Laos: Precarious Progress

1998

Nick Enfield

The Lao Kip has now dropped to around 4,000 per US dollar, from 1,000 in just twelve months. This is a much greater downturn than that seen in the neighbouring Thai economy - upon which Laos is so dependent - where the Baht has dropped over the same period from a rate of 25 to about 40 per US dollar. The effect of this financial disaster is beginning to hit hard in Laos, with prices of all imports rising considerably. The country depends heavily on imports, especially from Thailand, and this means almost all manufactured goods, including such basics as cooking oil and footwear. The government is struggling for any source of income it can get, and trying to remain socialist in its ideology while promoting a capitalist economy. The crisis is hitting the urban middle class worse than anyone. The rich are better able to afford the price rises, especially those who have been able to secure some income in US dollars, or who foresaw the crash in time to buy US dollars at a reasonable rate. On the other hand, for many poor Lao, to find that money doesn't buy much any more is to go back not very far in history, before the very recent developments which led to the wide availability of consumer goods in urban Laos. Only ten years ago, almost all urban residents depended for their daily livelihood on the yield of their market gardens, and on their regular catch in local forests, swamps and creeks. Thus, today, a lot of urban residents who had imagined their hunting days were over, are now once again turning to their natural surroundings for the necessary complement to their daily rice meal - be it fish, frogs, birds, or whatever. For many others, however, the new economic desperation results in a less and less resistible tendency to take financial advantage of one's situation wherever possible. Thus, the problem of corruption in Laos is more apparent now than ever, and it seems possible to pay for just about any privilege. At higher levels, there are many instances. For example, a recent study found that processes of awarding quotas for the extraction of non-timber forest products were unfair to villagers at the lowest level, a problem related to the central involvement of government companies in management and marketing. Corruption at the higher levels is widespread. At the lowest levels, profiteering and black marketeering are rife. While some cases seem harmless (no policeman on a monthly wage of US$10 would refuse a one dollar bribe from a traffic offender), others are dangerous (a driver's license may be purchased, without a test, for little more than ten dollars). Others are simply unfair (as in the case of the black market in restricted imports of essential goods such as motorcycles).

WATCHPOINT: The issue of corruption may become a crucial one for a poverty-stricken government.

 

About our company:

AFG Venture Group is an Asia and Australia based corporate advisory and consulting firm with over 20 years experience in creating alliances, relationships and transactions in Australia, South East Asia and India; including a 15 year history of corporate and equities advisory in Australia, undertaking merger, acquisition, divestment, fund raising and consulting for private and public companies.

Go to top