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Laos in 2022: No Post-pandemic Bounce Just Yet
- Edited by Thi Ha Hoang, ISEAS - Yusof Ishak Institute, Daljit Singh, ISEAS - Yusof Ishak Institute
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- Book:
- Southeast Asian Affairs 2023
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 27 February 2024
- Print publication:
- 31 March 2023, pp 149-162
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Summary
The year 2022 proved to be a challenging one for the Lao PDR, with stability of the economy taking centre-stage once again. As the adverse impacts of the COVID-19 pandemic began to abate in the early part of the year, they were promptly replaced by a number of macro-economic concerns that brought some degree of anxiety to both the public and private sectors. By mid-2022, it had become clear that this was not going to be the year of the post-pandemic economic bounce that some had hoped for. In September, the Asian Development Bank (ADB) adjusted down its 2022 GDP growth forecast for Laos from 3.8 per cent to 2.5 per cent, up just 0.2 per cent on the previous year's figure, when the impact of the pandemic was very much apparent and borders remained closed. Meanwhile, the ADB's 2023 forecast for Laos is a modest growth of 3.5 per cent.
Financial Woes
The principal (but not only) culprit has been a marked decline in the value of the Lao kip, which then triggered a steep rise in inflation given Laos's dependence on imports for a range of essential inputs, including petroleum, fertilizers and animal feed, among others. In September, the ADB revised up its inflation forecast for Laos in 2022 from 5.8 per cent to 17.0 per cent. That same month, the yearon- year figure for inflation was estimated to be 34 per cent—the highest level recorded since late 1999, having steadily crept up over the spring and summer months. Month-on-month inflation was 3.6 per cent, and the critical food inflation was running at 35.5 per cent year-on-year in September. With the exception of Sri Lanka, the Lao currency was the worst performing Asian currency in the first half of 2022, behind both Pakistan and Myanmar.
In May and June, petrol stations in Vientiane and other cities reported running out of both diesel and petroleum to sell, resulting in long queues of cars forming to purchase the modest amounts of fuel still available, albeit at high prices, and the introduction of some rationing. The lack of access to foreign exchange with which to import petrol seems to have been the root cause, forcing the Ministry of Finance to introduce temporary lines of credit to help import more fuel and thereby keep the Lao traffic moving.
Whither Myanmar's Garment Sector?
- Nick J. Freeman
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- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 24 January 2020
- Print publication:
- 14 March 2019
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The EU has threatened to suspend Generalized Scheme of Preferences (GSP) status for Myanmar, under which the country's exports can enter Europe without any tariffs or quotas. The official reason cited by the EU is a growing concern over human rights violations and issues around labour rights in Myanmar. If this threat were to be carried out, the business sector that will be most affected is Myanmar's burgeoning garment sector, which employs around 700,000 people, most of whom are women. The principal worry in Myanmar is that if EU buyers and brands have to start paying tariffs to import Myanmar-made garments, then they will opt to shift their sourcing to other countries. Without GSP, Myanmar's garment exports may no longer be price competitive. As one of the few manufacturing sectors in Myanmar to employ semi-skilled women, many of whom migrated from poor rural areas, the garment sector has come to play an important socioeconomic role in the country. Whether or not the EU decides to withdraw GSP status, Myanmar's garment sector faces a number of challenges. How Myanmar's policymakers and garment industry leaders respond to global industry trends will be just as important, in the long run, in determining the sector's commercial sustainability.
Whither Myanmar's Garment Sector?
- Nick J. Freeman
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- Book:
- Whither Myanmar's Garment Sector?
