Laos in 1997: Into ASEAN

Abstract

Membership in ASEAN will have a long-term effect on the direction of Laos's economic development. Laos has been given until 2008 to meet ASEAN Free Trade Area (AFTA) requirements to reduce tariffs on most goods to below 5%. This should encourage both trade and investment but will force the government to introduce fiscal reforms to make up for the 20% of total revenue it currently derives from tariffs. Laos will also become more fully integrated with its ASEAN neighbors. Overland routes through Laos are seen as essential to increase trade between Thailand and Vietnam and between Thailand and southern China (Yunnan). Bridge and road construction are now priorities, with aid donors and international lending institutions concentrating on infrastructure development. ASEAN membership is already having an impact on Laos's foreign relations. Throughout the year a string of ASEAN heads of state, prime ministers, and foreign ministers visited Vientiane. President Suharto of Indonesia led the way in February, followed by Prime Minister Goh Chok Tong of Singapore in March, Thai Prime Minister Chavalit Youngchaiyudh in June, Vietnamese Prime Minister Vo Van Kiet in August, and President Fidel Ramos of the Philippines in October. Agreements on agriculture, health, narcotics control, and cultural exchange were signed. Singapore has opened an embassy in Vientiane, and Brunei is to follow suit.