Laos Profile

Residents in Vientiane look over the Mekong at sunset.

Residents in Vientiane look over the Mekong at sunset.

Introduction  

Known as the Land of a Million Elephants, the Lao People’s Democratic Republic (Laos) is  Southeast Asian state rich in natural resources and cultural heritage. Laos has a long, turbulent history that has shaped its contemporary political system, government, economy, and foreign affairs. Laos is the sole land-locked nation within Southeast Asia, sharing borders with China, Vietnam, Thailand, Cambodia and Myanmar. The strategic geographic position and great natural resources of Laos played a significant role in the many historic dominations and colonization projects imposed upon the nation. However, it is for these same reasons that Laos has the great potential for modernization and poverty reduction, as well as a great responsibility to the protection of the natural resources contained within its borders.

laos_rel_2003

Link to Economic Data

Link to Environment and Resource Data

Historical roots of Modern Laos

The modern-day state of Laos traces its origins to the 14th century when King Fa Ngum united groups of townships along the Mekong River into the Lane Xang Kingdom. Lane Xang persisted as a unified nation through several centuries, with its monarchs fighting to protect and maintain their kingdom against regional invading forces. Lane Xang existed as a regional power with little relations to the West until conquered by invading French colonizers in 1893.  The Kingdom held tributary relations with China and served as a vassal state in the Burmese court in the 18th century.

Wat Xieng Thong in Luang Prabang, the holiest of temples in the Lane Xang era

Wat Xieng Thong in Luang Prabang, the holiest of temples in the Lane Xang era

As is the case for many of the nations in Southeast Asia, colonization severely altered the course of history for Laos and changed many aspects of the political system. After several decades of political upheaval and rebellion within in the Indochina region, Laos declared independence from France and Indochina in 1945, and was formally granted its freedom in 1954. The situation continued to worsen, however, as the Vietnam conflict spilled over into neutral Laos in the 1960s and 70s.  The US launched its secret war with Laos in 1965 sending bombing missions over the Ho Chi Minh Trail, a strategic supply and transportation route running through Laos used by the Viet Cong.   It is estimated that more bombs were dropped on Laos during this period than all of Europe during the Second World War, causing widespread devastation and creating even more obstacles to Laos’ development, modernization, and entry into global affairs.

The long struggle against colonizing powers reached a turning point in 1972, however, with the establishment of the Lao People’s Democratic Republic on December 2nd. At this point, Laos left its long traditional monarchial political system behind, and embarked upon their journey as an independent, communist state within Southeast Asia.

Current Political Structure

Upon the creation of the Lao People’s Democratic Republic, the former multiparty parliamentary democracy was replaced with the current system of party-controlled governance, called “democratic centralism.” Modeled on the Communist political systems of Vietnam and China, this type of political governance states that, in theory, each level of the Party democratically elects delegates to the next higher level. In practice, however, the selection process is heavily controlled and influenced by the Lao People’s Revolutionary Party (LPRP), and the higher levels of the government control the selection of the delegates.

Lao PDR established the nation’s first constitution in 1991, which allowed for the regular democratic election of a National Assembly for the first time. Candidates for the National Assembly are carefully screened by the Lao Front for National Construction (LFNC), however, with most belonging to the LPRP itself. Government officials in provinces, municipalities, and villages are selected by the Central Government, and there is no form of democracy in the selection of these local officials. Power within the Lao Government lies in the Politburo, not in the National Assembly, and all appointments are determined by the party instead of the National Assembly.

Young noviates are a common sight in Laos' Buddhist society

Young noviates are a common sight in Laos’ Buddhist society

In this way, the Lao Centralized Government maintains its’ authoritarian, single-party state power.  Widespread corruption and abuse of power is rampant within all branches and levels of the Lao government, and there is little to no prosecution or punishment for offenders. There has been no political liberalization within Laos since the formation of the Lao PDR, and political dissent is not tolerated, giving the Lao people little voice within their government. The ruling LPRP has recently reiterated that it has “no intention of introducing any political reforms that might limit its own monopoly on power,” giving little indication that any form of democratization or change will come for Lao PDR in the foreseeable future.

