tence of strong neighbors. Laos has few advantages for foreign investment.

## (6) Privatization

It is desired that criteria and procedure are transparent regarding the sale of state enterprises. The activity of the Privatization Committee should also increase the transparency as well as openness of its information, which will boost confidence in investment. It is important that competition should be promoted on the supply not only by privatization of state enterprises but also by new entries.

## (7) Capacity for Efficient Utilization of Foreign Assistance

With an improved relationship with the USA, loans from the IMF or the ADB have been carried out smoothly. In June 1992, IMF admitted the third Structural Adjustment Loan in 1992 (around 8 million dollars) to support the economic reforms toward the control of inflation. The ADB announced that an industrial development capital loan equivalent to 3 million dollars will be provided in the period from 1993 to 96. $ ^{34} $

A crucial issue today is capacity of efficient utilization of foreign assistance. This capacity consists of the financial situation and administrative ability. Laos is lacking in both. Ministry of Foreign Affairs, Ministry of Finance and Ministry of Planning and Cooperation share responsibility for foreign assistance. The division of labor is as follows: The Ministry of Foreign Affairs is in charge of requests of assistance as a whole. The Ministry of Finance is dealing with accepting bi-national assistance, and The Ministry of Planning and Cooperation is in charge of accepting multi-national assistance. $ ^{35} $ But the lack of human power in the government is becoming a serious problem in each Ministry, which restricts efficient utilization of foreign capital. The government needs to formulate a human resources development plan, and implement it quickly. $ ^{36} $

## (8) Improvement of Administrative Structure

The central government organization of Laos is too enormous in size, too excessive in the number of officials, and functions are excessively duplicated. Also division of labor is not clear. Laos government wants to reduce the number of the government officials from 200,000 to 70,000 but it is difficult for the dismissed 130,000 persons to find jobs. Dismissal of government officials also means a big loss of the supporters of the LPRP, because most of the government officials are LPRP's supporters. $ ^{37} $

## (9) External Policy

Economic cooperation among ASEAN, Laos and Vietnam will contribute to the economic development within this region. A larger ASEAN that includes the Indochina countries expands its regional market. Countries within this region will make profits from production capacity increases and expansion of trade because of the differences in development stages. Most of the ASEAN countries export consumer goods that Indochina countries need. Conversely, The Indochina countries can provide raw materials. In addition, The ASEAN countries will be able to carry out foreign direct investment and technology transfers that are necessary for Laos. $ ^{38} $

## 3 -2-2 Basic Problems to be worked out

--- Insufficient Basic Conditions for Social and Economic Development, and Relationship with Neighbors ---