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).