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Home | Laos | Overview of Laos | Economy

Laos is one of the world's poorest countries. The disruption during the civil-war period and the economic policies of the early years of the LPDR--notably the attempt to collectivize agriculture--resulted in economic stagnation in the country. By 1980, however, the government had begun to pursue more pragmatic development policies, and in 1986 it introduced market-oriented reforms. Subsequently, private enterprise has been allowed to operate on every level, and foreign investment has been encouraged. A number of nongovernmental organizations, including some from the United States, have been assisting the government, mainly in the fields of rural development and public health.

Resources and power
Laos has a number of mineral resources, including coal, iron, copper, lead, gold, tin, gypsum, and precious stones. Tin has been mined commercially since colonial times, and gypsum has become important; the other minerals have been worked only in primitive and unsystematic ways.
Laos has considerable hydroelectric power potential. Electricity produced from a dam on the Ngum River north of Vientiane and sold to Thailand is one of the country's most valuable exports.

Agriculture, forestry, and fishing
The chief occupation of the people is agriculture, with the vast majority engaged in rice farming. In years with normal harvests, Laos is self-sufficient in rice production, a reflection of the success of private landownership and market incentives. In addition to a variety of food crops, modest amounts of such cash crops as sugarcane, tobacco, and coffee are produced. Agricultural production, however, is vulnerable to natural calamities, and Laos is subject to periodic droughts and floods, with both sometimes occurring in the same year. A significant proportion of rice production comes from upland dry rice raised by hill people using shifting-cultivation methods (i.e., fields are cleared and cultivated for a few years before being abandoned and allowed to revert to forest). The government has considered this practice to be a major cause of deforestation and has attempted to resettle hill peoples on plains where they can adopt sedentary agricultural practices.
Another problem for the government has been the illegal cultivation of the opium poppy, mainly by Hmong hill people. Programs to curb production have had limited success because of the profitability of opium production and the inaccessibility of growing areas.
The extensive forests of Laos produce teak and other timber, benzoin (a balsamic resin), cardamom, and stick lac (used to make shellac). Much of the deforestation in the country has been blamed on logging operations and on the cutting of wood for fuel, which are believed to have caused the erosion of hillsides and the silting of rivers that has heightened the severity of droughts and floods. The regulation of logging by the government has been difficult because of poor communications and the high number of illegal operations.
Fishing is important for lowland dwellers, and aquaculture has increased. Livestock raising has grown in importance since 1980.

The main activities of the country's tiny industrial sector are food processing (rice milling and beverage production), sawmilling, and the manufacture of building materials and a variety of light consumer goods. Handicrafts also are important.

Finance and trade
Until the late 1980s, the government controlled all banking activities. Since then it has fostered the development of a private banking sector. Foreign investment and joint ventures with foreign companies have been officially encouraged.
The chief exports, in terms of value, are timber and other forest products, electricity, coffee, and tin. Major imports include foodstuffs, petroleum products, machinery, and transport equipment. The main trading partners are Thailand, Japan, and China. Imports always have vastly exceeded exports in value, leaving a gap to be filled by foreign aid.

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