¾ê¾ì½ ½ìñ ½ ¾êò ½Äª ½ ¾ ö ì¾ ñ ªò²¾ Àº ½ì¾ ½ ¾êò ½Äª Àº ½²¾ ñ ê½ ½«¾ º LAO PEOPLE S DEMOCRATIC REPUBLIC PEACE INDEPENDENCE DEMOCRACY UNITY PROSPERITY

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1 ¾ê¾ì½ ½ìñ ½ ¾êò ½Äª ½ ¾ ö ì¾ ñ ªò²¾ Àº ½ì¾ ½ ¾êò ½Äª Àº ½²¾ ñ ê½ ½«¾ º LAO PEOPLE S DEMOCRATIC REPUBLIC PEACE INDEPENDENCE DEMOCRACY UNITY PROSPERITY ì¾ ¾ À «½ ò ½ ó 2006 ANNUAL ECONOMIC REPORT 2006 ê½ ¾ ¾ Á¹È ì¾ BANK OF THE LAO PDR 2006

2 Bank of the Lao PDR Yonet Road P.O.Box No: 19 Vientiane Lao PDR Tel: (856-21) , Fax: (856-21)

3 ¾ì½ ¾ Îɾ Contents Pages À¹ñ øé Ⱦ ¾...1 I. ½-²¾ -À -«½- ò - º - - ì¾ ½ÁÎ ½ ò ½ÁÎ º ¾¹½ ½ÁÎ ðìò ¾ ¾ ȼ Á º  ½ º GDP ì½- ñ ì¾ ¾...10 II. ½-ÁÎ - ¾ À ò º ìñ ì¾»ñ ö ½ ¾ ì¾ È¾ ö ½ ¾ ¾ - ú ȼ ö ½ ¾...15 III. ½-ÁÎ À ò ª¾ ½ìò ¾ À ò «¾ À ò ª¾ À ò -±¾ ò À ô ºñ ª¾ º À É ½Â ¾ À ò ª¾ ½Â ¾ ºñ ª¾Áì ȼ ¾ ñ - - ɾ ê½ ¾ ¾ -ê ì½- ò ìñ...24 IV. ¾ ²ö ²ñ À «½ ò ñ ªÈ¾ ½Àê ½²¾ À «½ ò Âì ¾ - -ì½ ñ ªÈ¾ ½Àê ø Ⱦ ¾ - ɾ-ªÈ¾ - ½-Àê ¾ ɾ- ñ ªÈ¾ - ½-Àê Κ ò ªÈ¾ ½Àê ¾ ìö êô  ö º ªÈ¾ ½Àê...32 V. êè¾ºè¼ À «½ ò ó êè¾ºè¼ À «½ ò Âì êè¾ºè¼ À «½ ò ²¾ Ã...36 Message from the Governor...1 I. Lao economy Agricultural Sector Industrial Sector Service Sector Change in GDP components Price Level...10 II. Public Finance Government Revenues Government Expenditure Fiscal Deficit Financing...15 III. Monetary Sector Money Supply Monetary Base Deposits Credits Interest Rates Monetary Policy Exchange Rate Policy Banking Sector Restructuring...24 IV. External Sector Overview of the World Economy The Lao Balance of Payments Foreign Trade Foreign Trade Balance External Debts Foreign Direct Investments...32 V. Economic Outlook for World Economic Outlook Economic Outlook...36 i

4 ¾ì½ ¾»ø Îɾ List ot Figures Pages»ø êó 1. ¾ ½¹ ¾ ªö À «½ ò...7»ø êó 2. ¾ ½¹ ¾ ªö ½ÁÎ ½ ò...7»ø êó 3. ¾ ½¹ ¾ ªö ½ÁÎ º ¾¹½.8»ø êó 4. ¾ ½¹ ¾ ªö ½ÁÎ ðìò ¾...9»ø êó 5. ¾ ȼ Á  ½ º º GDP..10»ø êó 6. ½²¾ ¾ ÀÎñ ªó ñ ½ ó øé ö à É...11»ø êó 7. ÕÎñ º ÁªÈì½Ï ò ɾ ½êö ªÒ ñ ½ óì¾ ¾ øé ö à É...12»ø êó 8. «¾ ½ ¾ À ò º ìñ...13»ø êó 9. ¾ À ñ ì¾»ñ º ö ½ ¾...14»ø êó 10. ì¾ È¾ º ö ½ ¾...15»ø êó 11. ¾ È È¼ ö ½ ¾...15»ø êó 12. ¾ ½¹ ¾ ªö º «¾ À ò ª¾...16»ø êó 13. ¾ ½¹ ¾ ªö º ½ìò ¾ À ò..17»ø êó 14. ºñ ª¾ È º ½ìò ¾ À ò M 2 ª¾ ½ À ò...18»ø êó 15. ¾ ½¹ ¾ ªö º À ò ±¾...19»ø êó 16. À ò ±¾ Äì ½ ŒÄì ½ ¾...19»ø êó 17. ¾ ½¹ ¾ ªö º ò À ô...20»ø êó 18. ºñ ª¾ º À É ½ÀìÈ À ò ±¾ ö 12 À õº, Œ »ø êó 19. ºñ ª¾ º À É ½ÀìÈ À ò øé ö 12 À õº ìö ¾...24»ø êó 20. ¾ ì½ ñ ªÈ¾ ½Àê...26»ø êó 21. ¾ ɾªÈ¾ ½Àê...27»ø êó 22. ¾ ½¹ ¾ ªö º ¾ ºº Œ À í¾...28»ø êó 23. ¾ ɾ...29»ø êó 24. ¾ êèº êè¼...30»ø êó 25. Κ ò ªÈ¾ ½Àê...31»ø êó 26. ¾ ìö êô  ö º ªÈ¾ ½Àê...32»ø êó 27. ºñ ª¾Áì ȼ...32 Figure 1. Real GDP Growth...7 Figure 2. Real Growth of Agriculture...7 Figure 3. Real Growth of Industry...8 Figure 4. Real Growth of Service...9 Figure 5. Change of GDP Components...10 Figure 6. Inflation...11 Figure 7. Weight of each group of goods and services influencing changes in CPI...12 Figure 8. Overall Fiscal Performance...13 Figure 9. Revenue Collection...14 Figure 10. Expenditure...15 Figure 11. Financing Fiscal Deficit...15 Figure 12. Growth of Monetary Base...16 Figure 13. Growth of Money Supply: M Figure 14. Component in M2 Ratios by Currency...18 Figure 15. Deposit Growth...19 Figure 16. Short and LongŒTerm Deposits..19 Figure 17. Credit Growth...20 Figure 18. Average 12-months Deposit Rates 2003Œ Figure 19. Average 12Œmonth Deposit Rates Figure 20. Balance of Payment...26 Figure 21. Foreign Trade...27 Figure 22. Growth Rate of Export- and Import...28 Figure 23. Trade Balance...29 Figure 24. Number of Tourist Arrivals to Lao PDR...30 Figure 25. Extenal Debts...31 Figure 26. Foreign Direct Investments...32 Figure 27. Exchange Rate...32 ii

5 ¾ì½ ¾ ª¾ª½ì¾ Îɾ List of Tables Pages ª¾ª½ì¾ êó 1: ªö Àì - š- º -ê¾ À -«½- ò...5 ª¾-ª½-ì¾ êó 2: ì º - ½-ìò -ª½-²ñ -²¾ à ò ÄìȪ¾ ø ȾÀ²...42 ª¾-ª½-ì¾ êó 3: ñ ½ óì¾ ¾ øé ö Ã É (à À õº 12 ó 1999 Àê ¾ ñ 100)...43 ª¾-ª½-ì¾ êó 4: ñ ½ óì¾ ¾ øé ö Ã É (à À õº 12 ó 1999 Àê ¾ ñ 100)...44 ª¾-ª½-ì¾ êó 5: «¾- ½- ¾ -À ò - º -ìñ...45 ª¾-ª½-ì¾ êó 6: ì¾ -»ñ - º - ö ½ ¾...48 ª¾-ª½-ì¾ êó 7: «¾ ½- ¾ -À ò - º -ê½- ¾- ¾ Á¹È ì¾...48 ª¾-ª½-ì¾ êó 8: «¾- ½- ¾ -À ò - º -ì½- ö -ê½- ¾- ¾...49 ª¾-ª½-ì¾ êó 9: ºñ ª¾ º À É...50 ª¾-ª½-ì¾ êó 10: À ò ±¾ º ìø ɾμøÈê½ ¾ ¾ ê ì½ ò...52 ª¾-ª½-ì¾ êó 11: ò À ˆº...53 ª¾-ª½-ì¾ êó 12: ¾ ì½ ñ ªÈ¾ ½Àê.54 ª¾-ª½-ì¾ êó 13: ¾- ɾ-ªÈ¾ - ½-Àê...55 ª¾-ª½-ì¾ êó 14: Κ- ò- ªÒªÈ¾ - ½-Àê º -ìñ...56 ª¾-ª½-ì¾ êó 15: ºñ -ª¾-Áì - ȼ- ê½- ¾- ¾- Áì½- ª½¹ì¾...57 ª¾-ª½-ì¾ êó 16: À ò º À í¾- ¾ìö êô  - ö - º ªÈ¾ ½Àê Ⱦ ì½ ö ê½ ¾ ¾...58 ª¾-ª½-ì¾ êó 17: ì ¾ ìö êô ¾ ªÈ¾ ½Àê Á È ª¾ ½ÁÎ ¾ 2002-Œ ª¾-ª½-ì¾ êó 18: ªö -Àì - ñ -êèº -êú¼ -Áì½ ì¾ - Ä É- ¾ - ¾ êèº êè¼ º ì¾...60 Table 1: Selected Economic Indicators of the Lao PDR...5 Table 2: Gross Domestic Product by Value Added...42 Table 3: Consumer Price Index...43 Table 4: Consumer Price Index...44 Table 5: Status of Government Budget...45 Table 6: Government Revenue...47 Table 7: Bank of the Lao PDR s Balance Sheet...48 Table 8: Monetary Survey...49 Table 9: Interest Rates...50 Table 10: Deposits at Commercial Banks...52 Table 11: Credits...53 Table 12: Balance of Payments...54 Table 13: Foreign Trade...55 Table 14: Official External Debt...56 Table 15: Official and Parallel Exchange Rates...57 Table 16: FDI inflows transferred through Banking System...58 Table 17: Approved Foreign Investments...59 Table 18: Tourist Arrivals to Lao PDR and Revenues from Tourism...60 iii

6 À¹ñ øé Ⱦ ¾ ê½ ¾ ¾ Á¹È ì¾ Message from the Governor of the Bank of the Lao PDR à ½²¾ Á ìéº º Âì ê ó ¾ ñ Á Ä μè¾ ½¹ìñ ñ ɺ, À óêñ ¾ì½Âº ¾ Áì½ êé¾ê¾ ¾ ½ ¾, À ñ ªí ñ ¹¾º¾ ò À ë, ¾ Ò ¾»É¾, Âì ì½ ¾, Ä²ê ½ ¾ Áì½ ¾ ÒÁ È º º ª½¹ì¾ ¾ À ò ¾ ö, ÁªÈà ó 2006 À «½ ò º ì¾ ñ õ ªÒ ½¹ ¾ ªö μè¾ Á Á» Áì½ ªÒÀ ô Ã ì½ ñ 8,3%. Ã, ½ÁÎ º ¾¹½ ½¹ ¾ ªö 17,0%, ½ ò 2,9%, ¾ ðìò ¾ 7,4% Áì½ ²¾ ó ¾ À í¾ 15,2%. ñ Ä ªí ªðê ñ ùÉÀ «½ ò ½¹ ¾ ªö Á È Éº ¾ ìö êô  ö ¾ ªÈ¾ ½Àê Ã È ½ÁÎ º ¾¹½ ÒÁ»È Áì½ ²½ìñ ¾ ij³É¾ Õªö. ½²¾ ¾ ê¾ É¾ À ò ª¾ ñ õ ªÒ ó ½ «¼ ì½²¾ ó ö À ñ ªí ºñ ª¾À ò À³š Á È μøèã ì½ ñ Î ªö Àì,  ½ÀìÈ 6,8% ¹ì ìö ¾ ì½ ñ 7,2% à ó ºñ ª¾ Áì ȼ ì½¹ Ⱦ À ò ó ñ À ò ª¾ªÈ¾ ½Àê ó ¾ ½¹ ö  ²œ «¾, μøèã ì½ ñ ó / ì¾.  ½ÀìÈ êé¾ ó 2006 À ò ó ê¼ Ã ÈÀ ò Â ì¾ ½¹½ìñ Á Ⱦ 10,3% À ôê¼ Ã Èêɾ ó ½ìò ¾ À ò M 2 ½¹ ¾ ªö Ã ì½ ñ 30% ê¼ Ã È ó ¾ À² º ½ìò ¾ À ò M 2 Á È Éº ¾ ¾ ñ Ä ¾ Ĺì À í¾ º À ò ª¾ªÈ¾ ½Àê ø ¾ Á¹ùú ªí ªð õ: ¾ ìö êô º ªÈ¾ ½Àê Áì½ ¾ À² º ¾ ºº μè¾ Èº Ä. À«ò Á È È¾ In the wake of various uncertainties in global environment, which provide opportunities and challenges especially nuclear, terrorism, epidemic deceases, natural disasters and uncertainty in international financial markets, however, Laotian economy continued to achieve a high and sustained economic growth with annual average GDP growth at 8.3 percent in Of which, sectoral growth of economy are: industry grew at 17 percent, agriculture by 2.9 percent, service by 7.4 percent and imports by 15.2 percent. The remarkable economic growth was driven by the industry, which was largely boosted by foreign investments in mining and hydro power projects. On monetary front, monetary condition remained relatively stable as indicated by a single digit inflation rate (historically low, on average from 7Œ2 percent to 6.8) and generally stable exchange rate at 9,704 Kip/US$, On average, Kip appreciated against US dollar by 10.3 percent in 2006 compared to Broad money (M 2 ) expanded at 30 percent compared to The rise in M 2 was due to an increased inflow of foreign exchange in the forms of foreign investments and growth of exports. Despite broad money (M 2 ) highly increased than expected; stable monetary 1

