inflation control. This success was the result of monetary policy. Further more, domestic capital should be increased through boosting the domestic saving ratio. $ ^{25} $

The three branches of the former central bank became independent as commercial banks in which the government invested 100 percent. The three banks were Bank Sethathirath, Bank Nakhoneloung and Banque pour le Commerce Exterieur Lao (BCEL); all deal in foreign exchange and specialize in the foreign trade sector. Joint Development Bank (JDB) is a commercial banks established under joint management between Thailand's private sector and the Bank of Laos. As for local banks, Phak Tai Bank exercises jurisdiction over the southern region, Lao Than Bank that exercise jurisdiction over the mid-south resign, and Alun May Bank controls the mid-east region. $ ^{26} $

## (4) Foreign Investment

Because of promotion of foreign investments, together with various investment promoting policies, foreign direct investments have increased steadily. The number of foreign investments that Laos permitted was 280 in the period from 1988 to 1992, the total amount of which was 491 million dollars. Thailand was at the top with 93 investments valued at 138 million dollars in value. USA was second, with 13 investments totalling 72 million dollars in value. This shows the large influence Thailand has on Laos. $ ^{27} $

Broken down by sectors, manufacturing led with 58, trade had 49, and textiles had 47. On a value basis, tourism took too honors with 107 million dollars, followed by manufacturing (64 million dollars) and trade (60 million dollars). Recently foreign investment in the garment sector is increasing rapidly, mainly from Taiwan, Hong Kong and Thailand, who have set up 29 garment factories, up from only three in 1990. But the amount of investment did not meet the expectations of Laos. $ ^{28} $ The investments have been stopped or have been discontinued owing to poorly enforced laws and a not-fully established infrastructure. $ ^{29} $

Garment exports reached 6,800 dollars in the first quarter of 1992, according to the Commerce Ministry estimations. At least ten more garment factories are planned. $ ^{30} $

## 3 -2 Lessons and Unfinished Agenda

3-2-1 Problems Attached to the Reform Programs

--- Slow Progress in Conquest of the Twin Deficits ---

## (1) Fiscal Side

Government total revenue was 7.9 billion kips in 1991, a 30 percent increase over the previous year, thanks to new taxes, more efficient tax collection and an increase in public utility fares. However this amount covered less than half the state's expenditures of nearly 18.3 billion kips. $ ^{31} $ A balanced budget is still far away. As a part of economic reform, a cut in the number of the government officials was carried out, but retirement payment and annuities pushed up wages and pay expenditures. If more drastic cuts of government officials go forward, it is estimated that unemployment will increase sharply because of the relative inability of the private sector to absorb these people. Social policy, like unemployment insurance, needs to be established. The deficit of current expenditures is expected to increase as well. The increasing deficit of current balance in the short-term is unavoidable, therefore the government must come up with a long-term fiscal plan endeavoring to balance the budget deficit. To tackle the structural impediments creating the budget deficit, drastic restructuring