SEATTLE — Laos, officially known as the Lao People’s Democratic Republic, is a landlocked country in Southeast Asia. It is a lower-middle income country with a small annual GDP of roughly $16 billion.
According to the Asian Development Bank’s latest data from 2015, 23.2 percent of Laotians live below the poverty line, the second-highest poverty rate in Southeast Asia. Only Myanmar’s poverty is more prominent. Why is Laos poor?
Like many of its Southeast Asian neighbors, European colonial rule and a disturbing lack of freedom makes Laos poor. Laos was a colony of France until 1953, and since then has struggled to establish a stable and free system of government.
Following its independence, Laos experienced a tumultuous period of regime change in the wake of the effective power vacuum left by France. Almost immediately after the establishment of a monarchy, Laos exploded into civil war between royalist forces and communist revolutionaries. The war lasted until 1975, when the communists finally disposed of the incumbent government and established a one-party communist state.
Today, Laos is one of the world’s last remaining communist governments. The government, ruled by the Lao People’s Revolutionary Party, exerts tight control over individual freedoms and the media.
For years following the rebel victory in 1975, Laos was largely isolated from the rest of the world because of its authoritarian communist government. However, with the fall of the Soviet Union, Laos began to open up to the international community, presumably out of economic necessity.
Despite taking small steps to engage in international relations and trade, Laos has not yet fully embraced the rest of the world. Although it is not entirely isolated, Laos still lags behind much of the international community in terms of human and economic progress.
So far, the Lao People’s Revolutionary Party has refused to meaningfully democratize the government or liberalize the economy. As a result, there have been few strides in overall development; most Laotians still live in rural areas, 80 percent of whom rely on farming to survive.
Why is Laos poor? Laos’s general lack of political and economic freedom as well as its weak property rights have direct consequences on business. According to the Heritage Foundation, Laos ranks at 131 out of 182 countries in terms of business freedom. Unsurprisingly, firms are reluctant to enter Laos and do business, discouraging the creation of jobs and holistic economic development.
However, Laos is not economically stagnant. In fact, with a GDP growth rate of 7.2 as of 2017, Laos is the thirteenth-fastest-growing economy in the world. Even with its comparatively restrictive economic policies, Laos has taken advantage of its natural resources and established itself as a respected energy exporter.
Also, Laos performs well in regards to the U.N, Sustainable Development Goals. The country has significantly cut down on issues such as poverty and hunger compared to past decades, and even implements the SDGs into the domestic policy agenda.
Hopefully, Laos can continue to find success as an energy exporting economy in the short run. In the long run, continued progress will most likely come as a result of necessary democratic and economic reforms. If a disturbing lack of freedom answers the question ‘why is Laos poor?’, then a strong push towards egalitarianism will make Laos and its people prosperous.
– Isidro Rafael Santa Maria