Cambodia Laos - International University of Japan · Cambodia Laos Our quarterly Country Report on Cambodia and Laos analyses current trends. This annual Country Profile provides

COUNTRY PROFILE

Cambodia

LaosOur quarterly Country Report on Cambodia and Laosanalyses current trends. This annual Country Profileprovides background political and economic information.

1998-99The Economist Intelligence Unit15 Regent Street, London SW1Y 4LRUnited Kingdom

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ISSN 1364-3525

Comparative economic indicators, 1997

0 2 4 6 8 10

Vietnam

Singapore

Malaysia

Laos (a)

Indonesia

Myanmar (Burma)

Cambodia

Thailand

Gross domestic product% change, year on year

(a) 1996. Sources: EIU estimates; national sources.

0 5 10 15 20 25 30

Myanmar (Burma)

Laos

Cambodia (a)

Indonesia

Vietnam

Thailand

Malaysia

Singapore

Consumer prices% change, year on year

(a) Average year-on-year rate for the fourth quarter. Sources: EIU estimates; national sources.

0 1,000 2,000 3,000 4,000 5,000

Singapore

Malaysia

Thailand

Indonesia

Laos (a)

Vietnam

Cambodia (a)

Myanmar (Burma) (b)

Gross domestic product per head$

(a) 1996. (b) At free-market exchange rate. Sources: EIU estimates; national sources.

31,00031,00031,00031,00031,00031,00031,00031,00031,00031,00031,00031,00031,000

0 40 80 120 160 200 240

Indonesia

Thailand

Singapore

Malaysia

Vietnam

Myanmar (Burma) (a)

Cambodia (b)

Laos

Gross domestic product$ bn

(a) At free-market exchenge rate. (b) 1996. Sources: EIU estimates; national sources.

EIU Country Profile 1998-99 © The Economist Intelligence Unit Limited 1998

April 18th 1998 Contents

Cambodia

4 Basic data

5 Political background5 Historical background9 Constitution and institutions

10 Political forces12 International relations and defence

13 The economy13 Economic structure14 Economic policy16 Economic performance17 Regional trends

17 Resources17 Population18 Education19 Health19 Natural resources

20 Economic infrastructure20 Transport and communications22 Energy provision23 Financial services23 Other services

24 Production24 Industry25 Mining and semi-processing25 Agriculture, fishing and forestry28 Construction

28 The external sector28 Merchandise trade30 Invisibles and the current account30 Capital flows and foreign debt32 Foreign reserves and the exchange rate

33 Appendices33 Sources of information34 Reference tables34 Government finances34 Money supply and credit35 Gross domestic product

1

© The Economist Intelligence Unit Limited 1998 EIU Country Profile 1998-99

35 Gross domestic product by expenditure36 Gross domestic product by sector36 Consumer prices37 Population estimates37 Transport statistics37 National energy statistics37 Tourism statistics38 Main industrial production38 Agriculture, livestock, fishery & forestry production39 Exports39 Imports40 Main imports and exports40 Main trading partners41 Balance of payments42 Balance of payments, IMF data42 Net official development assistance43 External debt43 Foreign reserves43 Exchange rate

Laos

44 Basic data

45 Political background45 Historical background46 Constitution and institutions47 Political forces48 International relations and defence

49 The economy49 Economic structure50 Economic policy53 Economic performance54 Regional trends

55 Resources55 Population56 Education57 Health57 Natural resources

57 Economic infrastructure57 Transport and communications59 Energy provision60 Financial services62 Other services

2


62 Production62 Industry63 Mining and semi-processing63 Agriculture and forestry64 Construction

65 The external sector65 Merchandise trade66 Invisibles and the current account66 Capital flows and foreign debt67 Foreign reserves and the exchange rate

69 Appendices69 Sources of information71 Reference tables71 Government finances71 Money supply72 Gross domestic product72 Gross domestic product by sector72 Prices73 Population73 Labour force73 National energy statistics74 Transport statistics74 Tourism statistics74 Paddy production and yields75 Principal non-rice crops75 Livestock75 Forestry output76 Physical output of selected industrial goods76 Mining and quarrying77 Main exports77 Main imports78 Balance of payments, national estimates79 Balance of payments, IMF data79 Net official development assistance80 External debt80 Foreign reserves80 Exchange rate

3


Cambodia

Basic data

Land area 181,035 sq km

Population 11m (EIU estimate for 1997)

Main towns Population in ’000

Phnom Penh 691.0 (mid-1993 official estimate)Battambang 573.9 (mid-1993 official estimate)

Climate Tropical; rainy season, May-October; dry season, November-April

Weather in Phnom Penh Hottest months, March-April, 27°C average daily temperature (daily maxi-mums of 32-40°C); coldest month, January, 25°C average daily temperature;wettest month, October, 256 mm average rainfall; driest month, January, 8 mmaverage rainfall

Language Khmer

Measures Metric system. Local measures include:

1 tao=15 kg1 thang=40 litres (20-22 kg paddy)1 hap=60 kg1 king (or ray)=0.16 ha1 chi=3.75 g1 damloeng=37.5 g

Currency Riel introduced in March 1980. Average exchange rate in 1997 CR2,946.3:$1;early April 1998 CR3,580:$1

Time 7 hours ahead of GMT

Public holidays January 9th (National Day), April (Cambodian New Year), April 17th (Victoryover American Imperialism Day), May 1st (Labour Day), May 20th (Day ofHatred), September 22nd (Feast of the Ancestors), November 9th(Independence Day)

4 Cambodia: Basic data


Political background

Historical background

In the early ninth century rival Khmer principalities in the Mekong Delta gaveway to a highly centralised empire based at Angkor. After a period of politicaldecline Angkor was sacked in 1431 by the Thai kingdom of Sukothai, and bythe end of the 18th century the territory of the old Angkorian empire had beengreatly reduced.

The French seize control In the mid-19th century, as his kingdom came under threat from its Thai andVietnamese neighbours, the Khmer monarch, Ang Duong, asked the Frenchgovernment for protection. He was succeeded by his son, King Norodom, whosigned a treaty of protection with France in 1863. The treaty granted Francecontrol over Cambodia’s foreign policy, and a permanent French resident-general was established at the Cambodian royal court. In 1884 a second treatywas forced on King Norodom, establishing French colonial rule, and in 1887Cambodia was fully incorporated into the Indochinese Union. The colonialadministration of Indochina gave priority to the economic development ofsouthern Vietnam, and by 1945 Cambodia still had no modern industry.

King Sihanouk securesindependence

The French colonial government was ousted by the Japanese in 1945, and inCambodia a Khmer government, under the young king, Norodom Sihanouk,was installed in its place. King Sihanouk became alarmed at the anti-royalisttendencies of the movement and arranged for the French to return to power in1946, but later requested full independence. Faced with defeat in Vietnam,France acceded to King Sihanouk’s request in 1953, and an agreement wasratified the following year.

In 1955, in the run-up to elections that had been arranged as part of the Frenchdecolonisation process, King Sihanouk abdicated the throne to lead his ownparty at the polls. (He retained the title of Prince Sihanouk until 1993.) Hispolitical vehicle, the Sangkum Reastr Niyum (People’s Socialist Community),trounced all the other parties in the elections, including the Democrats (whohad won the first parliamentary election in 1948) and the Pracheachon(People’s) Party, an electoral front for the communists. For the next 15 yearsPrince Sihanouk dominated the country’s political life, his international androyal prestige allowing him to survive challenges from both the political rightand the left.

The Khmer Rouge takespower

However, in the final years of the Vietnam war Prince Sihanouk was accused byhis own generals of collaborating with Vietnam and destroying the nationaleconomy. A parliamentary vote against him was quickly followed by a coupd’état in 1970 led by the prime minister, Lieutenant-General Lon Nol. Themonarchy was abolished and a Khmer republic was proclaimed; Lon Nol waselected president in 1972. The Lon Nol regime was opposed by a coalition, ledby Prince Sihanouk, which included the underground Communist Party ofKampuchea (CPK), or Khmer Rouge, led by Pol Pot. The country rapidlydescended into civil war. The Lon Nol regime soon began to crumble, despite

Cambodia: Historical background 5


massive US military and economic assistance in the fight against the KhmerRouge, including the six-month saturation-bombing of rural Cambodia in1973. On April 1st 1975 Lon Nol was flown to Hawaii; the capital fell to theKhmer Rouge on April 17th.

Following the Khmer Rouge victory, Prince Sihanouk was quickly sidelined.Cambodia was renamed Democratic Kampuchea and proclaimed a worker-peasant revolutionary state under a new constitution promulgated in 1976.The National Assembly was merely a rubber-stamp legislature; ultimate powerlay in the hands of Pol Pot’s secretive CPK. Advocating economic developmentbased on self-sufficiency, the regime sought to isolate Cambodia from foreigninfluences, abolished money, and forced most of the urban population intolarge-scale rural co-operatives or industrial workcamps. The strategy was a cata-strophic failure. Economic chaos resulted in widespread starvation, while theregime carried out brutal purges of suspected “counter-revolutionaries”. Estimatessuggest that between 1m and 2m people were killed under the CPK regime.

The Vietnamese invasion— The Khmer Rouge regime pursued a strategy of confrontation with Vietnam.Diplomatic relations were severed in 1977 and Vietnam invaded Cambodia inDecember 1978. Pol Pot’s forces were quickly pushed back to the far west, andVietnam installed a government headed by the newly created KampucheanPeople’s Revolutionary Party (KPRP), led by Khmer Rouge defectors. The newgovernment renamed the country the People’s Republic of Kampuchea (PRK).

—is resisted by a broadcoalition

These developments led to the formation of non-communist resistance move-ments, including the Khmer People’s National Liberation Front (KPNLF), later tobecome the Buddhist Liberal Democratic Party, and the National United Front foran Independent, Neutral, Peaceful and Co-operative Cambodia (known by itsFrench acronym, FUNCINPEC), led by Prince Sihanouk. In 1982 FUNCINPEC andthe KPNLF joined forces to fight alongside the Khmer Rouge against the PRKgovernment. Throughout most of the 1980s neither side gained the upper hand.

A peace accord is signedin 1991—

In 1987 the Soviet Union, which had supported the PRK government, began towithdraw its assistance and to push for a negotiated settlement. Little progresswas made until early 1990, when the five permanent members of the UNSecurity Council began to negotiate a settlement. The Soviet Union persuadedHanoi and Phnom Penh to accept a limited UN role in supervising elections,designed to settle the matter democratically. This paved the way for the Parispeace agreement of October 1991. The KPRP was renamed the CambodianPeople’s Party (CPP), and the country was renamed the State of Cambodia(SOC). In February 1992 the UN Security Council approved a massivepeacekeeping operation, to be implemented by the UN Transitional Authorityin Cambodia (UNTAC).

—but the uneasy coalitionformed after the 1993

election—

The Khmer Rouge refused to disarm or to participate in the election, and thecampaign was marred by the intimidation and murder of members of rivalpolitical parties. However, the election went ahead in May 1993, and 20 partiestook part. FUNCINPEC, led by Prince Sihanouk’s son, Prince NorodomRanariddh, won by a small margin, securing 45.5% of the vote. The CPP camesecond with 38.2%. The only other parties to win seats were the Buddhist

6 Cambodia: Historical background


Liberal Democratic Party (BLDP) and the National Liberation Movement ofCambodia (known as MOLINAKA), which had broken away from FUNCINPEC.

FUNCINPEC was forced to share power with its former battlefield enemy, theCPP, because the CPP threatened not to recognise the result. In October 1993 acoalition government comprising FUNCINPEC, the CPP and the BLDP wasformed. Two co-prime ministers—Prince Ranariddh of FUNCINPEC and HunSen of the CPP—were appointed.

—gives way to newalliances

Relations between Hun Sen and Prince Ranariddh and their followers werenever good. In 1996 and early 1997 tensions between FUNCINPEC and the CPPincreased as both parties manoeuvred in advance of the planned 1998 localand national elections. In January FUNCINPEC joined forces with three otherparties to form the National United Front (NUF), which comprised the oppos-ition Khmer Nation Party (KNP), led by a former finance minister, Sam Rainsy;a faction of the BLDP; and the small Khmer Neutral Party (which does not haveany seats in the National Assembly). Meanwhile the CPP joined forces witharound ten small parties, including the BLDP faction led by the informationminister, Ieng Mouly, and MOLINAKA. These efforts were designed to deliverextra votes in the election scheduled for 1998.

Important recent events

November 1995: The former finance and economy minister, Sam Rainsy, forms theopposition KNP. The new party is not legally recognised. August 1996: Ieng Sary, former right-hand man of Pol Pot, defects from theKhmer Rouge along with 2,000-3,000 troops. September 1996: Ieng Sary receives a royal pardon and forms the DemocraticNational United Movement.January 1997: The NUF, comprising FUNCINPEC, the KNP, one faction of the BLDPand the Khmer Neutral Party, is formed. March 1997: The opposition KNP is the target of a grenade attack at a rally inPhnom Penh. The CPP is widely believed to be responsible.July 1997: Forces loyal to Hun Sen take over Phnom Penh. Prince Ranariddh andmany others flee the country. Pro-FUNCINPEC forces are driven back to the north.The Association of South-East Asian Nations (ASEAN) decides to delay Cambodia’sadmission to the grouping. Some Western countries freeze aid to Cambodia.The four parties of the NUF form the Union of Cambodian Democrats (UCD).December 1997: The national election date is postponed from May to July 26th1998 because of inadequate preparations.March 1998: Prince Ranariddh is tried in his absence and given a 35-year prisonsentence. He is then pardoned by King Sihanouk.April 1998: Leader of the hardline Khmer Rouge, Pol Pot, dies.

Hun Sen seizes power— In early 1997 a number of confrontations occurred between armed militia andother troops loyal to either the CPP or FUNCINPEC. Efforts to calm tensionswere ultimately unsuccessful. On July 7th-8th the second prime minister, HunSen, gained control of Phnom Penh after two days of fighting between CPP andFUNCINPEC troops. Just before the fighting broke out, Prince Ranariddh fled toFrance. Many other FUNCINPEC supporters, and members of other parties

Cambodia: Historical background 7


opposed to the CPP, also fled abroad. In early 1998 clashes continued in thenorth-west along the border with Thailand between royalist forces and pro-CPPtroops.

—and tries to legitimisehis regime—

Following his coup Hun Sen attempted to win some legitimacy for his regime.He maintained the coalition set-up, calling on those in FUNCINPEC willing toco-operate to appoint a successor to Prince Ranariddh. In July the FUNCINPECforeign minister, Ung Huot, replaced the ousted prince as co-prime minister.Hun Sen also pledged to hold the national election due in 1998, although thedate was put back from May to July 26th (see Constitution and institutions).

—and to sideline PrinceRanariddh

During late 1997 and early 1998 international donors stressed that aid forCambodia would not resume unless opposition politicians who had fled duringthe coup—including Prince Ranariddh—were able to take part in the election.Many opposition politicians have returned, including the leader of the KhmerNation Party, Sam Rainsy. However, Hun Sen demanded that, if PrinceRanariddh returned, he would have to face trial on charges of weapons smug-gling and negotiating with the Khmer Rouge. In late February a breakthroughcame when Hun Sen signalled his acceptance of a Japanese-brokered planunder which the prince would be tried in absentia and then pardoned by theking. In March Prince Ranariddh was tried in his absence, and sentenced to atotal of 35-years’ imprisonment. In late March he was duly granted a pardon byKing Sihanouk—at the request of Hun Sen—and returned briefly to Cambodia.

The election is scheduledfor July 1998—

In December 1997 the National Assembly voted to put back the election datefrom May to July 26th, as the government judged it did not have enough timeto complete the necessary preparations, such as voter registration. This resultedfrom delays in preparing crucial election legislation. The most controversialparts of the election legislation, such as those dealing with the National Elec-tion Commission, which is required to adjudicate in the event of a dispute,were passed by parliament only in November 1997.

Election preparations

July 1997: Hun Sen pledges to hold the election.October 1997: Legislation on political parties is passed by the National Assembly.November 1997: Legislation dealing with the National Election Commission ispassed.December 1997: The National Assembly votes to postpone the election until July26th 1998.

—but much work remainsto be done

The government still faces many hurdles in organising and financing the elec-tion, which is expected to cost $21m. The government estimates that it can payfor 30-40% of this, and in January 1998 international financial support for theelection was offered by several donors (for example, the European Unionpledged $11.5m). However, these funds were made conditional on the electionbeing free and fair.

8 Cambodia: Historical background


The opposition partiesface internal divisions and

continued harassment

Following the coup the four parties of the NUF announced the formation of theUnion of Cambodian Democrats (UCD), in opposition to Hun Sen. The fourparties were: FUNCINPEC, the faction of the BLDP led by Son Sann, the KNPand the tiny Khmer Neutral Party (led by Bel Hour). Many MPs from theseparties fled Cambodia following the coup, but most trickled back in late 1997and early 1998. Although key figures such as Sam Rainsy were able to conductpolitical activities such as meetings and marches, these parties continued toface intimidation and restricted access to the media. They are also riven byfactionalism (see Political forces). Hence with or without Prince Ranariddh’sparticipation, the CPP is likely to retain its hold on power after the election.There is also a possibility that the opposition will boycott the election.

Constitution and institutions

The co-premiership mayend after the next election

Since a new constitution came into force in September 1993, Cambodia hasbeen ruled by two joint prime ministers. According to Article 138 of the con-stitution, this is a temporary measure that will lapse when the government’sterm ends in 1998. For the time being the system has been kept intact, despitethe coup, by the appointment of Ung Huot in place of Prince Ranariddh.

The influence of themonarchy has declined

The 1993 constitution states that the country is a constitutional monarchy.The king is responsible for appointing the prime minister and approves thecabinet chosen by the prime minister. King Norodom Sihanouk’s influencebegan to wane when his health started to fail, and the ousting of his son—theformer co-prime minister, Prince Ranariddh—has further eroded his influenceover political developments in Cambodia. Rumours that King Sihanouk plansto abdicate in order to play a more active political role have surfaced peri-odically. In 1997 the king confirmed that he was considering abdicating butsaid that he would not do so before 2000 and that he would “never stand” inthe 1998 election. The constitution states that, when the king dies, his succes-sor is to be chosen by the Throne Council within seven days.

The security apparatus isdivided

The CPP has for long dominated the powerful defence and interior ministries.The police and the military have also been divided along party political lines.Since Hun Sen’s seizure of power the CPP has extended its influence both ingovernment and the security apparatus, and CPP-controlled forces are strongerthan those loyal to FUNCINPEC.

The role of the NationalAssembly

The constitution invests exclusive legislative power in the National Assembly,which is forbidden from delegating power to any other organisation or individ-ual (Article 90). Parliament cannot be dissolved before its five-year term hasexpired, unless the government has been dismissed twice within 12 months. Itsfive-year term can be extended by one year at a time on the recommendationof the king and subject to the approval of a two-thirds majority of the NationalAssembly, if national security is deemed to be threatened. Legislation can onlybe passed by an absolute majority of the votes of all members of parliament.

Despite the absence of many FUNCINPEC MPs, the National Assembly has notyet been reduced to a rubber-stamping institution.

Cambodia: Constitution and institutions 9


The judiciary is notindependent

The judiciary is dominated by CPP loyalists. Since Prince Ranariddh’s oustingin mid-1997, the UN’s special representative for human rights in Cambodia,Thomas Hammarberg, has drawn attention to the judiciary’s lack of neutrality.According to the Supreme Council of Magistracy (SCM) Law of 1994, an SCMshould be formed to appoint, punish or dismiss judges at all levels. However,the constitution prevents MPs from holding judicial positions, and in 1994 fiveof those who—by virtue of the offices held—expected to join the SCM wereMPs, resulting in a stalemate. FUNCINPEC wanted the SCM Law to beamended to allow the king to appoint the Supreme Court president, but inApril 1997 the CPP refused to let Chan Sok resign from the position, which hehad held since the days of the SOC government. Hence the CPP controls boththe higher and the lower branches of the judiciary.

Political forces

FUNCINPEC is in disarray— Since the 1993 election FUNCINPEC has been riven by factionalism, and inApril 1997 a number of party members called for FUNCINPEC’s president, thefirst prime minister Prince Ranariddh, to be sacked. The breakaway group, ledby Ung Phan, held its own congress in early June, electing the governor of SiemReap, Tuon Chhay, president. The coup, led by Hun Sen, has left FUNCINPECin an even weaker position, and the appointment of Ung Huot as replacementfor Prince Ranariddh as prime minister has further complicated the leadershipissue. Some FUNCINPEC MPs have chosen to throw in their lot with the CPP,while others have fled to Thailand or been killed; as a result FUNCINPEC nolonger has a majority in the National Assembly. In late 1997 and early 1998 anumber of FUNCINPEC politicians returned from abroad, but it is unlikely thatthe party will be able to regain its previous strength.

—and the CPP too facesinternal divisions

The CPP is headed by its chairman, Chea Sim, while the second prime minister,Hun Sen, is deputy chairman. There has frequently been speculation that HunSen’s position in the party is insecure. This speculation intensified followingHun Sen’s ousting of Prince Ranariddh in mid-1997. Chea Sim and another topCPP member, the co-interior minister, Sar Kheng, are believed to be moremoderate than Hun Sen and to have been critical of his seizure of power.

The BLDP has split andtwo new parties have been

formed

The BLDP (which was formed by the KPNLF) originated as part of the oppos-ition to the Vietnamese-installed government. Never an influential force, itsplit in 1995. One faction, led by the information minister, Ieng Mouly, sup-ports the CPP. In January 1998 Ieng Mouly announced the formation of a newparty, the Buddhist Liberal Party (BLP).

The core of the original BLDP, led by Son Sann, allied itself with FUNCINPECand joined the UCD. In mid-March 1998 Son Sann resigned as party leader inorder to be able to take up a place on the proposed Constitutional Council. Hewas replaced as party head by his son, Son Soubert, and the faction of the partywas renamed the Khmer Buddhist Liberal Democratic Party (KBLDP).

