Financial crisis threatens Laos' economic growth
10-OCT-2008 Intellasia | tourthailand.org
Oct 10, 2008 - 7:00:00 AM
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The global economic crisis could prevent Laos from leaving the UN's list of least-developed countries by 2020 if economic growth does not significantly increase, Lao economists warn.
The current growth rate of 8% per year could be enough to remove Laos from the list, but the US credit crisis is affecting the world market and its long-term impact on Laos is uncertain.
This was the assessment of deputy minister of Planning and Investment Bounthavy Sisouphanthong, who was speaking yesterday at a two-day economic forum in Vientiane to follow up on the Third National Human Development Report.
The report was prepared by the United Nations Development Programme in 2006.
"We need to speed up economic growth because more global economic turmoil is possible. Our growth rate needs to be at least 8.5 or 9% annually," Bounthavy said.
The forum gathered representatives from government ministries and the UN in an attempt to devise practical solutions to ensure the continued growth of the Lao economy.
Bounthavy said the US credit crisis was not as serious as the Asian financial crisis of 1997 and 1998 in terms of possible impact on the Lao economy.
"The reason for this is that there are not many US investors in Laos and Lao exports to the US are small, whilst a large volume of our exports is garment products," he said.
He said the financial crisis of 1997 and 1998 was very serious for Laos because the majority of investors in Laos at that time were from Thailand. Thai investors withdrew most of their money from Laos to stave off the threat of bankruptcy.
Economists suggested a clear plan be outlined in each sector to address any further downturn in the global economy. A larger budget for the development of health and education remained a key priority.
Bounthavy said at present the economy was growing but the development disparity between rural and urban areas was a persistent problem. Unemployment and income generation for villagers remained a challenge.
Officials at the forum are focusing on four topics.
The first topic is the need to boost productivity and quality in commercial production to better integrate the country's economy with that of other countries in the region.
The second topic is improving efficiency in the agriculture sector.
"Our labour force is small but we use a lot of people in this sector. We will have to balance the use of our labour force to match the demands of economic growth," Bounthavy said.
He said a lack of risk taking and profit motive meant investment in agriculture was not as efficient as it could be.
"Investment in agriculture is similar to that in other sectors, where the main aim should be to trade and earn a profit. But the investment of our people in agriculture only achieves self-sufficiency at present."
He said the low use of technology in agriculture showed Laos lagged behind in industrialised agriculture development.
Third on the agenda is a discussion of possible ways to add value to naturally sourced products, such as in mining, while facilitating the growth of small and medium sized enterprises. The growth of these enterprises is to be encouraged because they can provide a strong foundation on which to build the country's economy. This could help minimise the impact of any global economic downturn.
The final item for discussion at the forum is the management of illegal migration from Laos, with a view to ensuring migration does not have an adverse economic effect.
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