Recalibrating Asymmetric Relationships through Economic and Business Development: The Case of Lao PDR

Abstract

Poor and land-locked, communist-ruled Laos began opening its economy to capitalist methods at the end of the 1980s. With a sparse population and very limited technical capacity, the country’s principal economic activities involve foreign investors building dams for hydroelectricity or mining for minerals that are destined for export. The local economy is dominated by small and uncoordinated enterprises operating in mostly undeveloped and unsophisticated markets. Laos is in the process of becoming more integrated into the Mekong Region by virtue of the building of parts of the Asian Highway Network across its territory and some opportunities arising from the planned single market of the ASEAN Economic Community which reaches a new phase in 2015. The vision is for Laos to become a bridge for economic development. However, it is not clear that the mere presence of infrastructure will be sufficient for Laotian companies and institutions to receive benefits on a substantial and sustainable basis. Principal difficulties are (i) underdeveloped public human resource capacities and institutional support systems, (ii) lack of industry clusters and facilities that can provide SMEs access to regional and global value chains and (iii) limited endowment of resources, logistics, finance and limited capabilities to meet market demand. This paper examines the conjunction between ability of Lao actors to participate in emergent economic activities and the country’s ability at government level to articulate its own developmental priorities and attempt to achieve these through negotiation with other states. This requires seeking to recalibrate hugely asymmetric relationships with China, Japan and Thailand, among others.