The KNP suffersharassment

Many of the 20 parties that contested the 1993 election have now ceased toexist. However, the KNP, which was founded in November 1995 by the former

10 Cambodia: Political forces


finance and economy minister and one-time member of FUNCINPEC,Sam Rainsy, has become a prominent opposition movement. Because of itsoutspokenness, the KNP has faced severe intimidation. This included a grenadeattack on a peaceful protest in March 1997, in which 16 people were killed andmore than 100 injured. Shortly before Hun Sen’s takeover, Sam Rainsy wentabroad. He returned to Cambodia in November 1997 and has been activelycampaigning since. However, the KNP was denied permission to register as alegal political party, prompting a change of name to the Sam Rainsy Party. Theparty has not been immune to factionalism, and a breakaway group has beenformed.

The Khmer Rouge suffersdefections—

The Khmer Rouge has steadily lost resources and influence during the 1990s. InJune 1994 it was banned by the government, and the political wing of thegroup retreated to the mountains in Preah Vihear province in the far west ofthe country. There it established the Provisional Government of NationalUnion and Salvation (PGNUS), headed by the organisation’s president, KhieuSamphan. The government’s policy of enticing followers of the Khmer Rougeto defect proved very successful: best estimates suggest that the number of theguerrillas fell from around 10,000 in 1993 to less than 6,000 in 1996. The groupsuffered a further blow in August 1996, when Pol Pot’s right-hand man, IengSary, defected with an estimated 2,000-3,000 troops. Ieng Sary formed theDemocratic National United Movement (DNUM). By late 1997 the DNUMseemed to be moving closer to Hun Sen, having earlier appeared to becultivating FUNCINPEC. However, the DNUM will not contest the electionand its future political role is unclear.

Main political figures

Hun Sen: Vice-chairman of the CPP and the second prime minister since 1993. Tookcontrol of Phnom Penh by force in July 1997.Sar Kheng: Joint interior minister and deputy prime minister. Influential within theCPP.Prince Norodom Ranariddh: Son of King Norodom Sihanouk, head of FUNCINPECand appointed first prime minister in 1993. Ousted by Hun Sen in July 1997.Ung Huot: FUNCINPEC foreign minister. Appointed as a co-prime minister,replacing Prince Ranariddh, by a rump of FUNCINPEC in July 1997.Lieutenant-General Neak Bounchay: Prince Ranariddh’s most senior militarycommander. He escaped the coup to lead FUNCINPEC troops against the CPP andhas continued to hold out on the north-west border. Sam Rainsy: Former FUNCINPEC finance and economy minister, founder of theKhmer Nation Party. Popular at the grass-roots level.King Norodom Sihanouk: After abdicating in 1955 to lead his own political party,he was returned to the throne in 1993. His powers are now limited by theconstitution. In poor health.

—and splits beforePol Pol dies

In June 1997 the remaining Khmer Rouge hardliners, led by Ta Mok and KhieuSamphan, turned on Pol Pot after he had ordered the killing of another KhmerRouge leader, Son Sen, and his family on suspicion of opening negotiationswith the government. In July the Khmer Rouge tried Pol Pot and sentenced

Cambodia: Political forces 11


him to life imprisonment. Calls for Pol Pot to be extradited to face an inter-national trial for genocide gained pace, but in April 1998 Pol Pot was declaredto have died.

The hardline Khmer Rouge rump suffered further defections in March-April1998, apparently losing control of its northern base at Anlong Veng. It ismilitarily weak and politically marginalised.

International relations and defence

Troubled relations withThailand and Vietnam

Relations with Thailand have improved in recent years, after Phnom Penhaccepted that Bangkok had severed ties with the Khmer Rouge. Attention hasshifted instead to settling outstanding territorial disputes and developing com-mercial relations. However, there are tensions along the shared border con-tinue, as recent fighting between pro-FUNCINPEC and pro-CPP troops hasfrom time to time spilled across into Thailand territory.

Relations with Vietnam, which were soured by the Vietnamese invasion in1978 and the subsequent decade-long occupation, have also proved vulnerableto border disputes and problems over the status and treatment of ethnicVietnamese living in Cambodia. However, relations have become somewhateasier to manage since Hun Sen, who is pro-Vietnamese, took over.

ASEAN delaysCambodia’s entry

Cambodia was given observer status in the Association of South-East AsianNations (ASEAN) in 1995, and on May 31st 1997 it was announced that itwould become a full member of the association at the annual ministerial meet-ing in Kuala Lumpur the following July. However, following the coup by HunSen, ASEAN decided to delay Cambodia’s admission to the group. Since thenthe regional grouping has said that it is willing to reconsider Cambodia’s entryonce a free and fair election has taken place.

Relations with China areimproving—

Relations with China have changed dramatically since the Paris peace agree-ment was signed in 1991. Beijing has distanced itself from the Khmer Rouge,which it supported politically and militarily in the 1970s and 1980s, and hasdeclared its backing for the Phnom Penh government. In 1996 the Chinesegovernment reversed its earlier position, deciding to extend non-lethal militaryassistance to the Cambodian government. As an illustration of these changes,China indicated after Hun Sen’s takeover in July 1997 that it had few problemswith the new incumbent despite his close association with Vietnam. Mean-while, Chinese-Cambodian commercial ties are growing in importance.

—but Western supportremains conditional

The international donor community has pledged around $500m per year toassist in Cambodia’s reconstruction since 1993. However, relations with thedonor community have been strained. In November 1996 the IMF suspendedits structural adjustment facility pending clarification by the government ofthe implications of its forestry policy for the budget. When Hun Sen took over,the US, Germany, the IMF and the World Bank all suspended aid, althoughJapan, Australia and China did not. Donors such as the US and the multi-laterals are not considering resuming aid until after the election at the earliest.

12 Cambodia: International relations and defence


Hopes fade ofstreamlining the army

On paper the Royal Cambodian Armed Forces (RCAF) number some 140,000(including an army of 84,000), but a much smaller number are believed to becarrying out military duties. It has been common practice for senior officers todraw the pay of so-called ghost soldiers, thus inflating the official figures. Thegovernment had been aiming to trim the size of the armed forces to 60,000 by2000, but continued fighting in the north-west has put a halt to retrenchmentplans.

After the coup the CPP was left in control of the bulk of the armed forces.FUNCINPEC troops were estimated at a few thousand at most, with a similarnumber for the Khmer Rouge. The Khmer Rouge is now divided into two mainfactions: those loyal to the breakaway leader, Ieng Sary; and the group whichturned on Pol Pot in June 1997, led by Ta Mok and Khieu Samphan. In late1997 Ieng Sary appeared to align himself with Hun Sen.

The economy

Economic structure

Main economic indicators, 1997

Real GDP growth (%) 2.0

Consumer price inflation (%; annual av) 9.1a

Current-account balance ($ m) –297.8b

Foreign debt ($ m) 2,111.0

Exchange rate (CR:$; annual av) 2,946.3

Population (m) 11.0

a Average year-on-year rate for the 4th quarter. b 1996.

Sources: Official estimates; World Bank, Global Development Finance; IMF, International Financial Statistics; EIU.

Agriculturedominates GDP—

Agriculture dominates the economy, contributing almost 43% of constantprice GDP in 1996. Cambodia’s single most important commodity, rice,accounted for nearly one-third of total agricultural output and almost 14% oftotal GDP in 1996. Rubber and other crops (such as jute) together accounted for24% of agricultural output in 1996, with livestock accounting for 29%. Fishingand forestry each contributed under 10% of agricultural output and less than4% of GDP. (Reference table 5 provides a breakdown of GDP by sector; Refer-ence table 12 gives data on agricultural output.)

—but industry andservices have led growth

The industrial and services sectors account for a growing share of GDP. In 1996industry (comprising mining and quarrying, manufacturing, electricity, waterand construction) accounted for an estimated 20% of total GDP, up from 15%in 1991, while services accounted for 37%. The manufacturing sector’s contrib-ution to GDP remained fairly constant, at around 7-8% of GDP, in 1991-95.The mining and construction sectors led industrial output growth in 1996.Data for 1997 are not yet available. (See Reference table 3 for overall GDP andReference table 5 for contributions to GDP by sector.)

Cambodia: Economic structure 13


Cambodia faces afinancing shortfall

According to Asian Development Bank (ADB) figures, gross fixed domesticinvestment has grown strongly since 1990, reaching 19.8% of current-priceGDP in 1996, compared with 9.4% of GDP in 1991. The private sector accountsfor nearly 70% of domestic investment. The national savings rate stood at 5.7%of GNP in 1996. However, a substantial gap remains between domestic savingand investment; Cambodia therefore remains heavily dependent on foreigncapital inflows—which have largely dried up since mid-1997, leaving thecountry facing problems funding its budget deficit and external accounts. (SeeReference table 4 for historical expenditure-based GDP figures.)

Reliable figures for the geographical distribution of economic activity are notavailable. However, Phnom Penh and the southern seaport of Sihanoukville areimportant economic centres.

Economic policy

Central planning meetswith little success—

When the Vietnamese-backed government took power in 1979, it inherited adevastated economy from the retreating Khmer Rouge. The new governmentwanted to established a more effective, centrally planned economy. To this endannual production targets were set and efforts made to collectivise agriculture.However, this proved unpopular, and implementation was erratic. Industryshowed little sign of recovery.

—in response to reformsinitiated in 1985—

The first steps towards market-oriented reforms began at the Fifth Congress ofthe Kampuchean People’s Revolutionary Party (KPRP) in 1985, when formalrecognition was extended to the private sector. In 1986 the government aban-doned the collectivisation of agriculture and started to encourage privatehousehold production. The reform process was broadened in 1989, when farm-ers were permitted to sell surplus produce on the open market, although mini-mum state procurement prices were maintained. Official procurement of foodcommodities was finally eliminated in 1992.

State-owned enterprises were theoretically made financially autonomous in1989, although the government continued to rely on revenue from state firms.Privatisation was permitted, and some state companies were sold to privateinvestors or recapitalised through joint ventures. However, in practice thegovernment has preferred to try to improve state-sector efficiency by leasingassets to the private sector on a temporary basis.

—including trade andinvestment liberalisation

Reform of the external sector began in 1998, when the deepwater port ofSihanoukville was opened to international shipping. Private trading companieswere permitted in 1989, and quantitative restrictions on imports and importand export licences were abolished for most products. As part of this moreoutward-looking policy efforts were made to attract foreign direct investment(FDI). A new liberal foreign investment law was passed in August 1994, includ-ing tax incentives for investments in infrastructure, energy and labour-intensiveprojects. The authorities now want to promote investment in low-technologylight industries.

14 Cambodia: Economic policy


Key economic policy developments

1985: The government extends formal recognition to the private sector.1986: Collectivisation of agriculture is abandoned.1989: A foreign investment law is passed.1993: The Organic Budget Law is passed, placing responsibility for all revenuecollection and expenditure in the hands of the central Treasury.1994: The IMF approves a three-year enhanced structural adjustment facility (ESAF).A new foreign investment law is approved.1995: Privatisation regulations are approved and a privatisation commission isestablished.1996: A central bank law is enacted, strengthening the autonomy of the NationalBank of Cambodia.1997: The IMF withholds ESAF financing when Cambodia fails to improvebudgetary management.

Revenues have beenhard hit—

Disruption to the 1997 budget (for the fiscal year beginning January 1st 1997)caused by the fighting in July 1997 and the subsequent loss of aid and slow-down in economic growth was substantial. Revenue collection fell by 11%(compared with a targeted 19.4% increase). In 1996 the deficit was estimated at7.2% of GDP, and will have widened further in 1997.

—and so the governmenthopes to cut expenditure—

Anticipating that such difficulties will continue, the 1998 budget has targeteda 3.8% reduction in expenditure compared with 1997 at CR1.43trn ($419m). Asin previous years the largest portion (just under 20%) of expenditure is reservedfor defence and the real figure may be even higher. (See Reference table 1 forhistorical data on government finances.)

—and broaden therevenue base—

The government remains heavily dependent on revenue from customs duties,but efforts are being made to broaden the revenue base. Tougher penalties fortax evasion were introduced in 1997. Further plans were outlined in a new FiscalLaw which came into effect in 1998. Reforms will focus on the following areas:

• some existing taxes will be raised; and

• the government may impose new taxes on goods and services, includingrubber products, electricity, oil, cars, pharmaceuticals, wood products, ceramicsand glass.

—but fiscal controlremains weak

Nevertheless, administrative weakness will hamper the government’s ability toboost revenue collection. In addition, Cambodia remains dependent on exter-nal financing of the budget. The loss of aid in 1997 will place severe strains ongovernment financing.

Money supply growthhas slowed

After rising by 40.4% year on year in 1996, growth in M2 slowed sharply in1997, rising by 16.6% year on year. This may reflect the tendency of savers tokeep their money outside the formal financial system at times of politicaluncertainty. The National Bank of Cambodia (the central bank) has a limitedability to influence monetary developments, partly because of the high level of“dollarisation” and the small formal banking system. For example, in 1997

Cambodia: Economic policy 15


foreign currency deposits accounted for 63% of total M2, and 98% of quasimoney (time, savings and foreign-currency deposits).

Domestic interest rates have been completely liberalised, and reserve require-ments are being introduced. (See Reference table 2 for historical data on themoney supply.)

ASEAN membership wouldrequire further trade

liberalisation

In July 1997 the Association of South-East Asian Nations (ASEAN) decided todelay Cambodia’s membership of the group (see Political background). ASEANmembership, when it goes ahead, will entail further trade liberalisation asCambodia eventually joins the ASEAN Free-Trade Area (AFTA). Cambodia islikely to be given ten years to reduce tariffs on designated products to between0% and 5%.

In 1996 Cambodia secured Most Favoured Nation (MFN) status from both theUS and the EU. This was followed in May 1997 by the award of GeneralisedSystem of Preferences (GSP) privileges from the US. Cambodia became anobserver member of the World Trade Organisation (WTO) in 1995, and hopesto become a full member.

Policy towards foreign investment

The Law on Investment of the Kingdom of Cambodia, passed in August 1994, coversforeign and domestic investment. It encourages investment in a range of sectors,including export-oriented projects, tourism, agro-industry, infrastructure, energy andmining. Restrictions on foreign investment apply in law, accountancy, and certainareas of transport, construction and import-export. The investment law offers anumber of guarantees to foreign investors, including allowing them to remit foreigncurrencies abroad. Incentives are also available, such as corporate income tax of 9%and tax holidays of up to eight years.

Economic performance

Growth slows sharplyin 1997

According to official estimates, GDP growth slowed sharply in 1997 to 2%,compared with 6.5% in 1996. The main cause of the slowdown was disruptioncaused by fighting in July which resulted in a loss of both aid and investment.Industrial output, which grew by 13.3% in 1996, is thought to have recordedslower growth as a result of disruption to retail and external trade, whileconstruction, services and tourism all suffered as a result of a loss of businessconfidence. The regional financial crisis also contributed to the economicdownturn, curtailing investment and demand for exports from elsewhere inAsia.

Agriculture is still the key to growth in Cambodia. Because of inadequateirrigation and a lack of pesticides the country’s agriculture is highly vulnerable.In 1997 inadequate rainfall reduced the rice harvest, constraining agriculturalsector growth, although it is expected to exceed the previous year’s 1.8%.

16 Cambodia: Economic performance


Gross domestic product(% real change)

Average1996 1992-96

GDP 6.5 5.9

Agriculture 1.8 1.8

Industry 13.3 11.9

Services 8.8 8.5

Regional comparisonsLaos 6.9 7.0Thailand 6.7 8.1Vietnam 9.5 8.9Source: World Bank, Cambodia: Progress in Recovery and Reform, 1997; Asian Development Bank, Outlook 1997-98.

Inflation has eased The inflation rate averaged 7.9% in 1997, compared with an annual average of5.2% in 1996 (based on full-year IFS data). The government quotes the averageyear-on-year rate for the fourth quarter as its inflation rate for a given year: thisstood at 9.1% in the last quarter of 1997, almost unchanged from 9% in 1996.Prices climbed sharply in the wake of the July coup as disruption to retail tradeand panic-buying led to shortages of food and other goods. Inflation averaged16.5% year on year in July-September, before easing in the last quarter of theyear. The government’s extremely weak budgetary position following the lossof aid and investment has increased the danger that it will revert to printingmoney to finance the budget deficit, which would further fuel inflation. (SeeReference table 6 for inflation trends.)

Regional trends

The CPP is politicallystrong in the provinces—

The Kampuchean People’s Revolutionary Party (KPRP), which was later re-named the Cambodian People’s Party (CPP), established a strong grip on pro-vincial administrations during its period in power from 1979 to 1993. The CPPretains considerable influence at the provincial level. In 1997 the majority ofdistrict-level posts remained in CPP hands.

—but central governmentcontrol of the economy

is patchy

Central government control over Cambodia’s peripheral regions is generallyweak. The various factions of the Khmer Rouge still control some logging andmining activity along the border with Thailand. Budgetary control is furtherweakened by widespread smuggling. Efforts to strengthen central control havehad only limited success. The lack of central control over the budget—notablyover revenue raised from logging—has frequently strained relations with the IMF.

Resources

Population

The population ispredominantly rural—

Cambodia’s first and only population census was carried out in 1962 and gavea figure of 5.7m. Subsequent estimates of the size and structure of the popul-ation are based on assumptions of birth and mortality rates. Based on a UN

Cambodia: Regional trends 17


Population Fund (UNFPA) and a Cambodian government survey concluded inDecember 1996, the population was estimated at about 11m at end-1997.

Around 85% of the population lives in rural areas, according to 1993 UNFPAfigures. The largest cities are Phnom Penh, which had a population of 691,000in mid-1993, according to the Ministry of Planning (although it could be ashigh as 1m, according to the UNFPA), followed by Battambang and Si-hanoukville, both of which are substantially smaller. Total population densityis low, averaging 61 people per sq km on the basis of the 1997 populationestimate, although concentrations are higher in the lowland areas.

—and very young The most recent official figures from the National Institute of Statistics estimatethat 47% of the population was under 15 years of age in 1993. Those aged over65 accounted for only 3% of the population. The Asian Development Bank(ADB) estimates for 1996 confirm that almost 45% of the population was under15 years of age. The existence of a very young population suggests that futurepopulation growth rates will be high. (Reference table 7 provides populationdata for 1993-97.)

Age structure of population, 1996Age range

(% of total)

Age group 0-14 44.915-64 52.565+ 2.6

Total population (m) 10.7Source: Asian Development Bank, Key Indicators of Developing Asian and Pacific Countries, 1997.

The population isethnically homogeneous

Some 90% of the population are of Khmer ethnic origin. Although there areseveral other ethnic groups, notably in the highlands, the only groups ofsignificant size are Vietnamese, Chinese, and Cham and Malay Muslims. TheUNFPA has estimated the Vietnamese population at around 500,000 and theCham population at about 130,000. Racism directed at the Vietnamese is wide-spread. Official statistics suggest that the Chinese population is beginning tore-establish itself as a major economic force, having suffered persecution at thehands of the Khmer Rouge. There are now an estimated 300,000 Chinese,mainly in Phnom Penh, compared with 500,000 in the 1960s.

Population indicators, 1995(per ’000 population unless otherwise indicated)

Crude birth rate 40

Crude death rate 13

Life expectancy (years) 52

Population growth rate (%) 3Sources: World Bank, World Development Indicators, 1997; World Bank, Cambodia: Progress in Recovery and Reform, 1997.

Education

Literacy rates are low By the end of the Pol Pot era formal education had ceased, and many educatedCambodians had been killed or had fled abroad. Cambodia’s educational levelsremain poor. Primary school enrolment rates are low: the World Bank estimated

18 Cambodia: Education


enrolment at only 47% in 1990-96. Parents are increasingly expected to contrib-ute to the cost of their children’s education. According to the World Bank, thishas led to a further deterioration in enrolment rates over the past few years, andconsequently low literacy levels. The World Bank estimates that only 65% of thepopulation is literate and that, while 78% of men are literate, the rate drops tojust 50% for women. Other assessments have put literacy rates as low as 35%.

Educational opportunities at tertiary level are woefully inadequate A number ofcountries are providing training for officials to assist Cambodia’s preparationsfor joining the Association of South-East Asian Nations (ASEAN). However, thelack of skilled workers is a problem both for investors and for governmentefforts to improve public administration.

Health

The public healthcaresystem has broken down

Mortality figures reflect the poor state of public health provision in Cambodia.Infant mortality is estimated at 97 per 1,000 live births, and maternal mortalityat 490 per 100,000 births, although the true figure may be much higher. Deathfrom preventable diseases is common, especially in rural areas. Only 20% of theurban population and 12% of the rural population have access to safe drinkingwater. HIV infection and AIDS are also a growing problem, especially amongsex workers in Phnom Penh. Life expectancy at birth is only 52 years (accord-ing to a World Bank estimate for 1995).

The public healthcare system is extremely run-down and about 50% of thepopulation does not have access to public healthcare facilities. There has beena massive decline in the number of doctors and nurses per head since themid-1960s. The private sector has sought to fill the gap, but a lack of appropri-ate medical training means that people offering medical treatment are oftenill-qualified to do so.

Natural resources

Cambodia is the smallest of the three former Indochinese countries. It is bor-dered by Laos to the north, Vietnam to the east and Thailand to the west. Apartfrom the Cardamom Mountains in the south, which divide Cambodia’sinterior from its short southern coastline, the greater part of the country con-sists of a shallow basin centred on Tonle Sap (the Great Lake). The MekongRiver crosses Cambodia from north to south. During the rainy season, a largeamount of the Mekong’s flood waters are diverted into the Tonle Sap River andso into the Tonle Sap proper, doubling its size.

Cambodia’s forests are its most valuable resource. Despite deforestation forestscover between 35% and 62% of total land area, depending on which estimate isaccepted. Fish stocks are abundant, although reports are beginning to emergethat overfishing is causing a decline in stocks. Cambodia is believed to havecommercially viable—but not particularly large—deposits of phosphate, gran-ite, limestone, sand, gravel, clay and bauxite; and there are also gold, gem, andoil and gas reserves. The precise extent of these has not been assessed, althoughsome oil exploration has been undertaken.

