Lao People's Democratic Republic

In Laos, the government has reportedly already healed the economy from the economic flu. But in Thailand, there seems to be more uncertainty about the health of the economy, and some commentators are not ready to call the recession over. The Thai economy contracted by 4.9 percent from the previous year in the second quarter of 2009, better than the 7.1 contraction posted in the first quarter. What can we expect for the rest of 2009 and 2010?
 
This is very timely question for all World Bank economists in East Asia, who are currently finalizing their forecasts for the upcoming East Asia and Pacific Update economic report, to be launched in November. On my end, I am writing this post from Cambodia, where I am meeting with palm readers, fortune tellers and other economic healers to ensure highly accurate forecasts. Let me offer a preview of what the soothsayers are saying.

The Xe Bang Fai river in Laos started to break its banks over the last two weeks in some areas, causing testing to stop for the Nam Theun 2 project.

The rainy season in Laos is well advanced now, and the Province of Khammouane, where most of the Nam Theun 2 Hydroelectric Project (NT2) is located, has been hard hit over the last two weeks. Just over a week ago there was 225mm of rain over central Khammouane in one night, leading to floods in several places around the province – including the provincial capital of Thakek. Apparently there were places in Thakek up to a meter deep in water for a while: a combination of heavy rain and blocked drains, according to a local official. Those of us who were in Lao’s capital Vientiane during last year’s floods will vividly remember this.

As a result of this heavy rain, the Xe Bang Fai River, which drains a significant part of Khammouane, started to break its banks over the last week in some areas. The Xe Bang Fai is very significant to the NT2 as it is the river that will receive the water discharged from the hydropower facility when it is operating. The incremental impacts of NT2 water on the regular flood cycle of the Xe Bang Fai river has always been a concern for the project, and was studied extensively.

"I was swimming in the river near Godmanchester and I got the fright of my life when a large triangular dorsal fin broke the surface of the water just in front of me. It was so close I could have touched it."

The old fishermen proclaiming, "When I was young the fish used to be THIS big," need to be heeded – not ridiculed.

So said an old lady at my church in Cambridge, England, some 20 years ago when she found out I worked in biodiversity. She was recalling an event some sixty years before when she was a young girl. It turned out she was describing the dorsal fin of a massive European sturgeon, a prized source of caviar, and now virtually extinct in the UK. The wonderful old lady and I had different perspectives on the matter. To her the existence of the sturgeon at her local swimming hole was part of her personal experience, whereas to me it was a disconnected event in the foggy past. To her the long absence of seeing a sturgeon represented a loss, whereas to me it was a species I would never expect to see so close to my home because I knew they no longer exist. We had different baselines.

With a relatively unsophisticated economy that is agriculture- and natural resource-based, Laos has been affected by the crisis less than some neighboring countries.

In the aftermath of the 1997 Asian crisis, Lao PDR grew steadily, on average by 6 percent a year in real terms. Laos also impressively lifted one-eighth of its population out of poverty between 1993 and 2003. Laos aims to graduate from a low-income country status by 2020. The current global financial crisis, however, will slow down the progress in poverty reduction, as well as the growth rate and reduce government ability to invest in health, education, and infrastructure, therefore lowering Laos' chances to fulfill this goal (for more, see the World Bank's East Asia & Pacific Update, a regional economic assessment released today).

One of the poorest countries in the world, Laos is a small land-locked country in Southeast Asia, bordering and trading with China, Vietnam, Thailand, and Cambodia. Laos has a relatively unsophisticated economy that is agriculture- and natural resource-based, although industry as share of GDP has been growing steadily in the last decade. The population of around 6 million people engages mostly in subsistence agriculture.

So far, Laos has been affected by the crisis less than other countries, because: