Laos: Most Seriously Affected by Global Financial Crisis
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The affected sectors include foreign investment, exports, tourism, employment , government revenues and foreign aid, with the first three sectors being the most seriously affected as they involve foreign countries. what do you think of the future?? what can we do if the situation is worse?
If I have time I would go in depth in explaining it you, so I will make it short for now ok.
I don’t know how much you understand the details of market economy, but I will try to give you some basic economic perspective.According Microeconomics and Macroeconomics, the way to help a country to liberate itself from abject poverty is to increase GDP (Gross Domestic Product) the greater the GDP, the higher living standard would be realized.
The production of goods and services are the most important factors for a country based on the scarcity of its resources.That means we have to compare the marginal benefits to marginal costs including short term and long term opportunity costs.Economic resources are normally classified into four general categories: 1) Land, 2) Labor, 3) Capital, and 4) Entrepreneurial Ability. These four are very limited resources for our modern day Laos.Without proper utilization, Laos would face the daunting task in an effort to produce consumer goods and capital goods and to increase its GDP; it would be a hard-press to overcome.Lao government also needs to intervene during financial crisis and an outburst of inflation by establishing the market equilibrium price.The governments and the private enterprises need to study closely how market economy would respond to these following fundamental questions:
What goods and services will be produced?
How will the goods and services be produced?
Who will get the goods and services?
How will the system accommodate change?
How will the system promote progress?
Governments must do its best in Computing nominal GDP and the Real GDP as not to overstate or understate its growth.Then figure out the NDP, NI, PI, DI. Now if the prices fall, GDP has to be inflated and if the prices rise, deflating GDP has to be done accordingly.
In case you don’t know how to figure out Nominal GDP, I am more than happy to educate you on this.
When GDP has not yet been adjusted, it is called Nominal GDP. After adjustments are made, it is called Real GDP.There are two different approaches in computing GDP.One is called “Expenditure Approach” and the other one is called “Income Approach”
The Expenditure Approach is a lot easier to compute if you have this information:
By adding Personal Consumption, Gross Domestic Investment, Government Purchases and Net Export (Export – Import)
Under Income Approach or Allocation Approach:
You would add Compensation of Employees, Rents, Interest, Proprietors’ Income, and Corporate Profits, Taxes on Production and Imports, Statistical Discrepancy, Consumption of fixed Capital (Depreciation) and less Net Foreign Factor Income:
To make it simple for you to understand GDP under expenditure approach:
GDP = C + Ig + G + Xn
C= Personal ConsumptionIg = Gross domestic private investmentG = Government Purchases
Xn = Net Export
NDP = Net Domestic ProductNI = National IncomePI = Personal IncomeDI = Disposable Income
If you want to know how to compute GDP PCP (Per capita) just divide Real GDP by total population.
I hope this would give you a basic idea about economy for now.
I am not so good but let me try to answer your question:
Overall the impact would not be that huge to Lao economy as compared to other countries because the Financial sectors in Laos do not have direct connection to the rest of the world especially the US economy. However, the mining sector is heavily impacted because the copper price decreased by more 60% that caused the country largest foreign investor, Oxiana Inc ( an Australian mining firm ) sacked more than 100 employees both locals and foreigners in 2008. As the world's economy is in the downturn, industrial sectors are in the slowest movement.
Sectors Impacted:
Heavy industries: mining Net exports
-- Edited by JS.Park at 12:35, 2009-03-02
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"Only a life lived for others is a life worthwhile" Albert Einstein
this is not the answer I wanted ,man, haha but thanks anyway
I have no idea. But I hope our Lao farmers would not be affected much. Nobody will fire them from their jobs. They can sell their rice with higher price.
So, they are still "yen sabai sao na". That is what I can tell.
this is not the answer I wanted ,man, haha but thanks anyway
The reason why I did not answer you directly to your question was because I wanted you to have a broader concept in a national economy especially in terms of GDP. Since GDP is the main symbolic strength of a country’s economy, it is important to have some basic knowledge as how a country can improve its people living standard.As you are aware of Laos’ GDP is quite small, the government must find the way to increase its production in consumer goods and capital goods. But to answer you truthfully and directly about the possible impact on Lao’s economy, I would say yes to certain extent, but not too much even though it is a global financial crisis. Simply, Laos’ economy benefits more from foreign investment such as hydropower, mining, and construction rather than her gross domestic production.
