Yves Bourdet

On the Dynamics of Regional Disparities in Laos

A striking feature of the Lao economy is the existence of considerable differences in well-being and economic development among the provinces (and among the regions). This has long been a concern for both some Lao policy makers and the donor community. Not only the size of these differences but also their persistence, and in some cases their widening, have been a source of policy concern. Laos has been engaged in an ambitious reform program since the mid-1980s. A main component of this program is the removal of barriers to internal trade and to labor and capital mobility, a measure generally seen as favorable to regional economic growth and one which will help the laggard provinces to catch up. Some 10 years after the start of the reform process, however, it is clear that the new policy has failed to narrow the gap between rich and poor provinces, in spite of a better integration of the poor ones into the Lao economy. The main purpose of this study is to highlight the disparities between the Lao provinces and explain why some are so much richer (or poorer) and more (or less) productive than others. A second purpose is to examine the factors behind the emergence and persistence of regional disparities and see whether (and how) the reform policy in force in Laos since the mid-1980s-and the integration of the Lao economy into the greater Southeast Asian region-are likely to affect the patterns of provincial development.

Completing the European Union Customs Union: The Effects of Trade Procedure Harmonization*

A main component of customs unions is a common trade policy on imports from non-member countries. Trade policy covers both tariff and non-tariff barriers like trade procedures. We argue that since trade procedures vary markedly across EU countries, the EU is not, strictly speaking, a customs union. To illustrate this, we estimate the impact of trade procedures on exports from non-EU countries and find a highly statistically significant and negative effect. Simulating what the effects would be of harmonizing trade procedures, i.e. to actually complete the EU customs union, we find that aggregated exports to the EU would increase by 20 percent for the average exporter.

Reaping the Benefits of Deeper Euro-Med Integration Through Trade Facilitation

The current political turmoil in the Arab world has contributed to renewed interest in the Barcelona Process. This paper explores whether deeper integration in the form of trade facilitation – i.e. improved and simplified trade procedures – could be an important part of a reform agenda. Adopting a Southern perspective by focusing on exports from non-EU Mediterranean countries to the EU, we test whether the efficiency of trade procedures affects (i) bilateral volumes of exports, and (ii) the number of products exported. Our findings suggest that trade facilitation could lead to substantially increased export volumes and export diversification.

Completing the EU Customs Union. The Effects of Trade Procedure Harmonization

A main component of customs unions is a common trade policy on imports from non-member countries. Trade policy covers both tariff and non-tariff barriers like trade procedures. We argue that since trade procedures vary markedly across EU countries, the EU is not, strictly speaking, a customs union. To illustrate this, we estimate the impact of trade procedures on exports from non-EU countries and find a highly statistically significant and negative effect. Simulating what the effects would be of harmonizing trade procedures, i.e. to actually complete the EU customs union, we find that aggregated exports to the EU would increase by 20 percent for the average exporter.

Laos: The Sixth Party Congress, and After?

Introduction Laos in 1996 was uneasy about accepting all the consequences of the New Economic Mechanism (NEM). This was the main message of the Sixth Congress of the Lao Peoples Revolutionary Party. At first sight, the political forces that oppose rapid economic transformation seem to have reinforced their position. It remains to be seen, however, whether this change will be strong enough to stop ? or at least to significantly slow down ? the reform process and the integration of the Lao economy in the Southeast Asian region. On the other hand, the Sixth Party Congress seems to have strengthened the position of representatives of ethnic minorities in the political ?lite. It is an open question, however, whether this second change will increase the attention paid to remote areas and correct the pro-urban bias of the economic and foreign aid policies, thereby improving the prospects for a more balanced growth in Laos.

