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WEEKLY NEWSLETTER
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Laos
Index
Between 1975 and 1990, total foreign aid to Laos,
including
grants and loans, was approximately US$2.3 billion. Of
this sum,
only 65 percent had been spent as of 1989, of which grants
and
loans made up approximately equal quantities. Fifty-five
percent of
spent aid derived from the nonconvertible currency area,
17.8
percent from convertible currency area countries, and 27.2
percent
from international organizations and financial
institutions (see
table 12, Appendix).
According to the World Bank and the IMF, long-term
loans
increased nearly threefold, from about US$38.8 million in
1982 to
about US$111.4 million in 1988. Drawings on loans received
from the
nonconvertible currency area had averaged 73 percent of
the total
annually through 1988; in 1989, however, drawings from the
area
dropped to 23 percent of the total, and by 1991 they were
nonexistent. In January 1991, the Soviet Union suspended
all its
aid and credits to Laos although loan repayments were
postponed
until the end of the decade. Drawings from the convertible
currency
area during this period increased, but not enough to
support
spending at the level of the mid-1980s; by 1991 drawings
on all
loans received had dropped nearly 50 percent from 1988. In
response, grants from the convertible currency area, which
had
decreased from approximately US$45.4 million in 1985 to
just
US$14.7 million in 1989, spiraled to US$63.9 million in
1991.
Aid from the nonconvertible currency area was primarily
from
the Soviet Union and Vietnam. Until 1991 Soviet aid
constituted
over half of all aid to Laos, including the stationing of
over
1,000 Soviet technical personnel in Laos, and donations of
construction equipment, vehicles, and aircraft. The second
largest
donor was Vietnam, which sent roughly 5,000 advisers and
technicians to the country and participated in the joint
exploitation of mineral and forest resources.
The cutback in aid from the nonconvertible currency
area caused
Laos to seek improved ties with Western nations.
Australia, Japan,
and Sweden accounted for virtually all foreign aid from
the
convertible currency area until 1988; but by 1990, their
combined
share had dropped to about 78 percent, because other
developed
nations began to increase their aid programs to Laos.
Japan and
France have become more important aid donors in the early
1990s.
The United States does not have an "aid program" in the
traditional
sense because Laos is a communist country and is
prohibited from
receiving aid under the Foreign Assistance Act of 1961 (as
amended). The crop substitution program, begun in October
1989
following reassessment of the country's involvement in the
world
opium trade, is possible because of separate legislative
authority.
In December 1990, following an improvement in
Chinese-Laotian
relations, China pledged a US$9.3 million credit for a
five-year
economic and technical cooperation program in Laos.
Other aid is provided by international organizations
such as
the UNDP, the Asian Development Bank, the International
Development
Association, and the IMF. Multilateral organizations
provide large
loans in support of government reforms--in 1990 and 1991,
the IMF
and the Asian Development Bank made loans worth US$37
million for
this purpose.
Aid to Laos covers a wide range of activities,
including
technical and capital assistance for such projects as
hydroelectric
power stations (Sweden), a livestock vaccination program
(the
UNDP), and scholarships for agricultural study (Thailand).
The IMF
approved a US$50 million loan in 1993 in support of
economic
development, inflation reduction, and compensation for
depleted
reserves. Other loans have been granted for such
infrastructure
development as road construction, hydropower projects, and
telecommunications systems. Aid has also been extended for
irrigation projects and forestry and fisheries programs.
Other types of aid include loan forgiveness: in 1991
Japan and
Germany forgave loan liabilities worth US$32.3 million.
Despite the
country's continued striving to reach food
self-sufficiency, it
relies on food aid for its domestic needs during years of
poor
harvest. In 1988 and 1989, for example, 140,000 tons of
food aid
were donated or sold to Laos to make up for shortfalls
caused by
drought. Food aid in cash or in kind was donated to Laos
in 1991 by
the Food and Agriculture Organization and the UNDP, and by
the
United States, Australia, Thailand, and the Netherlands.
Although foreign grants and loans remain sufficient to
finance
Laos's trade deficit and development expenditure, at least
for the
medium term, poor absorptive capacity, the result (in
part) of a
poorly educated and trained labor force, reduce its
ability to make
efficient use of the available funds. The balance of
payments
actually went into surplus in 1989 and 1990. However,
there remains
the question of whether flows from the convertible
currency area
will continue to increase enough to make up for the losses
from the
nonconvertible currency area. Because the country's fiscal
and
trade position is not likely to improve dramatically in
the early
1990s, this is an important concern.
Data as of July 1994
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