Cambodia: Health 19


The cultivated area hasshrunk since the 1960s

There has been a large drop in the area cultivated since the 1960s. For example,according to the Ministry of Agriculture the area of land used for rice cultiv-ation decreased from 2.5m ha in 1967 to 1.8m ha in 1992/93, a reduction of28%. A factor in this decline is the widespread presence of landmines, whichare estimated to have been distributed over 30% of the country’s agriculturalland. The decline also reflects a reversion to subsistence farming in some areas.

Economic infrastructure

Transport and communications

Cambodia’s infrastructureis in a poor state

Cambodia’s transport and communications infrastructure is in a serious stateof disrepair. Severe damage and destruction was caused in the 1970s, and actsof sabotage by the Khmer Rouge caused additional damage to the country’sroad and railway network. The situation is especially bad in rural areas. Thefighting in July 1997 caused considerable damage to buildings and infrastruc-ture, including bridges, roads and the international airport at Phnom Penh,although some facilities—such as the airport—have been repaired.

Priorities forinfrastructure are

identified

In 1994 a World Bank’s report to the International Committee on theReconstruction of Cambodia (ICORC) identified four priorities for infrastruc-ture development:

• repairing the most dilapidated sections of the primary road network;

• rehabilitating rural roads;

• strengthening the capacity of the Ministry of Public Works and Transport tomaintain the road network; and

• providing technical assistance to the Cambodian authorities to enable themto implement donor-funded infrastructure projects.

Project implementation has been hampered by the poor security situation,shortages of qualified local staff and inadequate public resource mobilisation.The disruption to bilateral and multilateral lending following the fighting in1997 have also caused delays to infrastructure projects, while private-sectorcapital is likely to be in shorter supply because of the economic problems in theregion. (See Reference table 8 for historical data on transport.)

Roads The road network consists of about 3,200 km of national roads, 3,100 km ofprovincial roads and 28,000 km of rural roads. Some 2,400 km of these roadsused to be paved, but because of neglect and war-related damage only 600 kmstill are. Many of the country’s 2,400 bridges and numerous ferries are in a poorstate of repair. Motorcycle traffic is increasing in urban areas, but road trafficremains light.

Inland waterways Inland waterways provide an important means of transport, particularly duringthe rainy season when many roads are impassable. During the rainy seasonthere are some 1,800 km of navigable waterways, compared with 600 km in the

20 Cambodia: Transport and communications


dry season. The major routes are along the Mekong River and the Tonle SapRiver. Inland ports include those at Neak Luong and Kompong Cham. How-ever, siltation of the Mekong has rendered some stretches impassable for largeboats; existing dredging equipment needs to be upgraded.

Ports Cambodia’s two main ports are at Phnom Penh on the Mekong River and atSihanoukville, which is the country’s only deepwater seaport (althoughPhnom Penh can receive small ocean-going vessels). Both suffer from siltationand have antiquated cargo-handling equipment. In 1995-96 Japanese-fundedrenovation work was carried out at Phnom Penh port. In conjunction with thegovernment, the Asian Development Bank (ADB) is funding the upgrading ofSihanoukville port.

Air transport Cambodia’s main airports are at Phnom Penh (Pochentong airport),Sihanoukville and Siem Reap. Pochentong airport suffered heavy damage inJuly 1997 but has now been repaired.

There are regular international flights between Phnom Penh and regional des-tinations. Plans to open an air link between Phnom Penh and Taipei in 1997were delayed following objections from China. Domestic connections are mod-erately well-developed, since a number of small airports were refurbished bythe UN Transitional Authority in Cambodia (UNTAC).

RAC has lost its monopoly The national airline is Royal Air Cambodge (RAC), which is 60% owned by thegovernment; the remaining 40% is owned by a sister company of MalaysiaAirlines. Shortly after Hun Sen took over, he announced the cancellation ofRAC’s monopoly position and at least one other domestic carrier is expected tobe established.

Railways The railway system comprises two single-line metre-gauge tracks: a 385-km linerunning north from Phnom Penh to Poipet on the Thai border and a 263-kmroute from Phnom Penh to Sihanoukville. In 1996 repair work on the PhnomPenh-Sihanoukville line, which was funded by the ADB, was completed. ThePhnom Penh-Poipet line, however, remains in urgent need of repair. In 1994the railway system carried about 500,000 passengers and 100,000 tonnes offreight. Responsibility for the railways rests with the state company, RoyalCambodian Railways.

Telecommunications Telephone density is extremely low at 0.5 telephones per 100 people, com-pared with 0.7 in Laos and 1.4 in Vietnam. The $50m telecommunicationsnetwork installed for UNTAC by an Australian company, OTC/Telstra, islargely still functioning, linking all 21 provinces, although many small townsare without telephone connections. Telecommunications links also exist viathe Intelsat system. Mobile phone systems are widely used in urban areas tobypass deficiencies in the fixed-line telecom network. In 1997 there were fourmobile phone systems in operation. A subsidiary of Singapore Telecom oper-ates a nationwide paging service under the name of Phonelink.

Cambodia: Transport and communications 21


Energy provision

Generating capacityis low—

Publicly generated capacity in Cambodia stands at around 35 mw. Of this,25 mw comes from diesel power generators and the remainder from hydro-electric sources. Many companies and hotels have also installed their owngenerating units. According to some estimates, this has increased nationwidegenerated capacity by over 100 mw. However, capacity remains very low byregional standards. Laos has a capacity of 256 mw, while capacities inMyanmar (Burma) and Vietnam are 1,000 mw and 6,000 mw respectively. Themajority of the population has no access to electricity, relying instead on woodand charcoal for their energy requirements. Phnom Penh accounts for over85% of electricity consumed nationally. With electricity demand in the capitalrunning at around 75 mw and the distribution system old and badly in need ofrepair, power cuts are frequent. All diesel used to generate electricity has to beimported. (Reference table 9 provides national statistics on energy production.)

—and investment isneeded to meet growing

demand—

In 1994 the ADB estimated that demand for power would reach 125 mw by2000. A large-scale expansion of energy capacity is clearly needed to meet thisincrease in demand. Upgrading energy provision in Phnom Penh has beenidentified as a key priority, and will include a complete overhaul of the city’sdistribution system.

—but private-sectorinvestment remains

limited

Although energy distribution is expected to remain in public hands at least inthe medium term, the government wishes to attract private-sector investmentin power generation. The government has signed a handful of agreements withprivate companies, including Itochu of Japan and a subsidiary of Malaysia’sApex Communications Group. A consortium including Intercore, a US com-pany, has signed a deal to construct a 35-mw power station in Phnom Penhunder a build-operate-transfer (BOT) agreement although the project has suf-fered a number of delays. In November 1997 the government approved a $75mpower station project backed by the US-based Daysun Group. Current regionaldifficulties aside, the lack of a fully developed regulatory framework for private-sector participation hampers efforts to attract investment, and most funding todate has come from bilateral and multilateral sources. There is already someinvestment in oil and gas (see Production).

Energy balance, 1997(m tonnes oil equivalent)

Elec- Oil Gas Coal tricity Other Total

Primary production 0.00 0.00 0.00 0.02a 1.67 1.69

Imports 0.18 0.00 0.00 0.00 0.00 0.18

Exports 0.00 0.00 0.00 0.00 0.00 0.00

Primary supply 0.18 0.00 0.00 0.02a 1.67 1.87

Net transformation –0.05 0.00 0.00 –0.01 0.00 –0.06

Final consumption 0.13 0.00 0.00 0.01b 1.67 1.81

a Expressed as input equivalents on an assumed generating efficiency of 33%. b Output basis.

Source: Energy Data Associates.

22 Cambodia: Energy provision


Financial services

Private and foreign banksare in operation

The National Bank of Cambodia (NBC, the central bank) used to dischargeboth central and commercial banking functions. The move towards a moderntwo-tier banking system began in 1993, with the Law on the State Bank. Thisestablished the NBC solely as the central bank, with responsibility for regul-ating commercial banks, printing money and controlling foreign exchange. In1996 there were 33 registered commercial banks in Cambodia. These includedthe state-owned Foreign Trade Bank of Cambodia, as well as joint venturesbetween the state and the private sector (including private foreign investors).Since 1994 the central bank has been withdrawing from its joint ventures withcommercial banks, in order to regulate the commercial banking sector better,although concerns remain over the asset quality of some of the smaller banks.

Since the early 1990s, 100% foreign-owned banks have been permitted tooperate, enabling them to establish both representative offices and fullbranches. Thai banks predominate, although Malayan Banking, the UK’sStandard Chartered and France’s Banque Indosuez are also represented.

Distrust undermines thebanking sector

Although efforts have been made to ensure that deposit interest rates remainpositive in real terms, there is a widespread distrust of the banking systemamong Cambodians, in part based on past experience. Consequently bankscontinue to depend on borrowing from the central bank to meet demand forloans. In terms of lending, the state sector receives a disproportionate share offunds, although lending to the private sector has increased in recent years.Another constraint on the private sector is the lack of a well-developed ruralbanking network. However, in addition to the formal financial sector there isalso a thriving informal capital market, which is an important—if expensive—source of funding for small-scale businesses and farmers.

A stockmarket is planned,but remains on the

drawing board

A stockmarket has been in the pipeline for some time, but progress has beenslow. Initially there are likely to be only a few companies listed, although it hasbeen suggested that potential listings will include the state-owned Royal AirCambodge and a number of banks, utilities and construction companies.

Other services

The tourism sectorsuffered a slump in 1997—

In 1996 there were an estimated 260,000 visitor arrivals, compared with just72,000 in 1992. By 2000 the government hopes to raise the number of visitorsto 1m. However, these plans have been undermined by the outbreak of fight-ing in July 1997. Visitors in July (including 4,000 tourists) totalled 6,251,compared with 20,000 visitors in the previous month. For the whole of 1997visitor arrivals fell by 15.4% to 220,000, reflecting the sharp drop in arrivals inthe second half of the year.

Progress had been made in improving the availability of international standardhotel accommodation. For example, in December 1997 the historic 131-roomGrand Hotel d’Angkor in Siem Reap was officially opened following refurbish-ment by Singapore’s Raffles Holding. However, a recovery in the tourism sectoris not expected at least until after the election scheduled for mid-1998, since

Cambodia: Financial services 23


political tensions will remain high during this period. (See Reference table 10for historical data on visitor arrivals.)

—but the governmenthopes to revive thesector’s fortunes—

The government hopes to attract 270,000 visitors in 1998. In August 1997 thetourism ministry unveiled a new plan to develop the industry, concentratingon the following three areas:

• the temple complex at Angkor Wat (1998 has been declared “Visit AngkorYear”);

• the beaches around Sihanoukville; and

• eco-tourism in Ratanakiri province.

—although investmentremains sluggish

To realise these plans the authorities are seeking foreign investment in thesector. The development of a beach resort and a casino in and aroundSihanoukville by a Malaysian company, Ariston, is the largest project to date,with eventual investment of $1.3bn planned. However, the project has beenplagued with problems. Many other projects have remained dormant after theinitial signing ceremony, prompting the tourism ministry to call for alternativeinvestors to be found.

Production

Industry

Industry accounts for asmall share of GDP

The industrial sector comprises mining and quarrying, manufacturing, electric-ity and water, and construction. The sector has grown faster than overall GDPover the last few years, although it remains small as a percentage of GDP (justbelow 20% of constant price GDP in 1996). Apart from a limited amount ofcement production, the country has no heavy industrial capacity. In 1995around 50% of industrial production was generated by the state sector. How-ever, activity by small-scale private companies is increasing. (See Referencetable 11 for details of the main industrial products.)

The industrial sector, 1996

Output (CR bn)a 69.2

Employment (’000)b 225.0

Real output growth (%) 13.3

a Estimate; constant 1989 prices. b 1995.

Sources: World Bank, Cambodia: From Recovery to Sustained Development; World Bank, Cambodia: Progress in Recovery and Reform.

The manufacturing sectorhas been boosted byforeign investment

Manufacturing also remains relatively small as a percentage of GDP (some 8% in1996, in constant 1989 prices), although output has been boosted by foreigndirect investment (FDI), particularly from Asia. Much of the foreign investmentin the manufacturing sector is small-scale. The most important manufacturingsectors are rice-milling, and cigarette, beer and soft drinks production. Theleading growth areas in recent years include textiles and garment manufacturing

24 Cambodia: Industry


and food-processing. In late 1996 there were an estimated 38 garment factoriesin the country, employing 16,000 workers, although there are now more. Therehas also been a proliferation of companies producing construction materials,and in early 1998 Cambodia’s first plant producing consumer electronics wasopened.

Cambodia’s ability to attract larger manufacturing ventures is constrained byinfrastructure bottlenecks (including power shortages) and the unstable polit-ical climate. Investor confidence was hit when a number of factories weredamaged or looted during the fighting in mid-1997.

Mining and semi-processing

Oil and gas Cambodia is endowed with a variety of minerals, but exploitation is still onlysmall-scale. The mining sector contributed only 1.3% of real GDP in 1996. Thegovernment is seeking to attract foreign investment in the mineral and oil andgas industries. Since 1994 a number of companies have been exploring off-shore, although discoveries of commercially viable deposits of oil and gas haveso far been limited. In July 1996 the UK’s Enterprise Oil reported that its latestexploration well was dry.

New oil explorationagreements are signed

In November 1997 the government signed a series of exploration agreementswith five foreign oil companies. Exploration is to take place in four offshoreconcessions, but as they are in an area disputed with Thailand, talks betweenthe two governments must take place first.

Gold and gems A number of companies from Australia, Canada and Malaysia have signedagreements to prospect for gold in the provinces of Kompong Thom, PreahVihear and Mondulkiri. However, the sector lacks adequate regulation, as adraft mining law has yet to receive National Assembly approval. In addition,poor security has added to the difficulty of both exploration and extraction.There is an established gem-mining industry around Pailin. For many years thiswas exploited by the Khmer Rouge in co-operation with Thai companies.Despite the weakening of the Khmer Rouge, gem mining in this area remainslargely beyond central government control.

Agriculture, fishing and forestry

Agriculture, including livestock, fisheries and forestry, accounted for around43% of constant-price GDP in 1996 and employs the majority of the workforce.In its Asian Development Outlook report for 1997-98, the Asian DevelopmentBank (ADB) included data on labour patterns from the Report on the Socio-Economic Survey of Cambodia 1993/94 (SESC), the first survey of labour forceparticipation rates in Cambodia. According to these data, the agriculture, for-estry and fishing sector accounted for 75% of the workforce. Timber and rubberhave historically been the most important export commodities, although otheragricultural products such as maize, soybeans, live cattle, fruit and fish are alsoexported. (See Reference table 12 for historical data on agricultural output.)

Cambodia: Mining and semi-processing 25


In 1996 heavy flooding damaged the rice harvest, and rice output is estimatedto have fallen by 1.3% in constant price terms, reducing overall agriculturaloutput growth in national accounting terms to 1.8%, from 6.4% in 1995.Patchy rainfall and fighting in the north-west caused disruption to agriculturein 1997, although rice output was expected to be higher than in 1996.

Agriculture remains thekey to growth

A turnaround in the agricultural sector is crucial to Cambodia’s long-termeconomic development. Agriculture and rural development were key prioritiesin the government’s development strategy presented to internationaldonors in Tokyo in 1994. International organisations, governments and non-governmental organisations (NGOs) began implementing agriculture-relatedprojects such as mine-clearance, rural road rehabilitation and irrigation. How-ever, disbursement has been slow and, according to the World Bank, a lack ofco-ordination between projects has been a problem, as have shortages oftrained personnel.

Rice By the 1990s the area of land given over to rice cultivation was smaller than ithad been in the 1960s. The country’s best rice-growing land is in Siem Reap,Banteay Meanchay and Battambang provinces. The rice crop is very importantin terms of overall output; despite the fall in output in 1996, rice still accountedfor 13.6% of GDP. However, around 85% of rice cultivation is reliant on theannual rains, and generally only one rice crop is produced per year. Yields arelow by regional standards, averaging 1.3 tonnes per ha between 1992 and 1994(compared with 3.5 tonnes per ha in Vietnam). The government wants to boostrice output in order to improve domestic food security and produce anexportable surplus. The authorities have encouraged foreign investment in riceproduction.

Rubber In 1996 rubber output was 34,000 tonnes (according to the World Bank), wellbelow the levels achieved in the late 1960s. After a gap of almost 20 years,replanting started in 1986, but the stock is still dominated by old trees (24.8%of the stock is over 40 years old), reducing output potential. The area undercultivation has also fallen, from around 60,000 ha to 43,000 ha in 1994. Thebulk of production comes from six state-owned plantations. In 1996 thegovernment announced a plan to overhaul the rubber industry, dramaticallyincreasing the area under cultivation, and to privatise some aspects of it, possi-bly management and processing. Rubber remains an important export, butearnings are constrained by smuggling. Officially the export of rubber is

Cambodia’s rice-production calendar

Planting period Harvest period

Rainfed lowland rice Jun-Oct Oct-Dec

Floating rice May-Jul Dec-Jan

Flood-water rice Nov-Mar Feb-May

Irrigated lowland rice Nov-Mar Feb

Rainfed upland rice Apr-Jun DecSource: Ministry of Commerce, Cambodia Business and Investment Handbook.

26 Cambodia: Agriculture, fishing and forestry


handled exclusively by the state-owned Kampuchea Export Import Company(KAMPEXIM), but up to one-third of the rubber produced may be smuggled outof the country.

Other crops In the early 1990s only a small proportion of cultivated land was given over tothe cultivation of non-rice crops (excluding rubber). Since then the govern-ment has encouraged farmers to diversify. Non-rice crops include coconut,pepper, coffee, sugarcane, maize, sweet potatoes, soybeans and tobacco. Yieldsand output levels are generally below those achieved in the late 1960s.

Animal husbandry Livestock production accounted for nearly 13% of constant-price GDP in 1996and has been keeping pace with overall GDP growth. Animal stocks—cattle,buffalo, pigs and poultry—were severely depleted in the 1970s but have sincerecovered. Production is generally small-scale, carried out by private house-holds. Animals are generally not vaccinated and are therefore vulnerable todisease, although the government is seeking to improve animal health andbreeding services, with donor and NGO assistance.

Fisheries In 1996 fishing accounted for an estimated 3.5% of constant-price GDP. Catchesare currently thought to be at around 60% of their average levels in the 1960s.Environmental changes and overfishing are believed to be decreasing stocks.Around 60% of Cambodia’s catch comes from lake and river fishing. Sea-fishingand aquaculture are undeveloped and have significant growth potential. Mostdistribution and marketing of fish is carried out by the private sector.

Forestry Because of widespread illegal logging, estimating forestry’s contribution toGDP is difficult. Estimates of the extent of forest cover also vary widely, from35% to over 60%, compared with 73% in 1969 (the last time a full forestrysurvey was undertaken). There have been various government initiativesdesigned to improve the regulation and management of the exploitation offorest resources. In January 1996 Prince Ranariddh, as prime minister, said thatno further logging concessions should be granted until the government had aclearer idea of how much forest remains. However, such bans have proveddifficult to enforce because of opposition from powerful vested interests(including in the military). In October 1996 a draft forestry law was approvedby the cabinet, while the National Assembly passed new environmentallegislation. Both set out penalties for those found guilty of damaging the envi-ronment, including illegal logging. Nevertheless, all the evidence suggests thatenforcement is likely to continue to be a problem. In 1998 unprocessedCambodian timber was still being exported to Vietnam.

Cambodia: Agriculture, fishing and forestry 27


The government’s forestry policy

May 1995: A ban is imposed on log exports.December 1996: A new ban on the export of freshly cut timber is introduced.May 1996: The IMF delays the release of an $20m ESAF loan tranche pendingclarification of the government’s forestry policy.October 1996: An environmental group, Global Witness, says that illegal logging inboth government- and Khmer Rouge-controlled areas is widespread. A draft forestrylaw, setting out penalties for illegal logging, is approved by the cabinet.November 1996: The IMF withholds the $20m ESAF tranche because of concernsover the government’s forestry policy and its inability to raise revenue from forestryexports.March 1997: The IMF announces that further lending is conditional ontransparency over logging and other reforms. Global Witness criticises thegovernment’s management of what it refers to as “quasi-legal” logging concessions.

Construction

The construction industryis now in the doldrums

Since 1992 the construction sector has been more important in terms of GDPthan manufacturing. The UN Transitional Authority in Cambodia (UNTAC)operation in 1992-93 stimulated an increase in the construction of basic infra-structure, such as roads and bridges, and an expansion of hotel and otheraccommodation. This construction boom led to a proliferation of small com-panies producing bricks, roof and floor tiles, and cement. However, the supplyof building materials regularly fails to meet demand, leaving construction com-panies reliant on expensive imports.

It will take time to improve domestic supplies. In March 1997 one of SouthKorea’s largest cement firms, Tong Yang Cement Corporation, announcedplans to invest $200m in a quarry and cement plant in Kampot province. It isscheduled to be operational by 2000.

The external sector

Merchandise trade

Foreign trade, 1996($ m)

Merchandise exportsa 643.6

Merchandise imports 1,072.0

Trade balance –428.4

a Includes re-exports.

Source: IMF, International Financial Statistics.

Re-exports collapse— A big re-export trade has developed in recent years, taking advantage of thecountry’s relatively low customs duties and poor law enforcement. (Re-exportsare imported goods which are then re-exported with little further processing,

28 Cambodia: Construction


and in Cambodia they have consisted mainly of consumer goods.) Re-exportsfell by around 33% in 1996, partly because of a sharp drop in gold re-exports.In 1996 re-exports accounted for 55% of total exports, down from 67% in 1995(according to World Bank figures). Efforts are now being made to encouragevalue-added exports and a special export zone is under consideration atSihanoukville. (See Reference table 15 for details of key imports and exports.)

—leading to a widermerchandise trade deficit

The drop in re-exports pulled down overall exports to $643.6m from $855.2min 1995 (according to IMF figures; see Reference table 18 for IMF balance-of-payments data). Imports also fell, to $1.1bn from $1.2bn in 1995, partlybecause of the fall in non-retained gold imports. As a result the merchandisetrade deficit widened to $428m, from $332m in 1995.

