From: tun@quark.SFSU.EDU (Coban Tun)
Subject: Laos achieves econimic gains but problems persist
Date: Wed, 11 Nov 92 16:41:43 PST
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RTw  11/10 0051  LAOS ACHIEVES ECONOMIC GAINS BUT PROBLEMS PERSIST

    By Rosario Liquicia
    VIENTIANE, Nov 10, Reuter - Laos, one of the world's poorest countries, has
made significant progress in restructuring its economy but lack of
infrastructure and skills have prevented it from accelerating the pace of
reforms, officials say.
    The shift from a centrally-planned system to a market economy has yielded
positive results, but the southeast Asian republic has to overcome basic
problems in order fully to exploit free market principles, they said.
    "There are constraints to reforms," Lao Deputy Prime Minister Khamphoui
Keoboualapha told foreign journalists on a recent visit to the landlocked
communist state wedged between China, Vietnam, Cambodia, Thailand and Burma.
    "We have no experience in macro-economic management. The qualifications of
our people are limited. That is the first obstacle," said Khamphoui, who is
also Minister of Finance.
    Western analysts agree the lack of technical expertise is a major constraint
to further development. Many of Laos's educated people fled when it came under
communist rule in 1975.
    "The problem is you have a perennial institutional under-development plus a
lack of skilled personnel in public administration and in the private sector,"
said one analyst.
    The government introduced market-style reforms in 1986 in a bid to reverse
the slide of its economy, one of the least developed in the world.
    Annual per capita income is $170, the lowest in Asia, according to the
Asian Development Bank's 1992 development outlook. It said 82 per cent of its
population is in rural areas and the country has an infant mortality rate of
108 per 1,000 births.
    The reforms include lifting restrictions on private sector commercial
activities, removal of subsidies and price controls and decentralisation of
decision-making affecting production.
    Sisivath Sisane, first vice minister of the Ministry of Economy, Planning
and Finance said the government wanted to create a good climate for investment
but it lacked the manpower, money and institutional infrastructure to do so.
    A Western diplomat, however, said it was not the lack of funding that
hobbled the economy but its low absorptive capacity.
    "Laos is over-aided. Donors give a lot of assistance but they can't use the
money," the diplomat said. "They have no expertise. If you want to develop,
you need a good civil service."
    Laos, with a population of 4.2 million, is the recipient of generous
financing from international donors, analysts say. Total disbursements averaged
$80 million a year from 1989 to 1991, according to one aid agency official.
    "The economy could not have grown without this assistance," an analyst
said.
    Among the major sources of funds are the World Bank, the Asian Development
Bank and the International Monetary Fund.
    Officials said assistance from multilateral donors and some bilateral
sources made up for the loss of financial aid from the former Soviet Union. From
1975, Moscow provided Laos with some $740 million worth of oil, machinery and
equipment.
    Yet despite the constraints, the Laotian economy has still managed to grow
over the past three years following its transition, officials say.
    Gross Domestic Product (GDP) -- the total value of goods and services
produced within an economy excluding income from abroad -- is forecast to grow
6.5 per cent in 1992 and up to seven per cent in 1993, compared with four per
cent in 1991.
    Inflation is expected to drop to seven per cent by the end of the year
from 10 per cent in 1991 and 17.7 per cent in 1990.
    "The government will continue with its open door policy to attract foreign
investors," Khamphoui said.
    Officials say they need to strengthen their institutional capabilities,
build roads, improve transportation, set up communications and power
facilities to woo foreign capital.
    They want to attract overseas investments into agribusiness, oil
exploration, mining and tourism services. For now they seem to be making a
pitch for concessional lending.
    "If we are to accelerate development, we need the assistance and
cooperation of international organisations," Khamphoui said.
 REUTER AM DT JS