7 M 2 ½ ½¹ ¾ ªö À² ø ÁªÈ² À»ö¾ Ò ñ ¾ ¾»ñ ¾ ½«¼ ì½²¾ ɾ À ò ª¾Ä ÉÄ É μè¾ Ï ö õ: ºñ ª¾À ò À³šμøÈì½ ñ ªÔ Áì½ ºñ ª¾Áì ȼ ó ¾ ½¹ ö Áì½ Ï êè¼. ¾ ñ ª ½ªò ñ Á ö ½ ¾ Á¹È ìñ Ä É»ñ ö ó ö À ½Á ºº õ: ì¾»ñ ö ½ ¾ (ì êñ À ò È À¹õìºìɾ) ñ ì Ä É 93% º Á ¾. à ¾ À ñ Á¹ìÈ ì¾»ñ ¾ ²¾ à À ñ ì Ä É 106,4% À² 23,2% ê¼ Ã È ö ó 2004/2005, À ò êô È À¹ìõºìɾ ¾ ªÈ¾ ½Àê À ñ ì Ä É 54,8% º Á ¾. ²¾ ì¾ È¾ ö ½ ¾ ½ªò ñ Ä É 89,5% º Á ¾. Ã ì¾ È¾ ðìò¹¾ ½ªò ñ Ä É 99,1%, ì¾ È¾ À²ô ¾ ìö êô Áì½ Ã¹É øéμõ êò ½ªò ñ Ä É 80,6% Áì½ ¾ ¾ ö ½ ¾ ( Òì ¾ È À¹ìõºìɾ ¾ ªÈ¾ ½Àê ) ¹ì ìö ¾ 6,7% à ö ó 2004/2005 ¾À ñ 5,6% º GDP à ó 2005/2006. ¾ ɾªÈ¾ ½Àê Ò ó ¾ ½¹ ¾ ªö Á». à ó 2006 ø Ⱦ ¾ ɾªÈ¾ ½Àê ( ¾ À í¾ ñ ¾ ºº ) À² 35,3% ê¼ Ã È ó 2005.Ã, ¾ ºº À² 59,5% Áì½ ¾ À í¾ À² 20,2% ¾ ºº À² ªí ªðÁ È ¾ ¾ ¾ ºº Á»Èê¾ Àºö¾ 56,5%. à ¾ À² º ¾ À í¾ Á È ò ɾÀ²ô ¾ ìö êô Àºö¾ 46,7% Áì½»º ìö ¾Á È ò ɾ- ö Ã É ö À»õº Àºö¾ 41,5% º ø Ⱦ À í¾êñ Ïö. ¾ ¾ ¾ ɾ¹ìÐ ìö ¾ ì½ ñ 9,7% ¾À ñ 5,3% º GDP. condition could be maintained as indicated by low inflation rate and stable exchange rate. On fiscal front, budgetary plant was implemented with good progress as indicated by salient features: government revenue (including grants) was able to achieve at 93 percent of its plan. Of which revenue collected from domestic source achieved by percent, an increase of 23.2 percent as compared to 2005/06, and foreign aid was achieved at 54.8 percent. On expenditure side, budgetary expenditure was equal to 89.5 percent of the targeted plan. Of which current expenditure accounted for 99.1 percent, capital and onœlending net was equal to 80.6 percent and overall fiscal deficit (excluding grants) dropped from 6.7 percent in 2004/05 to 5.6 percent of GDP in 2005/06. External trade performed relatively strong. In 2006, the total volume of trade (imports plus exports) grew by 35.3 percent compared with the same period of last year. Export rose by 59.5 percent, while imports rose 20.2 percent. The significant increase in exports was mainly driven by mining exports (gold and copper), accounting for 56.5 percent, while contribution to imports rise was due to investment goods, and accounting for 46.7 percent and followed by consumption goods by 41.5 percent of total volume of imports. In 2006, trade deficit dropped from 9.7 percent to 5.3 percent of GDP. 2

8 ¾ ì½ ñ ªÈ¾ ½Àê õ ªÒÀ ó 97,3 ìé¾ Â ì¾ À² ¾ 10,8 ìé¾ Â ì¾ Ã ó Ã, ¾ ì½à ò ö ½ª À ó 41,3 ìé¾ Â ì¾, ¾ ɾ ¾ ÍÐ ìö 45,8%, ðìò ¾ À ó 3,3%, ì¾ Ä É ¾ ¹ìÐ ìö 23,7%, À ò º À ó À² 88,6% Áì½ ñ óêô Áì½ ¾ À ò À ó À² 48,9%. ¾ À ó à ¾ ñ ó Ⱦ Ä É ½ º È À»ñ Ã¹É ñ»º À ò ª¾ªÈ¾ ½Àê -À² - 335,7 ìé¾ Â ì¾, à ó 2006 ¾ ¾»ñ ½ ñ ¾ À í¾ ò É¾Ä É ½ ¾ 3,8 À õº. Ä ¼ øè ñ ¾ ²í À à ½ÁÎ À «½ ò ¾ À ò º ì¾ ê Ⱦ ¾ ɾ Àêò êè¾ºè¼ ì À «½ ò º ì¾ ¾ Ⱦ ½ ñ õ ªÒ ½¹ ¾ ªö Á» Á콪ÒÀ ô. à ó 2007 ¾ ½¹ ¾ ªö GDP ¾ ȾμøÈÃ ì½ ñ 7,5Œ8% ºñ ª¾À ò À³šÂ ½ÀìÈ Ïö óμøèøè Ã ì½ ñ ÒÀ ó 6,0%, ºñ ª¾Áì ȼ À ò ó / Â ì¾ - ½- õ ªÒ-Ã¹É ó ¾ ½¹ ö  ²œ «¾. ¾ ¾ ö ½ ¾ μøèã ì½ ñ ÒÀ ó 6,6% º GDP, ½ìò ¾ À ò M 2 ½ ñ ÒùÉÀ ó 18,0% ¹ìõ Àê ¾ ñ 22,0% º GDP, ¾ ì½ ö À ò ±¾ º ì½ ö ê½ ¾ ¾ ê ì½ ò ùÉÀ² 16,4% ¹ìõ Àê ¾ ñ 17,4% º GDP, ¾ ½¹ ¾ ò À ôê ì½ ö ê½ ¾ ¾ ½Ã¹É À² 19,0% Áì½ ñ»º À ò ª¾ªÈ¾ ½ Àê Ã¹É À² Áì½ ¾ ¾»ñ ½ ñ ¾ À í¾ã¹éä É 4 À õº Ä. À²ô ñ ª ½ªò ñ ¾ Ͼ øé ö ê ö Ä Éà ó 2007 ê¹ì ½ ½ º È Ã ¾ Overall balance of payment continued to show a record of surplus of US$ 97.3 million, an increase from US$ 10.8 million in Of which, current account balance (excluding official transfers) was in surplus of US$ million, trade deficit decreased by 45.8 percent, service with surplus of 3.3 percent, factor income (net) with deficit of 23.7 percent, transfers with surplus of 88.6 percent and capital and financial accounts with surplus of 48.9 percent respectively. The surplus from some of those items was contributed to the increase in international reserve, amounting to US$ million, which was equivalent to 3.8 months of imports. In parallel with salient features of economic and financial developments highlighted above, it is anticipated that economic out-look for Lao P.D.R will continue to be robust and sustained with expected GDP growth of 7.5 to 8 percent. Annual inflation is on average expected to be less than 6.0 percent and exchange rate between Kip/US$ would be generally stable. Fiscal deficit will be maintained below 6.6 percent of GDP. Money supply (M 2 ) will be restricted under 18 percent or equal 22.0 percent of GDP. Saving mobilization of banking sector is to increase by 16.4 percent, or equal to 17.4 percent of GDP, Credit expansion of the banking system is to increase by 19.0 percent, international reserves is to rise and ensure imports of goods by more than 4 months. To meet those targets for 2007 set above, À ó ½Â ¾ À ò ª¾ μè¾ ó ¾ ì½ ñ ì½ ñ the Bank of the Lao P.D.R (BOL) would do its 3

9 À²ô ½ìò ¾ À ò ùÉμøÈÃ ì½ ñ ê ÀϾ½ ö  ½ à ÉÀ ô õ ½Â ¾ À ò ª¾ê¾ ºÉº ¹ì¾, ½ªò ñ ½Â ¾ ºñ ª¾Áì ȼ μè¾ óä¹ ²ò À²ôÀ»ñ Ã¹É ó ¾ ½¹ ö Îñ ÁÎÉ, øéã¹éê½ ¾ ¾ ê ì½ ò ñ ºñ ª¾ º À É Ã¹ÉÀϾ½ ö À²ôì½ ö À ò ±¾ Ã¹É À² À²ôÀ ñ Á¹ìÈ êô à ¾ Ⱥ ò À ô, ²ñ ê½ ¾ì½ ö ê½ ¾ ¾ Ã¹É ó ¾ À Á Ï ö Áì½ É¾ Ä øè ¾ êñ ½ÄÏ, Á ÉÄ Îóš ò ê ÒÀ ó º ºº ö ùÉÄ ÉÀ ñ»ø ½ê Áì½ ²ñ ê½ ¾ ½«¾ ñ ¾ À ò ê ÒÁ È ê½ ¾ ¾ ùñ ó¹ì¾»ø ¹ì¾ Á. best to contribute to achieving targets by conducting a cautious monetary policy to appropriately control money supply (M 2 ) by using other indirect instruments. BOL would implement an exchange rate policy with flexibility to firmly maintain a stable exchange rate, encourage commercial banks (moral suasion) to implement an appropriate interest rate policy to enable them mobilize financial resources as funds for lending, develop a sound and prudent banking system, address the problem of NPL concretely as well as create a diversified non-œbanking institutions. øé Ⱦ ¾ ê½ ¾ ¾ Á¹È ì¾ Governor of the Bank of the Lao PDR ²øÀ²ñ ²ø ö Phouphet Khamphounvong 4

10 I. ½-²¾ -À -«½- ò - º - ì¾ À «½ ò º ì¾ Ã ó 2006 õ ªÒ ½¹ ¾ ªö Ã ì½ ñ 8,3% À² ¾ 7,3% à ó 2005 (À»ø êó 1). ì º ½ìò ª½²ñ ²¾ Ã ì¾ ¾ ó 1990 ª¾ ó ½ªòêò GDP μøèã ì½ ñ 1.658,9 ªœ ó. ì º ½ìò ª½²ñ ²¾ Ã ì¾ ¾ ½ ñ ª¾ ó ½ªòêò GDP NY μøèã ì½ ñ ,3 ªœ ó (ì¾ ì½º¼ μø誾ª½ì¾ êó 3). à ó 2006 ñ ¹ ½ ¾ ½¹ ¾ ªö À² Ä È¾ ó 2005 ɺ - ñ à ²¾ à - øéá» À ñ ªí Á È ¾ ½¹ ¾ ªö º ½ÁÎ ÒÁ»È Áì½ ²½ìñ ¾ ij³É¾ Õªö ê ¾ ¾ ¾ ìö êô º ªÈ¾ ½ Àê. º ¾ š ñ ó ½ÁÎ ¾ ºˆ Å-À : ½ ÁÎ ¾ ðìò ¾ Áì½ êèº êè¼. ²Éº ñ š ½ ²¾ Á ìéº ²¾ º  ½À²¾½ ¾ ½ ¹ ¾ ªö º À «½ ò ñ ¾ ½Àê ²¾ ²œ Ã É ¼, À ñ ªí ó,. ¹ ¼ ¾ Áì½ Äê ÒÀ ñ ºó Á» Î êúó È øé Áì½ À ñ ¾ À ó Ⱥ ê¾ É¾ ¾ êèº êè¼ Áì½ ºº ò ɾ º ì¾. À«ò Á È È¾ ºñ ª¾ ¾ ½¹ ¾ ªö º ½ ÁÎ ½ ò ½ óêè¾ºè¼ ¹ì ìö, ÁªÈ ø Ⱦ º ½ ìò ª½²ñ º ½ÁÎ ¾ š ñ ºñ ª¾ È Ã¹ È º GDP ¹ìõ ¹ì¾ Ⱦ 42,2% ¹ì ìö ¾ 44,4% º ó º ¾¹½ Àºö¾ 31,6% Áì½ À² 3,3% ê¼ Ã È ó 2005 Áì½ ðìò ¾ Àºö¾ 25,0% º GDP. I. Overview of Lao Economy In 2006, Lao economy continued to expand at 8.3 percent (see Figure 1), rising from 7.3 in The total value of the gross domestic products at the 1990 price of Calendar Year (GDP) was amounting to 1,658.9 billion Kip and while the total value of the gross domestic products at current price (GDP NY ) was amounted to 35,407.3 billion Kip (see further details in Table 3). This year s pace of Lao economic growth was faster than 2005 driver by domestic forces such as the strong growth in mining and hydro power sector from foreign investments. In addition, other sectors especially service and tourism sectors. Furthermore, external favourable environment especially the continued and high growth of some countries nearby including China, Vietnam and Thailand, was also a factor supporting and creating opportunities for tourism and exports of the Lao products. Although the growth rate of an agricultural sector tended to decline but the share of agricultural sector remained a major component of GDP accounting for more than 42.2 percent, dropping from 44.4 percent in Industry was accounted for 31.6 percent and up by 3.3 percent and service by 25.0 percent of GDP. Nominal GDP 5

11 ª¾ª½ì¾ êó 1: ªö Àì - š- º -À -«½- ò -ê - - ñ º ì¾ Table 1: Selected Key Economic Indicators of the Lao PDR ì¾ - ¾ p Items ½-ÁÎ - ¾ - ½-ìò (À óà ñ ) Real Sector (in percent) ºñ -ª¾- ¾ - ½-¹ ¾ -ªö º ì º ½ìò ª½²ñ ²¾ à ª¾ ì¾ ¾ ó 1990 GDP 5,91 5,79 6,88 7,29 8,30 GDP growth rate (constant price 1990) or GDP ºñ -ª¾-À ò -À³šêɾ ó 15,19 12,63 8,65 8,78 4,73 Inflation rate (End of period) ºñ -ª-¾-À ò -À³š- ½ÀìÈ 10,63 15,49 10,46 7,16 6,81 Inflation rate (Annual average) - ¾ -À ò - º -ìñ ê¼ Ã È GDP NY (À ñ %) 2001/ / / / /06 -Public finance (in percent of GDP NY ) ì¾ -»ñ ö ½ ¾ ì êñ À ò È À¹ìõºìɾ 13,96 13,01 12,13 13,31 14,78 Revenues and grants ì¾ -»ñ ²¾ à 12,65 10,91 11,03 11,61 12,54 Revenues À ò- È -À¹ìõºìɾ 1,31 2,11 1,10 1,70 2,24 Grants ì º ì¾ - Ⱦ Áì½ Ã¹É øéμõ êò 17,19 18,68 14,67 17,78 18,16 Total expenditure and net lending ì¾ È¾ ðìò¹¾ ê Ä 7,48 7,66 8,17 9,96 9,71 Current expenditure ì¾ - Ⱦ -ìö -êô -Áì½ Ã¹É øé-μõ - -êò 9,71 11,02 6,49 7,82 8,45 Capital and on-lending net - ȼ -À ò ö ì ,67-2,54-4,47-3,38 Overall cash balance - ȼ À ò ö -ì ê Ò- ñ -À ò - È -À¹ìõº-ìɾ -4,53-7,78-3,64-6,17-5,62 Overall cash balance (excluding grants) ½-ÁÎ -À ò -ª¾ (À óà ñ ) Monetary sector (in percent) -ºñ ª¾ ¾ À² ½-ìò- ¾ -À ò êé¾ ó (% ªÒ- ó) 27,05 19,19 22,10 8,33 30,09 Annual growth rate of money supply M 2 ½-ÁÎ - ¾ -À ò -ªÈ¾ - ½-Àê ê¼ Ã È GDP NY (À ñ %) External Sector (in percent of GDP NY ) - ¾ - -ì½ ñ ªÈ¾ ½Àê 3,62 0,92 0,47 0,38 2,70 Overall balance - ¾ - -ì½-à ò ö ½-ªòì êñ À ò º º ìñ 1,09-2,15-7,69-5,68 1,20 Current account balance (including official transfers) - ¾ - -ì½-à ò ö ½-ªò Òì Àºö¾À ò º º ìñ -2,18-3,38-9,23-6,69-0,70 Current account balance (excluding official transfers) - ¾ - ɾ -8,09-6,27-14,19-9,70-5,10 Trade balance ñ - ó-êô - Áì½ - ¾ -À ò 3,81 5,87 3,82 4,56 6,60 Capital and financial account ø Ⱦ ¾ ɾ 41,32 37,10 42,35 50,67 55,70 Foreign trade volume º Κ- ò -ªÈ¾ - ½-Àê 70,93 64,35 77,18 78,00 73,55 Stock of external debts p Ó ø À œº ªí P Pliminary estimation * À ô Ͼ ó ¾ Ï¾ ºññ ¼ ñ ñ À ô Ͼ Õ ½À²¾½ÁªÈà ª¾ª½ì¾ êó 1 Àê ¾, (8,3 = 8.3) * In the table 1 only, points were used in accordance with U.S. English format, meaning the same as comma in the Lao format, (8,3 = 8.3) * ñ ¾ªö Àì ê º½êò ¾ à ²¾ šá È Ä Éà ɫ¾ Ó ø ê¼ À ñ ó ö ½ ¾ Àì ÁªÈ À õº 10/2005Œ9/