Comparable data for 1997 are not yet available. Based on riel data, the tradedeficit narrowed to CR496.5bn ($182m) in the first half of 1997, comparedwith CR585bn ($228m) in the first half of 1996.

Primary products stilldominate exports—

Primary products, especially timber, dominate Cambodia’s domestically pro-duced exports (see Reference table 13). In 1996 timber exports still accounted forone-half of domestic exports, according to the World Bank. Exports of textilesand garments have begun to take off. In 1995 textiles and garments exports tothe 26 countries with which Cambodia has Generalised System of Preferences(GSP) privileges increased to $27.5m from $4m the previous year; garmentsaccounted for almost 10% of total 1995 exports (excluding re-exports).

—but import patternsare changing

Cambodia remains dependent on imports for a wide range of products. A largepercentage of imports are petroleum products, capital goods and other prod-uctive inputs. However, imports of consumer goods have increased in impor-tance in recent years, in part because of the growth of the re-export trade. Forexample, cigarettes were the second largest import item, after gold, in 1995.(Reference table 14 provides historical data on imported goods.)

Main trading partners Cambodia’s trade has shifted away from the former Soviet Union and othermembers of the now defunct Council for Mutual Economic Assistance (CMEA,also known as Comecon). In the 1980s trade with these countries was con-ducted by state-trading companies on a barter basis. The shift of all CMEA tradeto a hard-currency basis from the beginning of 1991 sparked a dramatic re-orientation of Cambodia’s trade towards Asian markets. Including re-exports,Thailand is Cambodia’s largest trade partner, although Singapore tops the listif re-exports are excluded. Extensive smuggling means that official data prob-ably underestimate the significance of trade with Vietnam and Thailand. (SeeReference table 16 for data on main trading partners.)

Trade liberalisation Most tariffs are now between 7% and 50%, compared with 3-100% before 1993.Import licences have been abolished, except for firearms and pharmaceuticalproducts. Export licences are required only for logs, sawn timber, preciousmetals and gems, antiquities and rice. It was expected that licences for riceexports would be abolished in 1995, but on announcing the lifting of the riceexport ban in 1996, the government specified that exporters would requirelicences. Trade in rubber, timber, rice and fuel is still dominated by state

Cambodia: Merchandise trade 29


companies. Further progress in trade liberalisation will be driven by member-ship of the ASEAN Free-Trade Area (AFTA), once Cambodia is admitted toASEAN (see Economic policy).

Main trading partners, 1993(% of total)

Exports toa: Imports fromb:

Thailand 36.2 Thailand 22.6

Japan 30.0 Japan 6.3

Germany 10.2 Indonesia 5.0

Malaysia 4.6 Hong Kong 3.9

Italy 1.5 China 2.6

a Includes re-exports. b Includes non-retained imports.

Source: Asian Development Bank, Key Indicators of Developing Asian and Pacific Countries, 1996.

Invisibles and the current account

The current-accountdeficit narrowed in the

first half of 1997

The rise in private transfers, including remittances by Cambodians livingabroad, was not sufficient to offset the rapid growth of the merchandise trade,incomes and services deficits in 1996. IMF figures for 1996 give a current-account deficit of $297.8m. Current-account data for the whole of 1997 are notyet available. However, based on riel data, as a result of the smaller merchan-dise trade deficit combined with the sharp narrowing of the services and in-comes deficits, the current-account deficit narrowed to CR553.4bn ($203m) inthe first half of 1997, compared with CR741.4bn ($289m) in the first half of1996. Anecdotal evidence suggests that both import and export growth slowedin the aftermath of the mid-year fighting.

The disbursement of official transfers (grant aid) has kept the size of the overallcurrent-account deficit manageable, but Cambodia will face severe financingconstraints as a result of the decision of a number of bilateral and multilateraldonors in mid-1997 to freeze aid pending free and fair elections. (Referencetables 17 and 18 provide historical data on the balance of payments.)

Current account, 1996($ m)


Services balance –59.0

Income balance –44.9

Transfers balance 234.5

Current-account balance –297.8Source: IMF, International Financial Statistics.

Capital flows and foreign debt

Some donors havesuspended aid

At a meeting in Paris on July 1st-2nd 1997, the Consultative Group of bilateraland multilateral donors pledged a total of $450m in aid to Cambodia for1997/98. This was a slight fall compared with 1996, when donors pledged$500m, but was in line with the government’s requests. However, a number ofkey donors, including the IMF, the World Bank and the US, announced a

30 Cambodia: Invisibles and the current account


suspension of aid following the military takeover by Hun Sen later that month.Other donors, notably Japan, have continued their aid programmes, althoughthere have been disbursement problems.

The decision by some donors to suspend aid for political reasons followed theemergence of a much tougher stance on economic reform by the donor com-munity. At the Paris meeting in 1997 the UN criticised the government forheavy expenditure on defence compared with education and health. TheWorld Bank called on the government to ensure that the fiscal system wastransparent and fair, and to secure more revenue from logging. The Cambodianadministration has a limited capacity to process such large amounts of money,with the result that disbursement is likely to continue to be slow. (See Refer-ence table 19 for historical data on development assistance.)

Most external debt isowed to the former

Eastern bloc

According to the World Bank’s Global Development Finance, Cambodia’s totalstock of external debt increased from $1.8bn at the end of 1992 to $2bn at theend of 1996. Nearly all the debt stock is medium- and long-term, most of which(96%) is owed to bilateral creditors. In 1996 the debt stock was equivalent to67.7% of GNP, within the generally accepted comfort ratio of 75%—an im-provement compared with 1994, when the ratio was almost 80%. These ratiosare calculated by converting Cambodia’s rouble debt of Rb815m at the unreal-istic 1991 official exchange rate of Rb0.554:$1, which gives a dollar value forthe rouble debt of $1.47bn or about three-quarters of the total. Excluding thenon-convertible currency debt altogether or applying a more realistic exchangerate, the debt ratios become far more manageable. (In the absence of an agree-ment on the rouble:dollar exchange rate, Cambodia has not been servicing itsrouble debt. (See Reference table 20 for data on external debt.)

Paris Club debt write-off Cambodia rescheduled its Paris Club debt in January 1995. Up to two-thirds ofthe hard-currency debt stock has been written off, and the rest is to be paid offover a 30-year period. The main debt indicators therefore improved in 1995.Further bilateral deals have been concluded with France, Germany and Japan.According to the World Bank, Cambodia did not contract or guarantee anyfresh external debt on non-concessional terms in 1996.

Foreign investmentapprovals have slowed

Foreign direct investment (FDI) inflows have played a relatively small role inexternal finance, although this is changing slowly. Political instability has de-tracted from the government’s efforts to encourage foreign investment. In 1997FDI approvals were $750m—of which $400m was approved before July—com-pared with approvals of over $1bn in 1996. The bulk of the new projects approvedin 1997 were from Asian companies, in light manufacturing (mainly garments).The leading investors are Asian, notably from Malaysia, Singapore, Thailand andHong Kong. Investment from Taiwan is also growing, although there was a briefpause in mid-1997, when Hun Sen temporarily stepped up his anti-Taipei rhetoric.

Actual investment remains low (although a proportion of foreign investment,particularly ethnic Chinese capital, is not captured by official statistics).According to the IMF, net FDI was valued at $294m in 1996, up from $151m in1995. Most investment went into garments, tobacco, timber-processing andbeverage production, as well as banking and construction.

Cambodia: Capital flows and foreign debt 31


Foreign reserves and the exchange rate

The riel fell in 1997 The riel ended 1997 at CR3,452:$1, a nominal depreciation of 21.4% comparedwith the end of 1996. The fall was the result of heightened political tensionsand fallout from the regional currency crisis. Cambodia’s official exchange rateusually trades at a slight discount to the parallel market rate, although the gapwidened in 1997 amid market expectations of a larger devaluation. Regularforeign exchange auctions are held. Despite efforts to ban their use, dollars andgold continue to be widely used in the free market. (See Reference table 22 forexchange rates against the dollar.)

Foreign reservesremain low

Cambodia’s foreign-exchange reserves have risen steadily in recent years,thanks to an increase in inflows of aid and, to a lesser extent, inflows of FDI.From a negligible amount in 1992, external reserves (excluding gold) rose to$298.5m by the end of 1997. Despite this improvement, the overall level ofreserves remains low. The year-end reserves figure amounts to just under threemonths of import cover (which is considered the safe minimum level), basedon the riel import figures for the first half of the year.

Total reserves (excl gold), 1997($ m)

Cambodia 298.5

Laos 164.7a

Myanmar 198.9b

a September 1997. b November 1997.


32 Cambodia: Foreign reserves and the exchange rate


Appendices

Sources of information

National statistical sources The availability of regular statistical publications is improving, although thereare still problems with consistency

Ministry of Economy and Finance, Economic Outlook for Cambodia 1995-2000,Phnom Penh, 1995

Ministry of Economy and Finance, Monthly Bulletin of Statistics

National Institute of Statistics, Socio-Economic Survey 1993-94, Phnom Penh,1994

National Bank of Cambodia, Economic and Monetary Statistics Review, PhnomPenh, monthly

International statisticalsources

Asian Development Bank, Asian Development Outlook 1997 and 1998

Asian Development Bank, Key Economic Indicators (annual)

IMF, Cambodia, Recent Economic Developments, March 1997

IMF, International Financial Statistics (monthly)

World Bank, Cambodia: From Recovery to Sustained Development, 1996

World Bank, Global Development Finance (formerly World Debt Tables, annual)

World Bank, Cambodia: Progress in Recovery and Reform, 1997

Select bibliography Acharya A, P Lizee and S Peou (eds), Cambodia: The 1989 Paris Peace Conference,New York, 1991

David Chandler, Brother Number One: A Political Biography of Pol Pot, Boulder,CO, 1992

David Chandler, The Tragedy of Cambodian History: Politics, War andRevolution since 1945, New Haven, CT, 1992

Pao-min Chang, Kampuchea between China and Vietnam, Singapore, 1985

Justin Corfield, The Royal Family of Cambodia, Melbourne, 1993

Dirksen, Flipse Doran and Le, Mekong Law Report: Cambodia, 1996

Michael Doyle, UN Peacekeeping in Cambodia: UNTAC’s Civil Mandate,London, 1995

Economist Intelligence Unit, Cambodia, Laos: Country Report (quarterly)

Grant Evans, and Kelvin Rowley, Red Brotherhood at War, London, 1990

Ben Kiernan, How Pol Pot Came To Power, London, 1985

M E Osborne, The French Presence in Cochinchina and Cambodia: Rule andResponse, 1859-1905, Ithaca, NY, 1969

Cambodia: Sources of information 33


Khieu Samphan, Cambodia’s Economy and Industrial Development, translatedand with an introduction by Laura Summers, Ithaca, NY, 1979

William Shawcross, Sideshow, London, 1979

UN, The United Nations and Cambodia, 1991-95, New York, 1995

Reference tables

Reference table 1

Government finances(CR bn unless otherwise indicated)

1993 1994 1995 1996a 1997b

Total revenue 290.1 590.4 642.9 749.1 896.4 Tax revenue 234.1 364.6 445.4 534.3 673.3 of which: customs duties 172.4 280.9 320.8 344.1 437.8 Non-tax revenue 56.0 225.8 197.5 214.8 223.1

Total expenditure 608.4 1,009.1 1,200.6 1,342.8 1,480.8 Current expenditure 373.2 673.8 698.6 812.9 870.0 of which: defence 219.4 398.2 398.2 399.9 390.8 Capital expenditure 235.2 335.5 511.1 529.9 610.8

Balance –318.3 –418.7 –557.7 –593.7 –584.4

Financing 318.3 418.7 557.7 593.7 584.4 Domestic 79.2 –13.4 –1.6 18.1 –13.1 Foreign loans 239.1 432.1 559.3 575.6 597.5

Ratios (% of GDP)Revenue 5.4 9.6 8.9 9.1 9.7 Expenditure 11.2 16.5 16.7 16.4 16.0 Current 6.9 11.0 9.6 9.9 9.4 Defence & security 4.1 6.5 5.5 4.9 4.2 Overall balance –5.9 –6.8 –7.7 –7.2 –6.3

a Estimates. b Target.

Source: World Bank, Cambodia: Progress in Recovery and Reform, 1997.

Reference table 2

Money supply and credit(CR bn; end-period)

1993 1994 1995 1996 1997

Money 203.8 201.7 278.5 328.9 384.8

Quasi money 129.6 250.4 370.6 582.7 678.1

Total liquidity (M2) 333.4 452.1 649.1 911.6 1,062.9

Net foreign assets 118.5 390.7 550.0 878.3 1,171.6

Domestic credit 343.1 386.3 446.4 567.4 696.5Source: IMF, International Financial Statistics.

34 Cambodia: Reference tables


Reference table 3

Gross domestic product(market prices unless otherwise indicated)

1993 1994 1995 1996a 1997a

Total (CR bn)At current prices 5,414 6,131 7,200 8,200 n/a At constant 1989 prices 292.1 303.7 326.8 348.0 355.0 Real change (%) 4.1 4.0 7.6 6.5 2.0

Per head (CR)At current prices 560,455 616,181 702,439 773,585 n/a At constant 1989 prices 30,238 30,523 31,883 32,524 32,273 Real change (%) 1.0 0.9 4.5 2.0 –0.8

a Official estimates.

Sources: World Bank, Cambodia: From Recovery to Sustained Development, 1996; World Bank, Cambodia: Progress in Recovery and

Reform, 1997.

Reference table 4

Gross domestic product by expenditure(CR bn; current prices; % of total in brackets)

1991 1992 1993 1994 1995

Private consumption 1,128 2,115.9 4,734.9 5,165.6 5,995.1 (84.0) (84.3) (87.5) (84.3) (83.3)

Government consumption 99.0 238.0 373.2 662.4 731.8 (7.4) (9.5) (6.9) (10.8) (10.2)

Gross fixed capital formation 126.0 245.0 961.7 1,168.2 1,483.7 (9.4) (9.8) (17.8) (19.0) (20.6)

Exports of goods & services 159.0 503.0 934.2 1,384.1 2,343.8 (11.9) (20.0) (17.3) (22.6) (32.6)

Imports of goods & services –176.0 –593.0 –1,590.0 –2,249.3 –3,354.4 (–13.2) (–23.6) (–29.4) (–36.7) (–46.6)

GDP 1,336.0 2,508.9 5,414.0 6,131.0 7,200.0 Source: Asian Development Bank, Country Economic Review: Cambodia, October 1996.

Cambodia: Reference tables 35


Reference table 5

Gross domestic product by sector(CR bn at constant 1989 prices; % change year on year in brackets)

1992 1993 1994 1995a 1996a

Agriculture 138.5 137.1 137.1 145.9 148.5 (1.9) (–1.0) (0.0) (6.4) (1.8)

Crops & rubber 79.0 77.2 70.9 82.2 82.9 of which:

(–0.4) (–2.3) (–8.2) (15.9) (0.9) rice 46.7 48.2 38.6 47.9 47.3

(–1.9) (3.2) (–19.9) (24.1) (–1.3) other 32.3 29.0 32.4 34.3 35.7

(1.9) (–10.2) (11.7) (5.9) (4.1) Livestock 36.9 38.0 39.5 41.1 43.8

(7.0) (3.0) (3.9) (4.1) (6.6) Fishing 12.7 12.0 11.8 12.2 12.1

(–5.9) (–5.5) (–1.7) (3.4) (–0.8) Forestry 9.9 9.9 14.9 10.4 9.7

(15.1) (0.0) (50.5) (–30.2) (–6.7)

Industry 45.7 51.7 55.6 61.1 69.2 (15.7) (13.1) (7.5) (9.9) (13.3)

Mining & quarrying 3.2 3.4 3.7 4.0 4.6 (6.7) (6.3) (8.8) (8.1) (15.0)

Manufacturing 19.0 20.5 22.1 24.3 27.5 (3.3) (7.9) (7.8) (10.0) (13.2)

Electricity & water 0.6 0.7 0.7 0.8 0.9 (20.0) (16.7) (0.0) (14.3) (12.5)

Construction 22.9 27.1 29.1 32.0 36.2 (30.1) (18.3) (7.4) (10.0) (13.1)

Services 96.5 103.3 111.0 119.7 130.2 (11.2) (7.0) (7.5) (7.8) (8.8)

Transport & communications 8.1 8.9 9.7 10.7 12.2 (15.7) (9.9) (9.0) (10.3) (14.0)

Wholesale & retail trade 39.9 42.3 44.8 48.8 54.6 (16.0) (6.0) (5.8) (9.1) (11.9)

Hotels & restaurants 1.3 1.4 1.7 1.8 2.2 (30.0) (7.7) (21.4) (5.9) (22.2)

Government, administration, education & health 11.0 11.5 12.4 12.9 12.7 (0.0) (4.5) (8.3) (3.6) (–1.6)

Home ownership 17.4 18.8 20.3 21.8 23.0 (6.7) (8.0) (8.0) (7.4) (5.5)

Other services 18.8 20.4 22.1 23.7 25.5 (9.9) (8.5) (8.3) (7.2) (7.6)

GDP 280.7 292.1 303.7 326.8 347.9 (7.1) (4.1) (4.0) (7.6) (6.5)

a Estimates.

Sources: World Bank, Cambodia: From Recovery to Sustained Development; World Bank, Cambodia: Progress in Recovery and Reform.

Reference table 6

Consumer prices1993 1994 1995 1996 1997

Phnom Penh index, Oct 1993-Sep 1994=100 n/a 104.2 105.3 110.8 119.6 % change n/a n/a 1.1 5.2 7.9

% change, average year-on-year rate for the 4th quarter 41.0 17.8 3.5 9.0 9.1Source: National Bank of Cambodia, Economic and Monetary Statistics Review.



Reference table 7

Population estimates1993 1994 1995 1996 1997a

Total (m) 9.7 10.0 10.3 10.7 11.0

Growth rate (%) 3.0 3.0 3.0 2.7 2.8

a EIU estimates.

Sources: World Bank, Cambodia: From Recovery to Sustained Development.

Reference table 8

Transport statistics(year-end)

Road traffic 1991 1992 1993

Passenger cars 9,025 20,834 28,919

Commercial vehicles 2,963 8,637 9,247

Road tractors 225 966 1,018

Motorcycles & mopeds 169,422 262,069 292,830

Shipping—merchant fleet 1987 1988 1989

No. of vessels 3 3 3

Displacement (grt) 3,558 3,558 3,558

International sea-borne freight traffic (’000 tonnes)a 1988 1989 1990

Goods loaded 10 10 11

Goods unloaded 100 100 95

a Estimates.

Sources: International Road Federation, World Road Statistics; UN, Statistical Yearbook for Asia and the Pacific; Ministry of Economics

and Finance, Monthly Bulletin of Statistics.

Reference table 9

National energy statistics(’000 kwh)

1990 1991 1992 1993 1994

Phnom Penh 182,685 113,754 141,546 132,948 132,989

Provinces 10,331 6,432 19,699 27,451 37,468

Electricity output 193,016 120,177 161,245 160,399 170,457Source: World Bank, Cambodia: From Recovery to Sustained Development.

Reference table 10

Tourism statistics(’000)

1992 1993 1994 1995 1996

Visitor arrivalsa 72 103 167 220 260

a Tourists and others.

Source: Cambodian authorities.



Reference table 11

Main industrial production(’000 units unless otherwise indicated)

1990 1991 1992 1993 1994

Agricultural engines (’000) 300 350 n/a 368 46

Tank trucks 400 292 164 164 148

Aluminium dishes (’000) 669 1,700 n/a 1,870 2,057

Nails (’000 tonnes) 1,342 230 n/a 1,787 1,926

Sandals (’000) 443 500 n/a 80 32

Soap (’000 tonnes) 935 279 n/a 311 336

Bricks (’000) 3,636 30,000 5,826 60,396 66,436

Cigarettes (packs) 152,036 150,407 180,000 84,316 130,000

White wine (’000 litres) 3,030 3,210 3,274 3,340 3,406

Red wine (’000 bottles) 1,280 1,663 1,696 1,730 1,765

Soft drinks (’000 cases) 275 135 214 292 345

Milk (’000 cans) 270 297 17,530 9,562 611

Fabrics (’000 metres) 1,392 287 190 181 177

Mosquito nets (’000 metres) 1,665 1,103 120 1,260 1,260Source: World Bank, Cambodia: From Recovery to Sustained Development.

Reference table 12

Agriculture, livestock, fishery & forestry production1992 1993 1994 1995 1996

Crops (’000 tonnes)Rice 2,221 2,117 2,223 2,745 3,300Corn 60 54 45 55 64Cassava 150 66 65 82 68Sweet potato 60 55 36 39 37Vegetables 210 200 197 193 141Soybean 40 39 23 17 28Sugarcane 142 140 219 202 178Tobacco 9 10 12 11 5Rubber 30 22 27 35 34

Livestock (’000 head)Cows 2,468 2,542 2,621 2,777 n/aBuffalo 804 824 810 764 n/aPigs 2,043 2,123 2,024 2,038 n/aPoultry 9,901 10,692 10,027 10,066 n/aDraught oxen 1,050 1,184 1,161 1,320 n/aDraught buffalo 482 520 473 444 n/a

Fish (’000 tonnes)Fresh fish 103 94 65 40 n/aDried fish 2 2 30 3 n/aSalted preserved fish 4 5 8 7 n/a

Forestry (cu metres)Round logs 105 83 14,260 n/a n/aSawn wood 29 29 45 n/a n/aSource: World Bank, Cambodia: Progress in Recovery and Reform.



Reference table 13

Exports($ m; fob)

1992 1993 1994 1995 1996

Rubber 12 11 30 41 32

Logs 25 50 124 112 53

Sawn timber n/a 34 73 73 96

Fish products 1.5 0.7 n/a 1.0 4.0

Non-traditional exports n/a n/a n/a 43 113

Re-exports n/a 117 228 540 361

Total incl others 51 219 462 809 659Source: World Bank, Cambodia: Progress in Recovery and Reform.

