Economic Reform And Structural Change In Laos

Abstract

The year 1988 marked a watershed in the tempo of reform in the Lao People's Democratic Republik (LPDR). Mid-way through the second five-year development plan (1986-90) of the LPDR, the government of the Lao People's Revolutionary Party (LPRP) introduced bold initiatives in the economy, international relations, and domestic politics. These reforms elaborate upon the approach initiated at the fourth party congress of 1986, when a decisive change was made to the centralized, bureaucratic approach to economic development planning. In its place are the beginnings of a new economic management system characterized by state enterprise autonomy and market incentives.1 Prior to 1986, ideological orthodoxy was reflected not only in a commitment to central planning but also in political isolation from the non-socialist world. Both of these tenets appear to have been abandoned. It is no coincidence that the reform process in Laos takes place alongside similar developments in Vietnam and the Soviet Union, with which Laos has close ties. Laos has experienced low productivity, weak industry growth and a lack of export diversification. This has been accentuated by a fall in the level of economic growth, which in retrospect makes the second five-year plan targets appear over-ambitious. The policy initiatives in 1988 are an acknowledgement of this poor economic performance and the role of policies based on the orthodox approach in this failure. The pace of political change in 1988 was set by two events: the February Plenary Session of the Supreme People's Assembly (SPA); and the extraordinary session of the SPA in April which promulgated bold new legislation. Both of these events will be discussed later.