Having suffered from colonisation by France for over a half century, civil war for two decades, and then being under US sanctions, the LPRP faced considerable challenges as it attempted to bring ‘true’ independence to the country. The key challenges the new government faced were associated with shortages of two important resources: skilled personnel and financial resources.
Human capital deficiencies: the victory of the LPRP led to the loss of most of the country’s educated elite who had served in the administration of the RLG. Dommen (1985: 141) notes that of 120,000 civil servants, who served the old regime, 48,000 fled from the country, 30,000 were sent to prison, and 40,000 were sent to the re-education camps to be inculcated with the new political orthodoxy. The country lost not only those who were skilled, well-educated and experienced in making the decisions demanded to run the country’s administration; they even lost those with even a small amount of managerial experience (Evans 1991: 98). A shortage of skilled and experienced personnel therefore became a significant obstacle for the new government in its attempts to run the country. In this situation, the communist Pathet Lao was not confident about its power to control the country at the beginning of the socialist period, and the government was in a dilemma over whether to recruit people from the old system to serve the new regime. The LPRP itself did not have sufficient human resources – those who had both experience and political qualifications – to guide the new regime. Large numbers of the LPRP’s supporters were
103 members of the various minorities who, though they may have developed some skills in fighting, were not in a position to replace the well-educated but politically-untrustworthy people who ran the RLG (Luther 1983: 11). However, the new government did not seem to have many choices and, thus, the government recruited members of the ethnic minorities to serve the bureaucratic system in the mid-level administration (Stuart-Fox 1986: 53-54;
Batson 1991: 144-145).
Lack of financial resources: the influence and role of the U.S. on the Lao PDR evaporated when the LPRP took over the country. While the country may have become more independent from the influence of the U.S., it also lost the most significant source of revenue for the government’s budget. The country needed to seek new sources of income which was not easy for a poor, land-locked country where mountainous areas account for around 80 per cent of the country’s total area. In contrast to its communist allies, Vietnam and the USSR, where industrialisation had developed or at least taken root before the revolution, at the time the LPRP gained control of the country, the Lao PDR was “still pre-feudal” (Phomvihane 1980 cited in Evans 1995: 41) and the majority of its population relied on subsistence-oriented agriculture, with very little surplus to be extracted for the country’s development (Evans 1991: 90). While new types of taxation were introduced, such as agricultural taxation, they were generally unable to generate as much revenue as the government wished due to both people’s poverty and the weakness of the state’s tax collection mechanism (Evans 1988a: 11-12; Bourdet 2000: 36). A World Bank report published at the end of the 1970s (1979 cited in Evans 1991: 91) records that “in 1977 Laos had no national savings, and … the country was fully dependent on the outside world to finance its development needs”. The new government could not even pay the state’s employees and civil servants. Instead, state officials were encouraged to develop their own vegetable gardens as well as to raise pigs, ducks, chicken and fish (Evans 1988b: 243; Sirikrai 1996: 130-131). A shortage of financial resources in combination with the government’s priority to allocate much of its limited budget for security purposes impeded any attempt at reconstruction and the restoration of a country destroyed by war.
These two conditions meant that the new communist government had to turn to its allies for assistance. Large numbers of Vietnamese and Russian experts were sent to the Lao PDR, replacing the American experts, to assist the new government in running the country’s administration. Assistance from the socialist bloc countries ranged from military assistance
104 to development in agriculture and forestry, mining and infrastructure25 (Stuart-Fox 1991:
189-199; Stuart-Fox 1997: 177-178). Members of the LPRP and young politically-trusted students were sent to Vietnam and the USSR for training in various fields. Some of this training did not fit the needs of the Lao PDR. One example – which does not seem to be apocryphal – was students who enrolled on courses in train maintenance and engineering when the country did not have a train system (Fry 1998: 157). The USSR and Vietnam also became new sources of foreign aid for the Government of the Lao PDR (GoL), accounting for around 60 per cent of foreign aid to the country during 1975-1985 (OECD cited in Guégan no date: 7). Even so, aid from its communist allies could not fill the gap left by the U.S. and its western allies (Stuart-Fox 1997: 177). The dire financial situation that the country found itself in after 1975 meant that “the Lao leaders never quite refused aid, wherever it came from” (Guégan no date: 7) although the amount of aid from the non-communist bloc and international organisations was far less than aid provided by the country’s communist allies.
