Working towards greater community control over land, forests and natural resources

Family incomes fail to keep pace with economic growth

Vientiane Times, 25 Oct 2014

Despite annual economic growth of 8 percent over the past four years, the average household income does not reflect this growth, senior government officials and economists say.

A senior economist, Dr Leeber Leebuapao, told Vientiane Times on Friday that strong economic growth does not necessarily translate into higher incomes for all sectors of society. This was because economic growth measures all sectors of the economy whereas individuals rely on different sectors of the economy which are growing at different rates. For instance, even though agriculture still accounts for over 70 percent of the nation’s workforce the sector itself is only growing at 3 percent annually.

Over 2.4 million people are currently reported to be employed, with only 7 percent working in the industrial sector, 22 percent in the service sector, and the rest in agriculture. Dr Leeber said the industrial and service sectors are growing very rapidly, triggered by the inflow of foreign investment, mainly in the resource sector. But GDP growth is an imprecise measure because much of that money may well be headed offshore, repatriated as profits by foreign investors in the resource sector.

Gross national income is a much more accurate measure of the money staying within the country but even this bears little relation to the incomes of everyday people. A small number of people are benefitting quite handsomely from the resource boom but for the majority of people, especially those without land and trying to make it in the capital, life remains a struggle.

Due to the large inflows of foreign capital and investment in infrastructure, inflation is on the rise in Laos but people’s salaries and incomes are not keeping pace with inflation, which was recorded at 6.37 percent in 2013. The cost of staples such as rice, meat and fish continues to rise as does the cost of petrol and housing rentals, creating more pressure for people, particularly the poor.

Deputy Prime Minister in charge of supervising macro-economy and service affairs, Dr Bounpone Bouttanavong, told a national meeting in Vientiane recently that the most important thing was to actively boost the productivity of rural people and businesses to create a stronger economic base for healthy economic growth. As a market of 6.5 million people, Laos needs to improve the quality of its exports by using modern technology and enhancing human resource development to benefit from the coming regional integration.

Dr Leeber said Laos will be heavily affected by the Asean Economic Community in 2015 as more competition will spring up in this region. More foreign products will flow to Laos and compete with goods made by rural people, but this will also mean that people will have a wider choice of cheaper products. Laos has a GDP of US$12 billion, with annual income per capita expected to reach US$1,692 this year and US$1,700 in 2015. The government will focus on ensuring that the poverty rate drops to 19.17 percent of the population by 2015.

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