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Economy of Laos

Laos is a poor, landlocked country with an inadequate infrastructure and a largely unskilled work force. The country's per capita income in 2010 was $986 (est.). Agriculture, mostly subsistence rice farming, dominates the economy, employing an estimated 75% of the population and producing 29% of GDP. Domestic savings are low, forcing Laos to rely heavily on foreign assistance and concessional loans as investment sources for economic development. In 2010, donor-funded programs accounted for approximately 8.5% of GDP and 90% of the government’s capital budget. In 2010, the country's foreign debt was estimated at $5.8 billion. Following its accession to power in 1975, the communist government imposed a harsh, Soviet-style command economy system until 1986, when the government announced its "new economic mechanism" (NEM). Initially small in scale, the NEM was expanded to include a range of reforms designed to create conditions conducive to private sector activity. Prices set by market forces replaced government-determined prices. Farmers were permitted to own land and sell crops on the open market. State firms were granted increased decision-making authority and lost most of their subsidies and pricing advantages. The government set the exchange rate close to real market levels, lifted trade barriers, replaced import barriers with tariffs, and gave private sector firms direct access to imports and credit. These economic reforms led to increased availability of goods and economic growth that has continued to the present day. The economy of Laos is essentially a free market system with active central planning by the government, similar to the Chinese and Vietnamese models. However, unlike China or Vietnam, Laos has negligible industrial capacity, a primitive and underproductive system of agriculture, and increasingly relies on its rich natural resources to earn much needed-foreign reserves. In particular, the hydropower, mining, precious metals, and timber sectors have attracted major investment from Thailand, Vietnam, and in the last decade, China. China is now the largest source of foreign direct investment (FDI) in Laos. The government relies heavily on foreign assistance for public investment, and despite escalating revenues from the natural resources sector, shows no signs of significantly reversing this trend. The seventh 5-year plan (2011-15) calls for a budget of U.S. $5 billion for public investment, U.S. $3.8 billion (76%) of which would come from foreign assistance. Tourism remains a bright spot of the Lao economy, offering real future potential, solid growth, and substantial job creation. International indices rate Laos poorly on transparency and ease of doing business. Endemic corruption and poorly developed commercial law continue to hamper economic development. Laos has begun the World Trade Organization accession process, with the intention of joining that organization as soon as possible. GDP (2010 est.): $6.9 billion. Per capita income (2010 est.): $986. GDP growth rate (2010 est.): 8.5%. Natural resources: Hydroelectric power, timber, and minerals. Agriculture (29% of GDP, 2011 est.): Primary products --glutinous rice, coffee, corn, sugarcane, vegetables, tobacco, ginger, water buffalo, pigs, cattle, poultry, sweet potatoes, cotton, tea, and peanuts. Industry (26.5% of GDP, 2011 est.): Primary types --copper, tin, gold, and gypsum mining; timber, electric power, agricultural processing, construction, garments, cement, tourism. Industrial growth rate (2009 est.): 4.8%. Services (2011 est.): 44.5% of GDP. Trade: Exports (2010 est.)--$1.950 billion: gold and copper, electricity, wood and wood products, garments, coffee and other agricultural products, rattan, and tin. Major markets --Thailand, Vietnam, China, Switzerland, United Kingdom, and Germany. Imports (2010 est.)--$2.258 billion. Major imports --fuel, food, consumer, goods, machinery and equipment, vehicles and spare parts. Major suppliers --Thailand, Vietnam, China, South Korea, and Belgium.

Geography of Laos

Location: Southeastern Asia, northeast of Thailand Map references: Southeast Asia Area: total area: 236,800 sq km land area: 230,800 sq km comparative area: slightly larger than Utah Land boundaries: total 5,083 km, Burma 235 km, Cambodia 541 km, China 423 km, Thailand 1,754 km, Vietnam 2,130 km Coastline: 0 km (landlocked) Maritime claims: none; landlocked International disputes: boundary dispute with Thailand Climate: tropical monsoon; rainy season (May to November); dry season (December to April) Terrain: mostly rugged mountains; some plains and plateaus Natural resources: timber, hydropower, gypsum, tin, gold, gemstones Land use: arable land: 4% permanent crops: 0% meadows and pastures: 3% forest and woodland: 58% other: 35% Irrigated land: 1,554 sq km (1992 est.) Environment: current issues: deforestation; soil erosion; a majority of the population does not have access to potable water natural hazards: floods, droughts, and blight international agreements: party to - Climate Change, Environmental Modification, Nuclear Test Ban; signed, but not ratified - Law of the Sea Note: landlocked