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 24 January 2020
- Print publication:
- 14 March 2019, pp 1-18
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Summary
MYANMAR's GARMENT SECTOR AND THE EU's THREAT TO SUSPEND GSP PREFERENCES
In 2013 Myanmar was reinstated into the EU Single Market's “Generalized Scheme of Preferences” (GSP), under which goods from the country — and forty-six other least developed countries — may enter the EU duty- and quota-free, in conformity with the “Everything But Arms” (EBA) trade scheme. This followed the positive progress that Myanmar had recently made in transitioning away from a military-led government, and served as “recognition of [Myanmar's] efforts to launch ambitious political, social and labour reforms”. However, in October 2018, following a fact-finding mission to Myanmar, the EU cautioned that Myanmar's GSP privileges might be suspended because of “deeply worrying developments highlighted in various United Nations reports, in particular as regards human rights violations in Rakhine, Kachin and Shan States and concerns around labour rights”.
In 2017, Myanmar exported goods to the EU collectively valued at €1.55 billion, of which the largest proportion by far, 72 per cent, was ready-made garments. Not coincidentally, one of the few manufacturing sectors to display significant growth in Myanmar over the last five years has been the garment sector. Some of that growth has been domestically generated, but a significant proportion stems from foreign investment in the sector, bringing in not just capital, but also non-financial inputs, such as global industry knowledge and expertise, and the all-important networks and relationships with international buyers.
Thus, the dynamics that lie behind Myanmar's recent garment sector growth is multifaceted, and comprises the following elements:
• Significant foreign investment inflows from Asian manufacturing companies (such as those from China and South Korea), leading to newly established export-oriented garment factories in Myanmar, and particularly in and around Yangon's industrial zones.
• A marked reduction in the number of domestically owned garment companies in Myanmar, which are unable to compete and therefore effectively shut out of the export market. Most are typically left supplying cheap garments and uniforms to the relatively modest domestic market.
• An increase in export volumes for garments, principally to the EU, that is partly dependent on GSP privileges that allow Myanmar-based (but not necessarily Myanmar-owned) garment producers to compete with overseas rivals on the in-store prices for garments sold in the EU market.
Whither Myanmar's Garment Sector?
- Nick J. Freeman
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- Book:
- Whither Myanmar's Garment Sector?
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 24 January 2020
- Print publication:
- 14 March 2019, pp vii-viii
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Summary
EXECUTIVE SUMMARY
• The EU has threatened to suspend Generalized Scheme of Preferences (GSP) status for Myanmar, under which the country's exports can enter Europe without any tariffs or quotas. The official reason cited by the EU is a growing concern over human rights violations and issues around labour rights in Myanmar.
• If this threat were to be carried out, the business sector that will be most affected is Myanmar's burgeoning garment sector, which employs around 700,000 people, most of whom are women.
• The principal worry in Myanmar is that if EU buyers and brands have to start paying tariffs to import Myanmar-made garments, then they will opt to shift their sourcing to other countries. Without GSP, Myanmar's garment exports may no longer be price competitive.
• As one of the few manufacturing sectors in Myanmar to employ semi-skilled women, many of whom migrated from poor rural areas, the garment sector has come to play an important socioeconomic role in the country.
• Whether or not the EU decides to withdraw GSP status, Myanmar's garment sector faces a number of challenges. How Myanmar's policymakers and garment industry leaders respond to global industry trends will be just as important, in the long run, in determining the sector's commercial sustainability.
Frontmatter
- Nick J. Freeman
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- Book:
- Whither Myanmar's Garment Sector?
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 24 January 2020
- Print publication:
- 14 March 2019, pp i-iv
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Foreword
- Nick J. Freeman
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- Book:
- Whither Myanmar's Garment Sector?
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 24 January 2020
- Print publication:
- 14 March 2019, pp v-vi
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Summary
The economic, political, strategic and cultural dynamism in Southeast Asia has gained added relevance in recent years with the spectacular rise of giant economies in East and South Asia. This has drawn greater attention to the region and to the enhanced role it now plays in international relations and global economics.
The sustained effort made by Southeast Asian nations since 1967 towards a peaceful and gradual integration of their economies has had indubitable success, and perhaps as a consequence of this, most of these countries are undergoing deep political and social changes domestically and are constructing innovative solutions to meet new international challenges. Big Power tensions continue to be played out in the neighbourhood despite the tradition of neutrality exercised by the Association of Southeast Asian Nations (ASEAN).
