1. State Capitalism and vulnerable livelihoods in Lao PDR
Dr. Edo Andriesse, International College,
Khon Kaen University, Thailand
State Capitalism and vulnerable livelihoods in Lao PDR

2. Two Major questions
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?

3. Source: Lee and Mathews, 2010
The BesT Consensus
The two principal agents
Creating firms and building their capabilities
2. Creating pilot agencies to guide industrialisation
B. Setting the process of capability enhancement in motion
Arranging for firms to access and leverage advanced knowledge
2. Promoting export-based engagement with the global economy
3. Targeting industries/technologies for initial import-substitution
4. Securing dynamic comparative advantages in leading sectors
C. Creating an economic environment for capability development
Building broad-based education, from primary to tertiary education
2. Creating a catch-up friendly, but cautious financial system
3. Establishing stable macroeconomic settings
4. Gradual phasing out of non-market interventions
Source: Lee and Mathews, 2010

4. Best Consensus
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.

5. Human Development in Southeast Asia
global rank
country
life expectancy
mean years
expected years
GNI per capita
at birth (years)
of schooling
(ppp 2008 U$) 27
Singapore
80.7
8.8
14.4
48893 37
Brunei D.
77.4
7.5 14
49915 57
Malaysia
74.7
9.5
12.5
13927 92
Thailand
69.3
6.6
13.5
8001 97
Philippines
72.3
8.7
11.5
4002
106
Indonesia
71.5
5.7
12.7
3957
113
Vietnam
74.9
5.5
10.4
2995
120
Timor-Leste
62.1
2.8
11.2
5303
122
Lao PDR
65.9
4.6
9.2
2321
124
Cambodia
62.2
5.8
9.8
1868
132
Burma
62.7 4
1596
Source: UNDP 2010

6. HDI value trend

7. Profound MisMatch 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.”

8. Poverty and literacy province poverty headcount ratio
province
poverty 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 63
Vientiane capital 14 17 15 95 88
Xayaboury 22 18 25 16 87 74
Vientiane province 31 19 71
Savannakhet 53 42 43 29 79 59
Bokeo 21 33 72 45
Huaphanh 52 51 78
Sekong 67 50 76 48
Source: UNDP 2009

9. Incoming FdI 2003-2008 (%) by country by sector Thailand 23.7
by sector
Thailand
23.7
Power generation
53.9
China
16.9
Agriculture
11.4
Vietnam
9.3
Mining
9.8
Japan
5.8
Industry and Handicraft
7.5
France
5.7
Services
4.3
India
4.8
Trading
3.8
South Korea
4.7
Construction
2.9
Australia
4.6
Hotel and Restaurant
2.6
Malaysia
1.8
Other activities
3.7
Singapore
1.4
Others
21.3
Source: IMF 2009

10. Impact of FDI 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

11. Impact of FDI 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).

12. Corridor Development N-S Corridor High speed railway EWEC Kunming
Mawlamyine
Danang
EWEC
Dawei

13. Corridor development
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.

14. DaWEI?
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.

15. Conclusions
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)

16. Conclusions
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).