Mountainous terrain and heavy annual rainfall give Laos considerable hydroelectric potential. The Mekong River and its tributaries in Laos have an estimated hydroelectric potential of between 18,000 and 22,000 megawatts, or roughly half that of the river as a whole. The remaining potential belongs to Cambodia and other riparian countries. Total installed capacity in 1991 was 212 megawatts, the majority of it hydroelectric, or only about 1 percent of the potential.

Production of hydroelectricity, the country's major export until 1987, expanded slowly throughout the 1980s, from 930 thousand megawatt-hours in 1980 to about 1.1 million megawatt-hours in 1989, an increase of about 17 percent. The majority of electricity produced--approximately 75 to 80 percent, as of 1992--is exported to Thailand, which has an agreement to purchase all surplus electricity. The remainder is supplied to power networks for domestic consumption. Through 1986 the sale of electricity to Thailand was the country's most important source of foreign exchange. Despite increased production, in 1987 hydroelectricity yielded its place as the principal export to wood products, because of the drought, which lowered water levels, and a reduction in the unit price of electricity to Thailand. By 1991 a new agreement between Laos and Thailand had raised the unit price of electric power.

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.

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 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.