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Economy and Management System in Laos

The long-term plan for economic development clearly identifies three regions to focus development: the north, the centre and the south. In the north, Xiengkhuang and Luangprabang are indicated as investment promotion areas for husbandry and tourism. Vientiane in the central region focuses on tourism and industry, whereas Khammuane focuses on electricity and processing industries. Savannakhet and Champasack in the south are areas focused on trading, agriculture and tourism.

Development has also been zoned so that ancient buildings and natural beauty spots receive development as tourist sites. Development of trade and industry will rely upon the promotion of foreign investment in industrial groups using local raw materials, such as mineral resources and electricity. Agricultural development focuses on agro-industrial and cereal crops.

Economic Development Planning in Laos

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The Laos's trading policy has varied from period to period according to economic policy. During the period 1975-1985, focus was made on centralized planning of economic policy. From 1985 until 1990, there was a change in economic policy with an emphasis on the role of marketing mechanisms in the country's economic development. The latest period, 1993-2000, has seen the adoption of the current plan for the long-term economic development of Laos under the policy of complete preparation for the 21st century. The period 1975-1985 was the first time the country stepped into socialism. The leadership of the Lao PDR tried to change society rapidly to be socialist. Meanwhile, the government also tried to strengthen its power to keep the system viable. This was in accordance with the ‘two duties of military strategy’which are the erection and protection of the country's security.

The Economy and Investment Opportunities in Laos

For more than 10 years after the alteration of both the political system and the title of the country to the Lao People's Democratic Republic in December 1975, Laos had no constitution. The Supreme People's Assembly gave approval in that year for the Lao PDR constitution, which was promulgated 15 August 1991.

The Lao constitution possesses three important features. First, the constitution is the result of Laotian unity in fighting for the recovery of independence. A provision stated that members of the People's Supreme Assembly, acting as the people's representative council, would automatically be discharged after the promulgation of the constitution.

Laos Economic Foundation

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Natural Resources

Laos has adopted the concept of its New Economic Mechanism as its policy on economic reform. The policy allows the application of a capitalistic system with the socialistic economy. The reason behind this adoption is the decision for Laos to develop its economy gradually under conditions that maintain decent living standards for its people as well as protect its national identity.

The following is an overview of the country's natural resources, which are the foundation of economic development.

Agriculture, Forestry and Livestock

Cultivated land covers only 8.000 square kilometers of the 80.000 square kilometers of potentially cultivable land. Rice growing accounts for 85% of the area planted. About 1.65 million tones of rice were produced in 1994 and 40% of the total output came from Savannakhet, Saravane and Champasak. Another portion was produced in the Vientiane Municipality.

Trade, Services, and Tourism in Laos

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Local Trade

Before the adoption of the "New Thinking" economic reform policy, the country's local trade was centralized. Decisions on manufacturing, wage rates and production structure were made entirely by the government.

Control over production by the agricultural sector has declined since the adoption of the policy. This led to the expansion of production. For example, livestock breeding was promoted as a new type of business.

The economy under the local trading system was encouraged. Improvements were made to the foreign exchange rate to make it more liberals. Government support was provided for certain aspects of production, and people were entitled to possess land.

Laos Industry and Handicrafts

Laos is promoting small and medium industries and handicrafts. These are processing industries, which add value to agricultural, and forestry products, industries producing consumer goods using local natural resources that reduce unnecessary imports. Such goods include traditional foods, clothes, vegetable oil, sugar, household appliances and construction equipment. Other manufacturing industries are geared for exports, especially the textiles industry, for which special import duty privileges have been granted for the import of raw materials and products imported specifically for exports production. Privileges also apply to the construction industry, such as for the construction of dams for electricity generation, the construction of transportation routes, communications and telecommunications-related construction and infrastructure-related industries that play a key role in the economic development of the country.

Laos Transportation

Transportation is a fundamental key to economic development. Lao has immense potential to develop itself as the land transportation hub of the region with careful planning, taking into account its pivotal position as the only Asian country with five borders, surrounded as it is by Thailand, Myanmar, China, Vietnam and Cambodia. As any international land transportation among other nations has to be conducted through Lao territory, and acknowledging the rapid economic growth of these countries, therefore, the future growth of the international transportation industry is assured.

Land Transportation

Laos Electricity and Energy

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Laos has more than thirteen tributaries that join the Mekong River, covering a distance of 1,500 kilometers. The rich soil of both mountainous and riverside areas accounts for 80% of the country's land mass, with rainfall never falling below 2,500 millimeters a year. This provides Laos with electricity generating capacity of not less than 18,000 megawatts.

With such plentiful natural resources, the Government of Laos set up a master plan to develop hydropower. Projects of the tributaries of the Mekong River cover 30 dams around the country that would generate hydroelectricity.

These dams are expected to enhance the country's hydroelectricity generation capacity to 8,520 megawatts. The current capacity stands at 220 megawatts only, most of which have been produced by the Nam Ngum Dam, located to the north of Vientiane, and the Se Set Dam in Saravane.

Laos Natural Resources

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Laos has adopted the concept of its New Economic Mechanism as its policy on economic reform. The policy allows the application of a capitalistic system with the socialistic economy. The reason behind this adoption is the decision for Laos to develop its economy gradually under conditions that maintain decent living standards for its people as well as protect its national identity.

The following is an overview of the country's natural resources, which are the foundation of economic development.

Agriculture, Forestry and Livestock

Cultivated land covers only 8.000 square kilometers of the 80.000 square kilometers of potentially cultivable land. Rice growing accounts for 85% of the area planted. About 1.65 million tones of rice were produced in 1994 and 40% of the total output came from Savannakhet, Saravane and Champasak. Another portion was produced in the Vientiane Municipality.

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