Cambodia and Vietnam. (The project is being built by Thai contractors and will supply most of the electricity produced to Thailand). In November 2012 the government held a ground-breaking ceremony for the dam. Officially, construction had been delayed since 2010 following concerns raised by other Mekong countries, but unofficial reports suggest that work on the project had recommenced in mid-2012. According to environmental groups and scientific bodies, the Xayaburi dam could adversely affect fish populations and farmers downstream. The Lao government maintains that its process for the dam's development is transparent and that it is working on solutions to the objections from neighbouring countries. Despite this evidence of increased assertiveness, the Lao government's stance on international affairs is usually based on the principles of non-interference and peaceful co-operation, and it is a proponent of regional integration. The country's leaders place great emphasis on regional prosperity, and they will support efforts by China and other countries to improve trade arrangements with the Association of South-East Asian Nations (ASEAN). Laos's trade efforts stretch beyond its local environment: in early 2013 the country joined the World Trade Organisation (WTO). Ties with the US have also strengthened, and in July last year the then US secretary of state, Hillary Clinton, briefly visited Laos, in the first such trip by a holder of that post since 1955. However, pressure will continue to be applied from abroad in relation to the Lao government's human rights record.

  POLICY TRENDS: The main priorities for the authorities in 2013-14 will be to keep inflationary pressures in check while maintaining support for the economy, and to move ahead with reforms aimed at making the business environment more conducive to private-sector activity. Foreign investment, predominantly from other Asian countries and directed into the resources sector, will increase in the forecast period. There will also be a welcome focus on infrastructure, exemplified by the construction of a US$7bn railway line between the Chinese city of Kunming and the Lao capital, Vientiane. The government has been making progress on reforming Laos's foreign trade regime, as part of its efforts to secure WTO membership (a process that was recently concluded). Recent legislative amendments have been designed to meet the organisation's requirements in a number of areas of reform, including tax, trade and intellectual property. The country has signed a series of free-trade agreements with China, Japan, Taiwan, the EU and the US, among others. The government will continue to run a budget deficit in the forecast period. The fiscal deficit (including grants) is estimated to have widened slightly in 2012, to the equivalent of 1.9% of GDP, from 1.7% in 2011. Owing to a number of revenue-raising measures, we forecast that the deficit will remain fairly small in 2013-14, at an average of 2.1% of GDP. (The government's forecast of the deficit, made on a fiscal-year basis, is that it will be considerably larger than this.) A new tax has been imposed on luxury goods, and there are proposals to introduce taxes on land and inheritance, as well as to rationalise the tax rates applying to foreign companies and workers. State-owned buildings could also be sold or leased as required. High global prices for minerals will boost public revenue. Prices for Laos's most important mineral export, copper, are estimated to have dropped sharply in 2012, but prices for the metal are set to recover in the next two years. The government will continue to receive royalties from the export to Thailand of electricity from the Nam Theun 2 hydropower facility, which began commercial operations in 2010.

  ECONOMIC GROWTH: Laos's relative economic isolation has meant that it has been relatively sheltered from the effects of weak demand in the developed world since 2008. Economic growth will remain rapid in the forecast period, averaging 8.5% a year-slightly faster than the pace of expansion in 2011-12. Despite weakness in the global economy, GDP growth in Laos will continue to be supported by moderately strong economic expansion on the part of its main trading partners in the region, namely Thailand, China and Vietnam. The development of several power projects will also help to keep economic growth healthy in 2013­14. High global prices for minerals have created strong foreign interest in Laos's extractive sector, and mining investment is likely to expand in 2013-14. The construction of the Laos-China railway should also boost investment. Agricultural productivity should continue to improve in the next two years (weather permitting) as large areas of farmland are leased to foreign investors. The outlook for services is partly dependent on the health of other economies in the region, given that the majority of tourists visiting Laos come from South-east Asia. A decline in the price of copper in 2013 (not our central forecast) would have an adverse impact on Laos's rate of export growth, but development of the hydropower sector will increase the diversity of the export base.

  EXTERNAL ACCOUNT: Falling international commodity prices (notably for copper) and lacklustre global demand weighed on export growth in 2012, although an expansion in sales of electricity to Thailand is expected to have boosted receipts overall. In 2013-14 exports will continue to grow as more electricity-generating plants begin production. Prospects for development of the garment-export sector are also good, although volumes will remain small compared with most of Laos's neighbours. Goods imports will be supported by lower tariff barriers, in line with Laos's commitments as a member of the WTO and the ASEAN-China Free-Trade Area, and also by the poor competitiveness of local products. Tourism revenue will continue to rise as Laos attracts greater numbers of foreign visitors, but the services account will also see rising outflows linked to contractor payments for infrastructure projects. Repatriation of profits and dividends by foreign-invested mining projects will maintain the deficit on the income account, but this will be offset by the surplus on the transfers account, which mainly reflects inflows of development assistance from international donors. The current account has returned to the black in recent years, recording an estimated surplus equivalent to 0.1% of GDP in 2012, but we expect the country to run a modest deficit in 2013-14.

  March 22, 2013

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Country Briefing

Land area

236,800 sq km

Population

6.44m (2010, IMF data, mid-year estimate)

Main towns

Population of the province in which a main town is situated (2005 population census):

Vientiane (capital): 698,318

Savannakhet: 825,902

Champasak: 607,370

Luang Prabang: 407,039

Climate

Tropical; rainy season, May-October; dry season, November-April

Weather in Vientiane (2006, 531 ft above sea level)

Hottest month, March, 33.4°C; coldest month, January, 17.5°C; wettest month, July, 440 mm rainfall; driest months, November, December and January, 0 mm rainfall

Language

Lao and others

Measures

Metric system; local measures include:

1 va = 5 sok = 10 khup = 2 metres

1 rai = 4 ngane = 1,600 sq metres

1 kang = 10 hoi = 1.2 kg

Currency

Kip (K). Average exchange rate in 2011: K8,044:US$1

Time

7 hours ahead of GMT

Fiscal year

October 1st-September 30th

Public holidays

January 1st-2nd (New Year); March 8th (International Women's Day); April 13th-15th (Pi Mai Lao, or Lao New Year); May 2nd (International Labour Day); June 1st (Children's Day); August 2nd (Khao Pansa, start of Buddhist Lent); October 30th (Ok Pansa, end of Buddhist Lent); October 31st (Boat Racing Festival); November 28th (That Luang Festival); December 2nd-3rd (National Day)

March 14, 2012