Reference table 14

Imports($ m; cif)

1993 1994 1995

Gold 28.0 78.4 305.0

Cigarettes 60.0 95.9 192.5

Petrol 17.7 29.0 58.3

Motorcycles 13.3 29.0 36.0

Diesel oil 18.4 30.4 51.0

Vehicles 18.5 12.0 22.0

Construction materials 24.2 20.8 19.2

Food products 2.7 11.6 17.8

Television sets 10.3 21.2 17.3

Clothing 20.7 11.9 17.2Source: World Bank, Cambodia: Progress in Recovery and Reform.



Reference table 15

Main imports and exports(’000 tonnes unless otherwise indicated)

1990 1991 1992 1993 1994

ExportsKapok (tonnes) 156 123 206 100 n/aRubber 24 31 27 21 31Car tyres (’000) 4 5 n/a n/a n/aSandals (’000) 170 n/a n/a n/a n/aTimber (’000 cu metres) 97 260 110 129 1,020Tobacco 0 2 0 n/a n/aPepper (tonnes) 0 49 30 n/a n/aSoybeans 14 49 10 2 3Maize 6 26 6 5 2

ImportsRice 0 15 17 n/a n/aBeer (’000 bottles) n/a 2,032 2,333 27,298 53,472Fabric (’000 metres) 13,259 21,010 22,738 27,315 27,299Cement 17 115 233 76 85Oil & petroleum 206 156 n/a 275 452Cars (units) n/a 1,847 5,462 3,059 1,777Motorbikes (units) n/a 122,611 146,556 65,476 129,724Television sets (units) n/a 25,791 13,989 80,102 98,244Source: World Bank, Cambodia: From Recovery to Sustained Development.

Reference table 16

Main trading partners($ m; incl re-exports)

1989 1990 1991 1992 1993

Exports to:Thailand 2.2 8.6 10.5 84.7 94.7Japan 2.0 3.2 5.0 8.5 78.5Germany 0.4 0.8 15.2 24.3 26.6Malaysia 6.8 14.9 9.4 13.2 12.1Canada 0.0 0.0 1.1 5.7 0.8Italy 0.1 0.0 0.0 1.2 3.8Netherlands 0.0 0.0 0.1 1.2 2.9France 0.1 0.9 2.6 3.1 0.7Indonesia 0.0 0.7 0.9 0.2 1.1Egypt 0.0 0.0 0.8 0.1 0.1

Imports from:Thailand 0.1 0.9 5.1 72.3 197.3Japan 3.9 5.0 7.4 251.7 54.8Indonesia 14.9 11.5 6.0 26.0 43.6Hong Kong 1.6 1.8 5.9 24.8 33.9China 1.4 3.3 2.4 14.1 22.4France 2.1 2.9 4.7 14.8 22.2US 0.0 0.0 0.0 17.7 20.0Malaysia 0.6 0.1 2.0 9.4 13.6Australia 0.4 1.2 3.4 65.9 7.1Germany 1.0 8.7 3.1 5.3 2.6Source: Asian Development Bank, Key Indicators of Developing Asian and Pacific Countries, 1996.



Reference table 17

Balance of payments($ m)

1992 1993 1994 1995 1996a

Exports 264.5 219.0 461.7 809.0 659.0 of which: re-exports 213.2 117.0 228.0 540.0 361.0

Imports 350.7 422.0 737.1 1,213.0 1,110.0 of which: retained importsb 137.5 305.0 499.0 673.0 749.0

Trade balance –86.2 –203.0 –275.4 –405.0 –451.0

Services balance 27.6 10.0 –74.6 –92.0 –60.0 Receipts 49.7 66.0 59.7 121.0 172.0 Payments –22.1 –56.0 –134.2 –213.0 –231.0

Private transfers 9.0 4.0 20.0 20.0 23.0

Official transfers 5.0 149.0 235.0 346.0 299.0

Current-account balance –44.6 –40.5 –95.4 –131.0 –189.0

Capital-account balance 38.0 75.0 136.0 171.0 241.0 Official medium- & long-term loans (net) –2.1 5.0 54.0 71.0 59.0 Foreign direct investment n/a 0.0 80.0 151.3 240.0 Short-term flows, errors & omissions n/a 70.0 2.0 –51.0 –58.0

Overall balance –6.6 35.0 41.0 40.0 52.0

Memorandum items (% of GDP)Current account deficit excl official transfers n/a –8.4 –14.1 –16.2 –15.6 Current account deficit incl official transfers n/a –1.8 –4.1 –4.5 –6.0

a Estimates. b Total imports less re-exports; includes project aid imports and estimated unrecorded imports.

Source: World Bank, Cambodia: Progress in Recovery and Reform, 1997.



Reference table 18

Balance of payments, IMF data($ m)

1992 1993 1994 1995 1996

Goods: exports fob 264.5 283.7 489.7 855.2 643.6

Goods: imports fob –443.4 –471.1 –744.4 –1,186.8 –1,072.0

Trade balance –178.9 –187.4 –245.5 –331.6 –428.4

Services: credit 49.7 63.9 54.5 114.0 162.8

Services: debit –63.6 –120.5 –156.7 –187.9 –221.8

Income: credit 0.0 0.5 2.1 9.7 12.6

Income: debit –20.6 –16.6 –25.9 –66.9 –57.5

Current transfers: credit 120.4 156.4 121.8 277.9 236.9

Current transfers: debit 0.0 –0.2 –0.2 –0.9 –2.4

Current-account balance –93 –103.9 –156.6 –185.7 –297.8

Direct investment abroad 0.0 0.0 0.0 0.0 0.0

Direct investment in Cambodia 33.0 54.1 68.9 150.8 293.6

Portfolio investment assets 0.0 0.0 0.0 0.0 0.0

Portfolio investment liabilities 0.0 0.0 0.0 0.0 0.0

Other investment assets –24.1 –51.1 –46.8 –103.4 –68.0

Other investment liabilities 5.0 –2.8 31.9 75.0 76.4

Financial-account balance 13.9 0.2 54.0 122.4 302.0

Capital-account nie balance 126.3 123.4 73.2 78.0 87.4

Net errors & omissions –34.0 1.0 65.6 11.5 –19.6

Overall balance 13.2 20.8 36.2 26.2 72.0

Memorandum itemTotal changes in reserves & related items (– indicates inflow) –13.2 –20.8 –36.2 –26.2 –72.0Source: IMF, International Financial Statistics.

Reference table 19

Net official development assistancea

($ m)

1992 1993 1994 1995 1996

Bilateral 95.4 199.6 181.0 341.0 252.5 of which: Japan 4.7 61.3 64.5 152.0 71.3 France 8.7 16.8 28.4 53.4 52.1 US 13.0 29.0 16.0 33.0 28.0 Australia 7.7 10.4 14.3 25.8 28.2

Multilateral 111.4 120.2 155.6 225.8 200.3 of which: IDA 0.0 0.0 38.2 24.6 45.6 UNDP 8.5 28.8 30.0 30.1 37.5 IMF 0.0 0.0 20.0 42.5 0.0 ADB 6.0 6.0 16.4 45.4 32.1

Total 206.8 316.8 338.8 566.8 452.8

a Official development is defined as grants and loans with at least a 25% grant element, providedby OECD and OPEC member countries and multilateral agencies, and administered with the aim ofpromoting development and welfare in the recipient country.

Source: OECD, Geographical Distribution of Financial Flows to Aid Recipients, 1992-96.



Reference table 20

External debt($ m unless otherwise indicated; year-end)

1992 1993 1994 1995 1996

Total external debt 1,840 1,829 1,915 2,081 2,111

Long-term debt 1,680 1,685 1,745 1,952 2,023

Short-term debt 145 135 140 17 19 of which: interest arrears on long-term debt 113 104 110 5 5 Use of IMF credit 15 9 30 72 69

Memorandum itemPrincipal arrears on long-term debt 328 477 577 588 708

Public & publicly guaranteed long-term debt 1,680 1,685 1,775 1,952 2,023Official creditors 1,680 1,685 1,745 1,990 2,013Multilateral 0 5 58 118 193Bilateral 1,680 1,680 1,687 1,822 1,821Private creditors 0 0 0 13 10 of which: bonds 0 0 0 0 0 banks 0 0 0 0 0

Total debt service 13 34 2 6 10Principal 11 15 0 4 4Interest 2 19 2 2 6 of which: short-term debt 1 1 1 1 1

Ratios (%)External debt/GNP 93.0 82.5 79.8 69.7 67.7Debt service paid/exports of goods & services 4.0 9.6 0.3 0.6 1.2Short-term debt/total debt 7.9 7.4 7.3 0.9 0.9Concessional loans/total debt 91.3 92.1 90.9 92.8 93.9

Note. Long-term debt is defined as having an original maturity of more than one year.

Source: World Bank, Global Development Finance, 1998.

Reference table 21

Foreign reserves($ m; year-end)

1993 1994 1995 1996 1997

Total reserves excl gold 24.2 118.5 192.0 265.6 298.5Source: IMF, International Financial Statistics.

Reference table 22

Exchange rate(CR:$)

1993 1994 1995 1996 1997

Annual average 2,689.0 2,545.3 2,450.8 2,624.1 2,946.3

Year-end 2,305.0 2,575.0 2,526.0 2,713.0 3,452.0Source: IMF, International Financial Statistics.



Laos

Basic data

Land area 236,800 sq km

Population 5.1m in 1997 (EIU estimate)

Main towns Vientiane (population in 1995: 528,109), Luang Prabang, Pakse, Savannakhet.

Climate Tropical; rainy season, May-October; dry season, November-April

Weather in Vientiane Hottest month, April, 23-38°C; coldest month, January, 14-28°C; wettestmonth, June, 302 mm average rainfall; driest month, December, 3 mm averagerainfall

Language Lao

Measures Metric system; local measures include:

1 va=5 sok=10 khup=2 metres1 rai=4 ngane=1,600 sq metres1 kang=10 hoi=1.2 kg

Currency Kip. Average exchange rate in 1997: K1,256.7:$1; end-December 1997:K2,009:$1

Time 7 hours ahead of GMT

Public holidays January 24th (Army Day), April 13th-15th (Lao New Year), May 1st (LabourDay), December 2nd (National Day)

44 Laos: Basic data


Political background

Historical background

Early history Laos traces its origins as a unified state to the emergence in the mid-14thcentury of the kingdom of Lan Xang Hom Khao, initially based in the northerntown of Luang Prabang. Riven by factionalism, the once wealthy kingdombecame increasingly fragmented. By the 19th century three separate kingdomshad emerged, centred on Luang Prabang in the north, Vientiane in the centreand Champassak in the south. By the late 18th century all three kingdoms hadbeen reduced to tributaries of Siam (modern Thailand).

French colonialism Following its colonisation of central and northern Vietnam in 1884, Francestarted to take control of the three Lao kingdoms in 1893, centralising themunder the rule of the royal house of Luang Prabang. For the next half-centuryLaos was ruled as part of French Indochina. After the outbreak of the secondworld war the French government was briefly replaced by the Japanese. Duringthis period nationalist sentiment grew among the Lao elite, and Laos wasdeclared independent in April 1945. However, the surrender of the Japanese inAugust 1945 left a political vacuum. The nationalist Lao Itsara (Free Laos)movement seized power, but by early 1946 French forces had once againgained control.

The evolution of thecommunist movement

In 1946 war broke out between France and the Vietminh, the communist-ledUnited Front organisation in Vietnam. The Vietminh’s radicalism influencedthe more radical elements in the Lao Itsara, led by Prince Souphanouvong (the“red prince”). In 1950 Prince Souphanouvong formed the breakaway Pathet Lao(Land of Laos) association, committed to continuing the communist struggleagainst colonialism in tandem with the Vietminh. The Lao People’s Party (laterthe Lao People’s Revolutionary Party, LPRP) was established in 1955 under theleadership of Kaysone Phomvihan, to organise support for the Pathet Lao.

Laos finally became independent from France in 1954, following France’sdefeat by the Vietnamese at Dien Bien Phu. The following year elections wereheld in Laos. The new government included two Pathet Lao members, a movestrongly opposed by the US, which cut off aid to Laos. The elected governmentproved short-lived and collapsed in 1959. It was replaced by a more right-wingadministration, which in turn was overthrown in a military coup less than ayear later. With the military in power, the Pathet Lao went underground,beginning an armed struggle against the government in 1963. At the same timeLaos was increasingly drawn into the war in Vietnam, with both the US and theNorth Vietnamese active in the country. For the next decade Laos was sub-jected to the heaviest bombing in the history of warfare, as the US sought tohinder the passage of North Vietnamese soldiers and supplies down the Ho ChiMinh Trail, which passed through Laos.

The LPRP takes control A ceasefire was agreed in 1973, when the communists formed a coalition withthe royal government. Half the cabinet posts went to the Pathet Lao, reflectingcommunist battlefield gains. However, the respite did not last long, and fight-

Laos: Historical background 45


ing soon resumed. In August 1975, four months after communist victories inCambodia and Vietnam, the Pathet Lao entered Vientiane. In December KingSavang Vathana abdicated, and the Lao People’s Democratic Republic wasproclaimed. Prince Souphanouvong was named president, but real power laywith the relatively unknown Kaysone Phomvihan, secretary-general of thenow renamed LPRP.

The CPRP continues to dominate political life. In 1986, under the slogan “newthinking”, Laos began to liberalise its economy. But the CPRP remains opposedto political reform along multi-party lines.

Important recent events

November 1992: The president of the LPRP and of the Lao People’s DemocraticRepublic, Kaysone Phomvihan, dies. Nouhak Phomsavan is elected president.March 1996: The Sixth Party Congress is held. General Khamtai Siphandonsucceeds Nouhak Phomsavan as head of the LPRP (and as prime minister). The partyconfirms that reforms will continue, although state control over the economy is to bemaintained. The military dominates the new Politburo line-up. July 1997: Laos joins ASEAN.December 1997: National Assembly elections are held. The military iswell-represented. February 1998: President Nouhak Phomsavan retires and is replaced by GeneralKhamtai. General Sisavat, who is linked to General Khamtai by the marriage of theirchildren, becomes prime minister, reinforcing the powerful Khamtai-Sisavat alliance.

Constitution and institutions

The 1991 constitution The present constitution, passed in 1991, states that while the LPRP should beresponsible for setting broad policy guidelines, the government should be leftto manage day-to-day administration. The constitution describes the CPRP asthe “leading nucleus” of the political system. The constitution emphasises thatthe economy is market-oriented and that all forms of economic ownership arepermitted.

The president has the power to appoint or dismiss the prime minister and thegovernment (with the approval of the National Assembly). In recent years, morepower has rested with the prime minister than with the president. However, thismay change with the appointment in February 1998 of General Khamtai aspresident, who may prove more powerful in the post than his predecessor.

The National Assembly’srole has been

strengthened—

The National Assembly meets twice a year and is elected for a period of five years(the next election is due in 2002). The powers of the National Assembly wereincreased by the 1991 constitution, which describes it as overseeing the activi-ties of the government and the judiciary. Legislation passed by the NationalAssembly is also intended to replace the previous system of rule by party fiat.

—but there has been noreal devolution of power

However, most members of the government are members of the LPRP, and allthose who stand for election to the National Assembly must be approved bythe party-controlled Lao Front for National Reconstruction (LFNR), which

46 Laos: Constitution and institutions


comprises such organisations as trade unions, peasant associations, and relig-ious and business groups. At the National Assembly election in December 1997only four non-party candidates were selected to stand, of whom only one gaineda seat. The judiciary, too, is in no sense independent of the LPRP.

Political forces

Laos remains a one-partystate—

The LPRP, established in 1955 as the Lao People’s Party, has held exclusivepower since the Pathet Lao ousted the royalist government in 1975. The LPRPremains opposed to political reform along multiparty lines.

The LPRP has shown itself to be remarkably resilient. A smooth transition fol-lowed the death in 1992 of the party president and leading revolutionary,Kaysone Phomvihan. The second generation of leaders, centred around GeneralKhamtai (first as prime minister and from February 1998 as president), hasproved more open to reform. Differences over the pace and direction of thereform process do exist but have never threatened the survival of the party itself.

The party has sought to tackle the perception that it represents the interests ofthe dominant ethnic group, the lowland Lao, over those of ethnic minorities.Of the four new Politburo members elected at the Sixth Party Congress in 1996,three were from ethnic minorities.

—and opposition is verylimited

Organised opposition to the LPRP is extremely weak. A number of small guer-rilla groups exist, notably Hmong rebels, whose opposition to the communistscan be traced back to their links with the US in the 1960s and 1970s. There areperiodic attacks on vehicles and personnel by bandits. There are also dissidentgroups based in eastern Europe, but they pose no threat to LPRP rule. Themedia are entirely state-controlled.

The military remainspolitically powerful—

Since its border conflict with Thailand in 1987 Laos has been at peace with itsneighbours. However, the Lao People’s Army still maintains a regular armedforce of 37,000 (mainly army) and a local militia of around 100,000.

The military has long been well-represented in political life. Six of the nine-member Politburo are generals and one is a colonel, while only two have nomilitary background. From time to time there have been reports of discontentin the military, but on the whole relations between the armed forces and theLPRP are good.

—and economically active The military is regarded as politically conservative but has exploited the oppor-tunities provided by the economic reforms. At the heart of the military’s com-mercial empire is the Bolisat Phatthana Khet Phoudoi (BPKP) Import-ExportCompany. Its activities are diverse, including agriculture and forestry, con-struction, light industry, trade and tourism. The BPKP is most active in thecentral region of Laos. It has two sister companies which operate in the northand the south of the country respectively.

Laos: Political forces 47


Main political figures

General Khamtai Siphandon: The current president, appointed in February1998. He succeeded Nouhak Phomsavan as head of the ruling party at its Sixth PartyCongress in 1996. Widely regarded as the head of the second generation leaderswho are the driving force behind the economic reforms.Nouhak Phomsavan: A founding member of the LPRP, regarded as a conservative.In 1998 he stepped down as president (a post he had held since the death ofKaysone Phomvihan in 1992), having retired as head of the party in 1996. He hasbeen retained as a party adviser but his influence is waning. He is reportedly close toBounnyang Volachith, who was elected to the Politburo when Nouhak retired.Sisavat Keobounphan: General Sisavat Keobounphan was dismissed from thePolitburo in 1991. He was reappointed at the Sixth Party Congress in 1996 andshortly afterwards he was appointed vice-president. In 1998 he took over fromGeneral Khamtai as prime minister. General Sisavat is another of the new generationof leaders. He is linked to General Khamtai by the marriage of their children, creatinga powerful Khamtai-Sisavat alliance.Saman Vignaket: Lieutenant-General Saman Vignaket ranks second in thePolitburo and is president of the National Assembly. Politically quite hard to place, heis part of the second generation of leaders but is also said to be close to the moreconservative Nouhak. Choumali Sayasone: Lieutenant-General Choumali Sayasone was promoted tonumber three in the Politburo at the Sixth Party Congress in 1996. He also holds theinfluential post of defence minister. Although regarded as politically conservative, hisinvolvement in the rapid expansion of the military’s economic activities has givenhim a stake in the reform process.

International relations and defence

Laos and Vietnam The LPRP government was heavily influenced by its links with the SovietUnion and Vietnam from the mid-1970s until the late 1980s, during whichtime around 40,000 Vietnamese troops were stationed in Laos. Relationsremain close, but military and security links have been downgraded. A fewyears ago Vientiane was reportedly considering the implications of allowingthe Treaty of Friendship and Co-operation it signed with Vietnam in 1977 tolapse when it expires in 2002, although little has been heard of this recently.

External relations areimproving

Laos’s special relationship with Vietnam led to a worsening in its relations withChina. However, the recent decline of Vietnamese influence has allowed rel-ations with China to improve. A border agreement was signed betweenVientiane and Beijing in 1993, there are regular exchanges at party and militarylevels, and crossborder trade is thriving (although much of it is illegal).

Relations with Thailand are much more cordial than a few years ago. However,their common border continues to be a source of friction and the issue of Laorefugees in Thailand remains unresolved. Efforts to demarcate the border beganin early 1997—although halted in late 1997, they are expected to begin onceagain. Laos joined the Association of South-East Asian Nations (ASEAN) inJuly 1997, which should further cement ties. The search for new export mar-kets and sources of aid has also led to improved relations with other capitalist

48 Laos: International relations and defence


states such as Japan, Australia and Sweden—which together with France areLaos’s main aid donors—and the European Union. Laos has diplomatic rel-ations with the US, and the two countries are co-operating in the areas of drugcontrol, bomb disposal and the search for US servicemen missing in action.

The economy

Economic structure

Main economic indicators, 1997

Real GDP growth (%) 6.9a

Consumer price inflation (%) 17.0b

Current-account balance ($ m) –364.5a

Foreign debt ($ m; year-end) 2,263a

Exchange rate (K:$; average) 1,256.7

Population (m) 5.1b

a 1996. b EIU estimate.

Sources: IMF, International Financial Statistics; World Bank, Global Development Finance, 1997; EIU estimates.

Agriculture stilldominates GDP—

Agriculture (including forestry and fishing) is the most important economicsector, accounting for 53% of current-price GDP in 1996, although its share hasfallen from 59% of GDP in 1992. Subsistence farming remains important. Riceis the most important crop; the rainfed rice crop accounts for over 75% of thetotal crop as irrigation is limited. Other crops include coffee, tea, peanuts,maize and sweet potatoes.

—but industry andservices are growing

more rapidly

Industry and services account for a growing share of GDP. Industry (comprisingmanufacturing, mining, utilities and construction) contributed 21% of current-price GDP in 1996, compared with 17% in 1992. Leading growth sectors aregarments manufacturing, food processing and low-technology assembling. In1992 textiles and garments overtook electricity as the largest single componentof industrial output. The construction sector has also registered strong growthin recent years.

Services contributed 23.8% of current-price GDP in 1996. Wholesale and retailtrade, the largest component of the services sector, has been particularly buoy-ant recently, as have hotel and restaurant services. (See Reference table 4 forhistorical data on the components of GDP.)

The central provinces arethe most economically

dynamic

The central provinces are economically more dynamic than either the south orthe north. They have benefited from their proximity to Vientiane, which hasattracted the lion’s share of investment. Communications and transport infra-structure are also more developed in the centre.

