Laggard Laos turns the economic
corner By Bertil Lintner
VIENTIANE - Somphone carries a mobile
phone in his back pocket and checks his e-mail
every day. He likes to drink beer in one of the
city's many bars, pubs and restaurants, and goes
to discos on weekends. Somphone, not his real
name, is unconsciously part of a new Lao
revolution: the market-led rise of an economically
empowered middle class.
It is still small
and largely confined to the capital Vientiane and
a few other urban centers, but a middle class is
slowly but surely emerging in this land-locked
communist-run country of nearly 6
million people. Previously
confined to ruling Communist Party cadres and
their children, the wealth created from the
country's gathering economic boom is now clearly
trickling down to a wider cross-section of the
population.
The Lao economy has grown by
more than 7% for the past two years, driven by
foreign investment in the development of the
hydroelectric power industry, fast expanding gold
and copper mining activity, and a rapidly growing
tourism industry. Since 2001, the Lao economy has
grown at an average annual rate of 6.5%. Official
development assistance and aid still contribute
largely to the national budget, but merchandise
trade is increasing as a driver of growth, up from
45.8% of GDP in 2005 to nearly 61% in 2006,
according to World Bank statistics.
Growing garment, horticultural and timber
sectors have improved Laos' economic performance
and helped to narrow external debt. The signs of
increased economic activity are visibly apparent
in Vientiane, where formerly pot-holed, dusty
streets are now clean, paved and full of traffic.
New shops sell imported consumer wares, new
motorcycles and cars zoom through once sleepy
streets, and the city boasts a bevy of Internet
cafes frequented not only by foreign tourists and
aid workers but locals as well.
Another
measure of rising prosperity: the number of mobile
phones in the country grew to 638,200 in 2006 from
a mere 29,500 in 2001, one of the fastest
expansions in the region over the same period. The
percentage of the population in Laos with mobile
phones, still lower than in neighboring Vietnam,
is notably higher than in nearby Cambodia, which
likewise is experiencing an unprecedented economic
boom, and considerably higher than in impoverished
Myanmar and East Timor.
The Lao government
has in fits and starts promoted the transition
from subsistence agriculture towards a more trade-
and investment-driven economy. Although the
communist government maintains socialist rhetoric
and vestiges of the old central planning regime,
for all practical sakes and purposes Laos is now
in the main a market economy.
That
represents a significant turn for Laos, which in
recent years has undertaken significant structural
reforms in trade, private sector development and
public financial management. Economic analysts say
the country has taken lessons from China and
Vietnam's capitalist transformations, albeit at a
slower, more cautious pace.
First launched
in 1990, the reform transformation from a
centrally planned to market economy has allowed
Laos to diversify from its traditional reliance on
China and Vietnam for its economic sustenance and
assert more economic sovereignty over the
country's vast bounty of natural resources.
According to the government's poverty
reduction plans, Laos, which now has a per capital
gross national income (GNI) of about US$500,
should at present economic growth rates graduate
by 2020 from so-called Least Developed Country
status - reserved for states with a per capita
income over a three-year average of less than $750
- and join the ranks of the world's middle-income
nations. GNI per capita is up from $290 in 1992,
when the economy was still largely closed to the
outside world.
As late as in
1999, statistics from the Lao state planning
committee showed that "remittances from abroad"
were the single most important source of income in
the Vientiane valley, then representing 28% of all
household earnings, compared with 25% from
agriculture, 22% from wages and 18% from
businesses.
Wealth gaps After
the communist takeover in 1975, nearly 10% of the
population fled the country and settled primarily
in Australia, the United States and France. For
years, these Lao expatriates supported their
poorer relatives in the country, but in more
recent years, remittances have almost ceased as
the local economy picks up steam.
At the
same time, urban living standards have improved
substantially, attracting people from the much
poorer countryside and imposing new
population-related stresses on the country's once
sleepy cities. Laos is now experiencing an
urbanization rate of 4%-5% per annum, which has
caused growing pains in Vientiane and in smaller
provincial centers.