Government of Laos

The only legal political party is the Lao People's Revolutionary Party (LPRP). The head of state is President Choummaly Sayasone. The head of government is Prime Minister Thongsing Thammavong. Government policies are determined by the party through the all-powerful 11-member Politburo and the 61-member Central Committee. Important government decisions are vetted by the Politburo. Laos adopted its Constitution in 1991, amending it most recently in 2003. The National Assembly, which has added seats at every election, approves all new laws, although the executive branch retains the authority to issue binding decrees. The most recent elections took place in April 2011, when the National Assembly was expanded to 132 members. Laos has enacted a number of new laws in recent years, but the country is still governed largely through the issuance of decrees. A small-scale insurgency against the regime that continued since the end of the Indochina conflict has essentially ended. Past incidents included attacks in 2003 and 2004 against various types of land transportation and public markets. There were reports of clashes in 2005 and 2007. In late 2006 and 2007, more than 1,000 former fighters and family members were estimated to have surrendered to Lao authorities, and there were no credible reports of clashes in 2010 or 2011. The United States opposes any acts of violence against the Lao Government. Principal Government Officials President--Choummaly Sayasone Prime Minister--Bouasone Bouphavanh Ambassador to the U.S.--Seng Soukhathivong Permanent Representative to the UN--Kannika Phommachanh Laos maintains an embassy in the United States at 2222 S Street NW, Washington, D.C. 20009 (tel: 202-332-6416). Government Type: Communist state. Branches: Executive--president (head of state); Chairman, Council of Ministers (prime minister and head of government); nine-member Politburo; 49-member Central Committee. Legislative--109-seat National Assembly. Judicial--district, provincial, and a national Supreme Court. Political parties: Lao People's Revolutionary Party (LPRP)--only legal party. Administrative subdivisions: 16 provinces, one special region, and Vientiane prefecture. Flag: A red band at the top and bottom with a larger blue band between them; a large white circle is centered.

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History of Laos

Laos traces its first recorded history and its origins as a unified state to the emergence of the Kingdom of Lan Xang (literally, "million elephants") in 1353. Under the rule of King Fa Ngum, the wealthy and mighty kingdom covered much of what today is Thailand and Laos. His successors, especially King Setthathirat in the 16th century, helped establish Buddhism as the predominant religion of the country. By the 17th century, the kingdom of Lan Xang entered a period of decline marked by dynastic struggle and conflicts with its neighbors. In the late 18th century, the Siamese (Thai) established hegemony over much of what is now Laos. The region was divided into principalities centered on Luang Prabang in the north, Vientiane in the center, and Champassak in the south. Following its colonization of Vietnam, the French supplanted the Siamese and began to integrate all of Laos into the French empire. The Franco-Siamese treaty of 1907 defined the present Lao boundary with Thailand. During World War II, the Japanese occupied French Indochina, including Laos. King Sisavang Vong of Luang Prabang was induced to declare independence from France in 1945, just prior to Japan's surrender. During this period, nationalist sentiment grew. In September 1945, Vientiane and Champassak united with Luang Prabang to form an independent government under the Free Laos (Lao Issara) banner. The movement, however, was short-lived. By early 1946, French troops reoccupied the country and conferred limited autonomy on Laos following elections for a constituent assembly. During the first Indochina war between France and the communist movement in Vietnam, Prince Souphanouvong formed the Pathet Lao (Land of Laos) resistance organization committed to the communist struggle against colonialism. Laos was not granted full sovereignty until the French defeat by the Vietnamese and the subsequent Geneva peace conference in 1954. Elections were held in 1955, and the first coalition government, led by Prince Souvanna Phouma, was formed in 1957. The coalition government collapsed in 1958, amidst increased polarization of the political process. Rightist forces took over the government. In 1960, Kong Le, a paratroop captain, seized Vientiane in a coup and demanded formation of a neutralist government to end the fighting. The neutralist government, once again led by Souvanna Phouma, was not successful in holding power. Rightist forces under Gen. Phoumi Nosavan drove out the neutralist government from power later that same year. Subsequently, the neutralists allied themselves with the communist insurgents and began to receive support from the Soviet Union. Phoumi Nosavan's rightist regime received support from the U.S. A second Geneva conference, held in 1961-62, provided for the independence and neutrality of Laos. Soon after accord was reached, the signatories accused each other of violating the terms of the agreement, and with superpower support on both sides, the civil war soon resumed. Although Laos was to be neutral, a growing American and North Vietnamese military presence in the country increasingly drew Laos into the second Indochina war (1954-75). For nearly a decade, Laos was subjected to extremely heavy bombing as the U.S. sought to interdict the portion of the Ho Chi Minh Trail that passed through eastern Laos. Unexploded ordnance, particularly cluster munitions, remains a major problem. In 1972, the communist People's Party renamed itself the Lao People's Revolutionary Party (LPRP). It joined a new coalition government in Laos soon after the Vientiane cease-fire agreement in 1973. Nonetheless, the political struggle among communists, neutralists, and rightists continued. The fall of Saigon and Phnom Penh to communist forces in April 1975 hastened the decline of the coalition in Laos. Several months after these communist victories, the Pathet Lao entered Vientiane. On December 2, 1975, the king abdicated his throne and the communist Lao People's Democratic Republic (LPDR) was established. The new communist government imposed centralized economic decision-making and broad security measures, including control of the media and the arrest and incarceration of many members of the previous government and military in "re-education camps." These draconian policies and deteriorating economic conditions, along with government efforts to enforce political control, prompted an exodus of lowland Lao and ethnic Hmong from Laos. About 10% of the Lao population sought refugee status after 1975, many of whom resettled in third countries, including the United States. From 1975 to 1996, the U.S. resettled some 250,000 Lao refugees from Thailand, including 130,000 Hmong. The last major resettlement to the United States of about 15,000 Hmong from the Wat Tham Krabok camp was in 2004. Over time, the Lao Government closed the re-education camps and released most political prisoners. By the end of 1999, more than 28,900 Hmong and lowland Lao had voluntarily repatriated to Laos--3,500 from China and the rest from Thailand. The Office of the United Nations High Commissioner for Refugees (UNHCR) monitored returnees for a number of years and reported no evidence of systemic persecution or discrimination against returnees per se. UNHCR closed its Laos office at the end of 2001.

