IENTIANE - Sweeping market reforms are rejuvenating Laos despite a disastrous
rice harvest, poor infrastructure, a lack of skilled workers and worries by
international organizations about the impact of progress on the country's
precious natural resources.
There is an air of prosperity in this
riverside capital with its new shops, hotels and restaurants, and its busy
markets overflowing with imported consumer goods.
Motorcycles and cars
are gradually replacing bicycles, and it is not uncommon to a see a Mercedes
Benz gliding down one of the city's tree-lined thoroughfares.
facade of budding urban wealth, however, here and in main provincial towns, lies
the grinding poverty of a still largely subsistence-level countryside, home to
85 percent of Laos' 4.5 million people.
There are also concerns about the
rapid exploitation of forests which, though fueling short-term growth,
jeopardizes hydro-electric power generation upon which the country has pinned so
much of its long-term hopes.
The extent of rural poverty in Laos is
illustrated all too starkly by the statistics.
Annual per capita income
is $230. The infant mortality rate is 103 per 1,000 live births. Life expectancy
is 50 years.
Cross the Mekong river to Thailand and life expectancy
shoots up to 69 years and the infant mortality rate is 27 per 1,000. Per capita
income in Thailand is $1,570.
Laos' rice harvest last year was down
almost 17 percent compared with 1992. Yet the increasingly resilient economy is
still expanding at almost seven percent a year.
"The growth rate is very
healthy," Ameerah Haq-Perera, of the United Nations Development Program
She added: "The reason you still have this high growth rate is
because of the increase in the service sector particularly, and foreign
investment, particularly in the garment sector.
"If there hadn't been a
shortage in the production of rice we would have seen an even higher growth
The communist regime which took over in 1975 began broad economic
restructuring four years later when it abandoned bids to set up Soviet-style
A macroeconomics reform program - dubbed the New
Economic Mechanism - was launched in 1986 and three years later a constitution
was adopted, guaranteeing domestic and foreign ownership of companies and
explicitly encouraging private business.
One diplomat said: "The
transition to a market economy has been much better than expected, they've
always been pragmatists - nationalists before communists. If something is not
working they give it up".
A UN official said: "In the short term the most
serious constraints are poor infrastructure and a shortage of human resources,
which the government is taking steps to remedy."
Growth is backed by
exports of timber, wood products and hydro-electricity. Another prospect is the
garment industry, which enjoys preferential access to the European
Timber and wood product exports earned $50 million last year
while the garment sector made $38 million and hydro power $15 million according
to government and World Bank estimates.
Logging quotas have been reduced
in recent years but illegal logging is still widespread.
log production quotas have stabilized at about 275,000 cubic meters a year,
about half as much again is being cut illegally, mostly for export to Thailand
the World Bank said.
The bank said: "The total annual cut [is] almost 50
percent above estimated sustainable timber removal rates."
warned that sedimentation of reservoirs and rivers as a result of deforestation
"pose a significant potential threat to hydro-power schemes and irrigation
The bank said: "The mountainous country has hydro-electric
power generation potential of 12,300 megawatts. Current capacity is 200
megawatts, most of which is exported to Thailand."
One diplomat said:
"The government plans to develop a generating capacity of 1,500 megawatts by the
year 2000 - Laos knows that in the long-term it can be a source of power for
very, very hungry markets in the region,"-Reuters