Laos, a mountainous land-locked nation of about six million people, is making the transition to a market economy in the same manner that Vietnam followed the path laid even earlier by China.
Although it has been among the poorest nations in the world, the Lao Peoples’ Democratic Republic, as it is known, has made great headway in the battle to reduce the grinding poverty that afflict so many of its citizens.
Despite the relatively low starting point in per capita incomes, the Asian Development Bank expects Laos to be able to meet its Millennium Development Goals in income poverty reduction.
“However, some non-income targets related to basic education, maternal health, child nutrition and access to clean drinking water may be beyond reach,” it noted in a recent country review.
At the heart of the double-digit industry growth has been exports from the copper-gold mine owned by Australian-listed Oxiana, which is presently expanding output at its two mines in the country.
Oxiana expects to produce about 60,000 tonnes of copper and about 120,000 ounces of gold from its Sepon mine in Laos this year.
Mineral exports commenced at US$58 million in 2004 and had risen to US$216 million in 2005.
Economic growth accelerated to 7.3% last year to take average growth over the past five years to 6.5%.
“Robust growth over the period is largely attributable to industry, particularly to the development of hydropower projects and gold and copper mining,” according to the ADB.
Industry expanded by 13% last year to account for 31% of the economy, a gain of 10% in the past decade. Services grew by 5.5% and agriculture by 3.3%.
Foreign direct investment last year increased by 30% to US$650 million, driven by large investments such as the Nam Theung 2 hydroelectric project and mining.
The government’s 6th Socio-economic Development Plan (2006-2010) aims to attain annual GDP growth of 7.5% to 8% annually during the period with industry growing by about 14% annually.
As in PNG, about 80% of Laotians are farmers although arable land in the landlocked 236,800 sq km country – nearly half the size of PNG – only amounts to 4% of the landmass.
Nevertheless, agriculture and forestry is anticipated in the current five-year plan to grow by more than 3% annually with the services sector experiencing 8% growth.
Data from the World Bank showed that per capita income in Laos has risen from a mere US$280 in 2000 to US$430 in 2005.
The Laotian government is planning for per capita GDP to increase to between US$700 and US$750 by 2010.
By the end of the decade, average income levels in Laos would overtake PNG, even though the Laotian starting base at the start of the decade was around half the level in PNG.
On current plans the Laotian government is on track for its goal of graduating from the ranks of least developed countries to a middle income developing country by 2020.
One sign of the rapidly improving socio-economic situation is access to fixed line and mobile telephones, which has risen 12-fold from 10.1 subscribers per 1,000 people to 120.4 in a mere five-year period.
Life expectancy at birth for the average Laotian is only 55.7, slightly better than Papua New Guinea’s 56.4 years but well below the Asia-Pacific average of 70 years.
In the case of both Laos and PNG, life expectancy has increased by about two years in the past five years.
One of the prime keys to rapid economic growth has been the construction of the 1,070MW Nam Theung 2 hydroelectric project in central Laos.
Work commenced in 2004 with financial assistance from the World Bank and Asian Development Bank and the US$1.45 billion (K4.4 billion) project remains on schedule for completion in 2009.
The vital reservoir impoundment stage will take place in June next year.
About 93% of electricity will be exported to neighbouring Thailand with the remainder going to local consumers.
ADB estimates suggest that the hydroelectric project will generate about US$1.9 billion (K5.8 billion) in revenue for the government over a 25-year operating period.
It will generate US$30 million (K91.9 million) a year in the first 10 years, during which time project debt is paid down, and rise to around US$110 million (K337 million) a year from 2020 to 2034.
The project is being undertaken on a build-own-operate-transfer basis by a consortium owned by Electricte de France International (35%), Electricity Generating Public Company of Thailand (25%), Italian Thai Development Public Co of Thailand (15%) and the Laotian government (25%).
Following the concession period of 31 years, the project will be transferred free-of-charge to the Laos government.
The ADB said the project “has been designed with a suite of environmental and social mitigation measures to ensure that living standards of people affected by the project improve and that the largest biodiversity area in mainland Southeast Asia is better protected and preserved.”
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