Laos: Economic structure 49


Economic policy

Introduction of reforms When it came to power, the Lao People’s Revolutionary Party (LPRP) was facedwith a war-damaged infrastructure, large numbers of refugees and the exodusof many professional people. These problems were compounded by the abruptloss of US aid. Attempts to collectivise agriculture encountered strong oppos-ition and production stagnated. The LPRP took the first tentative steps towardsmarket-oriented reform in December 1979. Restrictions on private trade wereeased and joint ventures between the state and the private sector were encour-aged. Agricultural taxes were reduced, and government procurement prices formost crops were increased. However, there was no move to dismantle thecentral planning mechanism.

The New EconomicMechanism

More far-reaching reforms began at the Fourth Party Congress in November1986. Under the slogan pean pang mai (new thinking), a shift towards a market-oriented economy began, with the introduction of what has since becomeknown as the New Economic Mechanism (NEM). Collectivisation of agricul-ture was abandoned and many restrictions on private-sector activity wereeased. State enterprises were given more freedom to determine prices, salariesand production plans. Privatisation began in 1988, accelerating in the next fiveyears, before slowing from 1993.

Laos’s privatisation programme

According to the IMF report, Lao People’s Democratic Republic: Recent EconomicDevelopments (June 1996), Laos has “gone further than most other formerly centrallyplanned economies” in privatising its state enterprises. The privatisation processstarted with Decree 19 of March 1988. At first privatisation was limited to somesmall organisations. In 1991 larger enterprises were included in the plan.Private-sector participation is excluded from only a narrow range of “strategic”industries (the Sixth Party Congress in 1996 stressed the key role of state enterprisesas the “mainstay of certain branches of production”).

According to the IMF, there were an estimated 640 state enterprises in 1988. By theend of 1995 over 500 state enterprises had been at least partially privatised.However, only 75 of these firms were sold outright. There has been a tendency tolimit divestiture of state firms to fixed-term lease contracts for production only. Thetotal value of the enterprises sold in 1989-95 was $72.6m, peaking in 1993 with thesale of Lao Brewery.

The Sixth Party Congresssets priorities

The government’s economic strategy was further developed at the Sixth PartyCongress in March 1996. The promotion of foreign direct investment (FDI) wasidentified as a major party policy, and the importance of both the state sectorand the private sector was emphasised. Sectors singled out as prioritiesincluded processing, energy and mining, and tourism. The report also reiter-ated the government’s long-standing aim of exploiting Laos’s potential as atransport hub, particularly between Thailand and south-west China.

50 Laos: Economic policy


State control remainsimportant—

Although reports at the congress stressed that different forms of economicownership were permitted, emphasis was placed on boosting the efficiencyof state enterprises, so that they might maintain their role as the “mainstayof certain branches of production and services”. The report to the congressemphasised that foreign investment should be accepted only in areas regardedby the government as priorities.

—but reforms willcontinue

Although debates over the relative roles of the state and the private sector willcontinue, even the most conservative of Laos’s leadership acknowledge thatthe market has a role to play in economic development. The appointment ofthe reformist General Khamtai as president in February 1998 (see Politicalforces) bodes well for the reforms, while the need to maintain competitivenessin a less favourable regional climate in the wake of the Asian economic crisismay propel reforms forward in some areas.

Fiscal reforms haveboosted revenue—

Since the NEM was adopted, the government has introduced a number of fiscalreforms intended to reduce the budget deficit and inflation. A key aim has beento shift the revenue base away from dependence on transfers from state enter-prises towards a mixture of income, property, excise and trade taxes. A numberof reforms stand out.

• In 1988 measures were introduced to replace transfers by state enterpriseswith a system of profit and turnover taxes.

• In 1989 the corporation and export tax systems were streamlined, personalincome tax was broadened, and taxes were introduced on the use of certainresources.

• In 1991 the government sought to centralise control over the budget. Cen-tral and provincial budgets were consolidated into a general governmentbudget, and a National Treasury was established. These changes took effect inthe 1992 budget (when the fiscal year was changed to October 1st-September30th from the calendar year).

• In 1994 export taxes were eliminated.

• In January 1995 the system of import tariffs was restructured.

In 1996 a new tax law was passed which expanded the range of goods eligiblefor turnover tax, raised the minimum threshold for income tax, lowered profittax rates, and introduced ad valorem duties. In the 1990s these efforts to diver-sify revenue sources resulted in a fairly steady rise in revenue as a percentage ofGDP, although the government remains heavily reliant on foreign financialassistance.

—and promotedcentralisation—

The reform programme has included efforts at centralisation, particularly infiscal policy. Until 1992 provincial administrations had independent budgets,with near-complete autonomy over local expenditure. Provincial authoritieshad jurisdiction over the collection of most tax and non-tax revenue in theirareas. In 1991, as part of a comprehensive restructuring of public finances, thegovernment passed a decree stating that all revenue must be centrally collectedand that provincial expenditure would be set by the national budget. In

Laos: Economic policy 51


practice, however, implementation has proceeded slowly and the provincescontinue to hold extensive fiscal powers.

—but the fiscal deficitremains large

The fiscal deficit has been on a declining trend as a percentage of GDP since thelate 1980s (although it has not fallen consistently, ballooning to 11.5% of GDPin 1993/94 before falling back to an estimated 8.6% of GDP in 1996/97, exclud-ing grants). Capital expenditure has picked up to around 11-12% of GDP ineach of the last three financial years (to 1995/96). (See Reference table 1 forhistorical data on government finances.)

Key economic policy developments

1986: Economic reforms are launched with the endorsement of the New EconomicMechanism.1988: A liberal foreign investment law is approved.1989: With the support of the multilateral financial institutions, the governmentlaunches a macroeconomic stabilisation programme.1991: Plans to privatise a number of larger state enterprises are announced.1993: The IMF approves a three-year enhanced structural adjustment facility (ESAF).1994: A revised law on foreign investment is passed, permitting 100%foreign-owned ventures.1995: The Domestic Investment Promotion Law is promulgated, offering Laoinvestors low-interest bank loans for projects in sectors such as textiles andagriculture, as well as in remote areas. 1996: A new body, the Committee for Management of Investments andInternational Economic Relations (CMIIER), is established to oversee the foreigninvestment approval process.1997: The government stresses that the development of hydroelectric power is justone part of its economic strategy. Light industry, notably garments andagro-processing, are also important.

Monetary policy According to IMF data, M2 rose by 16.4% in 1995 (when a rise in inflationresulted in a fall in real interest rates, which led to a decline in bank deposits),before picking up to 26.7% in 1996—although this was still well below theaverage annual increase of 40% in 1991-95. However, the ability of the Bank ofthe Laotian People’s Democratic Republic (the central bank) to control mone-tary growth is limited by the difficulties of controlling the growth of credit tothe private sector or of sterilising foreign capital inflows through open-marketoperations. Some progress has already been made in developing indirect mone-tary policy instruments: a minimum reserve requirement was introduced inOctober 1990 (and increased in November 1994 and again in June 1995),Treasury-bill auctions began in March 1994, and the central bank has operateda discount facility since May 1994. (See Reference table 2 for historical data onmoney supply.)

Foreign investmentliberalisation

In 1994 a revised law on foreign investment was passed, permitting 100%foreign-owned ventures. Investment is encouraged in a range of sectors, includ-ing manufacturing and energy. In 1996 the agencies overseeing foreign invest-ment approvals were reorganised. In August the Committee for Planning and

52 Laos: Economic policy


Co-operation (CPC) was abolished, and its subsidiary, the Foreign InvestmentManagement Committee (FIMC), was replaced by the Committee for Manage-ment of Investments and International Economic Relations (CMIIER). How-ever, the name FIMC is still widely used.

Trade liberalisation— In 1987 the state monopoly on foreign trade in several commodities was aban-doned. Quotas have gradually been removed and the tariff structure rational-ised. Quantitative restrictions remain only for imports of vehicles and exportsof timber. The government aims to attract foreign investment into export-oriented sectors. Laos has already benefited from a number of preferential tradeagreements. In 1996 the EU granted Laos Most Favoured Nation (MFN) tradingstatus and the US is likely to follow suit in 1998. Laos has also signalled itsdesire to join the World Trade Organisation (WTO).

—will be spurred byASEAN membership

In July 1997 Laos joined the Association of South-East Asian Nations (ASEAN).As a full member Laos will have to implement the ASEAN Free-Trade Area’s(AFTA) common effective preferential tariff (CEPT) arrangements, starting in1998. However, it will be given until 2008 to meet the full requirement oflowering tariffs on designated products to between 0% and 5%. Most otherASEAN member states have been set a deadline of 2003. In late 1997 the Laogovernment was preparing to establish eight international border checkpointsto monitor trade between Laos and other ASEAN member states.

Economic performance

Growth is volatile In 1992-96 Laos’s real GDP growth averaged 7%. Growth has been volatile inthe 1990s, as it is dependent on the performance of the agricultural sector,which accounts for more than half of total output and employed 87% of theworkforce in 1992 (see Reference table 7 for historical data on the labour force).The agricultural sector is vulnerable to bad weather (floods or drought) andpests, rural infrastructure is poor, and credit is scarce.

Gross domestic product (% real change)

Average1996 1992-96

GDP 6.9 7.0

Agriculture 3.0 5.0

Industry 13.4 11.0

Services 10.4 7.5

Regional comparisonsCambodia 6.5 5.9Thailand 6.7 8.1Vietnam 9.5 8.9Source: Asian Development Bank, Asian Development Outlook, 1997 and 1998.

The industrial sector has led overall growth in the 1990s, boosted by the impactof the reform programme. In addition inflows of FDI have resulted in theemergence of an export-oriented manufacturing sector, notably in textiles andgarments. The development of new, more dynamic Asian and European export

Laos: Economic performance 53


destinations following the collapse of Soviet and east European markets havealso stimulated export-oriented manufacturing. Increased tourism, trade andfinancial activity have contributed to buoyant growth in services throughoutthe 1990s.

Data on the expenditure breakdown of GDP are not available. However,increases in gross domestic investment since 1990 are thought to be the resultof higher private, rather than public, investment; the latter has been con-strained by efforts to curb the fiscal deficit. Nationwide, private consumptionis increasing slowly, although there have been stronger increases in urbanareas. (See Reference table 3 for historical data on constant and current-priceGDP and GDP per head.)

Inflation has risen Consumer prices increased at an annual average rate of 11% during 1993-96.Inflation surged in 1995, after three consecutive years of single-digit inflation,fuelled by strong money-supply growth and by shortages of rice and construc-tion goods. It fell back slightly in 1996 to an annual average of 13.1%, butestimates based on partial data suggest that price pressures intensified in 1997,and that annual average inflation reached around 17%. Inflationary pressuresin 1997 were caused by rising food prices (a result of flooding) and an increasein the price of many imported goods as a result of the weak kip. Inflationremains vulnerable to supply-side pressures, especially increases in food prices;food has a 54% weighting in the consumer price index, of which rice accountsfor 20%. (See Reference table 5 for consumer price inflation data.)

Consumer prices

Average1997a 1993-97a

% change, year on year; period average; 1990=100 17.0 12.4

a EIU estimate.


Regional trends

Regionalism versuscentralisation

The economic gap between Vientiane and the rest of the country has widenedsince the reforms began, as the lion’s share of foreign investment has gone tothe capital and its environs. In addition, central control over the regions hasalways been weak. To a large extent this is because of poor communications andtransport links between the provinces. It has been argued that the “open-door”economic policy is exacerbating such problems: as crossborder trade develops,northern Laos is being drawn into the orbit of Yunnan (in China), the north-eastern provinces are looking to Vietnam, and the centre and south of thecountry are becoming oriented towards Thailand.

54 Laos: Regional trends


Resources

Population

The population is largelyrural—

The official census conducted on March 1st 1995 put Laos’s population at4.58m (differing from the IMF estimate of 4.88m). Of these, 37% reside in threelowland provinces, Savannakhet, Vientiane (including Vientiane municipality)and Champassak, while over 76% of the population live in rural areas (accord-ing to a World Bank estimate). The capital, Vientiane, is the only large town,with 528,109 inhabitants in 1995—almost 12% of the population. With theexception of Vientiane, where population density is 135 people per sq km, thecountry is very sparsely populated. According to the most recent estimates, thenational average is 19.3 people per sq km. In neighbouring Vietnam the aver-age is around 214 people per sq km, while in Myanmar (Burma) it is around 64people per sq km.

The population is very young. According to State Planning Committee data for1995, 18.4% of the population was under four years of age, and 55% underthe age of 20. There are slightly more women than men: 50.6% comparedwith 49.4%.

Age structure, 1995

Age group %

0-4 18.4

5-9 13.8

10-14 12.0

15-19 10.8

20-24 8.2

25-29 6.7

30-34 6.6

35+ 23.5Source: State Planning Committee, Basic Statistics.

—and ethnically diverse The government recognises the existence of 65 distinct ethnic groups, whichcan be divided into three broad categories: Lao Lum (“lowland Lao”), LaoThoeng (“mountain Lao”) and Lao Sung (“Lao of the mountain tops”). Some60% of the population belong to Lao Lum groups, generally residing in thewestern valleys. A further 35% belong to the various hill tribes. In additionthere are a small number of ethnic Vietnamese and Chinese. The lowland Laoare politically dominant, and historical tensions with minority groups persist.One of the most alienated groups is the Hmong ethnic minority. Before thecommunists took power in 1975, they were opposed by a US-trained Hmongarmy. There are still Hmong refugees in Thailand, and they are periodicallyaccused of acts of sabotage by the Lao government. Some of these refugees havebeen given residence in the US, while others are expected to be repatriated toLaos in 1998.

Over 46% live below thepoverty line

According to the World Bank, average annual income per head in 1995 was$350. According to a 1995 World Bank study, some 22% of the population falls

Laos: Population 55


below the food poverty line (defined as the level of income sufficient to buy2,100 calories per person per day). Some 46% of the population falls below amore generous estimate of poverty, which includes a level of income sufficientto buy basic goods. On this measure, the incidence of poverty in rural areas is53%, compared with only 24% in urban areas. There is also a marked differencebetween regions, with almost 60% of the population in the south falling belowthe poverty line, compared with only 40% in the centre and 46% in the north.

Population indicators

Life expectancy (years) 52a

Population growth rate (%) 2.5b

a 1995. b 1997; EIU estimate.

Source: World Bank, World Development Report 1997.

Official figures mayunderestimate population

growth

Official population figures suggest that the population growth rate has slowedsharply in the 1990s, to around 1.8%. However, official population figures, includ-ing the 1995 census, have tended to be underestimates. The World Bank estimatesthat the population reached 5m in 1994, and that the average annual growth ratefor 1990-94 was 3.1%. According to IMF data (see Reference table 6), the totalpopulation reached 4.9m in mid-1995. The age structure of the population meansthat population growth rates are likely to remain high, despite high mortalityrates. Based on a rate of population growth of 2.5%, the population may havereached 5.1m by 1997. Based on official data, the figure is only around 4.8m.

Education

Low literacy levels Only 43% of the adult population is literate, according to the World Bank’sWorld Development Report 1997. Laos suffers from a shortage of schools, a lackof textbooks, poorly qualified teachers, and low school enrolment and comple-tion levels. According to government figures, the enrolment rate in primaryschools was 60% in 1995, although only 30% completed. According to a WorldBank study in 1995, only 55% of households surveyed had access to complete(ie five years) primary school education, with under 50% having access to“lower secondary” education.

Tertiary training is inadequate, with gaps in key areas such as informationtechnology and accountancy. In tackling educational deficiencies, the govern-ment is focusing on raising primary and secondary school enrolment rates. It isreceiving some external assistance in improving tertiary level education, and avery small number of people are receiving training abroad. There is also someeducational provision by the private sector. Budgetary constraints, however,make improvements difficult.

56 Laos: Education


Health

Healthcare provisionis poor

Health standards in Laos are poor. Infant mortality was estimated by the WorldBank at 90 per 1,000 live births in 1995, although recent government estimateshave been rather higher. Maternal mortality in 1989-95 was 660 per 100,000live births, which is high even for a low-income country. Rates of immunisa-tion are low. Life expectancy at birth is 52 years, compared with 68 in Vietnamand 58 in Myanmar. Underlying these poor results is a public health systemthat has been poorly maintained and is inaccessible to a large percentage of thepopulation. For example, of the 117 district hospitals, only 20 were reported tobe fully operational in 1994. Many people seek medical treatment from theprivate pharmacies that have sprung up in recent years, where personnel isoften inadequately trained. Around half of the poorest 15% of the populationrely on such forms of healthcare. Given resource constraints, the governmentis focusing on developing a more efficient primary healthcare system, includ-ing improving immunisation rates.

Natural resources

Laos is a mountainous, landlocked country, bordered by China to the north,Vietnam to the east, Cambodia to the south, Thailand to the west andMyanmar to the north-west. Southern Laos is less hilly but still rugged anddensely forested. Despite serious deforestation, some 45% of the country is stillforested. Of Laos’s many rivers, the most important is the Mekong, whichprovides a natural border with Thailand and Myanmar.

Main resources The country’s most valuable natural resources are its forests as well as its rivers,which have considerable potential for generating hydroelectric power. How-ever, there are concerns over the sustainability of the exploitation of Laos’sforests. Laos is also endowed with a wide range of mineral deposits, the mostimportant of which are tin, lead, gravel, gypsum and salt, although there arealso small coal, iron ore, gold, and oil and gas deposits. Exploration of Laos’snatural resources is not complete.

A tiny proportion of landis cultivated

Estimates vary, but, according to the World Bank, only 6% of Laos’s total landarea was used for pasture or crops in 1993. Irrigation is sparse; most farmingrelies on the rains. Permanent agriculture is practised in areas adjacent to theMekong River and its tributaries, and shifting “slash-and-burn” cultivation ispractised in the uplands.

Economic infrastructure

Transport and communications

Infrastructure is in a poorstate of repair

Years of war and a lack of investment have left Laos’s transport and communi-cations infrastructure in a poor state. This represents a major constraint oneconomic development. Almost all freight and passenger traffic moves by road,

Laos: Health 57


supplemented by a small volume of river and air transport. The amount offreight and passengers transported by air rose sharply in 1995. (See Referencetable 9 for historical transport data.)

The government’s priorities for infrastructure development to 2000 are set outin its 1994-2000 public investment programme. Some $671m is to be spent onthe sector, with the largest proportion (74%) reserved for upgrading the roadnetwork. Laos will also benefit from the regional infrastructure projectsplanned by the six countries of the Greater Mekong Subregion (Laos,Myanmar, China, Cambodia, Thailand and Vietnam). These will include theconstruction of more bridges across the Mekong River. (The first bridge overthe Mekong—the Mitraphab, or Friendship, bridge—was completed in 1994,linking Laos with Thailand.) A second and a third bridge are planned, althoughthe second bridge has been delayed by the regional economic crisis which hasundermined the financing arrangements.

Recent infrastructure developments

October 1996: Thailand’s Shinawatra Group is awarded a 25-year contract toundertake all telecommunications projects in Laos. It plans to establish 20,000 newfixed network connections in 1997.December 1996: The Asian Development Bank (ADB) approves a $3m loan tocover upgrading work on the highway linking Laos to Thailand.February 1997: Thailand’s Sahaviriya Group is awarded a contract to develop arailway network in Laos. The Nong Khai-Vientiane rail link is due to be completed inAugust 1998. September 1997: The financial crisis in Thailand undermines the financingarrangements for the second bridge across the Mekong river, linking Mukdahanprovince in Thailand to Savannakhet in Laos.

Roads Of the country’s 18,363 km of roads in 1995, less than half were surfaced.According to the World Bank, around one-third of all villages, home to 22% ofthe population, are in areas that are not accessible by vehicle. The percentageis higher in the north of the country (55% of all villages). Many dirt roadsbecome impassable during the rainy season. Work is being carried out to createall-weather surfaces on Route 13, which runs from Luang Prabang in the northto the Cambodian border in the south, and on Routes 7, 8 and 9, which runeast-west giving access to Vietnamese seaports. The development of the ruralroad network is a key element of the government’s transport policy, as it willallow national markets to become more integrated. Even in Vientiane trafficdensity is very light.

Inland waterways Although there are some 4,600 km of navigable waterways along the MekongRiver and its tributaries, they are not extensively used as a means of transport-ation. However, a number of river ports have been upgraded, and efforts arebeing made to improve river access.

Air transport Efforts are also being made to upgrade air transport, reflecting the desire todevelop the tourism industry. The main international connections are with

58 Laos: Transport and communications


Bangkok, Kuala Lumpur, Hanoi and Phnom Penh, but new routes to otherSouth-east Asian and Chinese destinations are planned. Since 1993 Lao Aviation(International), the country’s only airline, has been managed by China TravelAir Services. In 1995 agreement was reached to lease aircraft from anotherChinese company, Yunnan Airlines, to operate on international and domesticroutes. Pakse and Savannakhet airports are being upgraded to enable them toreceive commercial planes, while Luang Prabang has a new airport terminal.Smaller airfields are also being upgraded. These improvements are reflected inthe very large increases in passengers and freight transported by air in 1995.

Railways The country has no rail network. However, in 1996 work began on the construc-tion of a 30-km rail link between Vientiane and Nong Khai in Thailand, crossingthe Mitraphab bridge. The work is due to be completed in August 1998.Construction of the Nong Khai-Vientiane line is to be followed by the develop-ment of a comprehensive railway network in Laos. Thailand’s Sahaviriya Groupwas awarded the right to undertake the project in 1997. It includes routes fromVientiane to Luang Prabang (220-km); Luang Prabang to Bor Ten on theLao-Chinese border (220 km); Vientiane to Kham Muan (337 km); Kham Muanto Champassak (352 km); Champassak to Chong Mek near the Lao-Cambodianborder (60 km); Borikhamchai to Muang Vin (60 km); and Chaingkwang toWang Wien (120 km). No timetable for implementing these projects has beenissued, and they will probably not be realised for several years.