12 »ø êó 1. ¾ ½¹ ¾ ªö º À «½ ò Figure 1. Real GDP Growth Á¹ìÈ Ó ø : ø ½«òªòÁ¹È ¾ Source: National Statistics Center 1. ½ÁÎ ½ ò à ó 2006 ½ÁÎ ½ ò ½¹ ¾ ªö À² ¾ 2,5% ¾À ñ 2,9 % Áì½ ºñ ª¾ È 42,2% º GDP ¹ì ìö ¾ 44,4% º ó 2005 (À»ø êó 2). Ã, ½ìò ª½ ²ñ ¾ ø ²õ Àºö¾ 58,1% º º ½ìò ª½²ñ ½ ò Œ È¾Ä É ¹ìõ À² 2,6%, ¾ ìé¼ - ñ Œ ¾ Àºö¾ 34,8% À² 2,8% Áì½ ½ìò ª½²ñ ¾ Ⱦ Àºö¾ 6,9% À² 6,5% ê¼ Ã È ó Agricultural Sector In 2006, agricultural sector grew by 2.9 percent, rising from 2.5 percent in 2005 and covered 42.2 percent of GDP (dropped from 44.4 percent in 2005) (see Figure 2). Of which, crop products were accounted for 58.1 percent, up by 2.6 percent, livestock & fishery products accounted for 34.8 percent, up by 2.8 percent and forestry products accounted for 6.9 percent, and up by 6.5 percent of total agricultural sector compared to 2005.»ø êó 2. ¾ ½¹ ¾ ªö º ½ÁÎ ½ ò Figure 2. Real Growth of Agriculture 7 Á¹ìÈ Ó ø : ø ½«òªòÁ¹È ¾ Source: National Statistics Center

13 2. ½ÁÎ º ¾¹½ à ó 2006 ½ÁÎ º ¾¹½ ½¹ ¾ ªö 17,1% À² ¾ 15,9% Áì½ ºñ ª¾ È 31,5% º GDP À² ¾ 29,2% º ó 2005 (À»ø êó 3). Ã, ½ÁÎ º ¾ ¹½ ÒÁ»È À² 86,9% ¹ìõ Àºö¾ 16,8% º º ½ìò ª½²ñ º ¾¹½, º - ¾-¹½ - ÁªÈ À² 8,1% ¹ìõ 64,8%, ¾ Ò É¾ À² 19,6% ¹ìõ Àºö¾ 10,2% Áì½ Ä³³É¾Œ Õ ½ ¾ À² 3,3% ¹ùõ Àºö¾ 8,1% ê¼ Ã È ó Industrial Sector In 2006, industry grew by 17.1 percent rising from 15.9 percent and represented 31.5 percent of GDP, up from 29.2 percent in 2005 (see Figure 3). In which mining & quarrying rose by 86.9 percent or covered 16.8 percent of industry share, manufacturing rose by 8.1 percent or accounted for 64.8 percent, construction by 19.6 percent and represented 10.2 percent and electricityœwater supply rose by 3.3 percent or covered 8.1percent of total industry compared in 2005.»ø êó 3. ¾ ½¹ ¾ ªö º ½ÁÎ º ¾¹½ Figure 3. Real Growth of Industry 3. ½ÁÎ ðìò ¾ à ó 2006 ½ÁÎ ðìò ¾ ½¹ ¾ ªö - 7,4% À² ¾ 6,7% º - ó 2005 Áì½ -Àºö¾ 25,0% º GDP (À»ø êó 4). Ã, ½ÁÎ ö ½ ¾ ö 24,8% º ½ ìò ª½²ñ ½ÁÎ ðìò ¾ êñ Ïö ¹ìõ À² 7,5%, ¾ ɾ- ¾ ö Áì½ ¾ Ⱥ Àºö¾ 41,6% Áì½ À² 8,4%, ê½ ¾ ¾ 1,5% Á¹ìÈ Ó ø : ø ½«òªòÁ¹È ¾ Source: National Statistics Center 3. Service Sector In 2006, service expanded by 7.4 percent, rising from 6.7 percent in 2005 and represented 25.0 percent of GDP (see Figure 4). In which, communication was accounted for 24.8 percent, up by 7.5 percent, wholesale & retail trade covered 41.6 percent, up by 8.4 percent, banking by 1.5 percent and up by 8

14 À² 17,0%, ê -²ñ -º¾-Ä 9,3% À² 2,5%, ¾ - ðìò ¾ -²¾ -ìñ 10,0% À² 1,0%, ½«¾ ñ ê Ò É¾ Äì 2,3% À² 2,9%, » -Á» Á콻ɾ -º¾¹¾ 9,6% À² 15,1% ê¼ Ã È ó percent, ownership & dwellings 9.3 percent, up by 2.5percent, public administration 10.0 percent, an increase of 1.0 percent, non Œprofit institutions by 2.3 percent, up by 2.9 percent and hotels & restaurants 9.6 percent, up by 15.1 percent of total output of service. compared to 2005.»ø êó 4. ¾ ½¹ ¾ ªö º ½ÁÎ ðìò ¾ Figure 4. Real Growth of Service 4. ¾ ȼ Á  ½ º À «½ ò GDP. à Äì ½ ó 1990Œ2006,  ½ º À «½ ò Ä É ó ¾ ¹ñ ȼ -Àêôì½ É¾ (À»ø êó 5). ºñ ª¾ È º ½ÁÎ ½ ò ó-êè¾-ºè¼ ¹ì ìö μè¾ ªÒ-À ô - ½-ÀìÈ -ÁìÉ μøèã ì½ ñ 1,1% à ÁªÈ ì½ ó. à ½ ½ê ¾ ¹ì ìö Ⱦ Ä É ö À ó ¾ ºñ ª¾ È ½ÁÎ º ¾¹½ ê À² μè¾ ªÒÀ ô ½ÀìÈ 1,0% à ÁªÈì½ ó. ¾ ¹ñ ȼ Ⱦ Á È Éº ½Â ¾ º ìñ à ¾ À ó ¾ ½ìò À ñ ò ɾ Áì½ ½ÁÎ ðìò ¾ À²ô¹ñ À ñ ½Àê º ¾¹½ Áì½ êñ ½ÄÏÀêôì½ É¾. Á¹ìÈ Ó ø : ø ½«òªòÁ¹È ¾ Source: National Statistics Center 4. Change in GDP components During 1990-Œ-2006, GDP components had gradually changed (see Figure 5). The share of agriculture continued to decrease by 1.1 percent annually. In contrast, the moderate decline was offset by an industrial sector which increased continuously by 1.0 percent. Such change was due to public policy promoting commercialization intended to gradually transform the agricultural-œbased country into industrial and modern country in the future. 9

15 »ø êó 5. ¾ ȼ Á º  ½ º º GDP Figure 5. Change of GDP Components 5. ì½- ñ ì¾ ¾ à ó 2006, ñ ½ óì¾ ¾ øé ö Ã É -μøè-ã -ì½ ñ 103,5 ¹ì ìö 6,8%, À «õ ȾÀ ñ ì½ ñ ªÔ ûº 12 ó ñ ÁªÈ ó 1994 À ñ ªí ¾ Áì½ À ñ À õúº Ä ºñ ó à ¾ ɾ ¾ Áì½ ²ñ ê½ ¾À «½ ò Œ ñ ö º ½Àê. À«ò Á È È¾ ½²¾ À «½ ò º Âì ó ¾ ñ Á ɺ ì¾ ¾ Õ ñ ò à ª½¹ì¾ Âì Ò ó ½«¼ ì½ ²¾, ºñ ª¾À ò À³š Á È μøèã º À ¾ Ͼ - øé- ö μøèã ì½ ñ -Î -ªö -Àì ê ½²¾Á¹È ¾»ñ»º Àºö¾ (À»ø êó 6). ºñ ª¾À ò À³š ½ÀìÈ Ïö ó 2006 μøèã ì½ ñ 6,81% Áì½ Àì ¹ì ìö ¾ ì½ ñ 8,6% à À õº ²¾ ó 2006 ìö ¾μøÈÃ ì½ ñ 3,7% à À õº ª ì¾ ó ¾ À¹ ê ²¾Ã¹Éºñ ª¾À ò À³š¹ì ìö Á È Éº ñ ½ óì¾ ¾ ò É¾Ï ö ½ ¾ ö Áì½ ö ¹ì ìö À ô ¾ ì¾ ¾ Õ ñ ²¾ à ½Àê ó ¾ ñ ¹ì ìö, À ò ó Á Ⱦ. Á¹ìÈ Ó ø : ø ½«òªòÁ¹È ¾ Source: National Statistics Center 5. Price Level In 2006, consumer price index (CPI) was at percent, down by 6.8 percent and a historically low in 12 years since 1994, creating a favorable condition for reconstruction and development of socio Œconomic development. Despite variable global economic condition indicated by unstable oil price, inflation was under control in line with the target (a single digit) as approved by the National Assembly. Annual inflation rate was on average at 6.8 percent; in particular it was down from 8.6 percent in February 2006 to 3.7 percent in October The cause behind was due to a decline in communication and transport indexes as the result of drop in domestic fuel price and Kip appreciation. 10

16 »ø êó 6. ½²¾ ¾ ÀÎñ ªó º ñ ½ óì¾ ¾ øé ö Ã É (ºñ ª¾À ò À³š) Figure 6. Inflation Ͼ À¹ : Œ ª = óªò ó, Ͼ À«ò ¾ ȼ Á º À ò À³šÀ õº šê¼ à ÈÀ õº ¼ ñ º ó Ⱥ. Œ ª =À õº ªÒÀ õº,ï¾ À«ò ¾ ȼ Á º À ò À³šÀ õº š ê¼ Ã ÈÀ õº Ⱥ Ã ó ¼ ñ. ¾ ÀÎñ ªó º ñ ½ óì¾ ¾ øé ö Ã É (ºñ ª¾À ò À³š) ÁªÈì½Ï ò ɾ -à -À õº 12/2006 ê¼ Ã ÈÀ õº 12/2005 ó š: Ï ½ ¼ º¾ ¹¾ À² 9,4%; Ï À ô ˆ ô À ö¾ Áì½ μ¾ ø À² 7,6%; Ï À ô»ñ Ã É È ªö À² 7,8%; Ï ¾ -²ñ Ⱥ, ¾ ô ¾ Áì½ ¾ -²ò À² 2,9%; Ï À ô à Éà À»õº À² 2,7%; Ï À ô È ¹ Áì½ À ó À² 1,8%; Ï ê μøúº¾ -Ä À² 1,4% Áì½ Ï μ¾ ö ²½ ¾ À² 0,5%. à ½ ½ê Ï ö ½ ¾ ö ö ²ñ ¹ì ìö 2,0% À ô ¾ ì¾ ¾ Õ ñ ¹ì ìö (ì¾ ì½º¼ ª¾ª½ì¾ êó 4). Ï ò ɾê óºò êò²ö ¹ì¾ ªÒ ¾ ÀÎñ ªó º ñ ½ óì¾ ¾ øé ö Ã É Ä ÉÁ È: Ï ½ ¼ º¾¹¾ ó ÕÎñ 46,2%, Ï ö ½ ¾ ö ö 17,9%, Ï À ô à Éà ö À»õº 8,1% Áì½ Ï À ô ˆ ô À ö¾œμ¾ ø 6,4% (À»ø êó 7). Á¹ìÈ Ó ø : ø ½«òªòÁ¹È ¾ Source: National Statistics Center Note: Œ (yoy) mean year on year change of inflation. Œ (mom) mom means month on month change of inflation The changes in CPI by group of commodities in DecŒ2006 compared to the same period were foodstuffs rose by 9.4 percent, alcoholic beverages and tobacco by 7.6 percent, personal care and effects by 7.8 percent, recreation, education and printing by 2.9 percent, household by 2.7 percent, clothing and foot-œwear by 1.8 percent, housing by 1.4 percent and medical care by 0.5 percent. While communication and transport indexes were down by 2.0 as the result of decline in fuel price (see further details in table 4). The most influencing commodities to change in CPI were: foodstuff with a weight of 46.2 percent, communication and transport with 17.9 percent, household with 8.1 percent and alcoholic beverage and tobacco with 6.4 percent (see Figure 7). 11

17 »ø êó 7. ÕÎñ º ÁªÈì½Ï ò ɾ ½êö ªÒ ñ ½ óì¾ ¾ øé ö Ã É Figure 7. Weight of each group of goods and services influencing changes II. - ¾ À ò º ìñ * à ó 2005/06, ì¾»ñ ö ½ ¾ (ì êñ À ò È À¹ìõºìɾ) À² 27,0% ¹ìõ Àê ¾ ñ 4.921,4 ªœ ó Áì½ Àê ¾ ñ 14,8% º GDP NY ê¼ Ã È ó ö ½ ¾ 2004/05 (À»ø êó 8). à ; ¾ À ñ ì¾»ñ ²¾ à ½ªò ñ Ä É 4.176,7 ªœ ó Áì½ ì¾»ñ ¾ ¾ È À¹ìõº ìé¾ä É 744,8 ªœ ó. ì¾ È¾ ö ½ ¾ êñ Ïö ½ªò ñ Ä É 6.047,6 ªœ ó ¹ìõ Àê ¾ ñ 18,2% º GDP NY. à ; ì¾ È¾ ðìò ¹¾ ê Ä Ä ÉÃ ì½ ñ 3.233,0 ªœ ó Áì½ ì¾ È¾ ìö êô Áì½ Ã¹É øéμõ êò ½ªò ñ Ä É 2.814,6 ªœ ó. ¾ ¾ ö ½ ¾ Ò ì À ò È À¹ìõºìɾ ½ªò ñ Ä É 1.871,0 ªœ ó ¹ìõ Àê ¾ ñ 5,6% º GDP NY (ì¾ ì½º¼ μø誾ª½ì¾ êó 5). Á¹ìÈ Ó ø : ø ½«òªòÁ¹È ¾ Source: National Statistics Center II. Public Finance In 2005/06, budgetary revenue was amounted to 4,921.4 billion Kip (including grants), rising by 27.0 percent and equal to 14.8 percent of GDP NY compared to 2004/05 (see Figure 8). Of which; domestic revenue and amounted to 4,176.7 billion Kip and billion Kip respectively. On expenditure side, expenditure was amounted to 6,047.6 billion Kip or equal to 18.2 percent of GDP NY. Of which, current expenditure was kept at 3,233.0 billion Kip and investment and net lending were amounted to 2,814.6 billion Kip. Fiscal deficit (excluding grants) was amounted to 1,871.0 billion Kip or equal to 5.6 percent of GDP NY (see further details in table 5). 12

