Laos

Politics:

• Analysis

  Laos politics: Quick View - Hillary Clinton makes symbolic visit to Laos

  Event

  On July 11th Hillary Clinton made a brief but significant visit to Laos. The visit was the first by a US secretary of state since 1955 and is seen as evidence of Laos' growing importance in the region.

  Analysis

  Mrs Clinton's four-hour trip to Laos was the first by a US secretary of state since the end of Vietnam's war of independence. Much of that war was fought on Lao territory and the amount of ordnance dropped by US planes gave Laos the unfortunate distinction of being the most bombed country in history. Large areas of the country are still littered with bombs that kill and wound people; Mrs Clinton visited a charity that provides prosthetics for victims.

  Her visit is seen as evidence of the US's "pivot" towards South-east Asia in the face of growing Chinese influence in the region. As part of its effort to strengthen ties with Laos, the US government recently supported the country's bid to join the World Trade Organisation, as well as increased the amount of aid it provides.

  Mrs Clinton met the Lao prime minister, Thongsing Thammavong, and the two governments extended agreements concerning the search for the remains of missing US servicemen, drug control and the clean-up of unexploded ordnance. Mrs Clinton also urged the Lao government to defer the construction of a controversial hydropower project, the Xayaburi dam. Mr Thongsing repeated his government's previous assurances that the project would not proceed without a full environmental study being undertaken. The Lao government announced in May that work on the project was to be halted following protests from neighbouring countries; however, in late June reports emerged that construction had resumed, provoking protests in Cambodia.

  Progress on the dam, in addition to the Lao government's human-rights record could prove to be sticking points in relations between the two countries. Nevertheless, Mrs Clinton has gone some way towards making up for the perceived snub delivered by her predecessor, Condoleezza Rice, who pulled out of a scheduled trip to Laos in 2005.

  July 16, 2012

• 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

  December 04, 2012

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	75,435
  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	4.5
  Population (m)	6.0	6.1	6.2	6.3	6.4
  Exports of goods fob (US$ m)	1,092	1,053	1,746	2,131	2,280
  Imports of goods cif (US$ m)	1,403	1,461	2,061	2,336	2,645
  Current-account balance (US$ m)	78	-61	29	89	29
  Foreign-exchange reserves excl gold (US$ m)	629	609	703	741	809
  Exchange rate (av) K:US$	8,744	8,516	8,259	8,030	8,017
  a Actual. b 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
  Principal exports 2008a	% of total	Principal imports 2008a	% of total
  Base metals	52.3	Petroleum	23.1
  Petroleum	24.7	Machinery	21.8
  Jewellery	9.2	Base metals	13.1
  Vegetable products	7.0	Transport equipment	12.6
  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 IMF estimates

  Download the numbers in Excel

  Download text file (csv format)

  December 04, 2012

• 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 2012-13 forecast period. Political stability will be underpinned by strong economic growth. Concerns over food security, the growth of an urban middle class and increasing income inequality could be potential sources of discontent during the period. The next general election is not due until April 2015. In the meantime, the LPRP will continue to dominate the legislature, given that there are only four non-LRPP lawmakers. Economic growth will remain rapid, averaging 8% a year in 2012-13, supported by reasonably strong economic expansion on the part of Laos's main trading partners in the region, particularly China. In 2012-13 inflation is expected to average 6% as global food prices moderate and productivity in rice fields increases. The kip's value will remain fairly stable in the next two years, supported by foreign investment inflows, and will average K8,033:US$1 in 2012-13.

  DOMESTIC POLITICS: There is little likelihood that the ruling LPRP will face a serious challenge to its authority in 2012-13. Fast 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 recent period of political change has also strengthened its grip on power. Although the LPRP maintains a tight and essentially unchallenged grip on power, several factors could put the ruling party under pressure during the current term of the National Assembly (parliament). The growth of an urban middle class and the awareness among provincial party members of a growing gap between rural and urban incomes could become a source of discontent, as could the government's unpopular practice of leasing land to overseas companies. 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 coalesce and escalate. Concerns about food security have intensified recently, with rice crops being 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 regarding plans to increase food production and protect arable land. During its December 2011 session parliament recommended allocating K400bn (around US$50m) to post-flood reconstruction and agricultural aid in rural areas. The government has also said that it will invest over K600bn in rural development and poverty-reduction projects in fiscal year 2011/12 (October-September). 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. 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. The treatment of more than 4,000 ethnic-Hmong refugees who were repatriated from camps in Thailand's Phetchabun and Nong Khai provinces in 2009 will continue to be closely monitored from abroad.

