Laos: Looks Towards A More Prosperous Future


E.C. Chapman

Late in 1999 the value of the Lao kip drifted down to its lowest level, trading at more than 9,000 kip to US$. By the year's end it had improved a little, helped by modest strengthening of the Thai baht. Nonetheless, in the previous two years the kip had lost nearly nine-tenths of its value. Exports had slowed, Foreign Direct Investment (FDI) was lower and the domestic budget deficit was 10 per cent of GDP and rising.

In the absence of a major regional recovery the economic future of the Lao P.D.R. still looked bleak. Surprisingly then, in November two highly respected Ministers were able to point with confidence to what would eventually be a brighter future for the national economy and for the farm households who comprise 80 per cent of Laos' 5 million people. They based their views on recent developments in agricultural production and prospects for further commercial opportunities in both the uplands and the lowlands, downstream from Vientiane.

On 8-9 November in Vientiane the Ministry of Agriculture and Forestry held its first Donor Round-Table Conference. It was a small conference, by invitation only, involving less than 20 representatives of foreign donors and international agencies. The conference opened with key addresses by the Minister for Agriculture and Forestry, Dr Siene Saphangthong, and by the Vice-Minister, Committee for Investment and International Cooperation, Mme Khempeng Pholsena. The discussions which followed focused on a well-presented 96 page paper titled "The Government's Strategic Vision for the Agricultural Sector". According to later reports the conference was seen as so successful that the Prime Minister asked that it be followed by similar conferences in other sectors of Government.

The immediate objective of the Agriculture Ministry conference was to inform foreign donors of the Government's strategic plans, to help ensure their continued support for development in the country's two broad agro-economic zones. In the uplands farming is still strongly subsistence-oriented, but in the Mekong Corridor lowlands an agricultural transformation is already well under way, reflecting the expansion of irrigation and the diversification of smallholder production for the export of coffee, vegetable crops, livestock and rice, mainly to Thailand.

A further objective of the Discussion Paper was to demonstrate the advantages Laos could obtain in the next few years, as an increasing exporter of agricultural products and livestock to neighbouring countries, notably through the preferential trade arrangements available under ASEAN, AFTA (ASEAN Free Trade Association) and the provisions of CEPT (Common Effective Preferential Tariff). Further, as a future member of the World Trade Organisation (WTO), it was anticipated that Laos would benefit from its status as a lower cost producer of many crops.

At the November Conference the Discussion Paper provided valuable information and insights, but it glossed over some problems. These included its neglect of basic constraints, in the short term, on increased livestock production (disease incidence, animal health and feed production), its limited recognition of the massive effort needed to strengthen agricultural services at district level, and of the costs involved in developing an efficient transport system linking upland producers and export markets. On the other hand, with substantial foreign aid, improvements in all these areas may be achievable within a few years.

WATCHPOINT: Will membership of regional and multilateral bodies help Laos towards prosperity?


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