The Trends in Southeast Asia series acts as a platform for serious analyses by selected authors who are experts in their fields. It is aimed at encouraging policymakers and scholars to contemplate the diversity and dynamism of this exciting region.
THE EDITORS
Series Chairman:
Choi Shing Kwok
Series Editor:
Ooi Kee Beng
Editorial Committee:
Su-Ann Oh
Daljit Singh
Francis E. Hutchinson
Benjamin Loh
Navigating the Economic Reform Process
- from MYANMAR
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- By Nick J. Freeman, An independent development consultant, currently based in Yangon
- Edited by Daljit Singh
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- Book:
- Southeast Asian Affairs 2014
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 19 May 2017
- Print publication:
- 03 June 2014, pp 224-240
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Summary
Myanmar's political transition and economic reconstruction are intimately entwined. Achieving either depends on achieving both.
Introduction
The speed and extent of economic and political developments in Myanmar since March 2011 have surprised many observers of the country. The rate with which change is seemingly being embraced in the country contrasts markedly with the more cautious and incremental approaches taken in most other transitional economies of Asia, such as neighbouring China, Laos and Vietnam. This in turn has generated a great deal of excitement about Myanmar's immediate future, and the expectations of many stakeholders have become lofty as a result. For foreign investors, Myanmar is the last major “frontier” market in South and Southeast Asia, and poses an enticing business prospect in a number of ways. For the international development community, Myanmar is clearly in need of considerable technical and financial assistance, and the country will almost certainly be the recipient of significant aid inflows in the years ahead. And most importantly, for the Myanmar people themselves, the end of international isolation and improved prospects for internal peace provide an opportunity for the economy, and particularly their own incomes, to get a much-needed boost.
But delivering on all those expectations is not going to be an easy task, notably within the context of the fast-approaching 2015 elections’ time horizon, but also beyond that date. A number of hurdles, including the institutional and human capacity constraints that currently afflict Myanmar, necessitate that a development “road map” is designed and adopted that can deliver inclusive and sustainable growth, and which is feasible in its scope. Experience from other transitional countries shows that implementing and adhering to such a “road map” is rarely an easy task, and that delays and disappointments are virtually inevitable. There will always be different, yet legitimate, views on what the policy priorities are, as well as the optimal pace and depth of change. In addition, entrenched and powerful lobbies can have interests that are not aligned with economic reform, and seek to thwart some key components, particularly when it comes to business liberalization efforts and the opening up of the market to free and fair competition. Thus, Myanmar's future long-term economic growth prospects are potentially good, but are certainly not “a given”, and thus expectations have to be tempered with some degree of healthy realism about the numerous challenges that lie ahead.
Contributors
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- By Gregory A. Aarons, Nick Axford, Frances Wallace Bailey, Judith Bennett, Karen A. Blase, James Boyle, Tracey Bywater, Linda L. Caldwell, Jeanne Century, Anne Michelle Daniels, Thomas J. Dishion, Celene E. Domitrovich, Morgaen Donaldson, Glen Dunlap, Carl J. Dunst, Melissa Van Dyke, Dean L. Fixsen, Tamsin Ford, Lise Fox, Cassie Freeman, Robyn M. Gillies, Amy E. Green, Mark T. Greenberg, Violet H. Harada, Tim Hobbs, Cindy Huang, Robert J. Illback, Barbara Kelly, Kathryn Margolis, Elizabeth Miller, Dana T. Mitra, Jeremy J. Monsen, Julia E. Moore, Louise Morpeth, Barbara Neufeld, Colleen K. Reutebuch, Mollie Rudnick, Robert Savage, Robert E. Slavin, Elizabeth A. Stormshack, Phillip Strain, Keith J. Topping, Carol M. Trivette, Sharon Vaughn, Janet A. Welsh, Lisa Marks Woolfson, Joyce Yukawa
- Edited by Barbara Kelly, University of Strathclyde, Daniel F. Perkins, Pennsylvania State University
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- Book:
- Handbook of Implementation Science for Psychology in Education
- Published online:
- 05 November 2012
- Print publication:
- 20 August 2012, pp xi-xiv
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Trajectories of spiny lobster Jasus edwardsii recovery in New Zealand marine reserves: is settlement a driver?
