VIENTIANE - It was an unusually hot November day in Vientiane as 30,000 people assembled

in the capital's That Luang Square to pay their last respects to the late president

Kaysone Phomvihane.

Old comrades and political foes gathered for the funeral. General-Secretary of the

Vietnamese Communist Party, Do Moui, Heng Samrin, honorary president of the Cambodian

People's Party, senior North Korean, Chinese and Cuban officials attended. Also present

were ministers from countries of the Association of South East Asian Nations, former

enemies of Kaysone's communist regime.

Kaysone had led the Lao Peo-ple's Democratic Republic since the communist victory

in 1975 toppled the 600-year-old royal dynasty. His death marked a further shift

in the Indochinese political brotherhood carved out during decades of national liberation

struggle and cold war hostility.

But despite the significance, the period following Kaysone's death appears to have

been business as usual in this small land-locked country of four million people.

Dec. 2 celebrations marking the communist takeover saw the annual crackdown in Vientiane.

Police and Lao Youth Union cadres patrolled the streets in force, stopping motorists

for identification and arresting prostitutes, pimps and other elements deemed undesirable

by the authorities.

A heavy security presence continued up to the Dec. 20 elections for the new National

Assembly, the third since the ruling Lao People's Revolutionary Party (LPRP) abolished

the old constitution in 1975.

At a press conference on election day, Kaysone's successor to the presidency, 78-year-old

Nouhak Phoumsavan ruled out any post-poll political shifts. "We will continue

to implement constantly the internal policies of the government so as to turn into

reality the policies of His Excellency President Kaysone Phomvihane," he said.

Appearances, however, can be deceptive. Despite his reputation as a hard-liner, Kaysone

was above all a pragmatist, a trait characteristic of most of the LPRP. Over the

last four years the party has engineered a gradual political retreat from Marxism

and adapted to the changed circumstances by adopting the "Chinese model"-liberalizing

the economy to buy off potential dissent, while maintaining the existing political

structure.

Laos' communists have in fact been experimenting with market reforms for many years.

With the economy in a state of near collapse following the LPRP's own "Great

Leap Forward" in the mid-seventies, as early as 1979, Soviet-style collectivization

was abandoned and limited private enterprise allowed.

This was gradually extended throughout the eighties, culminating in the introduction

of the "New Economic Mechanism" in mid-1989, a set of far-reaching reforms

including cut-backs in lending to state enterprises, greater efforts to encourage

foreign investment, and widespread privatization.

These economic reforms can claim some limited success. Foreign economists estimate

that GDP in Laos grew 3.1 percent in 1991. Productivity rose, and the exchange rate

stabilized. In the four years since Vientiane introduced its Foreign Investment Code,

the government has issued 230 investment licenses, worth about US$350 million, mainly

to Asian companies. The International Monetary Fund, Asian Development Bank, UN agencies

and other donors have stepped in to fill the gaps left by the drying up of Soviet

aid.

Now there are more motorbikes and cars on the roads in Vientiane, and many young

Lao sport foreign designer clothes and fashionable haircuts that over a decade ago

would have landed them in re-education camps. New businesses and restaurants are

opening up at a rapid rate and during the day the city hums with the noise of a multitude

of construction projects.

The adoption of the Chinese model has not been in name only. Vientiane and Beijing,

who had previously fallen out over the former's support of the Vietnamese invasion

of Cambodia, have engaged in a rapid rapprochement. Chinese technical advisors have

flooded into Laos, and the two countries have conducted a steady stream of party,

economic and military exchanges.

This shift has coincided with improvements in two other diplomatic problem areas:

relations with Thailand and with the United States.

In January last year, Kaysone, who rarely travelled outside of Laos and the Eastern

bloc, visited Thailand as a guest of the Thai King. Thailand is now Laos's single

largest foreign investor, and most commentators expect this to continue, if not increase

with the completion of the Australian-funded bridge over the Mekong river between

the two countries in April 1993.

Laos-American ties, for years derailed by on going U.S. claims of MIAs remaining

in Laos, have also improved. Last year the U.S. upgraded its relations with the Lao

Government to ambassadorial level. There are also rumors that USAID, remembered by

many senior members of the Lao government as a front for American intelligence activities

during the war, is poised to be re-admitted to the country.

The big loser in this equation is Vietnam. Despite constant Lao pronouncements of

the importance of ties with Vietnam, in reality the relationship is in deep trouble.

Given its relative weakness in the region, Laos has repeatedly found its destiny

decided by the actions of the larger countries around it. Thus with the crumbling

of the Soviet bloc, it is not surprising that the Lao leadership is moving away from

its long- standing Vietnamese ally towards China and Thailand. Lao authorities are

also said to be displeased with the number of Vietnamese migrants in Laos, and the

increase of illegal logging by Vietnamese timber companies on Lao soil.

There has also been a slight loosening up on the domestic political front. More foreigners

have been allowed into the country, and all but a few of the re-education camps into

which thousands of Lao were sent after the communist takeover have been closed down.

Consistently ruled out has been any challenge to the one-party system. Proof of this

came during the recent elections. Although the choice available to voters was greater

than previously-in Vientiane prefecture, the country's most densely populated area,

voters had to elect 11 out of a slate of 18 candidates-all candidates still had to

be vetted by the authorities, and were drawn almost totally from the higher ranks

of the civil service, the Party, and its mass organizations.

But perestroika without glasnost is a difficult balancing act to maintain. The growing

availability of consumer items such as television sets has enabled increasing numbers

of Lao households to tune into images of the outside world through Thai TV. This

is helping to create a strata of disaffected young people whose visual exposure to

the lures of consumer capitalism is frustrated by the lack of opportunities provided

by Laos' underdeveloped economy. Crime and government corruption is also increasing.

The greatest threat to the government is the gradual return of many of the Lao who

fled the country in the closing stages of the war against the Americans. 300,000

people, some 10 percent of the population, left during this time. Over half of these

went to Western countries like France and the United States. The government needs

the skills and capital they bring with them, but is worried that many returnees will

not be content to restrict their energies to the economic arena.

According to one longtime NGO worker in Laos, "These fears have been heightened

in the wake of last May's pro-democracy uprising in Bangkok, which received very

little coverage in the official Lao media, and the key role which Thailand's growing

middle class played in this and subsequent agitation."

The remaining refugees, including large numbers of Hmong tribespeople who fought

Ameri-ca's secret war against the communist guerrillas, escaped to refugee camps

in Thailand. The authorities are concerned that these people are being repatriated

only to become foot soldiers in an anti-government cause.

Remnants of the insurgency, operating under a number of organizational titles, pose

little military threat to Vientiane. Over 2,000 defected to the authorities in 1992,

and those who remain are isolated, deeply factionalized, and as much concerned with

fighting over the spoils of opium production and illegal logging as they are in organizing

a political opposition.

On the surface, the pressures pulling at LPRP's rule manifests itself in what can

best be described as a form of political schizophrenia. At the same time as economic

reforms open up the country, the party leadership is retreating into almost xenophobic

rhetoric about the danger that foreign bad elements pose to the country.

But again, the difference between rhetoric and reality needs to be examined. The

LPRP's leaders know that the process of opening up is irreversible and few expect

any replay of Eastern European-style events in the immediate future. The military

is still firmly behind the government and there is no organized opposition. Nor would

Laos's neighbors relish the possibility of political instability disrupting their

economic activities in the country.

Given the age of the country's present rulers-Nouhak is 78 and most other high ranking

LPRP members are similarly in their late seventies-a more fundamental transition

has to occur at some stage. But, as in the past, pragmatic necessity, not ideology,

will be the main factor deciding when and how this happens.