Laos can suffer greatly if this global crisis continues beyond historical trends because it would finally affect foreign investment and tourism industry as well. America has experienced economic recession almost every ten years from a few months to a year or so before it finally recovers.Republicans are historically the main force of driving down our economy with the exception to Jimmy Carter who was democrat.If you look at the graph below, you would see how our national debts had risen during Republican years.Nonetheless, there is still hope that Laos will be removed from the list of the “least developed country to the extent of less developed country by 2020. As long as the government of Laos keeps its promises in pushing on with its market reforms, the international aid donors will try to help Lao PDR reach its target goal.
this is not the answer I wanted ,man, haha but thanks anyway
The reason why I did not answer you directly to your question was because I wanted you to have a broader concept in a national economy especially in terms of GDP. Since GDP is the main symbolic strength of a country’s economy, it is important to have some basic knowledge as how a country can improve its people living standard.As you are aware of Laos’ GDP is quite small, the government must find the way to increase its production in consumer goods and capital goods. But to answer you truthfully and directly about the possible impact on Lao’s economy, I would say yes to certain extent, but not too much even though it is a global financial crisis. Simply, Laos’ economy benefits more from foreign investment such as hydropower, mining, and construction rather than her gross domestic production.
Laos can suffer greatly if this global crisis continues beyond historical trends because it would finally affect foreign investment and tourism industry as well. America has experienced economic recession almost every ten years from a few months to a year or so before it finally recovers.Republicans are historically the main force of driving down our economy with the exception to Jimmy Carter who was democrat.If you look at the graph below, you would see how our national debts had risen during Republican years.Nonetheless, there is still hope that Laos will be removed from the list of the “least developed country to the extent of less developed country by 2020. As long as the government of Laos keeps its promises in pushing on with its market reforms, the international aid donors will try to help Lao PDR reach its target goal.
BruceLaoMan
-- Edited by BLM69 at 18:35, 2009-03-02
I think the answer u provided is not relevant to what he is interested in...
__________________
"Only a life lived for others is a life worthwhile" Albert Einstein
this is not the answer I wanted ,man, haha but thanks anyway
The reason why I did not answer you directly to your question was because I wanted you to have a broader concept in a national economy especially in terms of GDP. Since GDP is the main symbolic strength of a country’s economy, it is important to have some basic knowledge as how a country can improve its people living standard.As you are aware of Laos’ GDP is quite small, the government must find the way to increase its production in consumer goods and capital goods. But to answer you truthfully and directly about the possible impact on Lao’s economy, I would say yes to certain extent, but not too much even though it is a global financial crisis. Simply, Laos’ economy benefits more from foreign investment such as hydropower, mining, and construction rather than her gross domestic production.
Laos can suffer greatly if this global crisis continues beyond historical trends because it would finally affect foreign investment and tourism industry as well. America has experienced economic recession almost every ten years from a few months to a year or so before it finally recovers.Republicans are historically the main force of driving down our economy with the exception to Jimmy Carter who was democrat.If you look at the graph below, you would see how our national debts had risen during Republican years.Nonetheless, there is still hope that Laos will be removed from the list of the “least developed country to the extent of less developed country by 2020. As long as the government of Laos keeps its promises in pushing on with its market reforms, the international aid donors will try to help Lao PDR reach its target goal.
BruceLaoMan
-- Edited by BLM69 at 18:35, 2009-03-02
Man, I know well the economic basic, speically on GDP, But I appriciate your asnwer, you made very good home work!!!!!!!! thanks bro
I think the answer u provided is not relevant to what he is interested in...
Well, I can’t make it sound as simple as black and white but if he simply wanted a straight answer then, the answer is YES.He must have read the news somewhere and then added a question at the end. “What can we do if the situation is worse?” But in a real world of economics, things are not that simple.The truth is economy is about GDP and I was trying to address the economic way of thinking because it has several and critical closely interrelated features. Six sectors above were mentioned from foreign investment to foreign aid and please accept my humble explanations if you care to read.