Telecommunications Laos’s telecommunications are still undeveloped, although gradual improve-ments are being made. There are an estimated 0.7 telephones per 100 people.The aim is to increase this to 3 per 100 by 2000, and to 5 per 100 by 2009. Thetelephone network now reaches all 17 provinces, although some towns are stillwithout telephones. International dialling outside the main urban centres canbe difficult.

The most active foreign company in the sector is a Thai company, ShinawatraInternational, which has a 25-year joint-venture agreement with the state-owned Enterprises des Postes et Télécommunications de Laos to install andoperate a variety of telecommunications services. Following an agreement withan international consortium in 1996, two telecommunications satellites—Lao-Star 1 and Lao-Star 2—are scheduled to be launched in 1998.

Energy provision

Electricity production Generating capacity in Laos is 256 mw. Even allowing for the small size of thepopulation and economy, this is minute by regional standards. NeighbouringVietnam generates over 6,000 mw, while Myanmar has installed capacityapproaching 1,000 mw. According to the government, only 17% of the popul-ation has access to electricity (World Bank estimates put this at 11%). Powercuts are commonplace, especially during the rainy season. The majority of thepopulation meet their energy requirements by burning wood. (See Referencetable 8 for historical energy statistics.)

Almost 90% of Laos’s generated capacity comes from hydroelectric sources,where the country has significant potential. The largest share comes from the

Laos: Energy provision 59


Nam Ngum hydroelectric plant (Units 1 and 2), near Vientiane, which has acapacity of 150 mw. In March 1998 the 210-mw Theun Hinboun power plantwas due to come on stream. Also important is the Xeset hydroelectric plant inSaravane province, which has a capacity of 45 mw. The remaining electricity isgenerated by diesel power generators.

Electricity exports Over 80% of Laos’s hydroelectric power is exported to Thailand each year.Based on agreements signed between Vientiane and the Electricity GeneratingAuthority of Thailand (EGAT), these exports are expected to rise to 1,500 mwper year by 2000, and to 3,000 mw by 2005. In 1995 a memorandum of under-standing (MoU) was signed with Vietnam for it to purchase 1,500-2,000 mw ofelectricity from Laos between 1998 and 2000. A second MoU was signed in1996 under which Laos will sell Vietnam 1.5bn-2bn kwh of electricity per yearfor a period of 25-30 years starting in 2002/03.

In order to meet the expected level of future electricity demand, a large-scaleexpansion of generating capacity is planned over the next few years. In the early1990s the government predicted that installed capacity would reach 2,500 mwby 2000 and 7,000 mw by 2010. However, these targets now look ambitious. In1998 the country’s largest project to date, the 681-mw Nam Theun 2, had still tobe given the final go-ahead, despite extensive environmental studies. AssumingWorld Bank approval and loan guarantees are given, construction is still notexpected to begin before 1999, some three years behind schedule. Other hydro-electric power stations scheduled for completion over the next few years includeHong Sa (600 mw), Houai Ho (150 mw) and Se Kong (450mw). In total tenhydroelectric power projects have been approved, including Nam Ngum 3.A 600-mw coal-fired power station near the town of Hong Sa is scheduled tocome on stream in 2001.

Energy balance, 1997(m tonnes oil equivalent)

Elec- Oil Gas Coal tricity Other Total

Production 0.00 0.00 0.00 0.29a 1.12 1.41

Imports 0.12 0.00 0.00 0.01a 0.00 0.13

Exports 0.00 0.00 0.00 0.20a 0.00 0.20

Primary supply 0.12 0.00 0.00 0.10a 1.12 1.34

Net transformation –0.02 0.00 0.00 –0.07 0.00 –0.09

Final consumption 0.10 0.00 0.00 0.03b 1.12 1.25

a Expressed as input equivalents on an assumed generating efficiency of 33%. b Output basis.

Source: Energy Data Associates.

Financial services

There have beenfinancial-sector reforms—

Reform of the financial sector began in 1988, when the then State Bank startedto devolve its commercial banking functions and to adopt a supervisory centralbanking role. Its extensive structure of provincial and local branches wasrationalised, and two state-owned “autonomous” commercial banks were cre-ated (Nakhoneluang Bank and Sethathirath Bank). The first private-sector in-volvement in banking came in 1989 with the creation of the Joint

60 Laos: Financial services


Development Bank, a joint venture between the Lao government and Thai invest-ors. Four more autonomous banks were created out of former State Bank branchesin 1989.

The Central Bank Law of June 1990 formally outlined the powers of the centralbank, which was renamed the Bank of the Lao People’s Democratic Republicand given autonomy to conduct monetary and exchange-rate policy. In 1993the government established the Bank for Agricultural Promotion from the ruralcredit departments of the Nakhoneluang and Sethathirath Banks. As its namesuggests, the new bank was designed to improve the flow of credit to theagricultural sector. A number of steps have been taken to develop indirectmonetary instruments (see Economic policy). Treasury-bill auctions have beenheld since 1994, but a stockmarket remains a distant prospect.

—but state banks remaindominant—

Foreign banks have been permitted to open full branches since 1992, but theyare limited to operating in the Vientiane municipality. Most of the foreignbanks are Thai-owned, although Standard Chartered of the UK opened a repre-sentative office in 1996, and Taiwan’s First Commercial Bank and two banksfrom India and New Zealand respectively were given permission to openbranches in 1997. However, state banks continue to dominate the bankingsector. Nearly 50% of total assets are in the hands of one “autonomous” state-owned commercial bank, the Banque pour le Commerce Extérieur Lao (BCEL),which handles foreign trade and other overseas transactions. (The insurancesector is also dominated by the state, in the form of the state-owned AssurancesGénérales du Laos.)

—and the banking sectoris limited in scope

The reach of the banking sector is limited. Over 50% of the sector’s assets andas much as 90% of bank deposits are concentrated in Vientiane. However,some state-owned commercial banks are active outside the capital; Pak TaiBank, for instance, provides services in the south, while the Lao May Bank andLane Xang Bank provide services in the centre and north respectively. Lendingto state companies is more common than lending to the non-state sector, andthere is a bias towards short-term loans. This has led to a thriving informalcapital market, including private money lenders and revolving credit circles.

State bank bad debts areunder control

Some of the state-owned commercial banks inherited non-performing loansfrom the State Bank and have difficulty raising sufficient deposits, relyinginstead on the central bank for funds. A survey of the situation was undertakenin 1990 and completed in 1994. According to the IMF, the survey found thataround K18bn ($22.4m, or 1.6% of 1994 GDP) would be needed to deal withthe State Bank’s bad debts and improve capital adequacy ratios. With assistancefrom the Asian Development Bank (ADB) some K4bn was injected into thestate banking sector in March 1994, and K14bn was raised through govern-ment bonds in 1994, effectively removing the problem of bad loans. However,despite technical assistance in this field, the central bank’s capacity to regulatethe banking sector remains a cause for concern, and much bank lending isdirected rather than being undertaken according to commercial principles.

Laos: Financial services 61


Other services

Visitor arrivals aregrowing rapidly—

The government’s drive to develop the tourism industry is beginning to bearfruit. Since 1994 overseas visitors have been able to travel more or less unre-stricted throughout the country except in areas designated as dangerous. Visasare now more easily obtainable, and from mid-1997 it became possible, insome instances, to obtain a visa on arrival at Wattay airport. Visitor arrivalsincreased from 87,571 in 1992 to 403,000 in 1996. The majority come fromAsia, particularly Thailand. (See Reference table 10 for historical tourism data.)

Poor infrastructure remains a constraint on the sector. Hotels and hotel servicesare generally below international standards, although foreign investment inhotels and tourism is bringing rapid improvement. Efforts to train tourismpersonnel are also being made. However, the regional financial crisis may causea temporary lull both in hotel development and tourist arrivals, particularlygiven the important role played by Thailand in both respects.

—but “mass” tourism isbeing avoided

The main state tourism body is the National Tourism Authority of the LaoPeople’s Democratic Republic, which has eight provincial offices. However, inorder to co-ordinate tourism development, the authorities have established theLao Tourism Development Coalition, a joint government/private-sector body.There is a genuine commitment in Laos to avoiding the mass tourism that hasdeveloped in Thailand, because of the impact it would have on a small, cultur-ally diverse and, until recently, very isolated population. Hence the govern-ment is interested in developing so-called ecotourism and cultural tourism.

Production

Industry

Industrial sector, 1996

Output (K m; current prices)a 350,839.0

Employment (’000)b 65.0

Real output growth (%)c 13.4

a Preliminary data. b 1992. c Financial year 1996/97 (October-September).

Sources: World Bank, Lao People’s Democratic Republic Country Economic Memorandum; State Planning Committee, Basic Statistics;

IMF, Lao People’s Democratic Republic: Recent Economic Developments.

The industrial sector is characterised by small-scale manufacturing, processingand assembly plants, predominantly concentrated in and around Vientiane.Heavy industry is virtually non-existent. Industry’s share of GDP has risen inthe 1990s, largely because of inflows of foreign direct investment (FDI) and anincrease in the number of small-scale enterprises. Efforts to reform the state-enterprise sector have also played a part. According to the Ministry of Industryand Handicrafts, the number of handicraft companies almost doubled in thespace of one year, from 5,947 in 1994 to 10,826 in 1995.

62 Laos: Other services


Key sectors Apart from handicrafts, key growth areas are garments, agribusiness and woodproducts. (See Reference table 15 for volume data on important industrialproducts.) However, as recently as 1993, 50% of manufacturing output wasgenerated by rice-milling, and a further 25% by beer and soft drinks prod-uction. The major constraints on manufacturing growth are infrastructurebottlenecks, growing competition from imports in the border regions, cautiousprivate-sector investment, high transportation costs, cumbersome customsprocedures and high tariffs on key imported inputs.

The Sixth Party Congress report in 1996 identified agro-processing as a keysector for future development. The report also emphasised the importance ofincreasing the output of construction materials, such as cement, in order toreduce reliance on imports. In 1996 a Thai company, TPI Polene, received alicence to produce cement, while the management of a Chinese-operatedcement plant at Vang Vieng was transferred to Lao control in November 1997.

Mining and semi-processing

The mining sectorremains undeveloped—

Laos is endowed with a range of minerals (see Natural resources), althoughtheir precise extent is largely undetermined. There have been few moves todevelop other mining sectors, despite a government commitment to do so (seeReference table 16 for historical data on mining and quarrying.) The majorityof domestic mining companies are state-owned. Constraints on growth includedifficult terrain and poorly developed infrastructure, which make extractionand transportation very expensive.

—although there is someforeign investor interest

The mining sector has been open to foreign investment since the early 1990s.A number of companies have signed exploration agreements, including in theoil and gas sector, but few have reported commercially viable finds (althoughonshore oil exploration started in 1996). A number of Thai companies areexploring for coal and limestone.

Agriculture and forestry

The agricultural sector is the backbone of the Lao economy, providing morethan 50% of output (at current prices) and employing the majority of thelabour force. Like many former centrally planned economies, the agriculturalsector in Laos is grappling with a history of chronic underinvestment and, to alesser extent, the legacy of collectivisation. The majority of agricultural land isgiven over to rice production, which is still the largest single crop. Timber andwood products have historically been Laos’s most important sources of exportearnings, although restrictions on logging imposed in 1993 and the emergenceof new products mean that they no longer are. There are also modest exports ofother agricultural products, notably coffee.

Rice In 1995, 84% of the 667,000 ha of land under cultivation was devoted to riceproduction. The main rainfed crop is usually harvested in November. A smallamount of dry-season cultivation does take place. In recent years rice output

Laos: Mining and semi-processing 63


has fluctuated sharply, and Laos has often required emergency rice aid. (SeeReference table 11 for historical data on paddy production and yields.)

Non-rice crops Cash-crop cultivation has also been encouraged in recent years, particularlycoffee, cotton, groundnuts, sugarcane and tobacco. Measures announced by thegovernment in 1995 allow for tariff-free exports of coffee and cotton, and farm-ers cultivating these crops are exempt from paying duty on importedfarm equipment. Tobacco and coffee are the most important non-rice crops.Others include maize, peanuts and soybeans. Rubber cultivation is still at anexperimental stage. (See Reference table 12 for data on the output of principalnon-rice crops.)

Animal husbandry There has been a steady expansion in the rearing of farm animals, such ascattle, poultry and pigs, facilitated by the establishment of animal-breedingstations by the government. Since the mid-1980s there has also been a drive todevelop fish farming. According to World Bank figures, output of livestock andfisheries expanded at twice the rate of agricultural crops between 1988 and1993. (See Reference table 13 for data on animal husbandry.)

Forestry The forestry sector contributed around 4.5% to GDP on average in the early1990s, and is still the main export earner. Forestry products include a widevariety of different woods, as well as rattan, bamboo, cardamom and resins,and furniture. The principal challenge facing the authorities is how to managethis resource in a sustainable manner. Illegal logging and slash-and-burn cult-ivation have been responsible for a rapid reduction in forest cover: forests stillcover around 45% of the country (although only half of this is commerciallyaccessible), but this is a significant drop from the 55% quoted in official statis-tics as recently as 1991. The government has issued numerous regulationslimiting the amount of living timber that can be felled each year and banningthe export of unprocessed logs. However, this control has proved notoriouslydifficult to enforce. A forestry law, which is expected to identify protected areasand to include incentives to encourage local tree-planting schemes, has been inthe pipeline for some years but has yet to reach the statute books. (See Refer-ence table 14 for historical data on forestry.)

Construction

A mini-boom inconstruction

The construction sector’s contribution to GDP is small, at around 3% ofcurrent-price GDP. However, its contribution has been increasing since the late1980s and in recent years the industry has undergone a mini-boom. This ispartly a result of the increased demand for hotels and residential housing,although the sector has also benefited from the development of light industryand of the hydroelectric power sector. The construction sector’s vibrancy is,however, largely concentrated in and around Vientiane. Because investmentfrom Thailand is expected to slow following its economic problems, construc-tion growth is also expected to slow in 1998. Both state and private-sector firmsare active in the construction sector, although the state sector’s share of outputhas fallen rapidly since the late 1980s, to around 40% from over 70%. The

64 Laos: Construction


military also has well-developed commercial construction interests, andforeign construction companies are employed on some projects.

The external sector

Merchandise trade

Export growth has slowed According to the figures given in the IMF’s International Financial Statistics,throughout the 1990s imports have expanded slightly more slowly in dollarterms than exports, averaging 26.6% annual growth in 1992-96, comparedwith export growth of 27.3%. However, the rate of growth in exports sloweddramatically in 1995 to 1.8% (based on IFS figures), and was only 3.8% in 1996.Garment exports fared particularly badly in 1996, following the removal ofGeneralised System of Preferences (GSP) trade privileges by the EU (althoughthese were reinstated in October 1997, effective until the end of 1998).

Laos remains dependent on imports for a wide range of products, includingnearly all its capital goods, all its petroleum products and a large proportion ofits cement requirements. The garment and assembly industries are also highlydependent on imported inputs. The rate of growth in imports also slowed in1996, to 2.7% in dollar terms. (See Reference table 18 for data on main im-ports.)

Foreign trade, 1996($ m)

Merchandise exports (fob) 322.8

Merchandise imports (fob) 643.7

Trade balance –320.9Source: IMF, International Financial Statistics.

Exports of garments andcoffee have risen rapidly

Exports of hydroelectric power and forestry products continue to be important,but their share of total exports has declined. Hydroelectric power provided 7%of total export revenue in 1995, compared with an average of over 40% in1980-90. The reduction in the share of timber and wood products is lessmarked, but has also dropped well below its share of around 50% in the late1980s. The reduction in the share of exports for these key items reflects therecent rapid emergence of low-technology, labour-intensive manufacturedexports, particularly garments, as well as re-exports. Boosted by foreign invest-ment, garment exports rose at an annual average rate of 38% in 1992-95.However, according to press reports, garment exports (including textiles) fell by15.3%, to $65m 1996.

The one commodity which seems to be faring well is coffee. Coffee exports aregrowing strongly (the government aims to export 15,000 tonnes of coffee peryear by 2000). In 1995 green coffee exports accounted for 6% of total exportearnings, at $21.3m, and according to press reports their value rose to $25m—approximately 8% of total export earnings—in 1996. (See Reference table 17 fordata on main exports.)

Laos: Merchandise trade 65


Main trading partners, 1996(% of total)

Exports to: Imports from:

Vietnam 39.0 Thailand 63.6

Thailand 19.6 Singapore 6.6

Japan 6.2 Japan 6.3

France 5.8 China 3.8

Germany 4.6 Vietnam 4.8Source: Asian Development Bank, Key Indicators of Developing Asian and Pacific Countries, 1997.

Main trading partners Since the collapse of trade with the Eastern bloc, there has been a markedreorientation of Laos’s trade towards Asia. Laos’s external trade is now domi-nated by Thailand, which accounted for 63.6% of imports and was the destina-tion for 19.6% of exports in 1996. Other prominent trade partners are Vietnamand Japan. Trade with China is more important than official statistics suggest,owing to the large amount of smuggling across Laos’s northern border. There isalso a small amount of trade with the EU and the US. Trade with the US willreceive a significant boost when Laos is granted Most Favoured Nation (MFN)status, probably in 1998.

Invisibles and the current account

Current account, 1996($ m)


Services balance –39.3

Current-account balance –364.5Source: IMF, International Financial Statistics.

The current-accountdeficit

In 1996, as in recent years, Laos’s current-account deficit was driven by themerchandise trade deficit. (Reference tables 19 and 20 give historical balance-of-payments data.) The government’s encouragement of tourism over the pastfew years has led to a steady increase in earnings from this source. However,services remained in deficit in 1996 (according to IMF figures). The chronicdeficit on the merchandise trade account means that the current account islikely to remain in deficit for many years.

The current-account deficit (including official transfers), reached the equiva-lent of 6.9% of GDP in 1995, easing to 5.2% of GDP in 1996 (based on nationalbalance-of-payments data—see Reference table 19). It should be noted that thesize of the current-account deficit, based on IFS figures, is somewhat overesti-mated, since these figures exclude positive inflows of transfers (including aid).

Capital flows and foreign debt

Laos is reliant on aid— Laos’s current-account deficits are financed through foreign aid. Bilateral assis-tance, notably from Japan, Australia France and Sweden, has replaced assis-tance from the former Eastern bloc. This has largely been in the form of tiedaid. Laos remains reliant on official transfers to fund both the current-account

66 Laos: Invisibles and the current account


deficit and the budget. According to the IMF, around 43% of capital expend-iture in 1995/96 was financed by external grants and loans. (See Reference table21 for further data on official development assistance.)

—and FDI inflows arestill small

Inflows of foreign direct investment (FDI) are increasing modestly. Between1988 and mid-1996 nearly $6bn of foreign investment was approved by theLao authorities, although only around 30% of this has actually been disbursed.Thailand accounts for 41% of approved investment, with US investors (largelyoverseas Lao) a distant second, followed by South Korea, France and Australia.Laos’s membership of the Association of South-East Asian Nations (ASEAN),and MFN status from the US (when it is conferred), should boost foreigninvestor interest, although the benefits of ASEAN membership are likely to bedelayed until the worst effects of the regional currency crisis are over. Large-scale investment will remain limited to a few sectors.

External debt— According to the World Bank’s Global Development Finance, Laos’s total externaldebt stock, comprising convertible currency and transferable rouble debt, was$2.3bn at the end of 1996. Of this, $2.2bn was medium- and long-term debt,34% from multilateral sources and 66% from bilateral creditors, all on conces-sional terms. The ratio of debt to GNP dropped to 122% in 1996, having fallensteadily in the previous five years. However, the debt-service ratio rose to 6.5%compared with 5.8% in 1997.

—is complicated bynon-convertible

currency debt

Over 70% of Laos’s long-term debt is owed to former Eastern bloc creditors,mainly Russia, and this non-convertible currency debt is artificially inflated bythe use of an unrealistic rouble:dollar exchange rate. The bulk is being repaid,mostly by barter. After recent falls in the rouble, the repayment rates may berenegotiated. Apart from the transferable rouble debt, Laos is honouring itsdebt-servicing commitments. However, the kip’s fall in 1997 will increase theburden of debt-servicing. (See Reference table 23 for external debt data.)

Foreign reserves and the exchange rate

The kip fell sharplyin 1997—

The central bank has operated a managed float since 1988 and the kip has beenmade convertible on almost all current-account transactions. Between 1990and 1994 the currency remained stable, but Laos’s inflation exceeded that of itsmain trading partners, notably Thailand, resulting in an appreciation of thereal exchange rate. In September 1995 the kip was devalued to K925:$1 at atime when the dollar itself was weak. It remained at about this level in 1996,averaging K921:$1. As a result of Laos’s close economic ties with Thailand, thekip came under heavy pressure in the second half of 1997 following the deval-uation of the baht in July 1997. The kip fell to K2,009:$1 at the end of 1997, adepreciation of 53.5% compared with end-1996. Continued currency weaknessis expected in 1998.

Thai baht, dollars and gold are all widely used in the free market. To offset this,the central bank introduced new restrictions in June 1997 on the use of foreignexchange, for example for paying wages or purchasing goods. (See Referencetable 25 for data on exchange rates.)

Laos: Foreign reserves and the exchange rate 67


—and reserves remain low Laos’s external reserves (excluding gold) amounted to $164.7m at the end ofSeptember 1997 (IMF figures), down from $169.5m at the end of 1996. (SeeReference table 24 for data on reserves.) The fall in reserves suggests that Laos’scurrent-account deficit continued to worsen in 1997, and that capital inflowswere sluggish.

Total reserves (excl gold)($ m)

1997

Laos 164.7a

Cambodia 298.5

Myanmar 198.9b

a September 1997. b November 1997.


