The government of Laos — one of the few remaining official communist states — began decentralising control and encouraging private enterprise in 1986.[citation needed] The results, starting from an extremely low base, were striking: growth averaged 6% in 1988-2004 except during the short drop caused by the Asian financial crisis beginning in 1997. Major urban centers have experienced the most growth. The economies of Vientiane, Luang Prabang and Savannakhet in particular have experienced significant booms in recent years. The Lao economy is heavily dependent on investment and trade with its larger and richer neighbors, Thailand, Vietnam, and, especially in the north, China. Pakxe has also experienced growth based on cross-border trade with Thailand and Vietnam.

Much of the country, however, lacks adequate infrastructure. Laos has no railways, although a short link to connect Vientiane with Thailand over the Thai-Lao Friendship Bridge is currently under construction. The major roads connecting the major urban centres, in particular Route 13 South, have been significantly upgraded in recent years, but villages far from major roads are accessible only through unpaved roads that may not be accessible year-round. There is limited external and internal telecommunication, particularly of the wire line sort, but mobile cellular phone use has become widespread in urban centres. In many rural areas electricity is unavailable or offered only during scheduled periods.
A ferryboat on the Nam Ou river. Rivers are an important means of transport in Laos.
A ferryboat on the Nam Ou river. Rivers are an important means of transport in Laos.


Subsistence agriculture still accounts for half of GDP and provides 80% of total employment. Laos has the lowest percentage of arable land and permanent crop land in the Greater Mekong Subregion.[9] Only 4.01% of Laos is arable land, and only 0.34% of the country is planted with permanent crops.[10] Rice dominates agriculture, with about 80% of the arable land area used for growing rice.[11] Approximately 77% of Lao farm households are self-sufficient in rice.[12] Through the development, release and widespread adoption of improved rice varieties, and through economic reforms, Lao PDR achieved a net balance of rice imports and exports for the first time in 1999.[13] Between 1990 and 2005, rice production increased from 1.5 million tons to 2.5 million tons [1] [2]: an average annual growth rate of more than 5%.[14] This increase in production has been valued at $8 million to $19 million per year.[13] Lao PDR may have the greatest number of rice varieties in the Greater Mekong Subregion. Since 1995 the Lao government has been working with the International Rice Research Institute (IRRI) to collect seed samples of each of the thousands of rice varieties found in Laos.[15]

The economy receives aid from the IMF and other international sources and from new foreign investment in food processing and mining, most notably of copper and gold. Tourism is the fastest-growing industry in the country. However, economic development in general is hampered by a serious case of brain drain. A 2005 World Bank study reported that 37% of educated Laotians lived abroad, putting the country in fifth place for worst brain drain.

In late 2004, Laos gained Normal Trade Relations status with the US, allowing Laos-based producers to face lower tariffs on their exports; this may help spur growth.

Labels: Economy of Laos