A senior economist and former deputy minister of Laos spoke with the media on what he believes are major factors contributing to the current economic crisis in the country.
Dr. Kikeo Chanthaboury, Vice President of the Lao Academy of Social and Economic Sciences, and Former Deputy Minister of Planning and Investment pointed out some of the main factors affecting the economy when speaking to local media.
He highlighted Laos’ heavy dependence on exporting raw minerals, coupled with the absence of a developing manufacturing industry as reasons the economy remains fragile and vulnerable to external threats.
According to Dr. Kikeo, Laos’ economy “has experienced a direct impact from the decline in global mineral prices since 2016.”
Another main issue affecting the Lao economy is the difference between the inflow and outflow of foreign currencies, which have not equalized over time. According to Dr. Kikeo, fluctuations in both domestic and international markets result in insufficient capital to rapidly restore exchange rates to their normal levels.
Despite the government’s efforts to diversify the economy by reducing its reliance on natural resource exploitation and developing human resources, the country is still struggling to attract domestic and foreign investors.
The mass migration of Lao workers moving outside the country in search of better-paying jobs has led to a domestic labor shortage as well.
Concurrently, Laos’ national budget consistently faces a chronic imbalance due to inadequate income to meet developmental needs. Consequently, Laos must seek loans from both domestic and foreign sources, primarily to invest in essential economic infrastructure projects.
Lastly, Dr. Kikeo Chanthaboury pointed out the fact that informal economies remain rampant in Laos, meaning economic activities, enterprises, jobs, and workers that are not regulated or protected by the state.
Although administrative measures have been implemented to tackle this issue, effective management remains a challenge.
Dr. Kikeo suggested that Laos move from a natural resources-based economy to a production and manufacturing economy, in the same way that many other Asian nations have done, in order to reduce reliance on imports.
He also suggested studying ways to attract more foreign currency, restructuring debt or postponing payments, and enacting measures to guarantee the value of the Lao kip by tying it to gold and other valuable assets.