People of Laos

Laos' population was estimated at 6.5 million in early 2011, dispersed unevenly across the country. Most people live in valleys of the Mekong River and its tributaries. Vientiane prefecture, the capital and largest city, had about 799,000 residents in 2009. The country's population density was 27/sq. km. About half the country's people are ethnic Lao, the principal lowland inhabitants as well as the politically and culturally dominant group. The Lao are descended from the Tai people who began migrating southward from China in the first millennium A.D. Mountain tribes of Hmong-Yao, and Tibeto-Burman (Kor and Phounoy) as well as Tai ethno-linguistic heritage are found in northern Laos. Until recently, they were known as Lao Sung or highland Lao. In the central and southern mountains, Austro Asiatic (Mon-Khmer and Viet-Muong) tribes, formerly known as Lao Theung or mid-slope Lao, predominate. Some Vietnamese and Chinese minorities remain, particularly in the towns, but many left in two waves--after partial independence in the late 1940s and again after 1975. The predominant religion is Theravada Buddhism. Animism is common among the mountain tribes. Buddhism and spirit worship coexist easily. There also are small numbers of Christians and Muslims. The official and dominant language is Lao, a tonal language of the Tai linguistic group. Minorities speak an assortment of Mon-Khmer, Hmong-Yao, and Tibeto-Burman languages. French, once common in government and commerce, has declined in usage, while knowledge of English--the language of the Association of Southeast Asian Nations (ASEAN)--has increased in recent years. The government is encouraging officials and students to learn English. High school students are required to take either French or English; the majority today choose English. The government introduced English at the primary school level in 2010. Nationality: Noun and adjective --Lao (sing. and pl.). Population (2011 est., CIA World Factbook): 6.5 million. Annual population growth rate (2009 est.): 2.3%. Ethnic groups: Tai-Kadai language family (6 ethnic groups)--66.2%; Austro-Asiatic (Mon-Khmer and Viet-Muong) language family (30 ethnic groups)--22.8%; Hmong-Yao (2 ethnic groups)--7.4%; Tibeto-Burman (8 ethnic groups)--2.7%; other ethnic groups (including Vietnamese and Chinese) --0.9%. Religions: Buddhism --65%; Christianity --1.3%; others (principally animism, also Baha’i, and Islam) --33.7%. Languages: Lao (official), English, French, and various ethnic languages. Education: Literacy --69%. Health (2009): Infant mortality rate -77.82/1,000. Life expectancy (2009 est., World Bank)--65.4 years. Work force (3.691 million, 2010): Agriculture 75.1%; industry 5.5%; services 19.5%.
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