- DEBBIE J. FREEMAN, ALISON B. MACDIARMID, RICHARD B. TAYLOR, ROBERT J. DAVIDSON, ROGER V. GRACE, TIM R. HAGGITT, SHANE KELLY, NICK T. SHEARS
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- Journal:
- Environmental Conservation / Volume 39 / Issue 3 / September 2012
- Published online by Cambridge University Press:
- 01 June 2012, pp. 295-304
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Monitoring species’ response in marine protected areas is important for informing both the management of those areas and the establishment of additional protected areas. Populations of spiny lobsters Jasus edwardsii were monitored in eight New Zealand marine reserves for up to 34 years. The populations displayed highly variable responses to protection. While a few showed rapid (within 1–2 years of protection) increases in abundance, others showed little response even after a decade of protection. Some reserves displayed little initial recovery, then a sudden increase following several years of protection, while others displayed significant declines in abundance following initial recovery. Marine reserves located in areas with initially high densities of juveniles tended to have rapid recovery, but aspects of reserve design had no significant influence on the recovery rate. Variability among recovery trajectories also suggests that supply-side dynamics may be a key driver of lobster recovery. Densities of legal-sized lobsters were positively correlated with reserve age, but the abundance of juvenile lobsters increased in all but one reserve, indicating enhanced recruitment, survival and/or movement of juvenile lobsters into reserves. It is important to consider the placement of reserves, with respect to potential levels of larval supply, when establishing marine reserves for either conservation or fisheries management purposes and for evaluating their effectiveness.
Laos: Exiguous Evidence of Economic Reform and Development
- from LAOS
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- By Nick J. Freeman, Associate Senior Fellow at the Institute of Southeast Asian Studies
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- Book:
- Southeast Asian Affairs 2004
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 21 October 2015
- Print publication:
- 14 May 2004, pp 125-136
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Summary
Introduction
There were relatively few surprising or significant developments in Laos during 2003, although various events served to underline the rather unique character and specific challenges that confront one of Southeast Asia's least developed countries. And although the gradual pace at which events tend to occur in Laos did not accelerate in 2003, there were some interesting twists and turns to be observed during the year.
Economic and Business Developments
The Lao economy probably grew by about 5 to 6 per cent in 2003, broadly in line with the average annual growth rate of its gross domestic product (GDP) in the last decade. The local currency held broadly steady in 2003, appreciating marginally against the U.S. dollar and depreciating slightly against the Thai baht, the two foreign currencies most widely used in Laos. Inflation was running at around 11 per cent in 2003, due in large part to higher prices for rice and fuel, as well as continued growth in the money supply. In the first half of 2003, Lao exports were up by around 23 per cent (to US$175 million) and imports burgeoned by 17 per cent (to US$263 million), resulting in a trade deficit of almost US$90 million. Despite the consistent trade and current account deficit, Laos' foreign exchange reserves held broadly steady in 2003, at around US$200 million, or the equivalent of five months' import cover.
Cabinet changes and re-shuffles are quite rare in Laos, but new appointments to the posts of governor of the Bank of the Lao PDR (the central bank) and the minister of finance were made in January 2003. Chansy Phosikham moved from the central bank governorship role to that of finance minister, and was replaced as central bank governor by former trade and tourism minister Phoumi Thaipphavone. Meanwhile, former finance minister Soukan Mahalith became provincial governor of Xiang Khoang, in the northeast of Laos.