An Economic Evaluation of the Lao Transition Mix

Since the middle of the 1980s, Laos has been engaged in an ambitious progranmae of economic reforms, the New Economic Mechanism. The main objectives of this programme are to dismantle elements of the command economy inherited from the first decade of communist rule, and to develop an integrated market economy. Reform began on a limited scale in the agricultural sector in the early 1980s, reaching other sectors of the Lao economy by the second half of the 1980s. During the latter period and the early 1990s, reform efforts were concentrated on the core of the command economy system, namely the administrative allocation of production resources in the public sector and the imbrication of the financial sphere and state-owned enterprises. Because monetary stability is a prerequisite for the sustainability of reform in economies in transition, reform of a more systemic character has been accompanied by a non-accommodating stabilisation policy, similar to that advocated by the IMF and the World Bank in their structural adjustment programmes. The comprehensive and irreversible nature of the reform programme measures introduced in 1986, indicated that the ultimate objective was to be an integrated and monetised market economy. The eight years that have since passed permit a more definitive assessment of the overall transition progranune in Laos to be made. The main purpose of this paper will be to evaluate the design and macroeconomic impact of this reform programme. Lao reform policy faces certain domestic constraints, many of an institutional and political nature, which limit the reformability of the economy. A second purpose of this paper will be to highlight these constraints and to show how they contribute to limiting the development potential of the country. The paper is structured in the following way. Section 2 briefly surveys the Lao transition programme (scope, timing and sequencing) and its economic and political logic. Section 3 provides a macroeconomic assessment of the Lao reform programme. Particular emphasis is placed on the effects on economic growth (overall and by sector), and internal and external balances. Section 4 highlights the bottlenecks, mostly of an institutional and political character, that prevent the Lao economy from embarking on a more ambitious and harmonious path of development, and draws some policy conclusions.

Exchange rate regimes and import pricing

To what extent exchange rate variations are passed through into import prices has been on the research agenda over the past decade. Research efforts have focused on the very existence of pricing to market and on differences in pass-through behaviour between industries. Much less research has been devoted to the factors behind variations in pass-through behaviour within industries, and to changes in this behaviour over time. The change of exchange rate regime in Sweden in 1992 is used here to illustrate how the interaction between alternative exchange rate regimes, fixed and floating, and pricing behaviour affects pass-through behaviour. The study concentrates on the passenger car industry.

Labor Market Adjustment under Transition in Laos

Abstract Laos has engaged in an ambitious program of economic reforms, the New Economic Mechanism. Yet little attention has been devoted to the impact of the reform process on the functioning of the labour market and to the role of the labour market in mobilizing human resources. The purpose of this paper is to examine the impact of reform policy on the labor market and to show how a better adjustment of the labor market can facilitate the success of the New Economic Mechanism. The purpose of the paper is also to show how a better use of the information generated in the labor market can contribute to transforming the reform process into a process of sustained economic growth in Laos.

Completing the European Union Customs Union: The Effects of Trade Procedure Harmonization*: COMPLETING THE EUROPEAN UNION CUSTOMS UNION

A main component of customs unions is a common trade policy on imports from non-member countries. Trade policy covers both tariff and non-tariff barriers like trade procedures. We argue that since trade procedures vary markedly across EU countries, the EU is not, strictly speaking, a customs union. To illustrate this, we estimate the impact of trade procedures on exports from non-EU countries and find a highly statistically significant and negative effect. Simulating what the effects would be of harmonizing trade procedures, i.e. to actually complete the EU customs union, we find that aggregated exports to the EU would increase by 20 percent for the average exporter.

Laos - An Episode of Yo-Yo Economics

The macroeconomic situation of Laos has become significantly worse over the past two years as a result of both external and internal factors. Of the external factors, the depressed international environment in the Southeast Asian re gion, in the wake of the Asian crisis, has played a critical role. The fact that Thailand, one of the countries most hit by the Asian crisis, is the main trading partner of Laos (and also its largest foreign investor) explains the high vulner ability of Laos. This is not the whole story, however. Domestic factors in Laos have also contributed to fuelling macroeconomic fragility, as evidenced by the higher inflation and much larger exchange rate fluctuations than in neighbouring countries. Inflation reached 87 per cent in 1998 and was estimated to be more than 100 per cent in 1999. The Lao currency, the kip, depreciated by no less than 90 per cent in relation to the U.S. dollar between mid-1997 and mid-1999. Further, the kip fluctuated like a yo-yo during 1999: from some 5,000 kip per dollar in early January, it plunged to 10,000 kip per dollar in June, then appreciated to 5,800 kip in September and dropped again thereafter to 7,600 kip in December.1 Political inertia contributed greatly to the rapid deterioration of the macroeconomic stance in 1998 and 1999 by slowing down, and in some cases even blocking, the intro duction of a less accommodating macroeconomic policy and financial and banking reforms. On the other hand, economic growth has continued at a slower pace than before (4 per cent in 1998 compared with 6.6 per cent on average between 1991 and 1997) but better than in neighbouring countries, reflecting a kind of de-linkage of the real economy from the monetary economy.