18 »ø êó 8. «¾ ½ ¾ À ò º ìñ Figure 8. Overall Fiscal Performance b Ó ø ¾ : ½- - ¾ -À ò Á¹ìÈ Ó ø : Sources: Ministry ½- - ¾ -À ò of Finance. Sources: Ministry of Finance. 1. ì¾»ñ ö ½ ¾ ì¾»ñ ²¾ à ( ¾ ²¾ 󜺾 º Áì½ Ò Á È ²¾ 󜺾 º ) º ìñ ö - ó- 2005/06 ñ ì Ä É 4.176,7 ªœ ó Àºö¾ 12,5% º GDP NY (À»ø êó 9). à 쾻ñ ¾ ²¾ 󜺾 º À² 27,0% ê¼ Ã È ö ó 2004/05 Áì½ Àºö¾ 85,0% º ì¾»ñ ²¾ Ã. ì¾»ñ ¾ ²¾ 󜺾 º, ªí ªðÁ È À ñ Ä É ¾ º¾ º ªö Àì ê ì½ ò 24,0%, º¾ º - ö -Ã É 22,0%, ²¾ ó- ¾-À í¾ 15,0% Áì½ º¾ º Äì 13,0%. È ì¾»ñ ê ÒÁ È ²¾ 󜺾 º 624,9 ªœ ó À² - 5,0% -Àºö¾ 15,0% º -ì¾ -»ñ ²¾ -Ã. à š, Ä É ¾ Ⱦ- ò - Ⱦ 37,0%, -À ò - ñ - ö - Áì½ - Ⱦ-¹ì É ¹É¼ - 28,0% º ì¾ -»ñ ê ÒÁ È ²¾ 󜺾 º. ¾ À¹ ê ñ º ¾ À² º ì¾»ñ Á È Éº ¾ ñ ö Ͼ º¾ º ½ ñ ÃÏÈ- À Ä É ½¹ ¾ «¾ -º¾ º Áì½ Éº ¾ À ñ ì¾»ñ À² ¾  ¾ ìö êô º ªÈ¾ ½Àê À í¾ã  ¾ ÒÁ»È, ij³É¾ Õªö Áì½ ¾ êèº êè¼ (ì¾ ì½º¼ μø誾ª½ì¾ êó 6). 1. Budgetary Revenues Domestic budgetary revenues (including tax and nonœtax revenues) in 2005/06 were amounted to 4,176.7 billion Kip and accounted for 12.5 percent of GDP NY (see figure 9). Of which, tax revenue rose by 27.0 percent and represented 85.0 percent of public revenues. Tax revenues were mainly from turnover. tax accounting for 24.0 percent, excise tax by 22.0 percent, import duty by 15.0 percent and profit tax by 13.0 percent. NonŒtax revenues were amounted to billion Kip, up by 5.0 percent and accounted for 15.0 percent of domestic revenue. Of which, overœ-flight represented 37.0 percent, dividends and depreciation accounted for 28.0 percent of total nonœtax revenue. The improvement of government revenue collection was due to the new amendment of tax law, which helped broaden tax base and also increased revenue collection from foreign direct investments in 13

19 mining and hydro power sectors and tourism (see further details from table 6).»ø êó 9. ¾ À ñ ì¾»ñ º ö ½ ¾ Figure 9. Revenue Collection Á¹ìÈ Ó ø : ½- - ¾ -À ò Sources: Ministry of Finance. 2. ì¾ È¾ ö ½ ¾ à ö ó 2005/06 ì¾ È¾ ö ½ ¾ ½ªò ñ Ä É 6.047,6 ªœ ó, À² 16,0% ê¼ Ã È ö ó 2004/05, Àºö¾ 18,2% º GDP (À»ø êó 10). à š; ì¾ È¾ ðìò¹¾ ê Ä À² 11,0% Áì½ -Àºö¾ 53,0% º ì º ì¾ È¾ ö ½ ¾ êñ Ïö. ì¾ È¾ ìö êô à Ȳœ «¾  ìè¾ À² 23,0% ê¼ Ã È ö ó 2004/05 Áì½ -Àºö¾ 47,0% (ì¾ ì½º¼ μø誾ª½ì¾ ê 5). ìñ «½ ¾ Ã É È¾ ö ½ ¾ À²ôìö êô ( Òì ¾ Ã¹É øéμõ êò) óêñ Ïö 2.944,2 ªœ ó. à ìö êô É Á¹ìÈ êô ²¾ à 409,5 ªœ ó, Àºö¾ 14,0% º ì¾ È¾ ìö êô êñ Ïö, È ê À¹ìõºÁ È ¾ ìö êô ¾ ªÈ¾ ½Àê. 2. Fiscal Expenditure In FY 2005/06, fiscal expenditure was amounted to 6,047.6 billion Kip, rising by 16.0 percent over FY 2004/05, and accounted for 18.2 percent of GDP (see Figure 10). Of which, current expenditure rose by 11.0 percent and accounted for 53.0 percent of total expenditure. The capital expenditure was up by 23.0 percent and accounted for 47.0 percent (see further details in table 5). Capital expenditure (excluding on-œlending net) was amounted to 2,944.2 billion Kip. Of which, domestic source of capital investment was amounted to billion Kip and this accounted for 14.0percent of total expenditure, and the rest was from external finance. 14

20 »ø êó 10. ì¾ È¾ º ö ½ ¾ Figure 10. Expenditure Control 3. ¾ - ú ȼ ö ½ ¾ à ö ó 2005/06, - ö ½ ¾ ( Ò-ì À ò È À¹ìõºìɾ-) ¾ - μøèã ì½ ñ 1.871,0 ªœ ó À² 4,0% ê¼ Ã È ö ó 2004/05 Áì½ Àê ¾ ñ 5,6% º GDP (À»ø êó 11). Á¹ìÈ êô À²ô ¾ È È¼ ¾ ¾ ó 2.942,6 ªœ ó. Ã, Á¹ìÈ êô È À¹ìõºìɾ 744,8 ªœ ó, Á¹ìÈ êô øéμõ ¾ ªÈ¾ ½Àê 1.662,0 ªœ ó Áì½ Á¹ìÈ êô ²¾ à 535,8 ªœ ó (-ì¾ ì½º¼ μø誾ª½ì¾ êó 5). Á¹ìÈ Ó ø : ½- - ¾ -À ò Sources: Ministry of Finance. 3. Fiscal Deficit Financing In FY 2005/06, fiscal deficit (excluding grants) was amounted to 1,871.0 billion Kip, an increase of 4.0 percent compared to FY 2004/05 and equivalent to 5.6 percent of GDP (see Figure 11). The deficit was amounted to 2,942.6 billion Kip was which form of grants and external borrowing amounting to billion Kip, and 1,662.0 billion Kip and the domestic source was amounted to billion Kip (see further details from Table 5).»ø êó 11. ¾ È È¼ ö ½ ¾ Figure 11. Financing Fiscal Deficit Á¹ìÈ Ó ø : ½- - ¾ -À ò Sources: Ministry of Finance. 15

21 III. ½-ÁÎ À ò ª¾ 1. ½ìò ¾ À ò ½-ìò- ¾ -À ò (M 2 ) ó ¾ ½¹ ¾ ªö Ä, Àì ÁªÈêɾ À õº 10/2006 À ñ ªí ¾.»º êé¾ ó 2006 μøèã ì½ ñ 7.046,1 ªœ ó, ê¼ Ã ÈÀ õº 12/2005 À² 30,0% (À»ø êó 12), Àºö¾ 20,3% º GDP NY. ¾ À¹ ¾ À² º ½ ìò ¾ À ò à ó 2006 Á È ¾ ¾ ñ Ä ¾ Ĺì À í¾ º À ò ª¾ªÈ¾ ½Àê ø ¾ ¾ Á¹ìÈ ªí ªð õ: + ¾ ¾ ìö êô º ªÈ¾ ½Àê. À ò ìö êô ĹìÀ í¾ È¾ ì½ ö ê½ ¾ ¾ à ó 2006 ó 187 ìé¾ Â ì¾ ¾ 28 ìé¾ Â ì¾ Ã ó 2005; + ¾ ºº À² μè¾ Èº Ä õ: ¾ 553 ìé¾ Â ì¾ Ã ó 2005 À ñ 882 ìé¾ Â ì¾ Ã ó 2006 ñ Ä ¾ À² ªí ªð Á È ¾ ¾ ¾ ºº º ½ÁÎ ÒÁ»È õ À² 130% ¾ 217 ìé¾ Â ì¾ Ã ó 2005 À ñ 429 ìé¾ Â ì¾ Ã ó À ò ĹìÀ í¾ ¾ ¾ êèº êè¼ À² ¾ 140 ìé¾ Â ì¾ Ã ó 2005 À ñ 150 ìé¾ Â ì¾ Ã ó ½ìò ¾ À ò à ¾ Ͼ Á (À ò ó ð ì½ º μøè º ì½ ö ê½ ¾ ¾ Áì½ À ò ±¾ ½ Á ì¾ ñ ) μøèã ì½ ñ 1.998,3 ªœ ó À² 52,9%. ½ìò ¾ À ò ê ó ½²¾ Ⱥ μøèã ì½ ñ 5.047,8 ªœ ó. à À ò ±¾ À ñ À ò ó À² 17,8%, Áì½ À ò ±¾ À ñ À ò ª¾ªÈ¾ ½Àê À² 29,9% (ì¾ ì½º¼ μø誾ª½ì¾ êó 8). III. Monetary Sector 1. Money Supply Money Supply (M 2 ) have rapidly expanded since OctŒ2006. As of end DecŒ2006 it was amounted to 7,046.1 billion Kip, an increase of 30.3 percent and represented 20.3 percent of GDP NY compared to endœdec 2005 (see Figure 12). The cause driving rise in M 2 was due to the high inflow of foreign currency from main source as follows: + Foreign investments which were via banking system amounting to US$ 187 million in 2006, and rising from US$ 28 million in The rapid export growth rising from US$ 553 million in 2005 to US$ 882 million in Factors driving the exports were mining exports, up from US$ 217 million in 2005 to US$ 429 million in 2006 or equal to 130 percent. + Receipts from tourism rose from US$ 140 million in 2005 to US$ 150 million in The narrow money (including currency outside bank and demand deposits) was amounted to 1,998.3 billion Kip, up by 52.9 percent. Quasi money was amounted to 5,047.8 billion Kip. Of which, the Kip deposits and foreign currency rose by 17.8 percent, and 29.9 percent respectively (see further details from table 8). 16

22 »ø êó 12. ¾ ½¹ ¾ ªö º ½ìò ¾ À ò Figure 12. Growth of Money Supply: M2 2. «¾ À ò ª¾ à êé¾ ó 2006, «¾ À ò ª¾ À ½ º É À ò ö à º ðì½ º Áì½ À ò ±¾ º ê½ ¾ ¾ ê ì½ ò ê ±¾ Ä É ê¹ì ó 2.501,9 ªœ ó À² 37,2% ê¼ Ã Èêɾ ó 2005 (À»ø êó 13). à À ò ö à º ðì½ º μøèã ì½ ñ 1.336,6 ªœ ó À² 66,1% Áì½ Àºö¾ 53,4% º «¾ À ò ª¾êñ Ïö, À ò ±¾ º ê½ ¾ ¾ ê ì½ ò μøè ê¹ì 1.165,4 ª ó À² 23,1% ê¼ Ã Èêɾ ó 2005 (-ì¾ ì½º¼ μø誾ª½ì¾ êó 7). Á¹ìÈ Ó ø : ê½ ¾ ¾ Á¹È ì¾ Source: Bank of the Lao PDR 2. Monetary Base By Dec-Œ2006, monetary base, which consists of cash in circulation and deposits of commercial banks held at BOL, was amounted to 2,501.9 billion Kip, up by 37.2 percent compared to same period of last year (see Figure 13). Of which, cash in curculation was amounted to 1,336.6 billion Kip and represented 53.4 percent of monetary base. Commercial bank deposits held at BOL was amounted to 1,165.4 billion Kip, up by 23.1 percent compared to Dec-Œ2005 (see further details in Table 7).»ø êó 13. ¾ ½¹ ¾ ªö º «¾ À ò ª¾ Figure 13. Growth of Monetary Base 17 Á¹ìÈ Ó ø : ê½ ¾ ¾ Á¹È ì¾ Source: Bank of the Lao PDR.