4 - LAOS
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- By Nick J. Freeman, Institute of Southeast Asian Studies
- Edited by John Funston
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- Book:
- Government and Politics in Southeast Asia
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 21 October 2015
- Print publication:
- 23 October 2001, pp 120-159
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Summary
INTRODUCTION
Though often caught in the middle of regional strategic rivalry, Laos remains relatively isolated, and is perhaps Southeast Asia's least understood state. Now, it is moving tentatively onto the world stage, opening its economy and joining the regional mainstream with membership of the Association of Southeast Asian Nations (ASEAN) in 1997.
The origins of a unified Lao state arguably date back to the Buddhist kingdom of Lan Xang Hom Khao (Kingdom of a Million Elephants and the White Parasol), founded in the mid-fourteenth century under Fa Ngum, and initially centred on the town of Luang Prabang. During the early eighteenth century, as a result of a conflict over royal succession, Laos divided into three smaller and independent kingdoms, centred on Vientiane (the capital of Lan Xang after 1560), Luang Prabang, and Champassak. By the nineteenth century, all three kingdoms had become vassals of Siam, and their combined territorial extent comprised large areas of what is now northern Thailand (i.e., the Khorat Plateau and land west of the Mekong River), as had unified Lan Xang before them. By the time the French arrived in the latter part of the nineteenth century, just the kingdoms of Luang Prabang and Champassak were still functioning, after Siam's overthrow and destruction of Vientiane in 1828.
The current territorial extent of landlocked Laos is largely a product of French colonial acquisition and administration. Laos' present borders were defined in 1893 — and slightly extended westward in 1904 and 1907 — by forcible French acquisition, and subsequently recognized by a series of treaties between France and Siam.
5 - ASEAN Investment Area: Progress and Challenges
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- By Nick J. Freeman, Senior Fellow at the Institute of Southeast Asian Studies, Singapore.
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- Book:
- ASEAN Beyond the Regional Crisis
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 03 November 2017
- Print publication:
- 19 March 2001, pp 80-125
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Summary
FDI in South-East Asia (ASEAN 10) decreased by 23 per cent in 1998. The share of these countries as a group in total FDI in Asia has declined by nearly one tenth during the 1990s.
Introduction
The Association of Southeast Asian Nations (ASEAN) has been through rough times in the last couple of years. A vicious currency crisis in Thailand during mid-1997 mutated into a financial crisis, which then spread to the other currencies and financial markets of Southeast Asia, before mutating again into a more virulent regional economic downturn across much of East Asia. Depicted by one observer as the “bonfire of the certainties”, the Asian economic crisis knocked (formerly ebullient) subjective business confidence across the region, which further exacerbated the damage already being done to more objective business activity. Previously bold commercial banks took fright, as over-leveraged corporates in several countries began to default on loans, en masse. Banks’ loan books were frozen, credit became scarce, interest rates climbed precipitously, and the business environment became extremely hazardous. In those countries worst affected, good and bad firms alike found themselves in life-threatening situations. Some countries even saw the economic fallout from the crisis making an impact in their political arenas. The value of ASEAN's various local currencies came under downward pressure, as did the prices of most asset classes, from shares to property. Many forms of business endeavour were adversely impacted, including trade and investment. For almost anyone involved in business in ASEAN during 1997–99, the experience was decidedly unpleasant. Perhaps the only net winners so far have been corporate lawyers and accounting firms.
For most of those with operational investments in ASEAN, the period since mid-1997 has been extremely disappointing, as both the value of these investments, and the earnings to be derived from them, have shrunk fairly substantially. Conversely, for those seeking to enact new investments in Southeast Asia, the period since mid- 1997 has been quite exciting. Not only can some operational businesses now be bought at levels commensurate with their distressed condition, but post-crisis liberalization reforms are allowing foreign investors to acquire assets that were previously offlimits (in formerly protected sectors). This state of affairs has also dovetailed with new trends apparent in the field of international business, particularly with regard to a burgeoning of mergers and acquisition (M&A) activity, and strategic alliances.