Economic Profile

Unlike the National Government, the Lao economy has experienced significant liberalization, growth, and modernization in the years since the creation of Lao PDR. The Lao economy was initially socialized in 1972, with “all industry and financial institutions nationalized and a program initiated to cooperativize agriculture” by the Central Government.  This largely proved to be a failure, however, and the LPRP was forced to amend its hardline policies in 1979 after peasant revolt, collapsing production, and widespread famine. This decision was followed by an even greater move towards economic liberalization in 1986, when the New Economic Mechanism (NEM) was introduced as the latest reform program.

Lao gdp growth Lao gdp breakdown

The NEM set in motion the change from a centralized, government-controlled economy into a free market economy, with most internal trade tariffs and restrictions eliminated, cooperativization abolished, and a free market introduced for agriculture. Additionally, international trade was liberalized and foreign direct investment was sought after and encouraged for the first time. Further, between 1989 and 1997, most State-Owned Enterprises were privatized. Like neighboring countries Vietnam and China, Laos’ economic liberalization occurred without any corresponding political liberalization. These economic reforms and liberalization movements had a significant great effect on the Lao economy, and by the 1990s, significant economic growth of 6% was occurring on average per year. Laos remained highly dependent upon official development assistance and international aid, however, for the construction of infrastructure and poverty alleviation, despite great economic growth.

Lao PC GDP Lao inflation

Despite the significant economic challenges of the 1997-98 Asian Financial Crisis and the 2008 Global Financial and Economic Crisis, the Lao PDR economy continues to thrive. Experiencing annual growth rates of 7.1 percent from 2001-2010 with projected growth of 7.6 percent from 2011-2015, Laos has benefited greatly from the government’s decision to liberalize economically. In contrast to impressive economic gains, Laos severely lacks in infrastructure, particularly in rural areas, and electricity is available to only 75% of the population. Laos’ economy remains largely dependent upon the cultivation and export of natural resources, including hydropower, logging, minerals, and the mining of gold and copper.

Agriculture, specifically rice cultivation, remains the primary means of employment within Laos with more than 75% of the population dependent upon these traditional cultivation practices. Massive economic growth has reduced poverty from 46% in 1992 to 26% in 2010, creating very real improvements in the everyday lives of Lao people. The Gross National Income of Laos increased to $1,010 in 2011, elevating Laos from its lower income status to a lower-middle income economy. Laos is on track to meet its World Bank Millennium Development Goal of elevating itself out of the UN Development Program’s least developed nation status by 2020.

GDP by sector

Laos’ significant economic growth has greatly increased its participation in international affairs and economy, impressively elevating its status on the international stage. Laos gained Normal Trade Relations status with the United States in 2004, and opened its first Stock Market Exchange in 2011. The Laos government remains committed to raising the country’s profile among investors and is actively seeking foreign direct investment and aid within the economy. Lao PDR officially became a full member of the World Trade Organization on February 2, 2013, and looks forward to an increasingly important role in international trade. Laos is strategically located within one of the fastest growing regions of the global economy, and is increasingly integrating itself into the regional economy through cross-border investments and exports. As a full member of the Association of Southeast Asian Nations (ASEAN) and the ASEAN Free Trade Area, Laos plays an important role in regional politics as well as global affairs. In addition, Laos is a member of the United Nations, the ASEAN Regional Forum, the International Monetary Fund, and the World Bank. With the recent rapid increase in hydropower development within the Greater Mekong Subregion (GMS), Laos has gained even greater regional and international importance. The economic and environmental implications of hydropower development will have significant effects on the entirety of Southeast Asia, and the decisions that Laos makes today will shape the future of the region.

lao trade XM

The China-Laos Connection   

Lao PDR’s significance in regional and international affairs has not escaped the attention of the global Great Powers. Laos has always been the recipient of an abundance of foreign direct investment and international aid, but dramatic increases in funding from major powers such as China, Japan, and the United States has come with a price. As Laos’ strategic position within the GMS became clear, China wasted no time positioning itself to become “land-linked” to Laos, ensuring that Chinese corporations, railways, bridges, and dams would get first priority as the nation developed and modernized.  As of October 2013, China became the world’s biggest investor in Laos, spending $1.33 billion in the first eleven months of 2013 alone. Historically, China has viewed the Southeast Asian nations as “little brothers” to its great empire, believing that these smaller nations required guidance, aid, and Chinese interference in order to succeed.

