connection with Thailand and Vietnam. These three areas have developed economic activities under individual economic relationships with these neighbor countries. The economy of Laos can not develop without friendly relations with neighboring countries. Also Vietnam has interests in promoting relations between Da Nang and Laos. This strategy for developing ties with neighboring countries is very important.

(2) Strategy 2: Towards “Formulating One Nation Economy”

The other strategy promotes the formation of a domestic economy. But there are difficulties in financing because the establishment of infrastructure throughout the whole country is extremely expensive. Actually Laos may not be able to decide on either strategy. However it is important that Lao PDR emphasizes the strengthening of relations with the neighbor countries first. Also, they should promote infrastructure within the country.

“Mitraphap Bridge” was opened in April 1994. This is a friendship bridge over Laos and Thailand. It is also one test of whether the “new age of cooperation and development” will come in Indochina after the achievement of Cambodian peace. But Laos is cautious regarding regional cooperation, because it may not gain benefits from this, while only Thailand gains big profits. Laos may be swallowed up by such capitalistic countries as Thailand. Laos needs more leverage in its relationship with neighboring countries. Also, Laos should make efforts to develop partners other than Thailand, and create a multi-dimension economic strategy.

## 4 Conclusion

(1) The economic reforms of Laos are a survival mechanism as a minor power country in Indochina. The problem is how to develop under the difficult conditions that geographical and structural bottlenecks have caused. Laos cannot develop without utilizing the power of its neighboring countries. An open-door policy is indispensable for Laos: the transition to a market economy is the only way to promote this strategy.

The speed of the reforms is fairly reasonable. Inflation was curbed and production increased. Electric power and logos have supported the economy even in the transition period. But from now on Laos has to create a long-term prospect for its manufacturing and agriculture sectors.

(2) Macro stabilization has been achieved, with the exception twin deficits. The budget is a most significant problem. The reform of state enterprises is needed by all means to reduce the budget deficits. The important thing is not only privatization of state enterprises but also achievement of international competitiveness.

(3) In addition, it is also important that Laos has a long-term development strategy. Besides a general open-door, a more specific trade strategy by items is needed. And it is necessary to protect these strategic domestic industries by setting up high import tariffs.

(4) “The separation of politics and economy” in Laos

Today the trend to stick to socialist thinking is losing ground in Laos. In addition, the crucial problem is not socialist thinking itself, but the national economy. The LPRP and the government as one body are struggling for international cooperation and economic development. It is generally supposed that Laos is learning from Vietnam about the transition to a market economy.

After the death of Mr. Kaysone and Mr. Poun, it is said that no “theorists” remain in