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Laos, Economy

The traditional Lao economy was based on agriculture, handicraft production, and trade. Indeed, for centuries before Europeans arrived, flourishing local and long-distance trade networks had linked Southeast Asia with East and South Asia. It was the prospect of controlling the lucrative Asian trade in spices and other luxury goods that initially lured the French and other Europeans to Southeast Asia in the 17th and 18th centuries. Later they also hoped to exploit the regionís natural resources. However, French efforts to develop Laos economically in the late 19th and early 20th centuries came to little, as they quickly concluded that Laosís terrain made commercial agriculture and mining difficult. The civil war that followed independence in 1953 further impeded economic development. Even today, a large majority of Lao still engage in subsistence agriculture. Industry is limited to small-scale manufacturing of consumer products, though clothing and textile products have become a significant export. Government revenue is insufficient to cover expenditure and investment in infrastructure development, leaving the deficit to be met by foreign aid. The principal aid donors are Japan, France, Sweden, and Australia. In the late 1980s the government opened the economy to foreign investment. As a result, the average growth rate between and was percent, and by 2000 Laosís gross domestic product (GDP) had climbed to $1.7 billion. Average GDP per capita rose to $320, compared to $400 in Vietnam and $260 in Cambodia. Like the economies of other countries in the region, the Lao economy suffered badly when the value of several Asian currencies fell sharply in the late 1990s.

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