Economy

The government of Laos - one of the few remaining official socialist states - began decentralising control and encouraging private enterprise in 1986. Growth averaged 6% in 1988-2004 except during the short-lived drop caused by the Asian financial crisis beginning in 1997. As in many developing countries, the major urban centres have experienced the most growth. The economies of Vientiane, Luang Prabang and Savannakhet in particular have experienced significant booms in recent years. Laos' economy is heavily dependent on investment and trade with its larger and richer cousin, Thailand. Pakxe has also experienced growth.

In late 2004, Laos gained Normal Trade Relations status with the US, allowing Laos-based producers to face lower tariffs on their exports; this may also help to spur growth.

Agriculture

Subsistence agriculture still accounts for half of GDP and provides 80% of total employment. Laos has the lowest percentage of arable land and permanent crop land in the Greater Mekong Subregion. Only 4% of Laos is arable land, and only 0.34% of the country is planted with permanent crops.

Rice dominates agriculture, with about 80% of the arable land area used for rice breeding. Approximately 77% of Lao farm households are self-sufficient in rice. Through the development, release and widespread adoption of improved rice varieties; and through economic reforms, Lao PDR achieved a net balance of rice imports and exports for the first time in 1999. Between 1990 and 2005, rice production increased from 1.5 million tons to 2.5 million tons; an average annual growth rate of more than 5%. This increase in production has been valued at $8 million to $19 million per year.

Lao PDR may have the greatest number of rice varieties in the Greater Mekong Subregion. Since 1995 the Lao government has been working with the International Rice Research Institute (IRRI) to collect seed samples of each of the thousands of rice varieties found in Laos .

Infrastructure

Much of the country lacks adequate infrastructure. Laos has no railways, although a short link is planned to connect Vientiane with Thailand over the Thai-Lao Friendship Bridge. The major roads connecting the major urban centres, mainly forming Route 13, have been significantly upgraded in recent years, but villages that are far from major roads are accessible only through unpaved roads that may not be accessible year-round. There is limited external and internal telecommunication, particularly of the wire line sort, but mobile cellular phone usage has become widespread in urban centres. In many rural areas electricity is either not available or offered only during scheduled periods.

Foreign Aid and Investment

The economy receives aid from the IMF and other international sources and from new foreign investment in food-processing and mining, most notably of copper and gold. Tourism is the fastest growing industry in the country. However, economic development in general is hampered by a serious case of brain drain. A 2005 World Bank study reported that 37% of educated Laotians lived abroad, putting the country in fifth place for worst brain drain.

Facts and Figures

• GDP:
  • Purchasing power parity: $13.63 billion
  • Official exchange rate: $2.773 billion
  • Real growth rate: 7.4%
  • Per capita (PPP): $2,100
  • Composition by sector:
    • Agriculture: 43.4%
    • Industry: 30.6%
    • Services: 26%
• Labour Force:
  • Total: 2.1 million
  • By occupation:
    • Agriculture: 80%
    • Industry and services: 20%
• Unemployment rate: 2.4%
• Population below poverty line: 30.7%
• Household income or consumption by percentage share:
  • Lowest 10%: 3.2%
  • Highest 10%: 30.6%
• Inflation rate (consumer prices): 6.8%
• Budget:
  • Revenues: $400 million
  • Expenditures: $537.4 million
• Agriculture Products:
  • Sweet potatoes
  • Vegetables
  • Corn
  • Coffee
  • Sugarcane
  • Tobacco
  • Cotton
  • Tea
  • Peanuts
  • Rice
  • Water Buffalo
  • Pigs
  • Cattle
  • Poultry
• Industries:
  • Copper
  • Tin and gypsum mining
  • Timber
  • Electric power
  • Agricultural processing
  • Construction
  • Garments
  • Tourism
  • Cement
• Industrial production growth rate: 15.7%
• Electricity
  • Production: 3.936 billion kWh
  • Consumption: 3.26 billion kWh
  • Exports: 600 million kWh
  • Imports: 200 million kWh
• Oil
  • Production: 0 bbl/day
  • Consumption: 3,000 bbl/day
• Current account balance: -$504.2 million
• Exports:
  • Total: $982.2 million
  • Commodities:
    • Garments
    • Wood products
    • Coffee
    • Electricity
    • Tin
  • Partners:
    • Thailand 29.4%
    • Vietnam 12.5%
    • France 6%
    • Germany 4.5%
• Imports:
  • Total: $1.376 billion f.o.b.
  • Commodities:
    • Machinery and equipment
    • Vehicles
    • Fuel
    • Consumer goods
  • Partners:
    • Thailand 66.8%
    • China 9.1%
    • Vietnam 5.8%
• Reserves of foreign exchange and gold: $316.9 million
• Debt - external: $3.179 billion
• Economic aid - recipient: $379 million