Dr. Edo Andriesse, International College, Khon Kaen University, Thailand.

Dr. Edo Andriesse, International College, Khon Kaen University, Thailand

Is state capitalism a suitable recipe for overcoming Laos’ position in the economic and geographical periphery of Southeast Asia?

How could development corridors not only lead to economic growth, but also to a reduction of inequality and social exclusion?

A. The two principal agents1. Creating firms and building their capabilities2. Creating pilot agencies to guide industrialisationB. Setting the process of capability enhancement in

motion1. Arranging for firms to access and leverage advanced

knowledge2. Promoting export-based engagement with the global

economy3. Targeting industries/technologies for initial import-

substitution 4. Securing dynamic comparative advantages in leading

sectors C. Creating an economic environment for capability

development1. Building broad-based education, from primary to

tertiary education2. Creating a catch-up friendly, but cautious financial

system 3. Establishing stable macroeconomic settings4. Gradual phasing out of non-market interventions

Source: Lee and Mathews, 2010

Japan and South Korea complemented this with side payments to weaker parts in society: rice farmers, small and medium enterprises, regions lacking high growth industries and industries in decline.

Income inequality is now relatively low in Japan and South Korea.

global rank country

life expectancy

mean years

expected years

GNI per capita

   at birth (years)

of schooling

of schooling

(ppp 2008 U$)

27 Singapore 80.7 8.8 14.4 4889337 Brunei D. 77.4 7.5 14 4991557 Malaysia 74.7 9.5 12.5 1392792 Thailand 69.3 6.6 13.5 8001

97Philippines 72.3 8.7 11.5 4002

106 Indonesia 71.5 5.7 12.7 3957113 Vietnam 74.9 5.5 10.4 2995

120Timor-Leste 62.1 2.8 11.2 5303

122 Lao PDR 65.9 4.6 9.2 2321124 Cambodia 62.2 5.8 9.8 1868132 Burma 62.7 4 9.2 1596

Source: UNDP 2010

Rehbein (2007: 72-73) 

“While the habitus of most Lao is still firmly rooted in the rural past, it is now being exposed to radical changes and is under pressure to adapt to the market economy…And even if they succeed in adapting to the market economy, Lao often adhere to traditional conceptions of time, work, happiness and behavior that are hardly compatible with the ‘spirit of capitalism.”

provincepoverty headcount ratio

adult literacy rate 15+ in 2005

 1992/1993

1997/1998

2002/2003

2007/2008 male female

Lao PDR 46 39 34 28 83 63Vientiane capital 34 14 17 15 95 88

Xayaboury 22 18 25 16 87 74Vientiane province 31 28 19 28 88 71Savannakhet 53 42 43 29 79 59

Bokeo 42 39 21 33 72 45

Huaphanh 71 71 52 51 78 51

Sekong 67 50 42 52 76 48

Source: UNDP 2009

by country   by sector  

Thailand23.7 Power generation 53.9

China16.9 Agriculture 11.4

Vietnam 9.3 Mining 9.8

Japan 5.8Industry and Handicraft 7.5

France 5.7 Services 4.3India 4.8 Trading 3.8South Korea 4.7 Construction 2.9

Australia 4.6Hotel and Restaurant 2.6

Malaysia 1.8 Other activities 3.7Singapore 1.4

Others21.3    

Source: IMF 2009

Little employment generation Displaced citizens due to dam

building and new mining sites Insufficient attention paid to small

and medium enterprises (SMEs). For instance, there is no process of securing dynamic comparative advantages in the garment industry

Landlessness due to set up of large scale plantations. In Chinese rubber plantations in Northern Laos villagers usually receive 30% of the profits; the companies 70% (Shi 2008).

Dawei

EWEC

N-S Corrido

r

High speed

railwayMawlamyine

Danang

Kunming

Institutional mismatch: ADB thinks of corridors in a Washington Consensus fashion whereas Lao PDR and other countries have more the BEST Consensus in mind; particularly the Chinese model.

Cornford (2006) on EWEC: road improvements in Savannakhet have in fact led to higher inequality between relatively well off urban based Lao Loum people and relatively deprived rural Lao Theung people.

If really implemented, it will seriously reduce the likelihood of a successful EWEC as it makes the Mawlamyine deep seaport redundant.

In that case Bangkok’s position will be strengthened rather than peripheries in the GMS.

Is state capitalism a suitable recipe for overcoming Laos’ position in the economic and geographical periphery of Southeast Asia?

Yes, but more attention should be paid to firms’ capabilities (especially SMEs) and side payments to disadvantaged groups in society

More relation-based institutions are required (Bardhan 2005)

How could development corridors not only lead to economic growth, but also to a reduction of inequality and social exclusion?

Focus more on productive aspects, for instance insertion in global value chains.

Need for complementary social policies (notably education).