68 Laos: Foreign reserves and the exchange rate


Appendices

Sources of information

National statistical sources Laos authorities, Outline Public Investment Programme 1994-2000, Vientiane,1994

Lao Urban Labour Force Survey, Vientiane, 1992

Ministry of Industry, Power Development Plan 1991-2010, Vientiane, 1991

Ministry of Transport, National Transport Survey Plan to 2000, Vientiane, 1990

National Census Committee, Population Census 1995, Vientiane, 1995

National Statistical Centre, Lao People’s Democratic Republic Expenditure andConsumption Survey, Vientiane 1994

National Tourism Authority of Lao PDR, Laos Tourism Statistical Report 1996,Vientiane, 1997

State Statistical Centre, Basic Statistics About the Socio-Economic Development ofthe Lao People’s Democratic Republic, Vientiane, 1995

International statisticalsources

Asian Development Bank, Asian Development Outlook 1997 and 1998

Asian Development Bank, Asian Economic Indicators (annual)

Asian Development Bank, Key Indicators of Developing Asian and PacificCountries, 1997

IMF, International Financial Statistics (monthly)

IMF, The Lao People’s Democratic Republic: Systemic Transformation andAdjustment, May 1996

IMF, Lao People’s Democratic Republic: Recent Economic Developments, June 1996

OECD, Geographical Distribution of Financial Flows to Aid Recipients, 1992-96

UN, Statistical Yearbook for Asia and the Pacific (annual)

World Bank, Lao People’s Democratic Republic: Country Economic Memorandum,1994

World Bank, Lao People’s Democratic Republic: Social Development Assessmentand Strategy, 1995

World Bank, World Development Report (annual)

World Bank, Global Development Finance (formerly World Debt Tables, annual)

Select bibliography Y Bourdet, “Laos in 1996: Please Don’t Rush”, Asian Survey, Vol XXXVII, No 1,January 1997

Y Bourdet, “Labor Market Adjustment Under Transition in Laos”, Journal ofAsian Economics, Vol 7, No 4, 1996

Laos: Sources of information 69


L Brahm, and N Macpherson, Investment in the Lao People’s DemocraticRepublic, Hong Kong, 1992

M Brown, and J J Zasloff, Apprentice Revolutionaries: The Communist Movementin Laos 1930-1985, Stanford, CA, 1986

Economist Intelligence Unit, Cambodia, Laos Country Report (quarterly)

G Evans, Lao Peasants Under Socialism, New Haven, CT, 1991

B Funck, “Laos: Decentralisation and Economic Control” in B Ljunggren (ed),The Challenge of Reform in Indochina, Harvard, MA, 1993

J Hamilton-Merritt, Tragic Mountains: The Hmong, the Americans, and the SecretWars for Laos 1942-92, Bloomington, IN, 1993

A W McCoy, The Politics of Heroin in South-east Asia, New York, 1972

M Nguyen, “Laos: Back to a Land of Three Kingdoms”, South-east Asian Affairs1996, Singapore, 1996

M Stuart-Fox, Laos: Politics, Economics and Society, London, 1986

UN Industrial Development Organisation, Lao People’s Democratic Republic:Industrial Transition, 1994

Vientiane Times (bi-weekly in English), Vientiane

R Warner, Back Fire: The CIA’s Secret War in Laos, New York, 1995

J J Zasloff, and L Unger (eds), Laos: Beyond the Revolution, Basingstoke, 1991

70 Laos: Sources of information


Reference tables

Reference table 1

Government finances(K bn unless otherwise indicated)

1991/92a 1992/93 1993/94 1994/95 1995/96b

Total revenue 85.6 113.3 135.8 165.5 205.3 Tax revenue 60.8 85.9 106.7 134.7 169.6 Non-tax revenue 24.9 27.3 29.1 30.8 35.7

Total expenditure 174.4 170.5 258.9 293.6 356.0 Current expenditure 99.5 104.9 127.1 142.7 167.5 Capital expenditure 74.9 65.6 131.8 150.9 188.5

Balance (excl grants) –88.8 –57.2 –123.1 –128.1 –150.7

Grants 34.0 31.3 67.3 72.7 90.2

Balance (incl grants) –54.8 –25.9 –55.8 –55.4 –60.5

Total financing 61.5 41.6 55.8 55.4 60.5 domestic (net) 14.3 14.5 5.2 –5.0 –20.3 other foreign (net) 47.2 27.1 50.6 60.4 80.8

Memorandum items (% of GDP)Revenue 10.5 12.0 12.7 12.5 12.6 Expenditure 21.4 18.1 24.2 22.2 21.8 Capital expenditure 9.2 7.0 12.3 11.4 11.6 Deficit (incl grants) –7.5 –4.4 –5.2 –4.2 –3.8

Deficit (exc grants) –10.2 –6.1 –11.5 –9.7 –9.2

a In 1992 the fiscal year was changed to October 1st-September 30th, from the previous calendar-year basis. The 1991/92 figures were calculated by the IMF, for purposes of comparison. b Budget(including revisions made in March-April 1996).

Source: IMF, Lao People’s Democratic Republic, Systemic Transformation and Adjustment, 1996; IMF, Lao People’s Democratic Republic:

Recent Economic Developments, 1996.

Reference table 2

Money supply(K m; end-period)

1992 1993 1994 1995 1996

Money 35,144 52,239 61,343 67,177 75,558

Quasi money 41,318 73,609 104,690 126,089 169,371

Money (M2) 76,462 125,848 166,033 193,266 244,929

Net foreign assets 36,657 72,894 58,398 77,899 156,571

Domestic credit 56,215 74,817 129,042 157,297 149,624Source: IMF, International Financial Statistics.

Laos: Reference tables 71


Reference table 3

Gross domestic product(market prices unless otherwise indicated)

1992 1993 1994 1995 1996

Total (K bn)At current prices 834 935 1,089 1,391 1,673 At constant (1990) prices 682 722 781 836 1,170 Real change (%) 7.1 5.9 8.2 7.0 6.9a

Per head (K ’000)At current prices 187 203 230 278 328

a Estimates.

Sources: IMF, International Financial Statistics ; EIU estimates.

Reference table 4

Gross domestic product by sector(K m at current prices; % of total in brackets)

1992 1993 1994 1995 1996a

Agriculture 492,904 538,001 621,996 767,565 886,743 (59.1) (57.5) (57.1) (55.2) (53.0)

Industry 141,548 165,887 195,986 265,331 350,839 (17.0) (17.7) (18.0) (19.1) (21.0)

Mining 1,161 1,684 2,345 2,911 4,509 (0.1) (0.2) (0.2) (0.2) (0.3)

Manufacturing 106,890 122,315 139,670 196,661 264,246 (12.8) (13.1) (12.8) (14.1) (15.8)

Electricity, gas & water 9,751 12,581 17,320 18,912 24,565 (1.2) (1.3) (1.6) (1.4) (1.5)

Construction 23,746 29,307 36,651 46,847 57,519 (2.8) (3.1) (3.4) (3.4) (3.4)

Services 189,598 215,034 252,617 329,513 397,522 (22.7) (23.0) (23.2) (23.7) (23.8)

Indirect taxesb 10,150 16,000 18,577 28,340 37,494 (1.2) (1.7) (1.7) (2.0) (2.2)

GDPb 834,200 934,922 1,089,176 1,390,749 1,672,598

a Preliminary estimates. b Total GDP includes indirect taxes.

Source: Asian Development Bank, Key Indicators of Developing Asian and Pacific Countries, 1997.

Reference table 5

Prices(% change, year on year; period averages; 1990=100)

1993 1994 1995 1996 1997a

General consumer prices 6.3 6.8 19.6 13.1 17.0

a EIU estimate.


72 Laos: Reference tables


Reference table 6

Population

1993 1994 1995 1996a 1997a

Total (m) 4.60 4.74 4.88 5.0 5.1

Growth rate (%) 2.9 3.0 3.0 2.5 2.5

a EIU estimate.


Reference table 7

Labour force(% of labour force unless otherwise indicated)

1985 1990a 1992b

Labour force (’000) 1,511 1,752 1,859

Employed labour force (’000) 1,466 1,699 1,803

Agriculture 89.2 88.7 87.0

Manufacturing 1.8 2.0 2.5

Construction 0.7 0.9 1.1

Transport & communications 0.9 1.0 1.2

Commerce 1.7 1.8 2.1

Services & administration 5.7 5.6 6.1

Annual growth 2.8 3.0 3.0

a Ministry of Finance figures. b Estimates based on 1990 figures.

Source: World Bank, Lao People’s Democratic Republic: Country Economic Memorandum 1994.

Reference table 8

National energy statistics(m kwh)

1992 1993 1994 1995 1996

Production 753 919 1,197 1,044 1,249

Exports 462 356 829 705 782

Imports 40 48 58 43 n/a

Consumption n/a n/a n/a n/a n/a

a Estimate.

Source: Asian Development Bank, Key Indicators of Asian and Pacific Countries.



Reference table 9

Transport statistics

1991 1992 1993 1994 1995

RoadTotal length (km) 14,093 13,130 14,176 18,344 18,363 Passengers (’000) 14,118 15,648 15,961 16,556 13,112 Freight (’000 tonnes) 615 1,409 1,437 939 950

WaterwaysPassengers (’000) 636 690 703 898 436 Freight (’000 tonnes) 1,066 284 290 876 504

AirPassengers (’000) 118 156 159 199 1,097a

Freight (’000 tonnes) 1.0 2.0 1.5 1.5 12.4a

a As given in source.

Source: State Planning Committee, Basic Statistics.

Reference table 10

Tourism statistics

1992 1993 1994 1995 1996

Visitor arrivals 87,571 102,946 146,155 346,460 403,000 of which: Asia 81,022 94,836 136,114 314,470 357,692 Europe 4,496 5,986 8,019 20,635 30,582

% change, year on year 132.8 17.6 42.0 137.1 16.3

Revenue ($ m) 4.51 6.28 7,.56 24.74 43.59

Note. Visitor arrivals include foreign workers and business visitors, as well as “tourists for extendingvisas” (temporary arrivals from Thailand). In 1996 these arrivals accounted for 15% of the total,while tourist arrivals accounted for around 60%.

Source: National Tourism Authority of the Lao People’s Democratic Republic.

Reference table 11

Rice production and yields

1992 1993 1994 1995 1996

Total output (’000 tonnes) 1,502.3 1,250.7 1,577.0 1,417.8 1,414.0

Average yield (tonnes/ha) 2.66 2.32 2.58 2.53 n/aSources: National Statistical Centre, Committee for Planning and Co-operation 1975-95; State Planning Committee, Basic

Statistics, 1995; Asian Development Bank, Key Indicators of Asian and Pacific Countries.



Reference table 12

Principal non-rice crops(’000 tonnes; yield in tonnes per ha in brackets)

1991 1992 1993 1994 1995

Maize 68.6 57.7 47.6 55.8 50.4 (1.4) (1.5) (1.5) (1.99) (1.73)

Vegetables & beans 51.2 56.6 125.1 156.4 61.7 (7.5) (8.3) (8.4) (9.5) (6.5)

Soybeans 5.5 5.2 4.5 6.0 4.8 (0.9) (0.8) (0.8) (1.0) (0.8)

Peanuts 5.6 6.8 5.3 4.8 8.4 (1.0) (0.8) (0.8) (1.0) (1.0)

Tobacco 45.3 48.2 29.2 31.8 26.6 (4.4) (4.6) (4.1) (4.4) (3.6)

Cotton 4.7 5.3 5.9 5.9 8.8 (0.6) (0.7) (0.8) (0.8) (0.9)

Sugarcane 80.5 94.4 89.6 65.1 61.3 (28.4) (28.7) (26.4) (23.7) (22.8)

Coffee 8.1 7.4 7.0 9.0 8.6 (0.3) (0.4) (0.4) (0.5) (0.4)

Tea 1.7 1.0 1.5 1.9 0.8 (4.4) (1.7) (0.7) (0.5) (1.3)

Sources: National Statistical Centre, Committee for Planning and Co-operation 1975-95; State Planning Committee, Basic

Statistics, 1995.

Reference table 13

Livestock(’000 head)

1991 1992 1993 1994 1995

Buffalo 1,099 1,130 1,134 1,168 1,191

Cattle 903 993 1,020 1,081 1,146

Pigs 1,431 1,561 1,625 1,674 1,724

Poultry 8,032 8,906 10,091 10,697 11,338

Goats & sheep 120 104 126 142 153Sources: National Statistical Centre, Committee for Planning and Co-operation 1975-95, State Planning Committee, Basic

Statistics, 1995.

Reference table 14

Forestry output(’000 cu metres)

1991 1992 1993 1994 1995a

250 150 480 500 512

a Estimates.

Source: IMF, Lao People’s Democratic Republic: Recent Economic Developments.



Reference table 15

Physical output of selected industrial goods

1980 1990 1994 1995

Food, beverages & tobaccoBeer (’000 hl) n/a n/a 102 151Soft drinks (’000 hl) 13 n/a 92 105Bread & confectionery (tonnes) 316 155 650 680Fermented fish (tonnes) 131 121 280 280Fish sauce (’000 hl) 2 1 1 1Salt (’000 tonnes) 5 12 10 11Ice (’000 tonnes) 23 8 29 29Cigarettes (’000 packs) 15,000 n/a 46,800 53,100

Manufactured goods Textiles, shoes & clothingClothing (’000 pieces) 260 n/a 12,183 20,46Fabrics (’000 metres) 1,044 n/a 350 365Shoes & slippers (’000 pairs) n/a n/a 720 600

Plastics & chemicalsPlastic goods (tonnes) 47 n/a 460 500Soap (’000 pieces) n/a n/a 340 459Detergent (tonnes) 602 n/a 703 877

Construction & stone goodsChalk (’000 boxes) 18 n/a 115 118Bricks (’000 pieces) 3 n/a 55,000 56,400Cement (’000 tonnes) n/a n/a 7 59

Wood & wood productsTimber (’000 cu metres) 55 n/a 595 820Lumber (’000 cu metres) 11 n/a 271 289Plywood (’000 sheets) 76 n/a 1,870 2,069

OtherNails (tonnes) 61 n/a 56 61Electric wire (’000 metres) 8 n/a 2,072 2,192Agricultural tools (’000 pieces) 63 n/a 4 4Sources: UNIDO, Lao People’s Democratic Republic: Industrial Transition; State Planning Committee, Basic Statistics, 1995.

Reference table 16

Mining and quarrying(output; tonnes unless otherwise indicated)

1991 1992 1993 1994 1995

Tin 349 346 504 810 687

Coal (’000 tonnes) n/a n/a n/a 4 23

Gypsum (’000 tonnes) 76 90 130 131 110

Lime n/a n/a n/a 303 315

Sapphire (carats) 15,000 15,000 n/a n/a n/aSources: World Bank, Lao People’s Democratic Republic: Country Economic Memorandum; State Planning Committee, Basic Statistics;

IMF, Lao People’s Democratic Republic: Recent Economic Developments.



Reference table 17

Main exports($ m)

1992 1993 1994 1995a 1996a

Wood & wood products 42.7 65.8 96.1 88.3 125.0

Coffee 2.4 4.1 3.1 21.3 25.0

Hydroelectric power 17.0 19.6 24.8 24.1 30.0

Garments 27.3 49.0 58.2 76.7 65.0

Manufactured goods (excl garments & wood products) 29.4 38.1 36.3 78.3 –

Gold re-exports 0.0 36.0 46.2 17.7 –

Total exports 132.6 240.5 300.4 347.9 310.0

a Estimates.

Source: IMF, Lao People’s Democratic Republic: Recent Economic Developments; Asian Development Bank, Key Indicators of Developing

Asian and Pacific Countries; press reports.

Reference table 18

Main imports($ m)

1991 1992 1993 1994 1995a

Investment goods 43.0 69.9 113.8 146.1 189.2 of which: construction & electrical equipment 18.5 30.1 48.9 67.7 78.8

Consumption goods 90.4 140.5 224.7 276.5 283.8

Intermediate goods of which: inputs for garment industry 13.7 22.3 36.2 51.3 66.3 motorcycle parts 10.2 16.6 27.0 34.6 13.3

Gold & silver 4.9 7.9 12.9 46.8 29.5

Total imports, cif 215.0 265.5 431.9 564.1 587.2

a Estimates.

Source: IMF, Lao People’s Democratic Republic: Recent Economic Developments.



Reference table 19

Balance of payments, national estimates($ m)

1991 1992 1993 1994 1995a

Exports fob 96.6 132.6 240.5 300.4 347.9

Imports cif 215.0 265.5 431.9 564.1 587.2

Trade balance –118.4 –132.9 –191.5 –263.7 –239.3

Services (net) –1.4 21.5 33.1 25.4 22.8

Income (bet) –1.1 –1.2 2.8 –2.1 –5.7

Transfers 95.9 71.5 113.0 234.2 131.0 of which: official 85.5 62.9 103.5 124.7 109.3

Current-account balance –25.0 –41.1 –42.6 –106.3 –91.1 excl official transfers –110.5 –104.0 –146.1 –231.0 –200.4

Capital account 57.2 46.3 56.5 93.8 105.5

Medium- & long-term loans 35.1 62.1 69.5 55.7 90.5

Foreign investment 8.0 9.0 77.8 43.4 83.9 of which: foreign direct investment 6.9 7.8 47.6 42.4 77.2

Commercial banks assets & liabilities (net) 34.9 –14.9 –35.8 7.5 10.2

Errors & omissions –20.8 –9.9 –55.0 –12.8 –79.1

Overall balance 32.3 5.2 13.9 –12.5 14.4

Financing –32.2 –5.2 –13.9 12.5 –14.4

Memorandum itemsCurrent-account balance (incl official transfers), % of GDP –2.4 –3.5 –3.2 –6.9 –5.2 Current-account balance (excl official transfers), % of GDP –10.8 –8.8 –11.0 –15.0 –11.4 Source: IMF, Lao People’s Democratic Republic: Recent Economic Developments.



Reference table 20

Balance of payments, IMF data($ m)

1992 1993 1994 1995 1996

Goods: exports fob 132.6 247.9 305.5 310.9 322.8

Goods: imports fob –232.8 –397.4 –519.2 –626.8 643.7

Trade balance –100.2 –149.5 –213.7 –315.9 –320.9

Services: credit 61.4 85.2 87.0 96.8 104.3

Services: debit –71.3 –75.9 –152.1 –121.6 –143.6

Income: credit 5.6 8.6 7.2 7.4 9.2

Income: debit –4.6 –5.6 –9.2 –12.9 –13.5

Current transfers: credit n/a n/a n/a n/a n/a

Current transfers: debit –2.2 –2.0 –3.2 –3.4 n/a

Current-account balance –111.3 –139.2 –284.0 –346.2 –364.5

Direct investment abroad 0.0 0.0 0.0 0.0 n/a

Direct investment in Laos 7.8 29.9 59.2 n/a n/a

Portfolio investment assets 0.0 0.0 0.0 0.0 n/a

Portfolio investment liabilities 1.2 0.0 0.0 n/a n/a

Other investment assets –16.1 –43.2 –9.6 –1.5 –14.1

Other investment liabilities 4.1 –7.7 –25.3 –3.6 –10.0

Financial-account balance –3.0 –21.0 24.3 –5.1 –24.1

Capital-account nie balance 8.6 9.5 9.5 13.2 35.0

Net errors & omissions –16.3 13.2 71.8 92.4 35.4

Overall balance –122.0 –137.5 –178.4 –245.7 –318.2

Memorandum itemTotal changes in reserves & related items (– indicates inflow) 122.0 137.5 178.4 245.7 318.2

Exceptional financinga 126.7 153.3 175.9 303.1 383.4

a Includes aid transfers.


Reference table 21

Net official development assistancea

($ m)

1992 1993 1994 1995 1996

Bilateral 76.9 92.2 123.8 170.0 147.5 of which: Japan 24.8 40.4 60.7 97.6 57.4 Sweden 15.9 17.0 13.2 13.4 17.7 France 8.6 8.2 14.3 8.4 16.4 Australia 10.6 10.4 10.7 13.1 12.1

Multilateral 88.4 114.6 94.7 142.7 191.0 of which: ADB 20.7 45.9 24.0 61.4 83.6 IDA 37.7 37.4 26.2 27.1 59.0 IMF 8.3 8.2 8.5 15.9 5.5

Total 165.3 206.8 218.4 312.7 338.5

a Defined as grants and loans with at least a 25% grant element, provided by the OECD and OPEC member countries and multilateral agencies,and administered with the aim of promoting development and welfare in the recipient country.

Source: OECD, Geographical Distribution of Financial Flows to Aid Recipients, 1992-96.



Reference table 22

External debt($ m unless otherwise indicated; year-end)

1992 1993 1994 1995 1996

Total external debt 1,917 1,985 2,080 2,165 2,263Long-term debt 1,887 1,948 2,022 2,091 2,186Short-term debt 2 1 11 10 11 of which: interest arrears on long-term debt 0 0 0 0 0Use of IMF credit 28 36 47 64 67

Memorandum itemPrincipal arrears on long-term debt 0 0 0 0 1

Public & publicly guaranteed long-term debt 1,887 1,948 2,022 2,091 2,186Official creditors 1,887 1,948 2,022 2,091 2,186Multilateral 366 447 529 621 741Bilateral 1,521 1,501 1,493 1,471 1,445Private creditors 0 0 0 0 0Bonds 0 0 0 0 0Banks 0 0 0 0 0Other 0 0 0 0 0

Total debt service paid 10 29 20 26 29Long-term debt 9 28 20 23 25IMF repurchases & charges 0 0 0 2 3Short-term debt (interest only) 0 0 0 1 1

Ratios (%)External debt/GNP 170.0 149.5 134.8 122.8 121.9Debt service paid/exports of goods & services 4.8 8.3 5.0 5.8 6.3Short-term debt/total debt 0.1 0.1 0.5 0.5 0.5Concessional long-term loans/total debt 98.2 97.9 97.0 96.4 96.4

Note. Long-term debt is defined as having an original maturity of more than one year.

Source: World Bank, Global Development Finance.

Reference table 23

Foreign reserves($ m)

1993 1994 1995 1996 1997a

Total reserves excl gold 62.96 60.93 92.12 169.50 164.74

Gold (national valuation) 0.6 0.6 0.6 0.6 0.6

a September 1997.


Reference table 24

Exchange rate(period averages)

1993 1994 1995 1996 1997

K:$ 716.25 717.67 804.69 921.1 1,256.7Source: IMF, International Financial Statistics.

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Documents

Cambodia Laos - International University of Japan · Cambodia Laos Our quarterly Country Report on Cambodia and Laos analyses current trends. This annual Country Profile provides