23  ½ º º ½ìò ¾ À ò M 2 Á The currency components of money ª¾ ½ À ò ó õ: ½ À ò ó ó supply (M 2 ) are as follows: 2,943.0 billion 2.943,0 ªœ ó, Àºö¾ 41,8% º M 2 Áì½ Kip, represented 41.8 percent of M 2, 4,103.1 ½ À ò ª¾ªÈ¾ ½Àê ó 4.103,1 ªœ óó, Àºö¾ 58,2% º M 2. ºñ ª¾ È À ò ª¾ billion Kip was in foreign currency deposits, accounting for 58.2 percent. The ratio of ªÈ¾ ½Àê à ½ìò ¾ À ò M 2 μøèì½ ñ ö ê foreign currency in M 2 remained contant À ôê¼ Ã È ó 2005 (À»ø êó 14). compared to the same period (see Figure 14).»ø êó 14. ¾ ½¹ ¾ ªö º ½ìò ¾ À ò M 2 ª¾ ½ À ò Figure 14. Growth M2 by Currency Ó ø ¾ : ê½ ¾ ¾ Á¹È ì¾ Source: Bank of the Lao PDR. 3. À ò -±¾ à - È ó Ⱦ ¾ ê½ ¾ ¾ ê ì½ ò Ä ÉÀºö¾ Ã Ã È ñ º ¾ ðìò ¾ Ã¹É ó, ½ªò ñ ºñ ª¾ º À É À ò ±¾ ê ÀϾ½ ö ¾ ¾ ì½ ö À ò ±¾ Ä ÉÀ². à ó 2006 º -À ò -±¾ -ê -ì½ ö -ê½- ¾ ¾ -ê ì½- ò À² - 22,1% ¾ 5.316,8 ªœ- ó à ó 2005 ¾À ñ 6.492,2 ªœ- ó à (À»ø êó 15). º À ò ±¾ êñ Ïö À ô ê¼ Ã È GDP NY ñ ì Ä É 18,7%, À ò -±¾ -À ñ -À ò ó À² - 17,2% Àºö¾ 27,4% À ò ±¾ ½ -À ò ª¾-ªÈ¾ - ½-Àê À² - 24,1% -Àºö¾ 72,6% º º À ò ±¾ êñ Ïö (ì¾ ì½º¼ μ誾 Á¹ìÈ Ó ø : ê½ ¾ ¾ Á¹È ì¾ Source: Bank of the Lao PDR. 3. Deposits In recent years, commercial banks have persistently upgraded their service, pursued an appropriate interest rate on deposits, which resulted in increased saving mobilization. As of 2006, total amount of deposits in the entire banking system rose by 22.1 percent from the amount of 5,316.8 billion Kip in 2005 to 6,492.2 billion Kip in 2006 (see Figure 15). Total deposits in proportion to GDP accounted for 18.7 percent. Of which, Kip deposits were up by 17.2 percent and represented

24 ª½ì¾ êó 10). percent. Foreign currency deposits rose by 24.1 percent and accounted for 72.6 percent of total deposits (see further details in Table 10).»ø êó 15. ¾ ½¹ ¾ ªö º À ò ±¾ Figure 15. Deposit Growth Á¹ìÈ Ó ø : ê½ ¾ ¾ Á¹È ì¾ À ò ±¾ Äì ½ ªÒ¾ Ⱦ 12 À õº ìö ¾ À² 12,6% ê¼ Ã È ó 2005 Áì½ Àºö¾ 97,2% º º À ò ±¾ êñ Ïö, È À ò ±¾ Äì ½À ó 12 À õº Áì½ ªÔ Ⱦ 24 À õº À² 99,6% Áì½ Àºö¾ 2,8% º º À ò ±¾ êñ Ïö ê¼ Ã È ó 2005 (À»ø êó 16). Source: Bank of the Lao PDR. Short-Œterm deposits less than 12 months rose by 12.6 percent and above accounted for 97.2 percent of total deposits. Deposits over 12 months (but less than 24 months) rose by 99.6 percent and accounted for 2.8 percent of total deposits compared to 2005 (see Figure 16).»ø êó 16. À ò ±¾ Äì ½ ŒÄì ½ ¾ Figure 16. Short and LongŒTerm Deposits Á¹ìÈ Ó ø : ê½ ¾ ¾ Á¹È ì¾ Source: Bank of the Lao PDR. 19

25 4. ò À ô ê½ ¾ ¾ ê ì½ ò Ä ÉÃ¹É ò À ô À²ô ½ º È À í¾ã ¾ ²ñ ê½ ¾À «½ ò Œ ñ ö μè¾ ªÒÀ ô. à ó 2006, º À¹ìõº ò À ôã¹éá Ȳ¾ È À «½ ò º -ê -ì½ ö -ê½ ¾ ¾ ê ì½ ò μøèã ì½ ñ 3,414.2 ªœ ó À² 4,6% ê¼ Ã È ó 2005 Áì½ Àºö¾ 9,8% GDP NY (À»ø êó 17). à ; ½ ÁÎ ö À² 32,8%, ½ÁÎ ðìò ¾ À² 27,2%, ½ÁÎ ¾ ɾ À² 9,5%, ½ÁÎ º ¾¹½ Áì½ ¹ñ «½ À² 2,6% Áì½ ½ÁÎ ºˆ Å À² 15,5%. È ò À ôá È ½ÁÎ ½ ò Œ È¾Ä É ¹ì ìö 15,0%. à ½ ½ê ò -À ôá È ½ÁÎ º ¾¹½ Áì½ ¹ñ «½ Àºö¾ºñ ª¾ È 35,5% º ò À ôêñ Ïö, ¾ ɾ Àºö¾ 24,4%, ½ ò Àºö¾ 7,9%, ¾ Ò É¾ Àºö¾ 5,9% Áì½ ½ÁÎ ðìò ¾ Àºö¾ 4,7% (ì¾ ì½º¼ μø Ȫ¾ª½ì¾ êó 11). ¾ À¹ º ¾ ¹ì ìö º ò À ôã¹é ½ÁÎ ½ ò Œ È¾Ä É À ô ¾ ì½ ö ê½ ¾ ¾ ñ μøèã ½ ñ  ɾ ¼ ¾ ò À ô ê ì½ ò º øé øéμõ ùɹì¾.  Á Ã È ¾ ÄìÈì¼»ø êó 17. ¾ ½¹ ¾ ªö º ò À ô Figure 17. Credit Growth 4. Credit Commercial banks have persistently provided loans to boost socioœeconomic development. As of 2006, total amount of credit provided by the entire banking sector to all economic sector was amounted to 3,414.2 billion Kip, up by 4.6 percent compared to 2005, and accounted for 9.8 percent of GDP (see Figure 17). Of which, credit provided to transport rose by 32.8 percent, service by 27.2 percent, trade by 9.5 percent, industry and handicraft by 2.6 percent and other by 15.5 percent. While, loan provided to agriculture and forestry was down by 15 percent. The share of loans to economic sectors were 35.5 percent for industry and handicraft 24.4 percent, trade 7.9 percent for agriculture, 5.9 percent for construction and 4.7 percent for service in proportion of total loans(see further details in table 11). The reason behind credit slowdown to agriculture and forestry was due to the present condition of banking system was in the process of improving in credit management, aiming at viable and commercialœoriented basis. h 20 Á¹ìÈ Ó ø : ê½ ¾ ¾ Á¹È ì¾ Source: Bank of the Lao PDR.

26 5 ºñ ª¾ º À É Ã ó 2006, ñ ¾ê½ ¾ ¾ ê ì½ ò Ä É ó ¾ ñ ñ ºñ ª¾ º À É À ò ±¾ º ªö Ã¹É ø À ôê¼ Ã Èêɾ ó 2005 ê Ⱦ ¾ (À»ø êó 18).  ½ÀìÈ ÁìÉ ºñ ª¾ º À É À ò ±¾ ö 12 À õº, ìñ À ò ó À² ¾ 10,5% à 2005 ¾À ñ 11,0% à ó 2006, ìñ À ò Â ì¾ ½¹½ìñ À² ¾ 1,1% ¾À ñ 2,5% Áì½ ìñ À ò ¾ À² ¾ 1,1% ¾À ñ 2,0%. à Äì ½ ¼ ñ. ¾ ñ ºñ ª¾ º À É À ò ±¾ º ê½ ¾ ¾ ê ì½ ò (êñ À ò ó Áì½ À ò ª¾ ªÈ¾ ½Àê ) À²ôùÉÁê ÀϾ½ ñ ½²¾ À «½ ò ²¾ à ½Àê Áì½ ½²¾ ºñ ª¾ º À É ¾ ö. 5 Interest Rate By 2006, commercial banks had adjusted their interest rates on deposits with more positive return compared to 2005 (see Figure 18). On average, interest rates on 12Œmonth deposits for Kip rose from 10.5 percent in 2005 to 11.0 percent in 2006, interest rates on dollar deposits were up from 1.1 percent to 2.5 percent, and Baht rose from 1.1 percent to 2.0 percent over the same period. Commercial banks adjusting their interest rate on deposits (both Kip and foreign currency deposits) were made in line with the domestic economic condition and international interest rates.»ø êó 18. ºñ ª¾ º À É ½ÀìÈ À ò ±¾ ö 12 À õº Figure 18. Average 12months Deposit Rate Á¹ìÈ Ó ø : ê½ ¾ ¾ Á¹È ì¾ Source: Bank of the Lao PDR. ºñ ª¾ º À É À ò ±¾ ó ö 12 À õº ½ÀìÈ Ïö ó ÈÃ ì½ ñ 11,0% ìñ À ò ó Áì½ À ôê¼ Ã Èºñ ª¾À ò À³š à ó 2006 À¹ñ Ⱦ: ºñ ª¾ º À É À ò ±¾ ê ÁêÉ ò À ñ À ò ó «õ Ⱦ ñ À ñ 4,2% à ó 2006, ½Á Ã¹É À¹ñ Ⱦ ¾ ±¾ À ò ó ñ ó ö ªº Áê ê À ñ Á È On average, interest rate on term deposits 12 months was 11.0 percent for Kip and remained positive in real term about 4.2 percent compared to inflation rate at 6.8 percent in 2006, suggesting that return on Kip deposits continued to yield positive rate 21

27 øé±¾ À ò. ºñ ª¾ º À É À ò øéäì ½ 12 À õº ê ì½ ö ê½ ¾ ¾ ê ì½ ò Á È Ä É»ñ ¾ ñ, ª¾ À ô Ä º ªí êô ê ì½ ö Áì½ ¾»¼»Éº ªÉº ¾ ½²¾ À «½ ò. ºñ ª¾ º À É À ò øé ö 12 À õº ½ÀìÈ ê ì½ ö ê½ ¾ ¾ ê ì½ ò (À»ø êó 19) ìñ À ò ó ¹ì ìö ¾ ì½ ñ 21,1% à ó 2005 ¾À ñ 19,0% à 2006; À ò Â ì¾ ½¹½ìñ ¹ì ìö ¾ 11,5% ¾À ñ 10,4% Áì½ À ò ¾ ¹ì ìö ¾ 12,5% ¾À ñ 11,2%. È ªÈ¾ ì½¹ Ⱦ ºñ ª¾ º À É À ò ±¾ Áì½ À ò øé ö 12 À õº ½ÀìÈ Ïö ó 2006 À õº Ⱦ ö ê ìñ À ò ó õ: ¾ ì½ ñ 8,2% ¾À ñ 8,3% Áì½ ¹ì ìö ¾ 10,7% ¾À ñ 9,6% ìñ À ò Â ì¾ ½¹½ìñ. to depositors. Lending rates of banking system for 12 months were adjusted in line with the cost of fund and the need of economic conditions. On averages, interest rates on lending for 12 months of entire banking system were down from 21.1 percent in Kip in 2005 to 19.0 percent in 2006, 11.5 percent to 10.4 percent in US dollar and 12.5 percent to 11.2 percent in Thai Baht. The spread between deposit rates and lending rates for 12 months was on average almost constant such as 8.2 percent to 8.3 percent in Kip and dropped from 10.7 percent to 9.6 percent in US dollar.»ø êó 19. ºñ ª¾ º À É ½ÀìÈ À ò øé ö 12 À õº ìö ¾ Figure 19. Average 12months Deposit Rate Á¹ìÈ Ó ø : ê½ ¾ ¾ Á¹È ì¾ Source: Bank of the Lao PDR. 22

28 6. ½Â ¾ À ò ª¾ À²ô ½ º È À í¾ã ¾ ñ ª ½ªò ñ Á ²ñ ê½ ¾À «½ ò Œ ñ ö à ö ó 2006 Œ2007 ùÉÀ «½ ò ½¹ ¾ ªö 7,5Œ8%, ºñ ª¾ À ò À³š μøèã ì½ ñ Î ªö Àì Áì½ ºñ ª¾Áì ȼ ó ¾ ½¹ ö, ê¹ì Ä É ¾ ¾ Ͼ øé ö ê¾ É¾ À ò ª¾ º ªö À²ôÁ Ã È É º M 2 À² ÒÀ ó 18,0% ¹ìõ Àê ¾ ñ 17,4% º GDP, É ¾ «¾ À ò ª¾À² ÒÀ ó 14,0%,»ñ ½ ñ ñ»º À ò ª¾ªÈ¾ ½Àê ¾ ¾ É ¾ À í¾ ò ɾ¹ì¾ Ⱦ 4 À õº. õ ªÒ É º ñ ²ñ ê½ ¾ì½ ö ê½ ¾ ¾ ùÉÀ Á Ï ö Áì½ É¾ Ä øè ¾ êñ ½ÄÏ.  ºó Ã È ½²¾ ªö ò º ½²¾ À «½ ò ²¾ à Áì½ ¾ ö, ê¹ì Ä É À ó ½Â ¾ À ò ª¾ Á Ⱥ ¾ Â Ä É ñ ¹ì ºñ ª¾À ò Á»±¾ ñ ñ - ¾ -ì½ ñ 8% ¾À ñ 5% ìñ -À ò ±¾ À ñ -À ò - ó Áì½ 15% ¾À ñ 10% ìñ -À ò ±¾ -À ñ -À ò -ª¾ªÈ¾ ½Àê. øéã¹éê½ ¾ ¾ ê ì½ ò ó ¾ øéμõ À ñ Áì½ ñ êñ ½ À ò ó Áì½ À ò -ª¾ªÈ¾ ½Àê À²ôÁ ÉÄ ½²¾ Ⱥ, Ä É À ó ª½¹ì¾ œœ ¾ ²ñ ê½ ñ À²ô ȼ ö ½ ¾ Áì½ Á ÉÄ ½²¾ Ⱥ ùÉÁ Èê½ ¾ ¾ ê ì½ ò Áì½ ê½ ¾ ¾ ê ì½ ò ñ ºñ ª¾ º À É Ã¹ÉÁê ÀϾ½ ñ ½²¾ À «½ ò ²¾ à Áì½ ºñ ª¾ º À É ¾ ö. 7. ½Â ¾ ºñ ª¾Áì ȼ ê¹ì Ä É õ ªÒ ö ºñ ª¾Áì ȼ ºÉ¾ ºó ½ ñ À²ôùÉê½ ¾ ¾ ê ì½ ò à ÉÀ ñ Ⱥ ºó à ¾ ö ºñ ª¾ œœ ¾ º ªö À²ô»ñ ¾ ½ «¼ ì½²¾ ê¾ É¾ ºñ ª¾Áì ȼ ÁªÈì½Äì ½. 6. Monetary Policy To contribute to the implementation of a socio-œeconomic development plan for Œ2007, aiming at economic growth of 7.5Œ8 percent, a single digitœinflation rate and sound and stable exchange rate, BOL in response set its monetary target to maintain the growth of M2 no more than 18.0 percent or equal to 17.4 percent of GDP by limiting the growth of monetary base not exceeding 14 percent; ensure the level of international reserve equivalent to more than 4 months of imports; continue to reform and strengthen the banking system toward financial soundness and modernization. On the basis of the real internal and external economic conditions, BOL had relaxed its monetary policy by reducing reserve requirement ratio from 8 percent to 5 percent for Kip and from 15 to 10 percent for foreign currency deposits; encouraged the active operation of Interbank market, including Kip and foreign currency to address shortœlived liquidity problem and conducted open market operations to help support fiscal balance as well as overcome the shortage of liquidity of commercial banks; and encouraged commercial banks to adjust their interest rate consistently with the domestic economic conditions and the level of international interest rates. 23