With the completion of the Kunming-Bangkok highway that runs through Northern Laos, China is even more connected to the nation.  Concrete plans to create a high-speed railroad between Kunming and Vientiane in 2014 will further increase China’s influence within Laos, steering the nation’s path towards development in China’s direction.

Under construction, July 2012

The Chinese-Thai invested 4th Thai-Laos Friendship Bridge. Under construction, July 2012

Many Western powers, specifically the United States, are wary of China’s increased interest in the GMS and ASEAN nations. Fearing that China’s extensive investment in the GMS foreshadows plans to dominate the area economically and politically, the United States has increased efforts to improve diplomatic relations with Laos. In 2012, US Secretary of State Hilary Clinton made the first US diplomatic visit to Laos in more than fifty years. This indicates the importance of Laos within the ASEAN region and on the greater international stage. The diplomatic visit had very explicit intentions: promoting American influence within Laos and Southeast Asia, preventing Laos from being drawn even farther into the Chinese orbit, and promoting the US-led Lower Mekong Initiative project. The US is also largely concerned with the severe environmental impacts of China’s plans for the GMS. The building of dams, some which are proposed to be funded by China on Laos’ portion of the Mekong River is also hotly contested and detested within the Greater Mekong Subregion. The dams will have an enormous impact on the entirety of Southeast Asia, as the dams will severely affect the flow of water, fish, and resources downstream to Vietnam and Cambodia.

Many hundreds of thousands of people in Southeast Asia will be directly affected by the construction of the dams – through relocation, loss of livelihood, loss of protein, and loss of land. Thus, China’s influence within Laos has created many political, regional, and international relations dilemmas and conflicts. As was the case throughout much of Laos’ history, foreign powers are again attempting to take control of Laos’ political, economic, and development decisions for personal gains.

The untouched Mekong in Laos

The untouched Mekong in Laos

While there are many reasons to question and condemn China’s ever-growing influence within Laos, there are undoubtedly many benefits to a stronger bilateral relationship between the two nations. Criticisms of China’s influence within Laos are numerous – many argue that the Chinese are taking jobs away from Lao workers, destroying traditional Lao culture, polluting the environment and exploiting natural resources, among other complaints.[1] Many rapid changes within Laos have occurred as a direct result of Chinese influence and investment, and have had a direct (and often negative) impact on Lao peoples’ daily lives. However, Laos’ economic gains resulting from a close relationship with China cannot be ignored. As one of the world’s least developed nations, it would be difficult for the Lao government to deny any source of aid and investment that would improve infrastructure and security within the country. Chinese-sponsored dams along the Mekong River and in its tributary system would generate an enormous income for the Lao government – but at what cost? As of October 2013, Laos has pushed ahead with construction of its’ second dam along the Mekong River, indicating that they plan to move forward with China as they develop, despite regional and international pressure. As Lao PDR emerges into the globalized world, many factors must be weighed in their decisions as the Central Government strives for development and modernization. While it is impossible to predict the future of Laos, it is certain that this small, developing nation will play a strategic role in economic development and foreign relations in Southeast Asia well into the 21st century.

Basic country profile written by Laura R. Richie, November 2013

2 Responses to Laos Profile

  1. Pingback: New Addition: Country Profiles on East by Southeast | East by Southeast

  2. Major thanks for the article.Thanks Again. Cool.

Leave a Reply

Your email address will not be published. Required fields are marked *