History of Laos Since 1945 - Contemporary Laos

Contemporary Laos

The abandonment of collectivisation and the relaxation of discipline brought with them new problems, which grew worse the longer the communist party enjoyed a monopoly of power. These included increasing corruption and nepotism (a traditional feature of Lao political life), as ideological commitment faded and self-interest arose to replace it as the major motivation for seeking and holding office. The economic benefits of economic liberalisation were also slow to emerge. Unlike China, Laos did not have the potential for rapid economic growth through the restoration of a free market in agriculture and the fostering of export-driven low-wage manufacturing. This was partly because Laos was a small, poor, landlocked country while China was a geographic and demographic giant, but also because the Lao farmers, most living at little more than subsistence level, could not generate the huge surpluses, even given economic incentives, that the Chinese peasants could and did after Deng's decollectivisation of agriculture. In 1985, on the tenth anniversary of the communist takeover, the regime claimed that gross domestic product had doubled under its rule. This was misleading because the economy had been in a virtual collapse in 1975, making it an unrealistic basis for comparison. A United Nations report estimated that GDP had scarcely changed since 1980, although it had begun to rise in 1984. In any case the country remained very poor, with little industrial development.

The first decade of communist rule did produce some advances in health, education and social development, particularly for the ethnic minority peoples, who were the main beneficiaries of the restoration of peace and the reunification of the country. But in these fields the government was hampered by an acute shortage of trained personnel, resulting from the massive exodus of the educated classes between 1975 and 1978, and also from the loss of American assistance. Cut off from educational opportunities in the west, many young Lao were dispatched for higher education in Vietnam, the Soviet Union or eastern Europe, but even crash education courses took time to produce trained teachers, engineers and doctors. In any case, the standard of training in some cases was not high, and many of the Lao students lacked the language skills to understand what they were being taught. Today many of these Lao regard themselves as a "lost generation" and have had to gain new qualifications at western standards to be able to find employment.

In 1985, recognising the disappointing results of the party's first decade in power, Kaisôn introduced the New Economic Mechanism. Although justified with appropriate socialist phraseology, this policy amounted in effect to abandoning state ownership and control of the economy. The state bureaucracy was reduced in size and its role in economic management reduced, subsidies to state industries were abolished, managers were told that they should aim to make their enterprises profitable (which inevitably meant shedding employees), and retail prices were deregulated. While long-term benefits were expected from these reforms, in the short term they produced inflation, unemployment among workers from the loss-making state sector, and served mainly to increase resentment and insecurity among the urban population. The reforms thus did little to bolster the standing of the communist regime, particularly since its concessions to capitalism had cost it much of its ideological legitimacy. Fortunately for the party, the opposition forces were too weak and disorganised to take advantage of the party's vulnerable position.

The international position of Laos also remained precarious. Deference to Vietnam had resulted in the political and economic isolation of Laos. Its other borders with China and Thailand were hostile and closed. The policies of the government had left it dependent on Vietnam as its only ally and source of assistance. By the mid 1980s, however, relations with China had begun to thaw as Chinese anger at Lao support for Vietnam in 1979 faded and Vietnamese power within Laos diminished. By 1986 official ties had been restored, although relations remained cool. Ambassadors were exchanged in 1988, the same year the Vietnam officially withdrew its troops from both Laos and Cambodia (in fact some troops remained in Laos). At the same time, Laos made the first steps to repairing relations with the U.S., co-operating with U.S. efforts to find the remains of American air-crew shot down over Laos during the Indochina war. This restoration of ties was seen as necessary both to enable American aid and investment to resume, and to end covert U.S. support for the low-level anti-communist insurgency which continued to flicker in the south. The government also hoped that the U.S. would use its influence to urge Thailand to ease its economic and political pressure on Laos. In 1984 and again in 1987 there were border clashes between Thai and Lao forces in a disputed territory in Xainyaburī province, and Thai restrictions on trade continued to hurt Laos.

The collapse of communism in eastern Europe which began in 1989 and ended with the fall of the Soviet Union in 1991 came a profound shock to the Lao communist leaders. Ideologically, it did not suggest to the Lao leaders that there was anything fundamentally wrong with socialism as an idea, but it confirmed for them the wisdom of the concessions in economic policy they had made since 1979. More practically, the Soviet Union had been the largest contributor of foreign aid to Laos, but in 1989 Mikhail Gorbachev told Kaisôn that aid would have to be sharply reduced. In fact aid was cut off completely in 1990, creating a renewed economic crisis. Laos was forced to ask France and Japan for emergency assistance, and also to ask the World Bank and the Asian Development Bank for aid. This had further consequences. The international agencies required further economic liberalisation and reform as a precondition for large-scale aid. Laos was also forced to mend its fences with the non-communist countries if it wanted their assistance. Laos was helped in this by the restoration of civilian government in Thailand after 1992, which ended the confrontationist policies of the previous military regimes. Finally, in 1989, Kaisôn visited Beijing to confirm the restoration of friendly relations, and to secure Chinese aid.