Greater Mekong Sub-Region and the “Asian Crisis”: Caught Between Scylla and Charybdis
- from THE REGION
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- By Nick J. Freeman, Institute of Southeast Asian Studies
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- Book:
- Southeast Asian Affairs 1999
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 21 October 2015
- Print publication:
- 07 September 1999, pp 32-51
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Summary
Introduction
A vast amount has been published on the impact of the recent regional financial and economic turmoil — commonly termed the “Asian Crisis” — on the Asia-Pacific region, the emerging markets in general, and the global economy as a whole. However, despite their location close to the epicentre of this turmoil, there has been relatively little commentary or analysis on the impact of the Asian crisis on the four transitional countries of Southeast Asia: Cambodia, Laos, Myanmar, and Vietnam. This essay attempts to rectify, at least in part, this apparent gap in the coverage of the four countries, which will collectively be called the Greater Mekong Sub-region (GMS) for the purpose of this chapter. Having embarked on economic reform programmes in the latter part of the 1980s — broadly intended to unwind a significant part of the command economy structures, and replace them with more efficient market-oriented macroeconomic management methods — all four GMS countries were struck by the Asian crisis just as they were entering their second, and perhaps more challenging, decade of economic liberalization.
The adverse effects of the Asian crisis now appear to be greater and more far-reaching for the GMS countries than most observers and political leaders had first envisaged in late 1997. Initially sparked by a foreign exchange crisis in Thailand (a country which shares extended land borders with three of the GMS countries) in early July 1997, financial instability rapidly spread to the currencies and banking sectors of various other countries in the region, before burgeoning into a wider economic crisis for the Asia-Pacific, and leading to a contagion effect across a wide spectrum of the world's emerging markets. As a result, the Asian crisis now poses very immediate economic and financial challenges for many economies in the Asia-Pacific region, and has prompted a long-term change in global perceptions of financial and investment risk pertaining to emerging markets as a whole. Both those immediate challenges and the changes in risk perceptions undoubtedly apply to the four GMS countries.
Laos: No Safe Haven from the Regional Tumult
- from LAOS
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- By Nick J. Freeman, ING Baring International Pte. Ltd., Bangkok
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- Book:
- Southeast Asian Affairs 1998
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 21 October 2015
- Print publication:
- 04 August 1998, pp 141-158
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Summary
1997 was the year Laos entered the Association of Southeast Asian Nations (ASEAN) as a full member, and persisted with a more outward-looking — albeit still relatively reserved — stance towards the enveloping region, and the international community as a whole. Unfortunately, the country's opening up coincided with a marked dip in the economic fortunes of Southeast Asia, particularly Thailand, on which land-locked Laos remains heavily dependent for essential inputs. The first ripple effects emanating from regional turbulence was felt by Laos in mid-1997, when the local currency shadowed the Thai baht in depreciating markedly. And further adverse consequences will undoubtedly be felt in 1998, most notably with regard to much-needed foreign investment inflow pledges, which are likely to decline. Looking forward, the small scale of the country's economy — and its relative detachment from the region's financial markets — may help buoy Laos in weathering this economic storm, although the country will certainly not be wholly immune. Much will also depend on the extent of Vientiane's volition and competence in pushing ahead with the sorts of economic reform that provide the best guarantee of sustaining domestic economic growth. Notwithstanding the considerable progress made under the decade-long “New Economic Mechanism” reform programme, the leadership remains somewhat ambivalent about the prospect of moving ahead with a wholly new and coherent tranche of economic reform measures, preferring instead to take a familiar gradualist approach.
Political Developments: National Assembly Elections
After the drama of a Sixth Party Congress in 1996, developments in Laos' political sphere returned to relative normality throughout much of 1997. However, the pace of events picked up again towards the end of the year as Laos held nation-wide elections in late December for seats in the fourth legislature of the National Assembly. Polls for the National Assembly are held every five years, and approximately 2.5 million people were eligible to vote in 1997.