29 ²Éº ñ š ÒÄ É À ó ¾ Á Á ª½¹ì¾ œœ ¾ À ò ª¾ªÈ¾ ½Àê μè¾ À ñ ö ½ªò À²ô»ñ ¾ ½«¼ ì½²¾ ê¾ É¾ ºñ ª¾Áì ȼ à ÁªÈì½ Äì ½, ê¹ì - õ -ªÒ- À ó ½Â ¾ ºñ ª¾Áì ȼ ª¾ - ö -Ä -ª½¹ì¾ -ê - ó- ¾ - É - º º ìñ  ¾ ðìò¹¾ È ªÈ¾ ì½¹ Ⱦ ºñ -ª¾-ê½- ¾- ¾ ê ì½ ò ñ ª½¹ì¾ ÒùÉ-À ó 0,5%, Ä É õ ªÒ ö ºñ ª¾Áì ȼ ºÉ¾ ºó ½ ñ À²ôùÉê½ ¾ ¾ ê ì½ ò à ÉÀ ñ Ⱥ ºó à ¾ ö ºñ ª¾ œœ ¾ º ªö à º À õ: ºñ ª¾ ¾ ó /Â ì¾ Ò À ó ±0,25% º ºñ ª¾ ¾ Áì½ È ªÈ¾ ¾ œœ ¾ ÒÀ ó 1,15%.»ø êó 20 ½Á ùÉÀ¹ñ È ªÈ¾ à ó 2006 μøèã ì½ ñ ½ÀìÈ 0,3% ìñ À ò ó / ì¾, À Àê ¾ ñ ñ ì½ ñ ¼ º ó à ó 2006,  ì ÁìÉ À ò ó Á Ⱦ 10,3% À ôê¼ Ã ÈÀ ò Â ì¾ ½¹½ìñ. À à ºñ ª¾ ½ÀìÈ ûõœ ¾ À ò ó ñ À ò Â ì¾ ½¹½ìñ μøè Ã ì½ ñ ,1 ó /Â ì¾ ìñ ºñ ª¾ª½ ¹ì¾ Áì½ ,3 ó /Â ì¾ ìñ ºñ ª¾ê½ ¾ ¾ (ì¾ ì½º¼ μø誾ª½ì¾ êó 15). ¾À¹ ê ²¾Ã¹ÉÀ ò ó ó ¾ Á Ⱦ À ôê¼ ñ À ò ª¾ ªÈ¾ ½Àê (À ò Â ì¾ ½¹½ìñ ) Á È Éº óì¾»ñ ¾ ¾ ºº ÒÁ»È, ¾ êèº êè¼ Áì½ ¾ ĹìÀ í¾ º À ò ìö êô ¾ ªÈ¾ ½Àê (FDI) Áì½ º ¾ š ñ Ä É»ñ Á» øé ¾ ê¹ì ê ¾ ¾ õ ªÒ»ñ ¾ ½«¼ ì½²¾ º À ò ª¾. 7. Exchange Rate Policy BOL continued to set a daily reference rate to serve as basis for commercial banks in setting their buying and selling rates intended to maintain a stable exchange rate from time to time. In addition, necessary intervention in exchange market was carried to moderate the fluctuation of exchange rates. BOL has continued to employ a managed float system by managing the difference between the commercial bank rates and parallel market rate not exceed 0.5 percent, BOL continued to set a daily reference rate to serve as basic for commercial banks in setting their buying and selling rates within the range such as buying rate Kip per US$ less than ±0.25 percent of Mid-Œrate and spread for buying and selling rate no more than 1.15 percent. Figure 20 shows the difference in 2006 at 0.3 percent on average for Kip per US dollar which was at the same level of the year In Kip generally appreciated 10.3 percent against US dollar. The average exchange rate Kip/US (buying and selling rate) was in the range between 10,171.1 Kip/US$ for the market rate and 10,138.3 Kip/US$ for the commercial bank rates. (see table 15). The causes of Kip appreciation against foreign currency (US Dollar) were driver by revenue of mining, tourism and the capital inflows of FDI. In addition, it was also supported by the monetary stability maintained by BOL. 24

30 »ø êó 20. ºñ ª¾Áì ȼ Figure 20. Exchange Rate Á¹ìÈ Ó ø : ê½ ¾ ¾ Á¹È ì¾ Source: Bank of the Lao PDR. 8. ¾ ñ  ɾ ê½ ¾ ¾ -ê ì½- ò -ìñ ²¾ Íñ -ê -Ä É- -À ó - ¾ - ñ ì½ ö -ê½ ¾ ¾ ñ -ÁªÈ-ªí - È - ó À ñ ªí - ¾, ½-ÁÎ - ¾ -ê½ ¾ ¾ Ä É- ó- ¾ -À ô -Ĺ -Ä -à -êò -ê¾ μè¾ ª Îɾ- È ¾À ¾ ñ -ÁªÈ- ½- ¾ - ñ  - ɾ - Áì½ ì ªö -ê½ ¾ ¾ -ê ì½- ò -ìñ Ä É-Àì - - à - ¾ ó Áì½ ªí È - ó Â ó ½ ö -À²ô-Àªí¾-» - ɺ - ìñ ê¾ - ɾ -êô»º -Áì½ ò ¾- ¾,- ²Éº -êñ Á É-Ä ½²¾ ¾ À ò º ê½ ¾ ¾ -ê ì½- ò -ìñ Áì½ ¼ - ¾ -ê -²í - À -à - ½-ÁÎ - ¾ ê½ ¾ ¾ ½-Á -ºº - õ: À í¾ì ÁìÉ, ê½ ¾ ¾ -ê ì½- ò -Ä É- ó- ¾ ñ -Ä - øè- ½²¾ -ÃÏÈ -À ½-Á -ºº - õ: ñ - ò - º ê½ ¾ ¾ ê ì½- ò -À² - -Áì½ ó- ½ ²¾- ó Ⱦ-À ¾(À»ø ê 21)À ñ ªí ò -À ô ó- - ½²¾- -Áì½ Îš ò - Ò-À ó - º -ºº - ö -μøè-ã ì½ ñ - ªÔ (2Œ3%) ìñ -À ò - øé-ê - Ⱥ -ÃÏÈ º ê½ ¾ ¾ ê ì½- ò -ìñ. êô»º -Ä É-À² - -À«ò - Ⱦ- ñ - Ò-êñ -²¼ ²ð  ½À²¾½ ê½ ¾ ¾ -ê ì½- ò -ìñ Ò-Ä É-»ñ - ¾ - 8. Restructuring StateŒOwned Commercial Banks Following the reform of the banking system initiated in late 1980, the banking sector, (especially stateœowned commercial bank) has demonstrated an better performance following the retructuring and consolidation of stateœowned commercial banks in Mid Œ 1990s and early 2000s, which aimed at consolidating the capital and technical strenght of SOCBs and addressing capital loss of SOCBs. The silient features of banking performance can be demonstrated as follows. In general, the commercial banks have improved to a new level of quality as indicated by the growth of assets and better quality especially (see figure 21) quality of lending and levels of NPL can be restricted (2-Œ3 percent) for new lending of SOCBs. The bank capital gradually increased although remained insufficient. In particular, 25

31 - ½ º êô ÃÏÈ-ÁìÉ ªœ ó. -à - ê½ ¾ ¾ - ¾ ɾªÈ¾ ½-Àê ì¾ ó- 227 ªœ ó -Áì½ ê½ ¾ ¾ ²ñ ê½ ¾ì¾ 123 ªœ ó. Κ- ò Ò-À ó - º -ºº - ö ê -ªò - ɾ - ¾-¹ì¾ ó -Ä É-»ñ - ¾ -Á É-Ä - -²œ «¾ ¾ -»º -Κ-À ½ªò ñ Ä É-μȾ -Àªñ È -. ¾ - ðìò¹¾ - º ê½ ¾ ÄÏ ñ Ã É ¾ ö ; -, -À ñ ªí - ¾ - ñ -ì½ ö ICT, ¾ - ðìò ¾ ªøÉ ATM ( 35 ÎÈ ) ¾ Ä É-»ñ - ¾ - ñ -Áì½ É¾ -À í¾- øè- ¾ -êñ - ½- ¾ -º -À ò - È ì½-¹ Ⱦ - ½-Àê ê - Ⱥ -Ä -êñ -Ã.- à - - ó- ÒÅ ¾ š- (2006Œ2007) ÒÄ É ó ¾ ö ì½ ñ ìñ «½ ñ ñ Ⱦ É ê½ ¾ ¾ ê ì½ ò ¾ À ñ ö Ͼ Ⱦ É ê½ ¾ ¾ ê ì½ ò. ¾ ¾ ñ Ⱦ Ä ÉÀ»ñ Ã¹É ( ½À²¾½ ê½ ¾ ¾ ê ì½ ò ìñ ) Àì À ñ À í¾ªö Àº Áì½ ¾ À ô Ĺ º ñ ¾ê½ ¾ ¾ -ê ì½- ò - ó- -Äì. Ä - ¼ - øè- ñ - ¼ - ¾ - Ⱦ ê½ ¾ ¾ - -À ó - ½ ò - Ò- Ä É- ó- ¾ - ñ - - ɾ ª¾ -êò - ¾ ¹ñ -Ä - øè ¾ - ÄìÈ-ì¼ -ê ì½- ò μè¾ -Àªñ - È, ²Éº - ¼ - ñ š -À²ô- ½ º - È -Á É-Ä ¾ ê - ¾ º ½- ¾- ö ì¾ - ñ ¾-À ¾ Ò-Ä É- ó- ¾ - ɾ ª ê½ ¾ ¾ - ½- ¾ -à -ªí - ó  - ¼ - ¾ -À ò - øé- ½- ¾ êñ -Ïö Ä É-«õ -Á -μè¾ - ¾ -ªö ¾ -ê½ ¾ ¾ - -À ó - ½ ò -à -À ô- Ⱥ.»ø êó 21: ªö Àì š º ê ñ º ½ÁÎ ê½ ¾ ¾ (%) state commercial banks were recapitalized with an amount of 350 billion Kip. In which BCEL and LDB were responsible for 227 billion Kip and 123 billion Kip respectively. Long- Œstanding issue of NPL was basically resolved and loss provision was fully made. The banking operations was upgraded and moved forward to modernization. These included improvement of ICT system, introduction of ATM services (35 units), international express money transfer or remittances. In recent years, (2006-Œ2007) Decree Law on commercial banks was upgraded into law. Through a series of reform effort, bank performance (SOCB particular) has begun to take of ownership and thus recorded a profit. In parallel, Agriculture Promotion Bank has been reformed in the spirit of commercialisation. In addition, to contribute to poverty reduction Nayoby Bank was established in the first half of 2007 in which all policy lendings were separated from APB. Figure 21: Key Indicators of Banking Performance Total deposit /GDP Total Credit /GDP Total Asset /GDP NPL /Total Credit M2/GDP Á¹ìÈ Ó ø : ê½ ¾ ¾ Á¹È ì¾ Source: Bank of the Lao PDR. in

32 IV. ²¾ À «½ ò ñ ªÈ¾ ½Àê 1. ½²¾ À «½ ò º Âì. à ó 2006, À «½ ò Âì ½¹ ¾ ªö μøè Ã ì½ ñ 5,4% À ø ¾ 5,3% º ó 2005 (ª¾ ¾ ¾ ½À Á È 4,9%). ¾ À¹ ê ²¾Ã¹É À «½ ò Âì ó ¾ ½¹ ¾ ªö À² Á È Éº ¾ ¾ ¾ ÀÎñ ªó º ì½ ñ ì¾ ¾ Õ ñ ò à ª½¹ì¾ Âì óêè¾ºè¼ ¹ì ìö, ºñ ª¾ ¾ ɾ ¾ ñ õ ªÒ ½¹ ¾ ªö μè¾ ªÒÀ ô. º ¾ š ñ Ä É»ñ ö ½êɺ ºñ ó ¾ ¾ ½¹ ¾ ªö À «½ ò º ½¹½ìñ º¾ìò ¾  ½À²¾½ ½ÁÎ ê ì½ ò ɾ ñ ñ ó ¾ ½¹ ¾ ªö. ¾ ½¹ ¾ ªö ø º À «½ ò Âì À ó ì½ ñ ¾ ½À Ä É Á È Éº ¾ ²ñ ê½ ¾À «½ ò Áì½ ê ì½ ê¾ É¾ À «½ ò º Âì  ½À²¾½Á È º ñ ¾ ½Àê ê ìñ ²ñ ê½ ¾ ½¹ ¾ ªö Á» Áì½ ø Ⱦ ¾ ¾ ½À Ä É. À ñ ªí Á È ºñ ª¾ ¾ ½¹ ¾ ªö À «½ ò ó ø À«ò 10,7% ¾ 10,4% Ã ó ¾ ½ìò º ¾¹½ º Âì Ä É³œ ªö õ, ½ÁÎ ðìò ¾ ñ õ ªÒ ½¹ ¾ ªö Á», ø Ⱦ ¾ ɾ óºñ ª¾ ½¹ ¾ ªö Ã ì½ ñ 9,2% ¾ 7,4% à ó 2005, ¾ À ôï º øé ðìò ² Áì½ Ã ª½¹ì¾ Á» ¾, ¹ö ÎÈ ê ì½ ò ɾ ¾ ðìò ¾ À² ø,  ½À²¾½ È ½ Àê ºóμø, À ñ ªí Á È ½Àê Àμ ì½ ñ Ä É ñ ½ÁÎ ¾ ðìò ¾ Áì½ ºñ ª¾ ¾ ɾ ¾ ²¾ à ½Àê ø À ô ¾ Ä ÉÀ ñ À í¾²¾ ¾ ñ ¾ Á È ñ òì¾àª½ ¾ Âì à ó 2006 (ºó ª¾ ¾ ì¾ ¾ º IMF). ¾ ñ ª ½ªò ñ ½Â ¾ À ò ª¾ º ½ Àê ªÈ¾ Åà Âì ó õ: ½¹½ìñ Ä É ó ¾ ºñ IV. External Sector 1. Overview of the World Economy In 2006, global economy continued to expand at 5.4 percent, slightly up from 5.3 percent of 2005 (projected rate 4.9 percent). The continued economic growth was explained by tendency of oil price reduction in the world market. Employment rate continued to be low. In addition, favorable environment was supported by a continued economic growth in US, especially the growth of real estate sector. The unexpectedly high economic growth of the world economy was due to an advanced level of economic development and active economic transactions in the glove, especially the robust economic growth of developing economies such as a remarketable economic growth of China, rose from 10.4 percent in 2005 to 10.7 percent, the recovery of world industry, strong growth in service sector, strong growth of world trade volume from 7.4 percent to 9.2 percent during the same period; confidence of consumer and labor market, continued growth in business unit in service sector, (EU in particular). For example, Germany, the host of world cup 2006, had improved service sector and indicated high employment rate (IMF report). In terms of conducting monetary policy in the rest of the world US increased interest 27

