Laos in international development aid flows

Since the establishment of the Lao People's Democratic Republic (Lao PDR) in 1975, the development of the country has been uneven both due to domestic policy deficiencies as well as changing international environment. The aim of the article is to provide an overview of the domestic situation in the Lao PDR in connection with the position of the country at the world arena from the 1970s up to date. The study is based on the country-specific research issued abroad in the 1990s-2000s as well as individual papers provided by Russian authors in the 2000s. The sources used for the study include the World Bank and the UN agencies data as well as information from specialized bodies dealing with development including the USAID and the EEAS. The peculiarities of the political system attributed to the Lao PRD include one-party rule, state dominance on most spheres of life and high level of corruption. The economy of the country used to suffer from the land-locked character but nowadays the country strives to gain advantage from being a transit territory in the Mekong River region. Due to sharp turns in the state economic policy from nationalization and collectivization to market orientation, the economy has been rather weak. The efforts to make tourism one of the drivers of economic development along with mining, hydropower production and agriculture, were devalued by the pandemic. The opportunities for receiving education in the country are especially limited for the poor, representatives of ethnic minorities, and women. Due to the continuing growth of the population, it may become even more difficult to provide education in the country largely. The healthcare system is also understaffed and underfunded. Malnutrition is wide-spread among the poor population. However, the healthcare system has improved a lot during the last 30 years. Many social problems of the country are not duly solved partially due to large state deficit that is somehow balanced by foreign aid. Laos was acknowledged a least developed country (LDC) in 1971. Thus, Laos relied a lot on foreign aid. The volumes of official development aid provided to the Lao PDR by the OECD Development Assistance Committee in 1971-2020 changed a lot due to the changes in the main donors of development aid from France and the US at the beginning of the 1970s, then the Soviet Union and Socialist bloc countries in 1975-1990, then again Western states, Japan, UN agencies gaining the main donor position for the Lao PDR. Countering poverty and other social problems were declared the priorities for both Lao authorities and international aid donors, certain success was achieved: the average poverty rate has decreased, the GDP per capita has been growing, the public debt remained large, though. Since the country is expected to be deprived of the LDC status in 2026 due to achieving relatively good results, it is time for the Lao PDR to reformulate its domestic and foreign policy approaches.

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