In the 1990s the old guard of Lao communism passed from the scene. Suphānuvong retired in 1991 and died in 1995. He was succeeded as President by Kaisôn, while Khamtai Siphandôn became Prime Minister, but Kaisôn in turn died in November 1992, and was succeeded as President by Nuhak Phumsavan and as party leader by Khamtai, who thus emerged as the effective ruler of the country. In 1998 Nuhak retired and Khamtai succeeded him as President, a post he continued to hold until 2006, at 81 the last of the generation of leaders who waged the "thirty-year struggle" for power. General Sisavath Keobounphanh became Prime Minister in 1998, and was succeeded in 2001 by Boungnang Vorachith.

Since the 1990s the dominant factor in the Lao economy has been the spectacular growth in the South-East Asian region, and particularly in Thailand. In 1994 an Australian-funded bridge was opened linking Viang Chan with the Thai city of Nong Khai: this has become the country's most important piece of infrastructure, because it has linked Laos to the booming Thai economy. (Since then another bridge has been built linking Ubon Ratchathani in eastern Thailand with the southern Lao town of Pākxē. A third bridge, called the Second Thai-Lao Friendship Bridge has been built connecting Savannakhet to Mukdahan in Thailand, opened on January 9, 2007. Also see Third Thai-Lao Friendship Bridge and Fourth Thai-Lao Friendship Bridge.) To take advantage of this, the Lao government lifted virtually all restrictions on foreign trade and investment, allowing Thai and other foreign firms to set up and trade freely in the country. Lao and Chinese exiles were also encouraged to return to Laos, and to bring their money with them. Many did so - today a member of the former Lao royal family, Princess Manilai, owns a hotel and health resort in Luang Phrabāng, while some of the old Lao elite families, such as the Inthavongs, again operate (if not live) in the country.

Of equal benefit to Laos was the rapid expansion of tourism in South-East Asia, in which again Thailand was a leading participant. The Lao government saw the possibilities of income from tourism in the 1990s, but the almost total lack of tourist infrastructure, the poor transport system, the non-convertibility of the Lao currency and fears by some communist officials of political dangers and "cultural pollution" from an influx of foreigners all acted as barriers. The American writer Brett Dakin, who worked as an adviser to the Lao National Tourism Authority, has written an amusing account of the struggles of the Lao bureaucracy to adapt to the demands of the tourism industry. Among his projects was "Visit Laos Year" in 1999-2000, which began the current boom in tourism to Laos. Today Laos is a popular tourist destination, with the cultural and religious glories of Luang Phrabāng (now a UNESCO World Heritage Site) being particularly popular. A host of small businesses have grown up to serve the tourist trade, providing welcome employment to thousands of people, while foreign (mainly Thai) airlines, bus companies and hotels have moved in to fill the infrastructure gaps that the Lao government lacks the funds or expertise to provide.

Since the reforms of the 1980s, Laos has achieved sustained growth, averaging six percent a year since 1988, except during the Asian financial crisis of 1997. But subsistence agriculture still accounts for half of GDP and provides 80 percent of total employment. Much of the private sector is controlled by Thai and Chinese companies, and indeed Laos has to some extent become an economic and cultural colony of Thailand, a source of some resentment among Lao. Laos is still heavily dependent on foreign aid, but Thailand's ongoing expansion has increased demand for timber and hydroelectricity, Laos's only major export commodities. Recently Laos has normalised its trade relations with the U.S., but this has yet to produce any major benefits. The European Union has provided funds to enable Laos to meet membership requirements for the World Trade Organisation. A major hurdle is the Lao kip, which is still not an officially convertible currency.

The communist party retains a monopoly of political power, but leaves the operation of the economy to market forces, and does not interfere in the daily lives of the Lao people provided they do not challenge its rule. Attempts to police the religious, cultural, economic and sexual activities of the people have been largely abandoned, although Christian evangelism is officially discouraged. The media is state controlled, but most Lao have free access to Thai radio and television (Thai and Lao are mutually comprehensible languages), which gives them news from the outside world. Modestly censored Internet access is available in most towns. Lao are also fairly free to travel to Thailand, and indeed illegal Lao immigration to Thailand is a problem for the Thai government. Those who challenge the communist regime, however, receive harsh treatment. Amnesty International has continued to document illegal detention and torture of political detainees. Various opposition groups operate in Thailand and the U.S., but there seems little evidence of active opposition inside Laos. For the time being most Lao seem content with the personal freedom and modest prosperity they have enjoyed over the past decade.

In March 2006 Khamtai stepped down as Party leader and President, and was succeeded in both posts by Choummaly Sayasone, aged a relatively youthful 70. Like Khamtai, Choummaly had a military background, and was generally seen as unlikely to initiate major reforms.