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Global Financial Crisis Likely to Extend Laos Least-developed Country Status Beyond 2020


Lao authorities acknowledge that the current global financial crisis, which is crippling economies across the world, will make it difficult for Laos to reach its previously stated goal of lifting itself out of the least-developed country status by 2020, because that goal was based on the expectation that Laos' economy will continue to grow at a rate of 8% annually.

The Asian Development Bank (ADB) has recently predicted that Laos’ economy will keep expanding at a rate of betwen 7% and 8% from 2008 to 2010, based on continued growth in its energy and mining sectors during the past ten years. However, the impact of the current global economic turmoil will make it hard for Laos to achieve that growth rate, because Laos relies primarily on foreign investments, especially investments from fellow ASEAN members, to develop its economy. And since the majority of those countries export mainly to the U.S. and Europe where the financial crisis has hit hard, their investments in Laos will consequently be affected.

A case in point: five energy investment projects by those countries have been indefinitely suspended. They include the Namtheun I, Nam Ngiep, Nam Ou, and Namguem III hydro- power projects, as well as the Hongsa lignite project. The investors cite a 30% increase in costs as grounds for suspension, plus the fact that the intended buyer, Thailand, is unlikely to agree to purchase electricity generated by those projects at a higher rate than previously agreed upon.

As a result, it will be difficult for Laos to graduate from the United Nations’ list of least-developed countries in 2020 as planned.

Lao officials say, as an alternative, they will have to turn and focus their efforts and money on a more comprehensive rural development and building more infrastructures to facilitate access to urban centers for farmers living in remote rural areas, who have difficulty transporting their products to the markets. The goal is to help them expand their agricultural production, improve their health care, education, and in short, their standard of living.

Listen to Songrit's report in Lao for more details.

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