Laos: Mired in Economic Stagnation?

Southeast Asian Affairs 2003, pp. 135-45 LAOS Mired in Economic Stagnation? Bertil Lintner Introduction By most accounts, 2002 was a politically quiet year for Laos. Unlike previous years, there were no student protests or bomb explosions in the capital, Vientiane, and no reported rebel raids against army and police outposts. President Khamtay Siphandone's government grip on power appeared absolute with no open dissent in the ranks. Elections to the National Assembly were held on 24 February, and the government claimed, "all 2.5 million eligible voters nationwide used their right to vote."1 There were few surprises when a total of 166 candidates competed for 109 seats in the Assembly, which in effect is little more than a rubber-stamp body controlled by the ruling Lao People's Revolutionary Party (LPRP). Khamtay is also the president of the Central Committee of the party, which controls all aspects of life and society in the country. The lack ofpolitical debate and initiative was seen by most foreign observers as the main reason why Laos' troubled economy showed few signs of real improvement during the year. A Western embassy in Laos stated in an internal memo dated 10 October that: "the trend is disturbing." The currency, the kip, continued to slide, inflation rose, foreign investment declined, not enough revenue was being collected, and the government did not even have enough money to pay state employees, such as teachers. In the foreign-policy field, there were problems in the relationship with Thailand over border demarcation. Laos also continued to demand the extradition from Thailand of seventeen Lao rebels who had been involved in an attack on a border post in 2000, and then taken refuge across the frontier. Despite promises from Thailand, the issue remain unresolved as 2002 drew to a close. On the other hand, Laos moved closer to its old allies, Vietnam and Cambodia. In January, the prime ministers of Laos, Vietnam, and Cambodia met in Ho Chi Minh City to discuss the creation of a "triangle development"2 spanning the three countries. In July, a delegation from the Politburo of the Bertil Lintner is a Senior Writer (based in Thailand) for the Far Eastern Economic Review. 136Bertil Lintner Communist Party of Vietnam met their Lao counterparts in Vientiane, and speakers from both parties paid homage to the "great President Ho Chi Minh" (Vietnam's late president) and the "respected President Kaysone Phomvihane" (the founder of communist rule in Laos).3 The following month, an agreement was signed between Vietnam and Laos to facilitate the exchange of goods between the two countries in order to increase the volume of the border trade. The Lao Prime Minister, Bounnhang Vorachit, paid an official visit to China and pledged to implement thejoint statement signed by the two countries in 2000, which also involved increased border trade. However, with no structural changes in motion, free enterprise remains elusive in Laos. In short, Laos' attempts to open up its economy, and to tie it to the more prosperous economies of ASEAN, of which it became a member in 1997, have failed. As one economist put it, the country remains ruled by diktat and its economy has not become determined by market forces. Bilateral as well as multilateral donors have urged the Lao Government to liberalize its rigid political and economic system and criticized the lack of transparency, saying "that there is need to move out of the niceties and to get some clear answers from the government". "Donor fatigue" has also been mentioned and Laos has been described as a "very difficult working environment. No one takes Domestic and Social Issues The February National Assembly elections may have been the main political event of the year, but the outcome was known as early as in January, when it was announced that all but one of the 166 candidates who had been approved to stand for the elections were members of the LPRP. According to an article published by the Canberra-based ASEAN Focus Group, two candidates were members of the LPRP's eleven-member Politburo, and a further thirty-three belonged to the forty-two-member Central Committee. In the 1998 elections, four independent candidates...