Economy of Laos

Economy ofLaos

Vientiane
Currency	Lao Kip(LAK, ₭)
Fiscal year	1 October – 30 September
Trade organizations	ASEAN WTO RCEP G77
Country group	Developing/Emerging Lower-middle income economy
Statistics
Population	7,425,057 (2021)
GDP	$14.244 billion (nominal,2023 est.) $74.205 billion (PPP,2023 est.)
GDP rank	144th (nominal, 2023) 107th (PPP, 2023)
GDP growth	6.3% (2018) 4.7% (2019e) 1.0% (2020f) 4.6% (2021f)
GDP per capita	$1,879 (nominal, 2023 est.) $9,787 (PPP, 2023 est.)
GDP per capita rank	152nd (nominal, 2023) 126th (PPP, 2023)
GDP by sector	Primary sector:20.9% Secondary sector:33.2% Tertiary sector:45.9% (2017 est.)
Inflation(CPI)	40.3% (Jan 2023 est.)
Population belowpoverty line	22% (2013 est.) 58.7% on less than $3.20/day (2012)
Gini coefficient	36.4medium(2012)
Human Development Index	0.604medium(2018)(140th) 0.454lowIHDI(2018)
Labor force	3,800,051 (2019) 36.9% employment rate (2017)
Labor force by occupation	agriculture:73.1% industry:6.1% services:20.6% (2012 est.)
Unemployment	9.4% (2017)
Main industries	Copper,tin,gold,andgypsummining;timber,electric power,agriculturalprocessing,rubberconstruction,garments,cementandtourism
External
Exports	$3.654 billion (2017 est.)
Export goods	woodproducts,electricity,coffee,tin,copper,goldandcassava
Main export partners	Thailand35.2% China29.2% Vietnam10.4% (2022)
Imports	$4.976 billion (2017 est.)
Import goods	machinery and equipment, vehicles, fuel, consumer goods
Main import partners	Thailand52.3% China21.4% Vietnam8.9% (2022)
FDIstock	$15.14 billion (31 December 2012 est.)
Current account	−$2.057 billion (2017 est.)
Grossexternal debt	$17.16 billion (2020 est)
Public finances
Government debt	63.6% of GDP (2017 est.)
Budget balance	−5.5% (of GDP) (2017 est.)
Revenues	3.099 billion (2017 est.)
Expenses	4.038 billion (2017 est.)
Economic aid	$0.4 billion (1999 est.)
Foreign reserves	$1.27 billion (31 December 2017 est.)
All values, unless otherwise stated, are inUS dollars.

Theeconomy of Laosis a lower-middle incomedeveloping economy.Being one of thesocialist states(along withChina,Cuba,Vietnam,andNorth Korea), the Lao economic model resembles the Chinesesocialist marketand/or Vietnamesesocialist-oriented marketeconomies by combining high degrees ofstate ownershipwith openness toforeign direct investmentandprivate ownershipin a predominantlymarket-based framework.

Following independence,Laosestablished a Soviet-typeplanned economy.As part of economic restructuring that aimed to integrate Laos into theglobalized world market,the country underwent reforms called the "New Economic Mechanism" in 1986 that decentralized government control and encouraged private enterprise alongside state-owned enterprises.As of 2007, Laos ranked among the fastest-growing economies in the world, averaging 8% a year in GDP growth.It was forecasted that Laos would sustain at least 7% growth through 2019.

The key goals for the government included pursuing poverty reduction and education for all children, with an initiative to become a "land-linked" country. This was showcased through the construction of the nearly $6 billionhigh-speed rail from Kunming, China to Vientiane, Laos.The country opened a stock exchange, theLao Securities Exchange,in 2011, and has become a rising regional player in its role as a hydroelectric power supplier to its neighbors China, Thailand, and Vietnam. The Lao economy relies largely onForeign direct investmentto attract capital from overseas. The long-term goal of the Lao economy, as enshrined in the constitution, is economic development in the direction ofsocialism.

Despite rapid growth, Laos remains one of the poorest countries in Southeast Asia.Alandlockedcountry, it has inadequate infrastructure and a largely unskilled work force. Nonetheless, Laos continues to attract foreign investment as it integrates with the broaderASEAN economic community,due to its plentiful, young workforce, and favorable tax environment.

Laos has significant hydropower resources; the country also has large potential for small-scale hydro- and solar power.Excess electricity from hydropower is exported to other countries. Despite this, the country continues to also rely on coal in its electricity production.

Economic history

With the overthrow of the Laotian monarchy in 1975, thePathet Lao'scommunist governmentinstituted a planned economy of theSoviet-stylecommand economysystem, replacing the private sector withstate enterprisesand cooperatives; centralizing investment, production, trade, and pricing; and creating barriers to internal andforeign trade.

Seizure of power by the Communists also resulted in the withdrawal of mainly American external investment, on which the country had become greatly dependent as a result of the destruction of domestic capital during the Indochina Wars.

This changed in 1986 when the government announced its "new economic mechanism" (NEM). Initially timid, the NEM was expanded to include a range of reforms designed to create conditions conducive to private sector activity. Prices set by market forces replaced government-determined prices. Farmers were permitted to own land and sell crops on the open market. State firms were granted increased decision-making authority and lost most of their subsidies and pricing advantages. The government set theexchange rateclose to real market levels, liftedtrade barriers,replacedimport barrierswithtariffs,and gave private sector firms direct access to imports and credit.