According to
UN-Habitat, "The high percentage increase in
secondary towns is creating an additional burden
on the local authorities for providing basic
infrastructure. Nearly two-thirds of a total of
145 district towns do not have access to safe
water. Water supply and sanitation coverage in
secondary and district towns remain a major
concern for the government."
Laos is also
experiencing a widening gap between rural and the
newly rich urban areas and it remains to be seen
how, if at all, the government tackles the new and
multiplying socio-economic problems associated
with fast economic development. About 30% of the
population lives under the poverty line and
although Marxism-Leninism is no longer the
government's guiding light in economic
policy-making, Laos is still at least officially a
communist-run country.
Nowadays, communism
is little more than a tool to discipline civil
servants and keep state officials and other
potentially unruly elements in check. Ideological
training courses, usually lasting for five months,
are still regularly held. In the past, these were
held almost exclusively in the Vietnam capital of
Hanoi, but now seminars for civil servants
regularly take place in the Chinese city of
Kunming in Yunnan province, bordering Laos to the
north, reflecting a subtle shift in Laos'
allegiances between its two larger, nominally
communist, neighbors.
At the same time,
cultural influences from Thailand, to the
country's south, remain strong as the Lao and Thai
languages are closely related. Most Lao who reside
in the Mekong River valley regularly watch Thai
television and read Thai popular magazines, which
convey an entirely different capitalist message
than the ideological seminars held in Kunming.
Increasingly, the fledgling Lao middle class has
its own magazines, which more resemble Thai
weeklies and monthlies than the old periodicals
published by the ruling Lao People's Revolutionary
Party.
For instance, the bilingual English
and Lao monthly Sayo calls itself a "business
travel and lifestyle magazine" and carries
headlines such as "Look younger without plastic
surgery" and "How to create a home spa" - along
with photos of fashion models and advertisements
for beer and new brands of coffee. Target, also a
monthly, focuses more on business with headlines
like "How should the entrepreneurs adjust
themselves in the globalization era?"
So
will economic progress and an ascendant middle
class over the medium term call for more political
freedoms? Laos' rulers still maintain a monolithic
hold on political power. To date there is no overt
political opposition, but occasionally critical
voices are raised - albeit in convoluted manners.
In a carefully, but skillfully, worded article in
the English-language Vientiane Times on April 11,
2007, a local journalist wrote:
In the era of a free flow of
information, it seems that the party and the
government have no choice but to allow reporters
to do their jobs with a greater measure of
freedom. Otherwise, the quality of Lao
publications will suffer and the content will be
uninteresting, resulting in apathy among
readers. Without public regard for the media
there will be no widespread awareness of party
and government policies.
Apart from
such carefully crafted messages, so far there are
few if any signs of political dissent. Modern Laos
actually got its first lesson in dissent as early
as October 1999, when a group of students bid, but
failed, to stage a peaceful pro-democracy
demonstration in Vientiane where they attempted to
unfurl a pre-revolutionary Lao flag.
Some
of the protesters managed to escape to Thailand
and were later granted asylum in the United
States, from where they have continued to speak
out against the government and in favor of
political reform. But their movement was
premature: at that time, Laos was still utterly
impoverished and did not have anything resembling
an up-and-coming middle class.
Meanwhile,
large parts of the country still survive at basic
subsistence levels and village life in places like
the remote northeastern provinces of Houa Phan and
Phong Saly is still a primitive world apart from
Vientiane and even the old sleepy royal capital of
Luang Prabang, where a foreign tourism-driven boom
is underway.
Still, economic and social
change has definitely arrived in Laos and no
amount of ideological training for civil servants
is going to turn back the capitalist tide as long
as market forces are allowed to take deeper root
across the country. Laos' communist leaders can
either adjust to the new economic reality or fade
further into ideological irrelevance.
Bertil Lintner is a former
correspondent with the Far Eastern Economic
Review, where he wrote frequently on Lao politics
and economics. He is currently a writer with
Asia-Pacific Media Services.
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