Presentation on theme: "State Capitalism and vulnerable livelihoods in Lao PDR"— Presentation transcript:
1 State Capitalism and vulnerable livelihoods in Lao PDR Dr. Edo Andriesse, International College,Khon Kaen University, ThailandState Capitalism and vulnerable livelihoods in Lao PDR
2 Two Major questionsIs 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 ConsensusThe two principal agentsCreating firms and building their capabilities2. Creating pilot agencies to guide industrialisationB. Setting the process of capability enhancement in motionArranging for firms to access and leverage advanced knowledge2. Promoting export-based engagement with the global economy3. Targeting industries/technologies for initial import-substitution4. Securing dynamic comparative advantages in leading sectorsC. Creating an economic environment for capability developmentBuilding broad-based education, from primary to tertiary education2. Creating a catch-up friendly, but cautious financial system3. Establishing stable macroeconomic settings4. Gradual phasing out of non-market interventionsSource: Lee and Mathews, 2010
4 Best ConsensusJapan 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 rankcountrylife expectancymean yearsexpected yearsGNI per capitaat birth (years)of schooling(ppp 2008 U$)27Singapore80.78.814.44889337Brunei D.77.47.5144991557Malaysia74.79.512.51392792Thailand69.36.613.5800197Philippines72.38.711.54002106Indonesia71.55.712.73957113Vietnam74.95.510.42995120Timor-Leste62.12.811.25303122Lao PDR18.104.22.16821124Cambodia22.214.171.124868132Burma62.741596Source: UNDP 2010
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 provincepoverty headcount ratioadult literacy rate15+ in 20051992/19931997/19982002/20032007/2008malefemaleLao PDR463934288363Vientiane capital1417159588Xayaboury221825168774Vientiane province311971Savannakhet534243297959Bokeo21337245Huaphanh525178Sekong67507648Source: UNDP 2009
9 Incoming FdI 2003-2008 (%) by country by sector Thailand 23.7 by sectorThailand23.7Power generation53.9China16.9Agriculture11.4Vietnam9.3Mining9.8Japan5.8Industry and Handicraft7.5France5.7Services4.3India4.8Trading3.8South Korea4.7Construction2.9Australia4.6Hotel and Restaurant2.6Malaysia1.8Other activities3.7Singapore1.4Others21.3Source: IMF 2009
10 Impact of FDI Little employment generation Displaced citizens due to dam building and new mining sitesInsufficient 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 MawlamyineDanangEWECDawei
13 Corridor developmentInstitutional 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 ConclusionsIs 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 societyMore relation-based institutions are required (Bardhan 2005)
16 ConclusionsHow 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).