had 15.6 thousand persons (0.8 percent), in transportation 15.6 thousand persons (0.8 percent), in trade 48.9 thousand persons (2.5 percent), and civil servants-public employees totalled 293.4 thousand persons (15 percent). The figures show that privatization has not yet progressed.

## 3 -1-2 Supplyside Reform

## (1) Price Liberalization

By government ordinance number 12, “Promotion of goods and currency circulation,” goods circulation within the country was liberalized. And by government ordinance number 14, “Price policy”, price control on goods and service was abolished, with the exception of logs and public utility.

## (2) Reform of State Enterprises (Privatization)

Privatization of state enterprises has been underway. By June 1992, 105 out of the listed 604 State Owned Enterprises (SOEs) have already been privatized in different degrees and forms, such as leases, sales, contracting to workers, jointventures etc.. However, only 13 SOEs were actually sold out, most of which were by foreign enterprises. The reason is that the domestic private sectors have neither capital nor technology, because the private sector had been excluded from individual activities since the revolution. In the privatization procedure there are two criticisms. One is that deficit enterprises are “selected” but not well performing enterprises; the other is corruption caused by insufficient evaluation of the asset liabilities situation and by unfair bids. A common but simplified assumption is that privatization solved out all the difficulties. However as GDP figures show the privatized enterprises have not yet produced good results, and have contributed little to the growth manufacturing and service sectors. $ ^{23} $

The government’s state enterprise privatization program also contributed to the strong rate of foreign investment. In 1993 two major state firms, Lao Brewery and the Soft Drink Company both drew in fresh equity from Thailand's Loxley group to the tune of more than 12 million dollars. Two state garment factories and a tannery were also partly sold to foreign investors for renovation and revival. One case which created problems during 1993 was that of state carrier Lao Aviation. The government moved to push out Del-Chang Co., the firm which had been given a contract to resuscitate and operate international services, but that left it with a Peking-controlled Hong Kong firm, China Travel Aviation Services Ltd, in the pilot's seat. The airline, operating both international and domestic services, was believed to be losing money heavily and suffering extensive internal pilferage of funds and materials.

But trying to attract new cash and management into the carrier raised another, increasingly prominent challenge to the government. Lao Aviation's foreign investors, as well as investors in the tourism area, were pressing the government to liberalize its process for granting visas to visitors. All were complaining of losing money because they could not get enough customers. Visitor arrivals had doubled in 1992 to 80,000 and appeared to be growing slightly from that level for 1993. $ ^{24} $

## (3) Monetary System Reform

Although the nominal interest rate (1 year term deposit) in January 1990 was as high as 36 percent, real interest rates were negative. But now real interest rates turned thanks to