Laos: At the Crossroads

Abstract

There was no diversion in 2007 from the policy directions set down by the Eighth Congress of the ruling Lao People's Revolutionary Party (LPRP) in March 2006. The Lao People's Democratic Republic will remain a one-party state with old-style, Soviet-era political institutions, while encouraging free enterprise and foreign investment. The outcome has been a remarkable political stability, and an impressive economic performance. The economy has been booming at over 7 per cent growth for the past two years, due largely to massive foreign investment in the development of hydroelectric power and gold and copper mining as well as a rapidly expanding tourism industry. According to the government's poverty reduction plans, the country, which now has a gross national income (GNI) per capita of approximately US$500, should by 2020 exit Least Developed Country (LDC) status ? or countries with a per capita income of a three-year average of less than US$750, and some other criteria ? and join the ranks of middle-income countries. So far, only two of the nearly fifty LDCs worldwide have managed to pass the threshold by leaving LDC status and moving on to a level whose lower limit of having a GNI per capita exceeding US$900 is required for obtaining the middle-income status: Botswana in 1994 and Cape Verde in 2007. For Laos to graduate in a similar manner, it would have to achieve a more even distribution of wealth, improve education, and, perhaps above all, take stern measures against corruption. With more money in circulation and more goods available in the markets ? combined with abysmally low salaries for civil servants ? it is hardly surprising that the World Bank and other international