  INTERNATIONAL RELATIONS: Laos will continue its policy of regional and international integration in 2012-13, although the government has been unusually strident in its support for a controversial dam on the lower Mekong river, which is opposed by the authorities in neighbouring Vietnam. The government announced in May 2012 that work on the dam would be halted pending a full environmental review (as requested by Laos's Mekong neighbours). In June, however, environmental campaigning groups reported that work on the dam was continuing. The harder the Lao government pushes for the dam to receive the go-ahead, the greater will be the potential for relations to fray between the member states of the Association of South-East Asian Nations (ASEAN) over the issue. In general, the Lao government's stance on international affairs is based on the principles of non-interference and peaceful co-operation. 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 ASEAN. Ties with the US have also strengthened, and in July the US secretary of state, Hillary Clinton, made a brief visit to Laos-the first 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 challenges for the authorities 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 over 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 is expected to make progress on reforming Laos's foreign trade regime, with the primary aim of enabling the country to become a member of the World Trade Organisation (WTO). Recent legislative amendments have been designed to meet WTO requirements in a number of areas of reform, including tax, trade and intellectual property. Laos has signed a series of bilateral free-trade agreements-with China, Japan, Taiwan, the EU and the US, among others-that indicate support for the country's accession to the WTO. At the most recent WTO meeting in March, 18 countries expressed backing for Laos's bid to join the organisation. There has been no formal indication of when Laos will be allowed to become a member, but it could be as soon as late 2012. The government will continue to run budget deficits in the forecast period. The fiscal deficit (including grants) narrowed to the equivalent of 2.1% of GDP in 2010 and is estimated to have stood at 1.8% of GDP in 2011. Owing to a number of revenue-raising measures, we forecast that deficit will remain fairly small, averaging 2% of GDP in 2012-13. 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 minerals prices will boost public revenue. The Bank of the Lao People's Democratic Republic (the central bank) is expected to maintain its moderate monetary stance, given that inflationary pressures have diminished in recent months.

  ECONOMIC GROWTH: Economic growth will remain rapid in 2012-13, averaging around 8% a year-similar to the pace of expansion in 2011. Despite weakness in the global economy, GDP growth in Laos will still be supported by reasonably strong economic expansion on the part of its main trading partners in the region, particularly China. The development of several power projects will also help to keep economic growth healthy in 2012-13. High global prices for minerals have created strong foreign interest in Laos's extractive sector, and the leading mining companies operating in the country are looking to maximise their profits by increasing production. Such is the level of interest in the mining industry that parliament has put pressure on the government to slow the rate at which it is approving new concessions, as the legislature lacks the capacity to monitor them all properly. The construction of the Laos-China railway should boost economic growth, but the extensive use of Chinese engineers and workers on the project will mean that the main benefit to Laos comes from efficiency gains in the long term, when the time taken to transport goods will be reduced. Severe flooding in 2011 hit agricultural output in that year, but improvements in productivity should be felt in 2012-13, 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 the 2013 (not our central forecast) would have an adverse impact on Laos's export growth, but development of the hydropower sector will increase the diversity of the export base. Inflation has moderated steadily in recent months, decelerating to 2.9% year on year in July, from 6.7% in January. However, food prices could come under pressure again this year, owing to damage to irrigation systems caused by tropical storms in 2011 that has yet to be repaired. In 2012-13 inflation is expected to average 6% as global food prices moderate and productivity in rice fields increases.

  EXTERNAL ACCOUNT: The merchandise trade deficit (on a balance-of-payments basis) narrowed to US$314m in 2010, from US$408m in 2009, with the value of exports soaring by 66%, outpacing growth of 41% in the import bill. Continued growth in sales of electricity to Thailand and high commodity prices will have maintained the healthy pace of growth in export receipts in 2011. Export growth is expected to remain on a positive trend in 2012-13, but weaker international commodity prices and lacklustre global demand will slow the pace of expansion. Tourism revenue will also increase as Laos attracts greater numbers of foreign visitors. Imports will be supported by lower tariff barriers, in line with Laos's commitments as a member of the ASEAN-China Free-Trade Area, and also by the poor competitiveness of local products. Repatriation of profits and dividends by foreign-invested mining projects will maintain the deficit on the income account, but this will be more than 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 a surplus equivalent to 0.4% of GDP in 2010 and an estimated 1.1% in 2011. The current account will continue to post modest surpluses in 2012-13.

  September 24, 2012

View detailed map

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