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Cambodia Laos COUNTRY REPORT Cambodia Laos November 2001 The Economist Intelligence Unit 15 Regent St, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The EIU delivers its information in four ways: through our digital portfolio, where our latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising seminars and presentations. The firm is a member of The Economist Group. London New York Hong Kong The Economist Intelligence Unit The Economist Intelligence Unit The Economist Intelligence Unit 15 Regent St The Economist Building 60/F, Central Plaza London 111 West 57th Street 18 Harbour Road SW1Y 4LR New York Wanchai United Kingdom NY 10019, US Hong Kong Tel: (44.20) 7830 1007 Tel: (1.212) 554 0600 Tel: (852) 2585 3888 Fax: (44.20) 7830 1023 Fax: (1.212) 586 0248 Fax: (852) 2802 7638 E-mail: [email protected] E-mail: [email protected] E-mail: [email protected] Website: www.eiu.com Electronic delivery This publication can be viewed by subscribing online at www.store.eiu.com Reports are also available in various other electronic formats, such as CD-ROM, Lotus Notes, online databases and as direct feeds to corporate intranets. For further information, please contact your nearest Economist Intelligence Unit office Copyright © 2001 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author‘s and the publisher‘s ability. However, the EIU does not accept responsibility for any loss arising from reliance on it. ISSN 1361-1437 Symbols for tables “n/a” means not available; “–” means not applicable Printed and distributed by Patersons Dartford, Questor Trade Park, 151 Avery Way, Dartford, Kent DA1 1JS, UK. 1 Contents 3 Summary Cambodia 5 Political structure 6 Economic structure 6 Annual indicators 7 Quarterly indicators 8 Outlook for 2002-03 8 Political outlook 9 Economic policy outlook 9 Economic forecast 10 The political scene 14 Economic policy 16 The domestic economy 16 Economic trends 17 Agriculture 17 Industry 17 Services 18 Foreign trade and payments Laos 19 Political structure 20 Economic structure 20 Annual indicators 21 Quarterly indicators 22 Outlook for 2002-03 22 Political outlook 22 Economic policy outlook 23 Economic forecast 25 The political scene 27 Economic policy 28 The domestic economy 28 Economic trends 29 Agriculture 30 Industry 30 Services 32 Foreign trade and payments EIU Country Report November 2001 © The Economist Intelligence Unit Limited 2001 2 List of tables 27 Laos: government finances List of figures 10 Cambodia: gross domestic product 10 Cambodia: riel real exchange rates 15 Cambodia: demobilisation costs 24 Laos: gross domestic product 24 Laos: kip real exchange rates 29 Laos: inflation and exchange-rate depreciation EIU Country Report November 2001 © The Economist Intelligence Unit Limited 2001 3 Summary November 2001 Cambodia Outlook for 2002-03 Politically related violence is likely to continue through to the general election in 2003. While the democratic process will probably stagger on, a repeat of the constitutional crisis that followed the 1998 election cannot be ruled out. Relations with the international donor community also look likely to enter a more difficult phase owing to differences over reform. Real GDP growth is forecast to reach 2-3% a year in 2001-02, picking up to 4-5% in 2003. Investment is likely to remain flat and growth in tourism is expected to slow. Inflation should remain in single digits in 2002-03, although it may be pushed up by the forecast weakening in the riel. Foreign aid inflows will continue to finance forecast merchandise trade and current-account deficits. The political scene Legislation is now in place for a Khmer Rouge trial, but it is still not clear when it will take place. Voter registration has taken place for the commune elections. Three new cabinet ministers have been appointed. The police have arrested more people suspected of belonging to the Cambodian Freedom Fighters (CFF). A number of people have been charged in connection with a bomb attack on two hotels in Phnom Penh in July 2001. The government wants to send a large group of Vietnamese migrants back to Vietnam. The prime minister, Hun Sen, has pledged to co-operate with the US in its anti-terror campaign, but critical remarks made previously by the US ambassador to Phnom Penh did not go down well. Economic policy International aid donors have started to be more vocal in their questioning of the government’s commitment to reform. The World Bank has provided a loan to finance demobilisation. The National Assembly has passed a new land law. The Council for the Development of Cambodia has been reorganised. Changes to the foreign investment law are in the pipeline. The government’s logging policy has continued to cause controversy. South Korea has explored ways to develop economic ties. The domestic economy Approved foreign investment has fallen. Money supply growth has slowed. The riel has weakened after a long period of stability. The south of Cambodia has been hit by floods while there is drought in the north. The Asian Development Bank (ADB) is drawing up a medium-term strategy for agriculture. Garment factories have been closing. Tourist numbers are under threat. A new bridge across the Mekong is almost complete. Foreign trade and Trade through Phnom Penh slowed in the first half of 2001. Garment exports payments have slumped. Cambodia’s application to join the World Trade Organisation (WTO) has come under initial scrutiny. The Association of South-East Asian Nations (ASEAN) has lowered tariffs on imports from Cambodia. EIU Country Report November 2001 © The Economist Intelligence Unit Limited 2001 4 Laos Outlook for 2002-03 Further anti-government activity, including terrorist attacks, is likely during the forecast period. Some changes may be made to the cabinet after the National Assembly election next year but they are unlikely to involve key portfolios. Despite some promising signs, the pace of reform is unlikely to pick up significantly during 2002-03. Economic growth will slow in 2001-02, before picking up in 2003. Inflation is likely to be in double digits for at least part of the forecast period. Laos will continue to run merchandise trade and current- account deficits but financing them will be relatively straightforward. The political scene The Lao People’s Revolutionary Party (LPRP) is targeting corruption. The National Assembly is preparing for an election next year. New Lao and Vietnamese leaders have been getting to know each other, with a number of state visits. Relations with Thailand remain troubled. Although it pledged to support the international campaign against terrorism following the attacks on the US on September 11th, Laos has questioned the way in which the US is responding. The Lao foreign minister has visited Russia. An Australian couple jailed in connection with the alleged theft of gemstones has been freed. Economic policy The National Assembly has approved the 2001/02 budget. The government has indicated that it may be planning a new drive to reform state enterprises. The ADB has announced a major new poverty reduction strategy. The domestic economy The government has announced an ambitious growth target for 2001/02. Inflation looks likely to have risen in the second and third quarters. Money supply growth has slowed. Depreciation of the kip has speeded up. Floods have struck in central and southern Laos. Opium production has fallen. Foreign investment has slumped according to official figures, although Vietnamese investors remain active. The Nam Theun 2 hydroelectric power project is edging forward. Financing for the third bridge over the Mekong is now in place. A new bridge over the Mekong in Cambodia offers potential benefits to Lao traders. Vietnam is funding road repairs. National Route 13 has been damaged by the recent floods. The ADB is financing the second stage of an urban infrastructure project in Vientiane. Foreign trade and ASEAN has lowered tariffs on Lao imports. Vietnam has announced similar payments cuts. Imports from Thailand picked up sharply in the first half of 2001. Foreign reserves have fallen. Editors: Graham Richardson (editor); Danny Richards (consulting editor) Editorial closing date: October 31st 2001 All queries: Tel: (44.20) 7830 1007 E-mail: [email protected] Next report: Full schedule on www.eiu.com/schedule EIU Country Report November 2001 © The Economist Intelligence Unit Limited 2001 Cambodia 5 Cambodia Political structure Official name Cambodia Form of government Constitutional monarchy The executive The cabinet is constitutionally responsible to the National Assembly Head of state King Norodom Sihanouk. The king is selected by the Throne Council and reigns for life National legislature The 122-seat National Assembly has a term of five years and consists of 120 directly elected members National elections
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