1.Foreign Investment/export in Laos, if it doesn’t involve in export and imports of finished products/commodities then I just don’t see the profound impact at all. Hydropower for example, is a state-own enterprise so the contract is between Lao government and those entrepreneurs and they already accepted the deal.Laotian owned business, on the other hand, whose production of consumer goods and services would see the impact on their exports such as coffee industry, timber products, gypsum, rattan products, cardamom, sesame, forest products, garments and handicraft items. As a country, Laos’ net foreign factors is negative because her imports > her exports and as a result, her real GDP is also < her potential GDP.Without the capacity to double real GDP, the unemployment rate is also high and therefore, the numbers of labor force in Laos must seek employment somewhere else.
2. Tourism is definitely going to feel the pain. During financial crises, many people would rather not travel far unless they can anticipate the duration and the intensity of recession.
3. Government revenues depend on their purchase expenditures, collection of taxes, and the degree of corruption and the percentage of the transfer of payments.From what I had learned and from my own discernment, majority of high profitable enterprises are owned by high ranking government employees or former government employees, so it’s not easy to come up with the economically proximate analysis here.
4. Foreign aid will keep flowing into Laos as long as the government keeps its promises in pushing on with market reforms.For example, decentralizing decision-making, allowing greater transparency, improving its budgetary procedures as well as reforming in administrative practices (ethically disbursement of aid) but if Laos is moving backwards towards an old-style control and economic repression, then those foreign donors would re-evaluate or even cut back their aid and Laotians will be hopeless again as it was in the 80s. The good thing about Laos at the moment is the political stability and I totally support that for the sake of our motherland.The relations with Thailand, China and Vietnam is very crucial though I despise the Viets so much, but since Laos has a limited infrastructure, railroads (or no railroad?) limited telecommunications and poor road system, the three nations can be of so much help.
I have no doubt that Laos has improved human rights as its assurances to the international community provided that no negative reports from U.N human right commissioner. Laos would soon be able to undertake commitment and responsibility as ASEAN member if it can show a comparative improvement in English skill as other ASEAN members.The recent hosting of economic summit in Vientiane and the approaching of SEA game event should be a sign of encouragement for future generation.
By the way, if you have the information about inflation rate in Laos, please let me know.Also if possible, I want to find out if it is a demand-pull inflation or cost-push inflation or both.I would highly appreciate it and bye for now because BruceLaoMan is getting tired.
the current inflation rate in laos now is in the range of 5-9 % per year ( not too sure but I have read it fro some reliable sources ) and it is a cost push inflation...
the problem is, when the oil price goes up, everything seems to be more expensive but when the oil price falls, the price stay the same.
another problem we are facing now is the foreign exchange rate, when the dollar appreciates, it seems to push the price to go up too, when it depreciates ... prices remain high!
the current inflation rate in laos now is in the range of 5-9 % per year ( not too sure but I have read it fro some reliable sources ) and it is a cost push inflation...
the problem is, when the oil price goes up, everything seems to be more expensive but when the oil price falls, the price stay the same.
another problem we are facing now is the foreign exchange rate, when the dollar appreciates, it seems to push the price to go up too, when it depreciates ... prices remain high!
how do you explain or solve this phenomena?
If the national average unemployment rate in Laos is between 5% - 9% as you mentioned above, then I must tell you that Laos is doing pretty damn well. And Laos is certainly not heading to what we call a “hyperinflation” like Myanmar with the inflation of 47% in 2007 and Zimbabwe with the inflation rate close to 100,000%. Having said that, I just want to thank the Lord for blessing our motherland (The Kingdom of One Million Elephants)
To answer your question about the formidable impact on market prices when there is a change in the value of oil, this is a serious phenomenal for every country and I will do my best to give you some basic facts. Having a personal computer without software is pretty much useless and a country without oil will be collapsed because it plays an import role in our modern-day economy and it is a complement to all productions of goods-services. No oil means (no transportation) no transportation means no GDP and no GDP means a country has no efficient economy. So the government must watch the market-demand and the market-supply closely. For example, if the demand goes up, but the supply remains constant or goes down then the market equilibrium price will shift to a different demand/supply curve and the price for oil will jack up even higher. The government must intervene by setting up the equilibrium right below the market equilibrium price. Without this proper intervention and the prolongation of a high oil price, the economy can’t produce anything and as a result, the maximum or potential outputs will drop to the bottom. The excess demand will bid up the price due to a short supply of oil and if the problem persists, hyperinflation will follow and cause the economy to collapse.
