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Cambodia Laos COUNTRY REPORT Cambodia Laos 1st quarter 1999 The Economist Intelligence Unit 15 Regent Street, 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 subscription products ranging from newsletters to annual reference works; through specific research reports, whether for general release or for particular clients; through electronic publishing; and by organising conferences and roundtables. 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 Street The Economist Building 25/F, Dah Sing Financial Centre London 111 West 57th Street 108 Gloucester Road SW1Y 4LR New York Wanchai United Kingdom NY 10019, US Hong Kong Tel: (44.171) 830 1000 Tel: (1.212) 554 0600 Tel: (852) 2802 7288 Fax: (44.171) 499 9767 Fax: (1.212) 586 1181/2 Fax: (852) 2802 7638 E-mail: [email protected] E-mail: [email protected] E-mail: [email protected] Website: http://www.eiu.com Electronic delivery EIU Electronic Publishing New York: Lou Celi or Lisa Hennessey Tel: (1.212) 554 0600 Fax: (1.212) 586 0248 London: Jeremy Eagle Tel: (44.171) 830 1183 Fax: (44.171) 830 1023 This publication is available on the following electronic and other media: Online databases Microfilm FT Profile (UK) NewsEdge Corporation (US) World Microfilms Publications (UK) Tel: (44.171) 825 8000 Tel: (1.781) 229 3000 Tel: (44.171) 266 2202 DIALOG (US) Tel: (1.415) 254 7000 CD-ROM LEXIS-NEXIS (US) The Dialog Corporation (US) Tel: (1.800) 227 4908 SilverPlatter (US) M.A.I.D/Profound (UK) Tel: (44.171) 930 6900 Copyright © 1999 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 Redhouse Press Ltd, Unit 151, Dartford Trade Park, Dartford, Kent DA1 1QB, UK 1 Contents 3 Summary Cambodia 5 Political structure 6 Economic structure 7 Outlook for 1999-2000 11 Review 11 The political scene 17 Economic policy and the economy 21 Agriculture 22 Industry 22 Infrastructure 22 Tourism 23 Foreign trade and payments Laos 25 Political structure 26 Economic structure 27 Outlook for 1999-2000 29 Review 29 The political scene 31 Economic policy and the economy 32 Agriculture 32 Industry 33 Infrastructure 34 Energy and mining 35 Money and finance 35 Tourism 35 Foreign trade and payments 38 Quarterly indicators and trade data List of tables 18 Cambodia: the 1999 budget 21 Cambodia: consumer price inflation 21 Cambodia: money supply 24 Cambodia: international reserves 37 Laos: international reserves 38 Cambodia: quarterly indicators of economic activity 38 Laos: quarterly indicators of economic activity 39 Cambodia and Laos: French trade 39 Laos: foreign trade EIU Country Report 1st quarter 1999 © The Economist Intelligence Unit Limited 1999 2 List of figures 10 Cambodia: gross domestic product 10 Cambodia: riel real exchange rates 23 Cambodia: exchange rates, 1998 28 Laos: gross domestic product 28 Laos: kip real exchange rates EIU Country Report 1st quarter 1999 © The Economist Intelligence Unit Limited 1999 3 February 22nd 1999 Summary 1st quarter 1999 Cambodia Outlook for 1999-2000: The new government formed in November may last throughout 1999, allowing Cambodia to join the Association of South-East Asian Nations (ASEAN) later this year. But tensions between the two ruling parties will re-emerge in 2000, and could erupt into violence. The government may not deliver on its reform pledges, but GDP growth will nevertheless pick up in 1999 and 2000, boosted by new inflows of aid and foreign investment. Inflationary pressure will persist in 1999, easing in 2000 as the riel stabilises. The political scene: A new coalition government has been formed, compris- ing the Cambodian People’s Party (CPP) and the National United Front for an Independent, Neutral, Peaceful and Co-operative Cambodia (FUNCINPEC). A new cabinet has been named. Royal pardons have been granted to several enemies of the previous administration. Formation of the newly proposed Senate has been delayed. In accordance with new regulations, 30 MPs have resigned. The key opposition leader, Sam Rainsy, has promised to keep up pressure on the government. The Son Sann Party has merged with FUNCINPEC. The Khmer Rouge leaders, Khieu Samphan and Nuon Chea, have given up armed struggle. There is doubt