With thecollapse of communisminEastern Europeandthe Soviet Union,in 1991, the PDR Lao government reached an agreement with theWorld Bankand theInternational Monetary Fundon additional reforms. The government agreed to introduce fiscal and monetary reform, promote private enterprise andforeign investment,privatize or close state firms, and strengthen banking. It also agreed to maintain a market exchange rate, reduce tariffs, and eliminate unneeded trade regulations. A liberal foreign investment code was also enacted. Enforcement of intellectual property rights is governed by two Prime Minister's Decrees dating from 1995 and 2002.

In an attempt to stimulate further international commerce, the PDR Lao government acceptedAustralianaid to build a bridge across theMekongRiver toThailand.The "Thai-Lao Friendship Bridge",betweenVientiane PrefectureandNong Khai Province,Thailand, was inaugurated in April 1994. Although the bridge has created additional commerce, the Lao government does not yet permit a completely free flow of traffic across the span.

These reforms led to economic growth and an increased availability of goods. However, the1997 Asian Financial Crisis,coupled with the Lao government's own mismanagement of the economy, resulted in spiralinginflationand a steep depreciation of thekip,which lost 87% of its value from June 1997 to June 1999. Tighter monetary policies brought about greatermacroeconomicstability in FY 2000, and monthly inflation, which had averaged about 10% during the first half of FY 1999, dropped to an average 1% over the same period in FY 2000.

In FY 1999, foreign grants and loans accounted for more than 20% of GDP and more than 75% of public investment.

The economy continues to be dominated by an unproductive agricultural sector operating largely outside the money economy and in which the public sector continues to play a dominant role. Still, a number of private enterprises have been founded in industries such ashandicrafts,beer,coffeeandtourism.WithUnited Nations,Japanese,andGermansupport, a formerly state-controlledchamber of commerceaims to promote private business: theLao National Chamber of Commerce and Industryand its provincial subdivisions.

The latest round of state-owned enterprise reform in 2019 aims to ensure that the remaining SOEs become profitable ventures that are efficient and sustainable sources of income for the national treasury. These measures include closing unproductive enterprises, ensure businesses in which the state has investments are reformed into profitable ventures, and reduce corruption. As of 2019, the State-Owned Enterprise Development and Insurance Department of the Lao government has 183 enterprises under its supervision.

Laos faced an economic crisis in 2022. Caused by theCOVID-19 pandemicandexternal debtprimarily from China, it escalated into massiveinflationand adebt crisis,bringing the country to the brink ofdefault.As of late 2023, the country is still facing significant economic problems. A World Bank report finds that the economic instability "largely results from low revenue and accumulated debt. There is moreover a need to improve the efficiency of public expenditure and tackle the potential costs of state-owned enterprises and public-private partnerships.” TheLao kipcurrency value has fallen and inflation remains higher than before the pandemic. The same World Bank report states that "the main factor in the kip’s falling value has been the lack of foreign currency available (...) a result of the need to repay large external debts, despite some deferrals, and limited capital inflows." The per capita GDP of Laos has gone down from $2,595 in 2021 to $1,824 in 2023 because of the kip’s depreciation.

Agriculture

Main article:Agriculture in Laos

See also:Rice production in Laos

Agriculture, mostly subsistence rice farming, dominates the economy, employing an estimated 85% of the population and producing 51% ofGDP.Domestic savings are low, forcing Laos to rely heavily onforeign assistanceand concessional loans as investment sources for economic development.

Agricultural products include sweet potatoes, vegetables, corn, coffee, sugarcane, tobacco, cotton, tea, peanuts, rice; water buffalo, pigs, cattle, poultry.

In mid-2012, the Laos government issued a four-year moratorium for new mining projects. The reasons cited were environmental and social concerns relating to the use of agricultural land.

In 2019 Laos produced:

• 3.4 million tons ofrice;
• 3.1 million tons of roots and tubers;
• 2.2 million tons ofcassava;
• 1.9 million tons ofsugarcane;
• 1.5 million tons ofvegetable;
• 1.0 million tons ofbanana;
• 717 thousand tons ofmaize;
• 196 thousand tons ofwatermelon;
• 165 thousand tons ofcoffee;
• 154 thousand tons oftaro;
• 114 thousand tons ofsweet potato;
• 56 thousand tons oftobacco;
• 53 thousand tons ofpeanut;
• 46 thousand tons oforange;
• 43 thousand tons ofpineapple;
• 23 thousand tons ofpapaya;
• 8.6 thousand tons oftea;

In addition to smaller productions of other agricultural products.

Tourism

Main article:Tourism in Laos

As of 2011, tourism was the fastest-growing industry and played a vital role in the Lao economy. The government opened Laos to the world in the 1990s, and the country has since become a popular destination for travelers.

Other statistics

GDP:purchasing power parity – $14.2 billion (2009 est.)
Exchange rate– kip (LAK) per US dollar – 8,556.56 (2009), 8,760.69 (2008), 9,658 (2007), 10,235 (2006), 10,820 (2005)

• Oil – production:

0 bbl/d (2009 est.)

• Oil – consumption:

3,000 bbl/d (480 m³/d) (2009 est.)

• Oil – exports:

0 bbl/d (2007 est.)

• Oil – imports:

3,080 bbl/d (490 m³/d) (2007 est.)

Of the total foreign investment in Laos in 2012, the mining industry got 27% followed by electricity generation which had a 25% share.

External links

• Rice research in Lao PDR
• Rice Biodiversity in Lao PDRArchived14 October 2006 at theWayback Machine