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WEEKLY NEWSLETTER
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Laos
Index
Agriculture, the most important sector of the economy,
clearly
benefited from the introduction of the New Economic
Mechanism. The
changes positively affected performance by establishing a
consistent policy that induced increased agricultural
production
over a number of years--before the droughts in 1987 and
1988--
particularly in paddy production.
In June 1988, in line with the policies described by
the New
Economic Mechanism, the government passed a resolution to
reform
the agricultural sector. As announced at the Fourth Party
Congress
in 1986, the principal goal was to reorient the sector
toward a
market economy. The abolition of the much hated
agricultural tax as
well as the socialist restrictions on marketing helped to
create
necessary incentives for farmers.
The major change was in the pricing policy. The
practice of
setting low producer prices for a wide range of crops was
ended,
boosting incomes in rural areas. (In 1987 the procurement
price of
rice was only 30 percent of the market price).
Other changes were implemented. Restrictions on
internal trade
of agricultural products were removed allowing free
markets to
operate, at least for important crops such as rice. Laws
also were
enacted to guarantee farmers' rights to private ownership
of land,
including the right to use, transfer commercially, and
bequeath.
Tax exemptions for specified periods also were decreed.
The reforms emphasize the government's belief that
further
increasing and diversifying agricultural production
requires the
participation encouragement of the private sector. Food
security,
as always, remains a key objective, but the focus of the
new
agricultural policy is on the production of cash crops
that can be
processed--to increase their value--and then exported. The
means
for reaching that goal include the popular 1989 measure of
abandoning the poorly developed attempts at establishing
the
socialist infrastructure of agriculture--a cooperative
farming
system.
The primary objective of the cooperative farming
system, based
on the Vietnamese model, had been to help the nation
achieve selfsufficiency in food. Reflecting the government's pursuit
of this
goal, the number of government-assisted cooperative farms
nearly
tripled between 1978, when the drive to reorganize
agriculture
began, and the introduction of the New Economic Mechanism
in 1986.
At that time, cooperative farms numbered about 4,000 and
employed
about 75 percent of the agricultural labor force although
most were
cooperatives only on paper, and there was no practical
cooperative
management. By 1988, however, employment in the
cooperatives had
decreased and included only 53 percent of all rural
families and
about half of all rice fields.
The distribution and sale of collectively managed land
to
families began in 1989. Most families in the old settled
areas had
their original land returned, which they still recognized.
By mid1990 most state farms and agricultural cooperatives had
been
disbanded. This move, in conjunction with the removal of
many
restrictions on food prices and the distribution of
agricultural
goods, helped to precipitate a modest growth in
agricultural output
of about 7 percent in 1990.
At the Fifth Party Congress in March 1991, the
government
reiterated the basic objective of its agricultural policy:
a shift
from subsistence production to cash crop production
through crop
diversification and improved linkages to export markets.
Although
rural farmers have limited experience in marketing their
farm
produce and are cautious about participating actively in
the
market, they are beginning to produce and sell their
specialized
crops and livestock and buy manufactured goods on a
regular basis.
At the congress, the government also affirmed its support
for the
private ownership of land and its intent to protect
farmers' rights
to long-term use of land, to bequeath land to their
children, and
to transfer their land rights in exchange for
compensation. These
assurances, among other improvements in the economic
atmosphere,
are an attempt to make Laos more attractive to foreign
investors.
Data as of July 1994
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