Why do the market prices for most products and commodities remain unchanged after the oil price go down?
As you probably already know nearly all prices in the economy are set by supply and demand. Consequently, if the rise in quantity demand for goods and services in Laos remains high and the drop in the price of oil would only profit businesses unless there is a decrease in quantity demand, the price of most commodities will remain unchanged.Hence, don’t get confused with market-demand and quantity demand because they have no direct relationship.
In a reference to your question about foreign exchange rate, the foreign exchange rate is a market in which various national currencies are exchanged for one another and the equilibrium prices in such currency markets are called exchange rates and is the rate at which the currency of one nation can be exchange for the currency of another nation but majority of Lao trading partners want the money in American dollars. For example, when a dollar depreciates, it would take fewer kips to buy goods and when the dollar appreciates, it would take more kips to buy from Lao trading partners, so it is up to the currency of those partners against dollars.
The only possible solution is Laotian exports must be greater than the imports from those trading partners to secure trade surplus when the international value of the dollar declined, but I just don’t think that will happen anytime soon given that Laos is a lot poorer than any of her business partners and Laos’ GDP is very small. This doesn’t mean we can’t catch up with them. Government, if all possible must allocate sufficient funding in education and training because investment in human capital will increase in labor productivity and earnings. Without knowledge and skills, it is delaying the maximum outputs causing a delay in a country’s development. The literacy and widespread education in the country is an urgent matter because without highly educated inventors, new technologies do not get developed so Laos will keep importing them; furthermore, without highly educated work-force, it is quite impossible to even implement those imported technologies and them into productive use.
In addition, Lao government though, is not considered a tyrannical leader but I don’t think they have passed the law of property rights. This is another important factor to attract more potential domestic and foreign investment. Another experimental practice to alleviate poverty and help the poor or near poor households in Laos is to introduce the Institutions of Microfinance wherein, they can provide the loans with below-market interest rate because people do need to have motorbikes to transport their goods to market, to buy livestock for sell, to buy land so they can grow their farm products as well as to cope with their own personal needs. By having access to the “below-market interest rate loan” poor people would highly appreciate this financial service.
I don’t know much about banking businesses in Laos such as their rules, regulations and the operational pattern in approving loan. Do they require you to have some sorts of assets as collateral to secure a loan?
Is it a foreign-owned bank in Laos or Laotian-owned? And what’s the paid in capital in that bank? Anyway, I sincerely hope for all the success and blessing for our motherland; we have been so poor for long and our people never demanded much from the government but just a common desire among all of us for the access to human basic needs. I myself know quite well how it feels like becoming destitute. I would never forget the abject poverty that I experienced in the early 80s and just think of the word poor, my eyes are already flooded with tears. I have say buy for now.
You are definitely qualify for a chief economist position in Laos. Please go back and help us Bruceman.
Hey, that was pretty kind wish from you brother.It would be nice to work for our motherland sharing our expertise since we all have exposed to different levels of education in various fields.Last time, there was also an opening for accounting and finance in Austrian embassy in Vientiane, Laos.You should check into it if you earned a degree in political science or in international business relation; that would qualify you for the job.My current lifestyle would not fit for any relocation because I have a seven year-old daughter whom I love so much and she needs lots of love from me; besides, it won’t be good for her future. I’d rather have her get education here in the state.Moreover, I can’t live without her anyway.
I think it won’t be long before Laos will get approved for a full membership of World Trade Organization. From what I know, Laos is currently granted an observer status and that’s a good sign. I also learned that in the 90s, Laos had more than 30 trading partners from Asia to U.S and Europe.
There are many young Laotian talents who have been graduating or studying oversea periodically.These folks are the future of Laos and I am totally proud of them.Just let me cheer our motherland on the sideline its economical progress and the political progressiveness.Your kind wish is profoundly touched and please allows me to reciprocate this very same wish to you.
