Country Report Laos June 2009

Outlook for 2009-10: Domestic politics

There is little prospect that the ruling Lao People's Revolutionary Party (LPRP) will face a serious challenge to its authority in 2009-10. Accelerating inflation (especially in prices of staple food items and fuel) failed to provoke serious protest in 2008. Despite reports of rice shortages in remote areas, the fact that the majority of the Lao people are self-sufficient rice farmers ensured that the government did not face problems on the scale seen in other rice-reliant countries in Asia. Now that the risk of high inflation has receded, the main challenge facing the LPRP is addressing popular unrest stemming from the economic slowdown and a rise in job losses. The LPRP has maintained its firm grip on power and has exerted tight control over Lao society even as the economy has continued its rapid development and the country has opened up to foreign technology and ideas. Services and facilities will continue to be modernised, and the population (particularly in urban areas) is increasingly starting to enjoy many of the choices offered by globalisation. On balance, the Economist Intelligence Unit believes that this growing prosperity, combined with the relatively low level of education and a strong state security apparatus, means that political dissent is unlikely to be voiced publicly in the short term. However, the potential for social instability stemming from job losses should not be underestimated.

Moves towards a multiparty political system are unlikely for the time being, but the prime minister, Bouasone Bouphavanh, has been frank on several issues. The public seems to welcome his reforms, although they pose a challenge to entrenched elites within sections of the government and the military. Bouasone has halted grants of land concessions to foreign investors (although there are reports that new concessions have been approved despite the moratorium). The government has also cracked down on illegal mining and logging operations in response to the concerns expressed by rural communities. However, as with other reforms designed to curb cronyism and leakage in revenue collection, Bouasone is unlikely to find enough allies to confront the powerful entrenched interests involved in these activities. Following the approval by the National Assembly (the legislature) in July 2008 of a law permitting private ownership of media outlets, the government has passed a law permitting the formation of civil society organisations. These two laws should provide the legal framework for Lao citizens to organise in groups independent of party control. However, the existence of an extensive security apparatus and the lack of independent courts will deter overt criticism of the status quo.

Despite continued ethnic tensions, the authorities have maintained stability and there have been no recent reports of attacks by insurgents on government or civilian targets. Nevertheless, the administration will continue to struggle to project an image of stability in Laos to foreign governments until the Hmong issue is resolved, amid persistent allegations of harsh treatment of this ethnic minority. The Southeast Asian Games in December in the capital, Vientiane, will give the government scope to raise Laos's profile in the region.

© 2009 The Economist lntelligence Unit Ltd. All rights reserved
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