Vietnam: Better Managing Reform
- from Vietnam
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- By Nick J. Freeman, Institute of Southeast Asian Studies
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- Book:
- Southeast Asian Affairs 1996
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 21 October 2015
- Print publication:
- 22 February 1997, pp 385-402
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Summary
Nineteen ninety-five was an eventful year for Vietnam, as the country marked the twentieth anniversary of its reunification, the fiftieth anniversary of Ho Chi Minh's declaration of independence, and the sixty-fifth anniversaries of the founding of the Communist Party of Vietnam and the Vietnam Fatherland Front. It was also the year that Hanoi finally “normalized” its relations with Washington, and gained full membership status in the Association of Southeast Asian Nations (ASEAN). But with these anniversaries now passed, and greatly improved external relations firmly secured, government attention has shifted back towards domestic issues, and the need to look ahead. Having laid the broad foundations of economic reform in Vietnam — which will be a decade old in 1996 — and begun to see relatively consistent performance results, better managing the reform process has become Hanoi's primary task. In anticipation of the Eighth Party Congress, provisionally scheduled for mid-1996, Vietnam's leaders have been debating the appropriate pace and parameters of doimoi (renovation), the results of which should become evident in the impending 1996–2000 Five-Year Plan.
Whilst few observers question the commendable success of the economic reform programme — pursued fairly vigorously since 1986, resulting in greatly improved economic growth figures — there is a perceived desire to take the process further, although the Party wishes to see reform remain contained within fairly fixed socio-political limits. With the gross economic inefficiencies endured under the centrally planned system now largely (although not wholly) removed, the government realizes it must enact new initiatives that will generate new growth if the reform process is not to become mired at its current stage. And there is little room for complacency, with the perils of excessive bureaucracy and corruption, a worrisome budget and current account deficit, new-found inflationary pressure, widening disparities in income, and numerous other adverse factors, potentially able to stall — if not actually derail — the current reform programme.
9 - Concluding Remarks
- from Section III - Conclusion
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- By Ng Chee Yuen, Visiting Senior Fellow, Centre for Management of Technology, National University of Singapore, Singapore, Nick J. Freeman, Head, Indochina Research ING Baring International, Bangkok, Frank Hiep Huynh, Senior Lecturer, School of Economics, LaTrobe University, Melbourne
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- Book:
- State-Owned Enterprise Reform in Vietnam
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 09 November 2017
- Print publication:
- 01 November 1996, pp 153-164
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Summary
The State as Development Agent
Although Vietnam now recognizes the utility of a state-regulated market economy, and the desirability of a multi-sectoral economy (that is both private and state enterprises), the complete abandonment of state-owned enterprises (SOEs) is not deemed acceptable. Indeed, Vietnam wishes to see the state sector maintain its position at the forefront of the economy. One general conviction prevailing, and categorically stated in two of the chapters on Vietnam (Tiem and Thanh, Tuan et al.), is the view that the state plays a pivotal role as a development agent; and that the provision of certain goods and services shall remain in the exclusive domain of the state. The areas listed range from public utilities, infrastructure, defence, security, transport, postal services, and telecommunications to fertilizers, pesticides, veterinary products, and geological prospecting.
Three basic reasons have been given for an active state role: (1) low or non-profitability in the provision of (often capital-intensive) public utilities and infrastructure; (2) the need to help develop remote and mountainous areas; and (3) the need for industries necessary for Vietnam's industrialization and modernization, which the private sector is unable, at present, to play an important role in promoting. The literature on the establishment of SOEs, however, cites many more reasons, pertaining to factors such as macroeconomic stabilization, just and fair distribution of income and wealth, market failures and imperfections, monopolistic market structures, and externalities (see for example, C.Y. Ng and N. Wagner, Marketization in ASEAN. Singapore: ISEAS, 1991).
Indeed, the ASEAN experience has shown a strong case for the state to play a pivotal role in development, through the establishment of SOEs. It should, however, be noted that all ASEAN countries are currently undergoing dramatic transformation, through divestment of SOEs, having experienced a serious drain on their budgets in the recent past. The one possible exception where SOEs have been (in general) profitably and efficiently run is Singapore, and yet this state too has a comprehensive programme of privatization.