33 ª¾ º À É ½Â ¾ ¹ì¾, à À õº ðì½ ö 2006 ê½ ¾ ¾ ¾ È Ä É ñ ºñ ª¾ º À É ¾ 0% ¾À ñ 0,25%. È ê½ ¾ ¾ ¾ ºóμø, ºñ ò Áì½ ê½ ¾ ¾ ¾ ½Àê ªÈ¾ Å Ã È ºóμø Á È ñ õ ªÒ»ñ ¾ì½ ñ ºñ ª¾ º À É Ä É õà ¾. Ⱦ À ò Â ì¾ ½¹½ìñ óêè¾ºè¼ ºÈº Ⱦìö À ô ¾ ª½ ¹ì¾ À ò ª¾ªÈ¾ ½Àê ñ ó ¾ ñ ö ªÒì½ ñ ¾ ¾ ö ½ ¾ Áì½ ¾ ¾ ¾ ì½ ö ½ªò ñ ªÈ¾ ½Àê º ½¹½ìñ õ ªÒÀ² ø. ºñ ª¾À ò À³š º ñ ¾ ½Àê ªÈ¾ Åà Âì ó êè¾ºè¼ ¹ì ìö,  ½À²¾½ ºñ ª¾À ò À³š º ñ ¾ ½Àê ê ìñ ²ñ ê½ ¾ ¹ì ìö ¾ ì½ ñ 5,4% ¾À ñ 5,3% à ó ¾À¹ ¹ìñ Á È ¾ ¾ ¾ ¹ì ìö º ì¾ ¾ Õ ñ ò Ä É ö À»ñ ùÉÀ «½ ò Áì½ ºñ ª¾ ¾ ɾ ¾ ½¹ ¾ ªö ø ¾ - -ì½ ñ ªÈ¾ ½Àê. - ¾ - ì½ ñ ªÈ¾ ½Àê ñ õ ªÒÀ ó ªÒÀ ô, À à - ó 2006 À ó - 97,3 ìé¾ - -ì¾ (À»ø êó 22) ö Ã¹É ñ»º À ò ª¾ªÈ¾ ½Àê À² 40,8% ê¼ Ã È ó 2005 Áì½ ó º À¹ìõº ¾ ¾»ñ ½ ñ ¾ À í¾ 3,8 À õº (ì¾ ì½ º¼ μø誾ª½ì¾ êó 12). ¾ ì½à ò - ö ½ªò-à ó 2006 À ó μøèã ì½ ñ 41,3 ìé¾ Â ì¾ ê¼ Ã È ó 2005 À² 121,4% Áì½ Àºö¾ 1,2% º GDP NY. ¾ ì½ ö ½ªòê Òì À ò º º ìñ «½ ¾ ¾ μøèã ì½ ñ 26,2 ìé¾ Â ì¾. - ñ ó-êô - Áì½- ¾ -À ò -À ó - 229,9 ìé¾ Â ì¾ Áì½ Àºö¾ 6,6% º GDP NY. Ã, À ò ìö êô  ö - ¾ -ªÈ¾ ½-Àê - ó 187,3 ìé¾ Â ì¾ Áì½ À ò -ìö êô -ºˆ Å ó 42,6 ìé¾ - ì¾. rate many times. In July 2006, BOJ also adjusted zero interest rate to 0.25 percent. European Central Bank, England, and other central banks maintained the level of interest rate as usual: US dollar tended to be depreciated as the result of some concerns of continued budget deficit and current account deficit. Inflation rates in various countries had a tendency to drop, especially in developing countries; down from 5.4 percent to 5.3 percent in The reason behind was the price reduction of crude fuel, resulting to high economic growth and employment rate. 2. Balance of Payments The balance of payment continued to be in surplus with amount of US$ 97.3 million (see Figure 22) resulting in increase in international reserve by 40.8 percent, and can now be covered 3.8 months of imports (see further details in table 12). Current account showed a surplus of US$ 41.3 million, up by percent and accounted for 1.2 percent of GDP. Current account deficit (excluding government transfer) was amounted to US$ 26.2 million. Capital and financial account was US$ million and accounted for 6.6 percent of GDP. Of which, foreign direct investments were amounted to US$ million and other was US$ 42.6 million. 28

34 »ø êó 22. ¾ ì½ ñ ªÈ¾ ½Àê Figure 22. Balance of Payment Á¹ìÈ Ó ø : ê½ ¾ ¾ Á¹È ì¾ Source: Bank of the Lao PDR. 3. ¾ - ɾ-ªÈ¾ - ½-Àê 3. Foreign Trade In 2006, the total volume of trade was à ó 2006, ø - Ⱦ- ¾ - ɾ- ñ -ªÈ¾ - ½-Àê amounted to US$ 1,942.2 million, up by 35.3 º ì¾ μøèã ì½ ñ 1.942,2 ìé¾ Â ì¾ percent with an amount of US$ 1,435.1 ½¹½ìñ À² 35,3% ¾ ì½ ñ 1.435,1 million in 2005 (see figure 23), and accounted ìé¾ Â ì¾ ½¹½ìñ à ó 2005 (À»ø êó 23) for 55.7 percent of GDP and 50.7 percent in Áì½ - -Àºö¾ 55,7% º GDP NY, À à 2005 (see further details in table 13) Àºö¾ 50,7% (ì¾ -콺¼ -μø誾ª½ì¾ ê 13).»ø êó 23. ¾ ɾªÈ¾ ½Àê Figure 23. Foreign Trade ø Ⱦ ¾ ºº À² - 59,5% (À»ø êó 24) ¹ìõ ¾- ì½ ñ 553,1 ìé¾ - -ì¾ ½¹½ìñ à ó 2005 ¾À ñ 882,1 ìé¾ - -ì¾ ½¹½ìñ - Áì½ Ó ø ¾ : ê½ ¾ ¾ Á¹È ì¾ Source: Bank of the Lao PDR. Total exports rose by 59.5 percent (see figure 24) or amounted to US$ million in 2005 to US$ million and accounted for 29

35 Àºö¾ 25,3% GDP NY. ½ÁÎ ¾ ªí ªðê 25.3 percent of GDP. Major sector boosting À»ñ Ã¹É ¾ ºº À² ó: ½ÁÎ º ¾¹½ export growth were mining industry up by ÒðÁ»ÈÀ² 130,0% ¾ ì½ ñ 216,6 ìé¾ Â ì¾ ½¹½ìñ à ó 2005 ¾À ñ 498,8 ìé¾ Â ì¾ ½¹½ìñ, ½ÁÎ ªñ ¹ ò À² 15,0% ¾ 110,8 ìé¾ Â ì¾ ½¹½ìñ ¾À ñ 127,5 ìé¾ Â ì¾,- ij³É¾ À² 2,7% ¾ 98,5 ìé¾ Â ì¾ ¾À ñ 101,2 ìé¾ Â ì¾. ø Ⱦ ¾ - -À í-¾à² - ¾ 882,0 ìé¾ Â ì¾ ½¹½ìñ à ó 2005 ¾À ñ 1.060,2 ìé¾ percent, rising from US$ million in 2005 to US$ million, garment by 15.0 percent, a rise from US$ million to US$ million, electricity by 2.7 percent, an increase from US$ 98.5 million to US$ million. Total import rose from US$ million in 2005 to US$ 1,060.2 million in 2006 or up Â ì¾ ½¹½ìñ à ó 2006 ¹ìõ À² 20,2% by 20.2 percent and accounted for 30.4 ê¼ Ã È- ó 2005 Áì½ Àºö¾ 30,4% º percent of GDP. Major components of imports GDP NY.  ½ º ªí ªð ê À»ñ Ã¹É ¾ À í¾ were investment goods with an amount of À² ó ò - ɾ-À²ô- ¾ -ìö -êô ó ø Ⱦ 495,6 US$ million, a rise of 27.3 percent, ìé¾ Â ì¾, À² 27,3% ò ɾº ½Â² Œ ðìò consumption goods with an amount of US$ ² 440,2 ìé¾ Â ì¾, À² 10,4%,- ò ɾ million, up by 10.4 percent, raw ñ «ò À²ôº ¾¹½ ªñ ¹ ò 98,7 ìé¾ Â ì¾, À² 46,4% (ì¾ ì½º¼ μø誾ª½ì¾ êó 13). materials for garment with the amount of US$ 98.7 million, up by 46.4 percent, (see further details in table).»ø êó 24. ¾ ½¹ ¾ ªö º ¾ ºº Œ À í¾ Figure 24. Growth Rate of ExportŒImport Á¹ìÈ Ó ø : ê½ ¾ ¾ Á¹È ì¾ Source: Bank of the Lao PDR. 30

36 4. ¾ ɾ- ñ ªÈ¾ - ½-Àê ¾ ¾ ¾ ɾ ñ ªÈ¾ ½Àê º ì¾ ñ õ ªÒ ¾ μøèã ì½ ñ 178,2 ìé¾ Â ì¾ ½¹½ìñ ¹ì ìö 45,8% À ôê¼ Ã È 2005 (¹ì ìö ¾ ì½ ñ 328,9 ìé¾ Â ì¾ ½¹½ ìñ à ó 2005) (À»ø êó 25) Áì½ Àºö¾ 5,1% º GDP NY. º ¾, -ì¾ -Ä É- êò ¾ μøèã ì½ ñ 60,0 ìé¾ -Â ì¾ ½¹½ìñ ¹ì ìö 23,7% ê¼ Ã È ó ðìò ¾ - êò À ó 152,9 ìé¾ - -ì¾ ½¹½ìñ À² 3,3% ê¼ Ã È ó 2005 Áì½ À ò º êò À ó 126,6 ìé¾ - -ì¾ ½¹½ìñ À² 88,6% (ì¾ ì½º¼ -μø誾ª½ì¾ êó 12). ¾À¹ º ¾ À ó ðìò ¾ Á È Éº óì¾»ñ ¾ ¾ êèº êè¼ Áì½ ñ óà ò º ¾ ²¾ ìñ «½ ¾ Áì½ Àº ½ ö ûø À ò È À¹ìõºìɾ ¾ ªÈ¾ ½Àê. 4. Foreign Trade Balance Trade balance remained in deficit in the amount of US$ million, down by 45.8 percent compared with 2005 (a drop from US$ million in 2005) (see figure 25), and accounted for 5.1 percent of GDP. In addition, factor income (net) was in deficit of US$ 60 million, down by 23.7 percent compared to Service (net) was in surplus of US$ million, a rise of 3.3 percent compared to 2005 and transfer (net) surplus with US$ million, up by 88.6 percent (see further details in table 12). The reason behind the surplus in service was mainly contributed by incomes from tourism and official and private transfer (net) in the form of foreign aid.»ø êó 25. ¾ ɾ Figure 25. Trade Balance à ó 2006 ì¾»ñ ¾ ¾ êèº êè¼ ó êñ Ïö 173,2 ìé¾ Â ì¾ À² 18,0% À ôê¼ Ã È ó 2005 Áì½ Àºö¾ 5,0% º GDP NY,  ì ñ êèº êè¼ êñ Ïö 1,2 Á¹ìÈ Ó ø : ê½ ¾ ¾ Á¹È ì¾ Source: Bank of the Lao PDR. In 2006, receipt from tourism was amounted to US$ million with the number of tourists of 1.2 million, and accounted for 5.0 percent of GDP. Of which, 31

37 ìé¾ Àêô ö. à ½Àê ê ºñ ª¾ È ¹ì¾ ȾÏøÈ Á È ¾ ¾ ½Àê È º¾ ¼ À² 12,3% ê¼ Ã È ó 2005 Áì½ Àºö¾ 73,4% º ñ êèº êè¼ êñ Ïö,  ½À²¾½Á È ñ êèº êè¼ ¾ ½Àê Äê Àºö¾ 55,6% º êñ Ïö ¹ìõ À² 12,0% ê¼ Ã È ó º ¾ Á È ¾ ¾ ½Àê È ºóμø Àºö¾ 11,4% Áì½ À² 5,8% À ôê¼ Ã È ó 2005, À ñ ªí Á È ¾ ½Àê ±ì Áì½ Àμ ì½ ñ ºñ ª¾ È ¹ì¾ È ¾ÏøÈ (À»ø êó 26). tourism from ASEAN was the highest ratio of 12.3 percent rise compared to 2005, and accounted for 73.4 percent of total number of tourists. The tourists from Thailand accounted for 55.6 percent of total number or rose by 12.0 percent. The rest was from EU, accounting for 11.4 percent and rose by 5.8 percent. Of which, tourists from France and Germany were accounted the largest proportion.»ø êó 26. ªö Àì º ñ êèº êè¼ ê À í¾ ¾ ì¾ Figure 26. Number of Tourist Arrivals to Lao PDR Á¹ìÈ ðü ǿ : ºö ¾ êèº êè¼ Á¹È ¾ Souce: Lao National Tourism Administration 5. Κ ò ªÈ¾ ½Àê êé¾ - ó 2006, º -Κ- ò -ªÒªÈ¾ - ½-Àê º - - -ì¾ ó 2.470,6 ìé¾ - -ì¾ ½¹½ ìñ, À ô-ê¼ Ã È- ó À² - 11,8% ¹ìõ- Àê ¾ ñ 71,0% º - GDP NY (À»ø êó 27). à -, 74,5% Á È Îš ò Äì ½ ¾ Á Ⱥ ñ - Á ¹ì¾ ±È¾ ¾ ºö - ¾ - ñ -ª - ¾- ö -À : ê½ ¾ ¾ Âì (WB), ê½- ¾- ¾ -²ñ -ê½- ¾-º¾- ó (ADB) Áì½ ºö ¾ º êô ¾ À ò ì½¹ Ⱦ ½Àê (IMF). È À¹ìõºÀ ñ ΚÁ º ±È¾ (ì¾ ì½º¼ -μø誾ª½ì¾ êó 14). 5. External Debts As of endœ2006, total outstanding of foreign debts of Lao PDR was amounted to US$ 2,470.6 million, up by 11.8 percent or equal to 71.0 percent of GDP (see figure 27). Of which, 74.5 percent was responsible for concessional long-œterm debts in the form of multilateral commitments with international financial institutions, mamely the World Bank, Asian Development Bank and International Monetary Fund. The rest was bilateral debts 32

38 à ó 2006, ì¾ Ä É ì½îšá ȪȾ ½Àê 49,1 ìé¾ Â ì¾ ½¹½ìñ. à -, (see further details from 14). In 2006, debt repayment of Lao PDR ¾ -ì½-ªí -êô 32,0 ìé¾ - -ì¾ ½¹½ was amounted to US$ 49.1 million. Of which, ìñ, È À¹ìõºÁ È ¾ ì½ º À É. principal repayment was amounted to US$ 32 million and the rest was interest rate payment.»ø êó 27. Κ ò ªÈ¾ ½Àê Figure 27. Extenal debt 6. ¾ ìö êô  ö º ªÈ¾ ½Àê (FDI) ²¾ ¹ìñ ò ò ¾ ɾ ¾ À ò º¾ óä É È¾ ²í Ä, FDI à - ì¾ ½¹ ¾ ªö À² μè¾ Èº Ä. à ó 2006 ì¾ Ä Éº½ ñ ¾ ìö êô  ö º ªÈ¾ ½Àê (FDI) 158  ¾, ò À ñ À ò 2.680,5 ìé¾ Â ì¾ ½¹½ìñ, À² 66,7% À ôê¼ Ã È 2005 (À»ø êó 28). à š ó º À ò ìö êô ªö ò Á È 650 ìé¾ Â ì¾, À² 30,0% (À² ¾ 500 ìé¾ Â ì¾ Ã ó 2005). È À ò êô ê º Ⱦ ê½ ¾ ¾ À² œ ¾ 27,7 ìé¾ Â ì¾ Ã ó 2005 À ñ 187,4 ìé¾ Â ì¾, À² 575,5%. ¾ À¹ º FDI À² Á È ¾ ¾ ¾ ìö êô à 2 ½ÁÎ ¾ ù Èªí ªð õ: 1). ½ÁÎ º ¾ ¹½ ij³É¾ Õªö À : ÕÀêó 2, Õ ˆ 2 Áì½ À ½Ï¾ 3 (À õº Àê ¾ ñ 500 Á¹ìÈ Ó ø : ê½ ¾ ¾ Á¹È ì¾ Source: Bank of the Lao PDR. 6. Foreign Direct Investments Since Asian Financial crisis has passed, foreign direct investments have rapidly risen. In FDI projects were approved by Lao PDR with the amount of US$ 2,680.5 million, up by 66.7 percent (see figure 28). Of which, real volume of investments were US$ 650 million, rising of 30 percent (an increase of US$ 500 million in 2005). Fund transferred via banking system rose from US$ 27.7 million in 2005 to US$ million in 2006 or percent. The cause explaining the significant rise in FDI were major investments in two major projects such Nam Theun 2, Nam Ngeume 2 and Sekaman 3 (almost equal to US$ 500 million in 2006); mining industry 33