Though realising the different paths of the revolutions in the Lao PDR and the USSR, the LPRP hoped that the Lao PDR would be able to create a modern industrial economy while bypassing capitalism (Evans 1995: 65; Stuart-Fox 1997: 169). However, this aim was not achieved. Evans (1988a: 10-11) notes that before the revolution, the industrial sector and mining accounted for around five per cent of GDP, with less than 10,000 workers. Industries in the Lao PDR, though they basically produced consumer products, needed to import raw materials, especially from Thailand – its principal neighbour to the west with which it had generally poor relations (Stuart-Fox 1991). The new government faced difficulties in developing the country’s industries; it lacked skilled manpower to run factories and could not provide the raw materials needed for production. Even the agricultural sector could not provide raw materials needed for agro-industrialisation. The cooperatives heavily promoted in the late 1970s entirely failed to modernise agricultural systems and increase agricultural productivity (this issue will be discussed in the following section). Ten years after Liberation, the economy of the Lao PDR was still very close to being a ‘natural economy’.
25 Stuart-Fox (1991: 189-194) records that Vietnamese troops were sent to the Lao PDR to assist the new communist government maintain its internal security and to build infrastructure (especially roads and bridges). The number of Vietnamese troops fluctuated, but by the end of 1980, more than 50,000 Vietnamese soldiers were in the Lao PDR.
105 The socialist government was unsuccessful in developing the economy of the country under the socialist model: the planned economy. The replacement of privately owned enterprises by state enterprises in a combination of fixed-price controls over commodities created economic problems instead of economic sustainability. Unexpected weather conditions after the revolution made the economic situation worse. The country faced food shortages, especially in urban areas; and state enterprises completely failed to resolve this problem.
Dual markets – the state’s market and the unofficial parallel or ‘black’ market – emerged.
The shortage of food and of foreign exchange meant that the economy relied increasingly heavily on the ‘black’ market which the state was unable to control. The gap between prices in the official and the ‘black’ market widened26 (Worner 1997; Bourdet 2000), and the inflation rate worsened. This made it difficult for people in towns, especially state officials on low wages, to make ends meet. Two years after the victory of the Pathet Lao, the Lao economy was in an even worse state than it was during the final years of the civil war. The GNP at the end of 1977 was around ten per cent lower than in 1974 - a year before the victory of the LPRP (Evans 1988b).
The communist government led by the LPRP failed not only to resolve the economic problems of the country but also to improve the standard of living of the Lao population.
While government records show increasing numbers of social services provided to the people – such as schools and teachers, health care centres and staff, and food aid programmes – they were generally inadequate in terms of both quality and quantity due to limited resources. While the number of schools, teachers and pupils increased, around 80 per cent of students left school before completing a primary level education. Many ex-school students, especially in rural areas, could not maintain their rudimentary reading and writing skills after leaving school. Urban and rural disparities in literacy were evident (Stuart-Fox 1997: 193; Ireson 1998: 50-51). Healthcare services were also far from adequate. The Health Minister (Phonsena 1985 cited in Stuart-Fox 1997: 193) noted that in 1985 – 10 years after the revolution – only 18 per cent of Lao villages were able to access drinking water while people suffered from endemic disease and malnutrition.
26 One example was the price of rice in the ‘black’ market in 1976 (a year after the LPRP took over the country), which was four times higher than the price determined by the state. This gap widened to nearly nine times in 1979 (Aray 1983 cited in Bourdet 2000: 54 notes 7).
106 Overall, in 1985, ten years after the LPRP had taken over the country, the Lao PDR, while it might have become independent from American domination, was far from being independent from foreign influence. Lack of resources needed for the country’s development in combination with its geographical conditions (a land-locked and mountainous country), poor infrastructure, a low level of development in agriculture and industry, and political instability did not allow the country to maintain its independence from foreign influences and to fully determine its own future. The survival of the country, perhaps more accurately the survival of the LPRP, was heavily reliant on its communist allies, especially the USSR and Vietnam. The country became independent from one power to become dependent on another power bloc. The new regime was also unsuccessful in accumulating the wealth necessary to drive socialist reconstruction and development. Ten years after the LPRP began to follow the socialist model, the country was still listed as one of the UN’s least-developed countries. In short, changes in economic policies and practices were needed if the regime was to survive and the country to prosper (this issue will be discussed in section 4.3).