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Laos: Reading Marx, quoting Adam Smith

Published by The Straits Times, Singapore on 2004-10-25

WHEN most people - including Laotians themselves - think about the People's Democratic Republic of Laos, heart-warming thoughts rarely rise to the mind. It's among the 10-member Asean's four least developed countries, along with Cambodia, Myanmar and Vietnam. It's among just a handful of communist states in the world. It's among few states in this age of widening democracy to be controlled by an authoritarian party that proscribes all political opposition and, if critics are to be believed, it does awful things to dissenters.

But now there are an increasing number of reasons why Laos may, at long last, invite kinder thoughts from the outside world, and perhaps from its own citizenry.

Despite having suffered massive damage during the brutal years of the Vietnam War three decades ago when it became the most bombed country in history, Laos is welcoming tourists and foreign investors with great gusto - although such traffic is still relatively thin. And although Laos is the world's third biggest producer of opium, after Afghanistan and Myanmar, the government has accelerated efforts to persuade growers to switch to more conventional crop growing like sweet potatoes, corn and, of course, rice.

And here's the most astonishing thing of all: Laos, with a gross domestic product of US$2 billion, has become a full-fledged market economy, with its growth prospects among the best in South-east Asia, especially if the government sustains its economic liberalisation drive.

By adopting strict fiscal policies, inflation has been contained to a manageable two percent. Previously large state bureaucracies have been trimmed. The annual budget of US$600 million is now publicly unveiled and discussed in town hall-type meetings. Last year, Laos even attracted nearly US$200 million in foreign direct investment from Australia, Malaysia, Thailand, mostly for its mining enterprises, services industry and producing hydro-electricity. That figure is likely to double in 2004.

Indeed, traditionally tough-minded institutions such as the World Bank believe that Laos offers strong prospects for social stability, economic growth - indeed, even prosperity -and political cohesion in the region.

"The lesson that Laos may teach other desperately poor countries in Asia and elsewhere is simply this: if economic progress can be enhanced in Laos, it can be done anywhere," Mr Peter L. Stephens, Regional Communications Manager of the World Bank in Singapore, told The Straits Times yesterday. "The Bank believes that Laos is on the right track when it comes to generating economic development through a market economy.

Laos's economic prospects will undoubtedly be discussed when Asean holds a summit in the capital city of Vientiane late next month, perhaps in belated recognition that Laos, which joined the organisation in 1997, is deserving of more regional and world attention.
However, that attention is coming to Laos in more ways than one these days. Just yesterday (Friday), the United States State Department warned that terrorists may be planning to set off bombs during the Asean summit and in five of Laos's 16 provinces, Bolikhamxai, Khammouan, Savannakhet, Salavan and Champassak. Diplomats suggest that a rebel group known as the Committee for Independence and Democracy in Laos - which claimed responsibility for setting off a bomb that killed two people in the center of Vientiane on February 4 and a February 6 blast in the southern city of Savannakhet during a parley of Asean tourism ministers - may have issued threats.
The group has long blamed the government of Prime Minister Bounyang Vorachit of corruption mismanagement. Consisting of some members of the 250,000-strong Hmong ethnic group - which fled into Laos's high mountains after the Pathet Lao communist victory in 1975 - the rebels have said that such the bombings were a way to demand regime change and an end to Vietnamese influence in Laos.
Professor Grant Evans of the University of Hong Kong believes, however, that - the odd bombings aside - the rebels do not pose a serious threat to Laotian stability. Nor does he subscribe to Amnesty International's assertion last month (September) that the Laotian government was committing "war crimes" in a "genocidal campaign" against the Hmong.
"Genocide? My short answer is 'No!'" Professor Evans, who recently investigated the economic and human rights situation in Laos, said. "The government is authoritarian and undemocratic, but its policies towards the minorities are as even-handed as any other state in the region receiving World Bank aid."
That aid amounted last year to US$35.5 million in a loan from the International Development Association, the so-called "soft loan" arm of the Bank which frequently offers low or no loans to poor countries, especially those that emphasise private sector participation in economic development.
Now the World Bank's involvement with Laos is about to increase dramatically. That's because the Bank is close to completing an evaluation next month of a US$1.2 billion private sector hydroelectric project in the Mekong. Sources within the Bank say that the institution's top management and work on the project, known as Nam Theun 2 Power Project, will almost certainly approve the project may commence by early next year. It is aimed at generating 1,070 megawatts of power.
Why is the World Bank taking such interest in this hydroelectric project?

"Because it has the potential to make a major difference in a country, which appears trapped in poverty," Mr Stephens said. There are not many options for generating income. It comes down basically to timber or hydroelectricity. We are keen to do what we can to help Laos develop - sustainably and with respect for the environment. If Nam Theun 2 offers a ways to achieve this, we will support it; if not, we won't."

Mr Stephens said that Bank officials were particularly impressed by the fact that Laotian government representatives traveled earlier this year to Bangkok, Paris, Tokyo and Washington to seek out public feedback about the hydroelectric project. That was largely because, in recent years, left-leaning organisations based in the United States, have pressured the World Bank to cease and desist assisting dams and other mega projects that have the potential of displacing large numbers of indigenous people from their homes because of the flooding of areas caused by the diversion of river waters.

Indeed, the Laotians received predictable warnings from groups such as the International Rivers Network and the Environmental Defence Fund.

But World Bank research, as well as that conducted by independent consultants such as McKinsey & Company, shows that when Nam Theun 2 is fully completed in about five years, it will bring in annual revenues of US$13 million the first year of operation, and up to US$150 million by 2033.

That's because Thailand's Electricity Generating is already committed to buying 995 megawatts of the energy produced by Laos.

Singapore has been a leading and positive influence in Asean circles, especially in seeking to ensure that the poorer members of Asean don't "drop off the back," according to Mr Stephens. "Since Laos is very symbolic of poverty in Asean, of the need for external support to help a country grow and remain stable, and of the benefits of all countries," international organizations such as the Asian Development Bank the European Investment Bank and the Agence Francaise de Developpement, are financially supporting Nam Theun 2.

I asked Mr Stephens yesterday if the opposition from international civil society critics might derail the Laos project.

"There are foreign NGOs involved, and a number have played an invaluable role in
emphasising the environmental potential, the poverty reducing benefits and the
need for attention to anti-corruption measures," he said.

"Their role has been very valuable to the proposed project and to Laos. There are also a number of groups who seem disposed to criticize and oppose this project, no matter how it changes or improves, no matter what it may mean for some desperately poor people," Mr Stephens added. "These groups do not seem compelled to offer an alternative beyond talking about more discussions and more studies. That won't feed people who are malnourished. But protesting against a project like this does attract attention and help in fundraising efforts by some of these groups, so we certainly expect that opposition, no matter what we do."

Meanwhile, Laotian leaders keep focusing on economic development. They might read Marx, but they quote Adam Smith.

Pranay Gupte,
Senior Writer and Global-Affairs Columnist


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