about the government’s commitment to a Khmer Rouge war crimes trial, although there is popular support for one and international pressure has been building. Troop cuts have been promised, but may be tough to fulfil. Hun Sen has resigned as armed forces commander- in-chief. Cambodia has regained its UN seat, and is expected to join ASEAN soon. Hun Sen has visited China. The economy and economic policy: The 1999 budget has been passed; defence still consumes the lion’s share of expenditure. The revenue target may be optimistic, and the introduction of value-added tax has caused some head- aches. The government is hoping for new aid commitments; the IMF and Japan have discussed new lending, but some donors want to wait for the results of a new crackdown on illegal logging. The economy showed no growth in 1998, although foreign investment approvals rose. Inflation eased in late 1998. Money supply growth has remained rapid. Sectoral trends: Flooding has followed drought, hitting the main rice crop. Workers have gone on strike in the garment sector. The Asian Development Bank has approved a loan for a key road link. The tourism industry has re- mained depressed. Foreign trade and payments: The US has imposed quota restrictions on Cambodian garments. The government will have to make tariff reductions once it joins the ASEAN Free-Trade Area. The riel has stabilised and inter- national reserves have strengthened. Laos Outlook for 1999-2000: Political stability will endure, and economic reform will proceed gradually. GDP growth will remain sluggish in 1999 before picking up in 2000. Inflation will remain in double digits, but the kip will not repeat EIU Country Report 1st quarter 1999 © The Economist Intelligence Unit Limited 1999 4 the falls of 1997-98. Export growth will recover as regional demand picks up from 2000. The political scene: The prime minister, General Sisavat Keobounphan, has called for efforts to tackle red tape and corruption. The 50th anniversary of the Lao People’s Army has been celebrated. Laos is seeking to lessen its reliance on Thailand by building on its close ties with China and Vietnam. Laos has backed Cambodia’s ASEAN membership. The prime minister has visited Myanmar and the president has visited Vietnam. Border talks with Thailand have made some progress. The US has continued to provide anti-narcotics assistance. Economic policy and the economy: The government wants to cut back expenditure. The official target of 6-7% GDP growth in 1998/99 looks optim- istic. New state enterprise reforms have been announced. Inflation has soared. Sectoral trends: The main 1998 rice harvest has been hit by drought. An agricultural census has been announced. The start-date for construction of a new cement plant has been put back. General Sisavat has sought to revive interest in a trans-Asian railway. Japan has announced extra funding for bridge renovation. Road links to the Vietnamese coast have continued to receive atten- tion. Japan has committed finance for the second Mekong bridge. The Nam Theun 2 hydropower plant has still not received the go-ahead. Foreign investors have signed agreements on prospecting for gold and sapphires. A joint-venture bank with Vietnam has been planned. Visa formalities have been eased for Visit Lao Year. Foreign trade and payments: Laos has agreed to faster tariff cuts under the ASEAN Free-Trade Area, but progress may be slower than planned. The US has still not granted Laos normal trade relations. Red tape has remained a problem. Barter trade with Vietnam has been discussed. The kip has stabilised, as have reserves. India has extended a $2m soft loan. Editor: Lucy Elkin All queries: Tel: (44.171) 830 1007 Fax: (44.171) 830 1023 EIU Country Report 1st quarter 1999 © The Economist Intelligence Unit Limited 1999 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 holds office for life National legislature The 122-seat National Assembly has a term of five years and consists of 120 directly elected members National elections Last National Assembly election held on July 26th 1998; next election due May 2003 National government The Cambodian People’s Party
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