Cambodia Laos
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COUNTRY REPORT Cambodia Laos August 2000 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 conferences and roundtables. The firm is a member of The Economist Group. 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ISSN 1361-1437 Symbols for tables “n/a” means not available; “–” means not applicable Printed and distributed by Redhouse Press Ltd, Unit 151, Dartford Trade Park, Dartford, Kent DA1 1QB, UK 1 Contents 3 Summary Cambodia 5 Political structure 6 Economic structure 6 Annual indicators 7 Quarterly indicators 8 Outlook for 2000-01 8 Political forecast 9 Economic forecast 10 The political scene 14 Economic policy 16 The domestic economy 16 Economic trends 18 Agriculture 19 Industry 20 Services 21 Foreign trade and payments Laos 23 Political structure 24 Economic structure 24 Annual indicators 25 Quarterly indicators 26 Outlook for 2000-01 26 Political forecast 27 Economic policy outlook 27 Economic forecast 29 The political scene 34 Economic policy 35 The domestic economy 35 Economic trends 35 Agriculture 36 Industry 36 Infrastructure 37 Services 37 Foreign trade and payments List of tables 17 Cambodia: consumer prices 18 Cambodia: money supply 18 Cambodia: rice production EIU Country Report August 2000 © The Economist Intelligence Unit Limited 2000 2 List of figures 10 Cambodia: gross domestic product 10 Cambodia: riel real exchange rates 15 Cambodia: foreign investment projects 17 Cambodia: consumer price inflation 21 Cambodia: tourist arrivals 28 Laos: gross domestic product 28 Laos: kip real exchange rates 38 Laos: textile and garment turnover EIU Country Report August 2000 © The Economist Intelligence Unit Limited 2000 3 August 10th 2000 Summary August 2000 Cambodia Outlook for 2000-01 Cambodia is likely to remain politically stable in 2000-01 although the local government elections scheduled for 2001 could lead to increased tension between the three main parties. The UN could still withdraw from the planned Khmer Rouge tribunal. The government will continue to adopt a bold and proactive approach on reform, although implementation will often fall short of what is intended. The economic recovery will become more entrenched in 2001 when GDP growth could rise to 6.5%. Inflation is likely to pick up but remain in single digits, while the riel is expected to remain broadly stable. The trade and current-account deficits are forecast to widen. The political scene The UN and the government have agreed on the details of a Khmer Rouge tribunal but the legislation is yet to be approved by the National Assembly. It is still not known who will be tried. A Khmer Rouge commander accused of murdering three Western tourists has been acquitted. New legislation for local government elections scheduled for 2001 is still not ready, and there have been calls for electoral reform before the poll. Prince Norodom Ranariddh has backed the creation of a human rights commission. A border demarcation agreement has been signed with Thailand but border problems with Vietnam and Laos remain unresolved. Economic policy The government has set out a broad policy strategy to 2005 and has detailed its preferred foreign investment goals. Working groups are to be established to foster dialogue with the private sector. The pilot military demobilisation programme is nearly complete. Plans for a new National Assembly building have come up against opposition. Relations with the EU have deepened. The land mine problem may not be as bad as official figures suggest. The domestic economy Private investment picked up in the first half of 2000 but 51 inactive foreign investment projects have had their licences cancelled. Investment from Shanghai is increasing. Inflation remains low but money supply growth accelerated in the first quarter. The riel has remained stable against the US dollar. The 1999/2000 rice harvest exceeded expectations and the exportable surplus increased. The rubber harvest was good but output has been marred by low prices. The government has clamped down on illegal logging. Garment workers have won a small increase in the minimum wage but only after protests and strikes, which turned violent. Agro-processing has great potential but investors are struggling to raise the capital needed. Plans to establish a stockmarket have been reactivated. Tourism grew strongly in the January-May period, helped by continued political stability and an increase in regional flights. A South Korean firm is to develop Cambodia's Internet server business. Foreign trade and Port statistics suggest strong growth in the volume of external trade in the first payments half of 2000. The US has increased quota levels for Cambodian garments, and EIU Country Report August 2000 © The Economist Intelligence Unit Limited 2000 4 market access for textiles and garments exports to the EU has been assured until 2002. Société Générale de Surveillance (SGS) has resumed its inspections of Cambodian imports after a six-month dispute with the government. The external reserves have continued to strengthen. Laos Outlook for 2000-01 The Lao People’s Revolutionary Party will retain its hold on power in 2000-01 but could face an upsurge in political dissent, including further bomb attacks. Relations with Thailand will not suffer irrevocable damage despite the raid by anti-government rebels in southern Laos. The Seventh Party Congress is unlikely to be followed by a quickening of reform. Economic growth will remain at a modest 4.5-5% in 2000-01 reflecting low levels of public and private investment. Inflation should ease, but the trade and current-account deficits are likely to widen. The political scene There have been further bomb explosions in Vientiane. The authorities are blaming Hmong rebels but other observers think rival factions in the government might be to blame. Anti-government rebels embarked on a cross- border raid in the southern province of Champassak province before retreating into Thailand. The government has called on the Thai government to extradite the rebels. Vietnam has denied it has sent troops to suppress the Hmong. Amnesty International has appealed for information on dissidents detained since October. The ruling party has been preparing for next year’s Seventh Congress. The Lao president, General Khamtay Siphandone, has visited China. The government is to host the next ASEAN-EU (ASEM) summit. It has requested foreign financial support to tackle the country’s drug problems. Economic policy A dialogue with the IMF is continuing about a possible poverty reduction and growth facility arrangement. The government has rejected debt relief for the timebeing. Laos and Vietnam are planning to establish trade promotion centres. The domestic economy Inflation is continuing to fall and the kip has been stable. A small increase in the wet season rice crop is expected. Foreign investment is falling overall, but rising from Vietnam. A memorandum of understanding on Nam Theun 2 electricity price has been signed. Japanese package tourists have cancelled their planned visits, citing instability fears. Foreign trade and The government has imposed restrictions on Thai imports. A market access payments agreement guaranteeing Lao textiles and garments quota-free access to the EU until 2001 has been formally signed. Editor: Graham Richardson Editorial closing date: August 10th 2000 All queries: Tel: (44.20) 7830 1007