Laos is a landlocked country in Southeast Asia which originates from the ancient 14th century kingdom of Lang Xang. Since the fall of the Lang Xang Kingdom, Laos has continually been under control of outside forces. Historically Laos has not been given the chance to grow and prosper as an individual country. After Laos was granted sovereignty in 1953 the neutral country was caught up in the Vietnam War until 1975 and suffered from devastating air strikes and bomb drops. In 1975, Laos was taken under control by the communist party Pathet Lao, forming the Lao People’s Democratic Republic (Lao history).
Finally under its own control, the people’s democratic republic of Laos now has the chance to grow and prosper. Laos’ GDP experienced substantial growth rates during the years after the Vietnam War, peaking at fifteen percent in 1981. This has since settled down to an average of six percent throughout the nineties and the twenty first century. With this continual growth in GDP, the purchasing-power-parity per capita GDP was able to continuously increase. Per capita GDP grew from 362 international dollars in 1980 to over two thousand international dollars in 2009 (Graph 1).
But often during growth, the data is skewed as the rich become richer and the poor stay poor. This happened to Laos, and can be seen by looking at the income inequality in Laos as shown by the Gini coefficient. From 1992-93 the coefficient was 28. 6. Five years later from 1997-98 the coefficient was 35. 7. This is a 4. 4 percent growth rate in the coefficient, caused from the first four quintiles losing their portion of the income, and the top quintile experiencing a 2. 9 percent growth (Lengsavad, 2000). Over 6. 5 million people live in Laos.
According to the Social and Economic Developers Association of Laos, seventy-nine per cent of the population lives in rural mountainous and river regions, with the only twenty-one per cent living in urban areas. Officially, “Poverty is the lack of ability to fulfill basic human needs, such as: not having enough food [i. e. less than 2,100 calories per day/capita], lack of adequate clothing, not having permanent housing, not capable of meeting expenses for health care, not capable of meeting educational expenses for one’s self and other family members, and lack of access to transport routes” (Lengsavad, 2000, p. 0). Poverty is estimated at twenty-six percent, or 1. 65 million people (The World Factbook, 2009). To combat poverty in Laos, the government is promoting the modernization of agriculture sector to make the industry more productive and “ensure food security for all Lao people” (Lengsavad, 2000). Historically, Laos has been a relatively secluded country with its people farming to sustain living. Over recent history however, the Laos government is pushing forward efforts to reduce poverty and therefore increase the wellbeing of its people by becoming a market economy with the utilization of its natural resources.
Exports have expanded at a rate of ten percent from 2001-08 (AusAID, 2010). Macroeconomic stability in Laos is in part due to Laos’ involvement in the Association of Southeast Asian Nations (ASEAN), becoming a member in 1997. With their signed commitments, Laos is implementing and maintaining many beneficial policies on trade, taxation, interest rates, exchange rates and industrial policies. A high priority for Laos is the improvement of the financial sector, including an action plan for micro-credit (Lengsavad, 2000).
Although Laos’ health status is still unfavorable, the life expectancy at birth of Laos has grown from 50 years in the 1980’s to 62 years. This is due to the reduction and elimination of many diseases. Laos has been free of poliomyelitis since 2000, morality from malaria has fallen sixty percent in rural areas from 1996 to 2000, and other life-shortening diseases such as diphtheria and measles have declined. This is due to an increase in the access to clean water and latrines, as well as an increase in the number of health facilities (Lengsavad, 2000).
Education levels in Laos are considerably low, with fifteen percent of the villages without a primary school. In the rural northern region, ninety percent of schools do not reach grade 5, and forty percent of the children attend these schools. The women in Laos often suffer more than the men, with this being more prevalent in rural areas. A rural ethnic minority girl aged eighteen has an average of two years of schooling, while urban ethnic minorities average 8. 5 years (Lengsavad, 2000).
A strength of Laos comes with the opportunities ahead. Laos can look at models put forth by developed countries and model their development after those with the greatest results. The country will eventually develop, and the path they take is theirs to choose. A weakness of Laos is the country has been corrupt in the past, and by being a single-party state, there is not much the common people can to do to ensure an honest government. An opportunity of Laos is in the potential of their natural resources.
Laos is a landlocked country, but benefits from having a substantial portion of the Mekong River run through the country. By damming this river and selling the electricity to China, Vietnam, and Thailand, Laos is working towards becoming the “battery of South-East Asia” (Ong, 2007). Revenue from damming would be used to alleviate poverty. A threat to Laos is if foreign investors or countries see the potential in the Laotian economy and take the profits from the people for themselves.
A policy suggestion of mine would be for Laos to provide education to the country using the revenues from the increased trade. The returns of education provide an increase for both the well being of the people and the GDP of the country. Public education needs to be provided as a right to the people, with the foregone costs of sending a child to school reimbursed to the family. It is important Laos understands how these current costs provide a foundation as Laos enters into the world economy.
AusAID, Australian Government. (2010). Laos. Retrieved from http://www.ausaid.gov.au/country/country.cfm?CountryId=35
Lao history. Social and Economic Developers Association. (n.d.). Retrieved from http://seda-laos.org/ welcome/?page_id=4
Laos GDP – per capita (ppp). (2010, November 3). Retrieved from http://www.indexmundi.com/laos/gdp_per_capita_(ppp).html
Lengsavad, S. Lao People’s Democratic Republic. (2000). National growth and poverty eradication strategy. Retrieved from http://www.undplao.org/newsroom/publication/Ngpes/ Lao%20PDR%20-%20NGPES%20-%20Main%20Document.pdf
Ong, L. (2007, November 21). Laos plans a water-powered future. BBC. Retrieved from http://news.bbc.co.uk/2/hi/business/7104254.stm
The World Factbook. (2009). Washington, DC: Central Intelligence Agency. Retrieved from https://www.cia.gov/library/publications/the-world-factbook/index.html