39 ìé¾ Â ì¾ Ã ó 2006). 2). ½ÁÎ º ¾¹½ í ÒÁ»È À² 70% (À² ¾ 40 ìé¾ Â ì¾ ¾À ñ 70 ìé¾ Â ì¾ Ã ó 2006,  ð ìò ñ ²øÀ É ¾ ò ºö ½ª¾ìó). º ¾ š FDI à ½ÁÎ ¾ ½ ò ÒÀ² À ¼ ñ À ñ ªí Á È Â ¾ ø Ä Éμ¾ ²¾ì¾,Áì½ ªí Ä É ò Ͼ ºˆ Å (ì¾ ì½º¼ μø誾ª½ì¾ êó 17). rose by 70 percent (up by US$ 40 million to US$ 70 million in 2006 as invested by Phubia mining of Australia). In addition, FDI in agriculture sector was also increased, especially rubber plantation, fruit plantation (see further details in table 17).»ø êó 28. ¾ ìö êô  ö º ªÈ¾ ½Àê Figure 28. Foreign Direct Investments Á¹ìÈ Ó ø : ½ ½ ½ ¾ Á ¾ Áì½ ¾ ìö êô ( ö À ó Áì½ É º ¾ ìö êô ²¾ à Áì½ ªÈ¾ ½Àê. Source: Committee for planning and Investment: CPI (Department for Promotion and Management of Domestic and Foreign Investment). Á¹ìÈ Ó ø : ê½ ¾ ¾ Á¹È ì¾ Source: Bank of the Lao PDR. V. êè¾ºè¼ À «½ ò ó êè¾ºè¼ À «½ ò Âì à ó 2007,  ºó ª¾ ¾ ¾ ½À º º êô ¾ ö (IMF) ùɻøÉ È¾ À «½ ò Âì ¾ Ⱦ ½ ½¹ ¾ ªö Ã ì½ ñ 5,2% ÍÐ ìö ¾ 5,5% º ó À Ä É»ñ ö ½êö ¾ ¾ ½¹ ¾ ªö À «½ ò º ñ ¾ ½Àê º Âì ¹ì ìö Ã ì½ ñ 2,6% ¾ 3,1% º ó Ã, ºñ ª¾ È ¾ ½¹ ¾ ªö À «½ ò ½Àê ½¹½ìñ º¾À ìòò ¾ ¹ì ìö ¾ V. Economic Outlook World Economic Outlook In 2007, as projected by IMF, the world economy will continue to grow at 5.2 percent, a slight decline from 5.5 percent in 2006 as the result of continued economic growth of leading economies with 2.6 percent, a drop from 3.1 percent in Of which; US economic growth rate was down from 3.3 percent to 2.0 percent in 2006, EU area 34

40 3,3% à ó 2006 ¾À ñ 2,0% à ó 2007, È ½Àê ºóμø¹ì ìö ¾ 2,8% ¾À ñ 2,6%, ó ø ¾ 11,1% ¾À ñ 11,2% Áì½ ºò À ¹ì ìö ¾ 9,7% ¾À ñ 9,0%. ø Ⱦ ¾ ɾ Âì ½¹ ¾ ªö μøèã ì½ ñ 7,1% ¹ì ìö ¾ 9,4% à ó Ã, ø Ⱦ ¾ ºº ½ Àê ²ñ ê½ ¾ÁìÉ ¹ì ìö Ã ì½ ñ 5,5% ¾ 8,5%, ½Àê ìñ ²ñ ê½ ¾¹ì ìö μøèã ì½ ñ 10,7% ¾ 11,7% à ó 2006 Áì½ Ã ½ ½ ¼ ñ, ø Ⱦ ¾ À í¾ º ½Àê ²ñ ê½ ¾ ÁìÉ ¹ì ìö μøèã ì½ ñ 4,6% ¾ 7,6%, ½ Àê ìñ ²ñ ê½ ¾¹ì ìö Ã ì½ ñ 12,8% ¾ 5,2% à ó ì½ ñ ºñ ª¾À ò À³š à ñ ¾ ½Àê ²ñ ê½ ¾ÁìÉ ¹ì ìö Ã ì½ ñ 2.0% ¾ 2,3% Áì½ ½Àê ê ìñ ²ñ ê½ ¾ ø Ã ì½ ñ 5,7% ¾ 5,3% º ó ì¾ ¾ Õ ñ ¹ì ìö 0,8% ¹ìõ ½ÀìÈ Ïö ó 2006 Ã ì½ ñ 60,75 Â ì¾ ½¹½ìñ / ¾Àë. ºñ ª¾ º À É ì½ ¹ Ⱦ ê½ ¾ ¾ Ã ìº º (London Interbank offert rate: LIBOR) Ã ì½ ñ 5,3% ìñ À ò Â ì¾ ½¹½ìñ Áì½ Àê ¾ì½ ñ ¼ ñ º ó 2006, ìñ À ò ÀºÂë ø Ã ì½ ñ 3,8% ¾ 3,1% Áì½ À ò Àμ È ø Ã ì½ ñ 0,9% ¾ 0,4% º ó êè¾ºè¼ À «½ ò ì¾ ºó Ã È ¾ Ͼ øé ö ê¾ É¾ À «½ ò º ìñ «½ ¾ ê Ä É ö Ä Éà êò ê¾ Áì½ ¾ Ͼ º Á ²ñ ê½ ¾À «½ ò Œ ñ ö 5 ó êó 6 º ìñ «½ ¾ õ: à ö ó 2006/07. À «½ ò º ì¾ ¾ Ⱦ ½ õ ªÒ ½ ¹ ¾ ªö μè¾ ªÒÀ ô Ã ì½ ñ 7,5Œ8%. Ã, ºñ ª¾ È Á È º ½ÁÎ ½ ò ¾ Ⱦ ½ dropped from 2.8 percent to 2.6 percent, China was up from 11.1 percent to 11.2 percent and India was down from 9.7 percent to 9.0 percent. World trade volume expanded 7.1 percent, a drop from 9.4 percent in Of which; total exports of developed countries were decreased from 8.5 percent to 5.5 percent, slightly down by 10.7 percent from 11.7 percent in 2006 for developing country. While value of total imports from advanced countries was down 4.6 percent from 7.6 percent, developing countries declined at 12.8 percent, a drop from 15.2 percent in Inflation rate in developed countries was down from 2.0 percent to 2.3 percent and while developing countries was up by 5.7 percent from 5.3 percent in Price of oil dropped by 0.8 percent or annual average price was at US$/Barrels, London Interbank Offered Rate (LIBOR) was at 5.3 percent for US dollar, the same level of While, Euro tended to rise from 3.1 percent to 3.8 percent end of year also rose from 0.4 percent to 0.9 percent in Economic Outlook Based on targets on economic growth set in the sixth 5-Œyear socio-œeconomic development plan set as follows: In FY 2006-Œ2007 Lao economy is projected to grow at 7.5-Œ8 percent. Of which, agriculture sector will covers 42.0 percent of GDP. industry 31.5 percent and services 26.5 percent. Inflation is to maintain 35

41 Àºö¾ 42,0% º GDP, º ¾¹½ 31,5% Áì½ ðìò ¾ 26,5%. ºñ ª¾À ò À³š ½ õ ªÒ»ñ ¾Ä ÉÃ ì½ ñ ªÔ Ⱦ ºñ ª¾ ¾ ½ ¹ ¾ ªö º À «½ ò. ºñ ª¾Áì ȼ ó ¾ ½¹ ö Áì½ Ï êè¼,»ñ ½ ñ ñ»º À ò ª¾ªÈ¾ ½Àê ¾ ¾ É ¾ À í¾ ò ɾ 4 À õº Ä. ¾ À ñ ì¾»ñ ö ½ ¾ º ìñ À² 8,3% ¹ìõ Àê ¾ ñ 12,8% º GDP, ½ªò ñ ì¾ È¾ À² ÒÀ ó 20,9% º GDP Áì½ À»ñ Ã¹É ¾ ¾ ö ½ ¾ μøèã ì½ ñ 6,3% º GDP. ø É ¾ ºº Ã¹É Ä É 652,9 ìé¾ Â ì¾ ½¹½ìñ Áì½ ¾ ÕÀ í¾ ÒÀ ó 977,9 ìé¾ Â ì¾. ¾ À² º ½ìò ¾ À ò M 2 Ã ì½ ñ ÒÀ ó 18.0% ¹ìõ Àºö¾ 22.0% º GDP, É ¾ «¾ À ò ª¾Ã¹ÉÀ² ÒÀ ó 14%. À²ô ½ º È À í¾ã ¾ ²ñ ê½ ¾À «½ ò Œ ñ ö Áì½ Á ÉÄ ¾ ê ¾, ê½ ¾ ¾ ½ ì½ ö À ò ±¾ Ã¹É À² 16,4% ¹ìõ Àê ¾ ñ 17,4% º GDP Áì½ ½¹ ¾ ò À ôã¹é À² 19.0% ¹ìõ Àºö¾ 11% º GDP. lower than economic growth rate. Exchange rate is to remain constantly stable. Revenue collection would expand by 18.3 percent or equal to 12.8 percent of GDP. Expenditure is to keep less than 20.9 percent of GDP and maintain fiscal deficit of 6.3 percent of GDP, promote more exports to reach US$ million and imports are to be less than US$ million, control the growth M 2 less than 18.0 percent or equal 22.0 percent of GDP. Of which, monetary base to increase less than 14.0 percent. Gross official reserve would guarantee imports of goods over 4 months. In support of socioœeconomic development plan and poverty reduction, the banking sector will increase deposit mobilization to be 16.4 percent or equal 17.4 percent of GDP and credit expansion at 19.0 percent or equal 11.0 percent GDP. 36

42  ½ º ¾ ñ ª º ê¹ì ª¾ª½ì¾ êó 1:  -»È¾ - ¾ - ñ -ª - º - ê½- ¾- ¾ -Á¹È - - -ì¾ Ã ó ½²¾ ðìò¹¾ êè¾ ö ½¹ ¾ Àì ½¹ ñ êè¾ ²øÀ²ñ ²ø ö êè¾ ñ ó ² ó êè¾ ö ø ì¾ ¾ ö ñ êè¾ ¼ ½¹ ¾ ½Á¹ ô ¾ êè¾ ë. ªó ²ö ½ ñ êè¾ ö ²¾ ij ò ½ê¾»º ½ê¾»º - ½ê¾ ½ ¾ ò ½ ¾ ò ½ ¾ ò ½ ¾ ò ½ ½ øé Ⱦ ¾ ê½ ¾ ¾ Á¹È ì¾ êè¾ ²øÀ²ñ ²ø ö øé- Ⱦ- ¾ êè¾ ö ö ¾ì¾ ö»º øé Ⱦ ¾ êè¾ ö ²¾ ij ò»º øé Ⱦ ¾ ¹ö -¹ ɾ- ö Áì½ ê¼ Àê ¾ êè¾ ºÓ òì½²ñ êè¾ ö êò -²½- ö êè¾ ê½ ó Á ê½ìö êè¾ ¾ ö À õº Á ½ ó êè¾ ¾ Á ¾ -²½- º - êè¾ ¾ ª¾ ¾ë¾ ó êè¾ ðì½ ó óìñ ª½ ½ êè¾ ½ ñ ª½ìò ö êè¾ Á À õº ñ ¾ ò êè¾ Ï ²ñ ê½ì¾ êè¾ ñ ½ ó ñ êè¾ ¾ ²¾ ¾ ½Äìêº êè¾ ²¾ êº º ö ¾ ¹ö Îɾ¹Éº - ¾ ê½ ¾ ¾ Á¹È ì¾ ¹ö Îɾ ö - ñ -ª Œ-²½- ñ - ¾»ñ ¾ ¾ ¹ö Îɾ ö - - ¾²¾ ûñ ¾ ¾ ¹ö Îɾ ö - ½Â ¾ À ò ª¾ ¹ö Îɾ ö ²ö ²ñ ¾ ö ¹ö Îɾ ö -À ò -ª¾ Áì½ ñ ¾ Ⱦ ¾ ¹ö Îɾ ö - ð-ìò- ¾ ê½- ¾- ¾ ¹ö Îɾ ö - ñ - óœ ¾ À ò»ñ ¾ ¾ ¹ö Îɾ ö - É - º ê½ ¾ ¾- ê ì½- ò Áì½ ½«¾- ñ ¾ -À ò Ⱦ ¾ ¹ö Îɾ ¾ ¾²¾ êɻñ ¾ ¾ ¹ö Îɾ ¾ ¾²¾ ÀÎõº»ñ ¾ ¾ ¹ö Îɾ ½«¾ ñ ¾ ê½ ¾ ¾ ¹ö Îɾ ø Àªñ  Âì ó Áì½ ¾ ˆ ¾ ê½ ¾ ¾ (ê¼ Àêí¾»º ¹ö Îɾ ö ) 37

43 Á ¾ êó 1: »Ⱦ ¾ ñ ª º ê½ ¾ ¾ Á¹È ì¾.

44 Á ¾ êó 2: »Ⱦ ¾ ñ ª º ì½ ö ê½ ¾ ¾ à ì¾. 39

45 Table 2: Management Structure of the Bank of the Lao PDR. Executive Board H.E. Somsavad Lengsavad H.E. Phouphet Khamphounvong H.E. Chansy Phosikham H.E. Somboun Rasasombath H.E. Siaosavath Savengsuksa H.E. Dr. Ty Phommasack Mr. Somphao Phaysith Chairman Vice- chairman Vice- chairman Member Member Member Member Governor and Deputy Governors Mr. Phouphet Khamphounvong Governor Mr. Bounsong Sommalavong Deputy Governor Mr. Somphao Phaysith Deputy Governor Director Generals Mr. Or Vilaphan Mr. Khamvong Thipphavong Mr. Bountavy Kaetalong Mrs. Kongduane Sengmany Mrs. Sengdao Bouphakonekame Mrs. Bounta Dalavy Mr. Norady Sirattana Mr. Na Chantalivong Mr. Sengduane Panyasit Mr. Khamman Phantala Mr. Vankham Duangmanichanh Mrs. Khampha Panmalaythong Mr. Phanethong Kongvongsa Director General of Administration Department Director General of Organization and Personnel Department Acting Director General of Internal Audit Department Acting Director General of Monetary Policy Department Director General of International Relations Department Director General of Currency Issue Department Acting Director General of Banking Operations Department Director General of Financial- Accounting Department Acting Director General of Bank and Financial Institution Supervision Department Acting Director General of Southern Branch Acting Director General of Northern Branch Acting Director General of Banking Institute Information Communication Technology centre of the Bank (equivalent to Deputy Director General).

46 Chart 1: Organizational chart of the Bank of the Lao PDR 41 11/6/2006

47 Chart 2: Organizational chart of Lao Banking System 42 11/6/2006