Industry and services carried the economy forward in 1993, as their value added grew by 10.3% and 7.7%, respectively. Because of bad weather conditions, agriculture, which was the main source of growth in 1992., registered a barely positive growth performance in 1993 at 2.7%

Agriculture Sector

Crops production continued to account for around one, half (48.41/o) of total agriculture value added in 1993. Livestock and fisheries also represented a significant proportion (40.7/o) of agriculture value added. The remainder of 10.9% id accounted for by forestry.

The sluggish growth of the agriculture sector was due mainly to unfavorable weather conditions in 1993. While drought was reportedly experienced in some provinces, flooding was reported in others. Consequently, value added by crop production declined by I 1.0%. Livestock and fisheries posted a growth of 4.2%. This, together with an extraordinary growth of 183.7% of forestry, made possible a positive growth in agriculture value added.

It will be recalled that the country suffered from the same unfavorable weather conditions 'in 1991. As a result, agriculture value added actually declined, thereby reducing GDP growth to only 4% that year.

Food Crops

Based on GDP estimates of the National Statistics. Center, paddy production value added in 1993 represented about 65% of total crops production.

Data from the Ministry of Agriculture and Forestry shows that a total area of 649,310 hectares was under cultivation in 1993. The total area cultivated for nice production is estimated at 538,690 hectares, representing 83% of the total. The remainder was devoted to maize, starchy roots, vegetables and industrial crops. particularly coffee, tea, mungbeans, soybeans, peanuts, tobacco, cotton, and sugar cane.

The total area cultivated for nice production declined by almost 10% from 592,550 hectares recorded in 1992 to 538,690 hectares in 1993. Lowland rice (350,407 hectares) accounts for 65% of total cultivated area, of which only 3.7 (13,020 hectares) benefit from irrigation. The remaining 35% is accounted for by upland rice cultivation.

Total rice production is estimated at 1.25 million tons in 1993, 20% less than 1.5 million tons 'in the previous year as a result of adverse weather conditions. Except for vegetables and coffee, all other crops registered a decline in production from 1992 to 1993.

In 1985, total rice production was estimated already at 1.4 million metric tons. Since then, annual rice production in the Lao PDR has exhibited an erratic trend within the range of between 1.2 to 1.5 million metric tons. It is estimated that to achieve national self sufficiency in food, the country's rice production level must increase to 1.6 million tons. Even at this national production level, traditional rice deficit provinces may still experience acute shortage under unfavorable weather conditions due to poor infrastructure for moving rice stocks from surplus to deficit areas within the country.

A number of irrigation projects continue to be implemented in order to promote lowland cultivation of rice towards achieving food self-sufficiency and to discourage upland shifting cultivation. Extension services are also being provided to encourage more permanent rice cultivation methods and crop diversification, and to assist farmers in accessing available farm credits. Rural infrastructures, including farm to market roads for a number of pilot upland communities, are also being improved/contracted to encourage family-owned farms to produce at levels beyond subsistence in a market economy.

Livestock and Fisheries

Value added from livestock and fisheries was recorded at kip 165,478 million in 1993, 4.2% more than the previous year.

It is estimated that there were around one million heads each of water buffaloes and cattle in the country. Most of them are raised in the provinces of Savannakhet, Champasack, and Vientiane. Pig raising is also an important component of the livestock sub-sector with an estimated 1.6 million heads and so is poultry with 10 million.

Government policy alms to increase livestock production and fishpond cultivation an alternative to subsistence and shifting farming practices. Investments and exports in t] sector are being encouraged through reductions in export quotas and taxes. Although cattle beef export has penetrated the Thai market, Lao export of animal products still has to gain access to other markets in neighboring countries. The small domestic market and limited access to the international market pose as a constraint to the expansion of livestock production.

Animal health programs continue to be implemented by the Government to reduce morbidity from various animal diseases, including foot and mouth disease, rinderpest, and intestinal parasites.

The Nong Teng Vaccine Center in Vientiane province produces vaccines for the country's animal health program. However, further training and provision of financing mechanisms are still necessary to enable farmers to benefit fully from the program.

Forestry

The Lao PDR forests are endowed with valuable hardwood, which continue to be important source of foreign exchange earnings. In 1993, exports of wood products including lumber amounted to $38.2 million. In addition, exports of raw logs generated $8.5 million Together, they accounted for more than one fifth (22%) of total exports earnings.

The orientation of government policy is shifting towards the promotion of wood processing from exports of raw logs and lumber. However, full implementation of this policy is hindered by shortage of capital and technical skills within the country.

Over the last three years, the Government has also been implementing a policy of striking balance between exploitation and conservation of the country's valuable forestry resource A temporary logging ban was imposed in 1991 pending determination of a sustainable quota system for the logging industry. It would now appear that logging is no longer banned but merely regulated in view of the intensification of activities in the forestry sector, including exports of forest products. As noted in a previous section, forestry value added reportedly increased by almost 200% in 1993 after suffering a contraction the year before.

Industry Sector

Manufacturing, which accounts for almost three fourths (73.7%) of industrial value added, grew by 7.7% in 1992. Construction, whose share is also significant at 17.7% posted a higher growth of 16.1%. While the share of mining to industrial value added was minimal at 1%, it registered the biggest growth at 36.5%.

Electricity, gas and water, comprising 7.6% of industrial value added also move ahead with a growth of 2 1 % after suffering contractions during the previous two years. After declining from 828 million KWH in 1991 to 753 million KWH in 1992 due to unusually, low water level of the Nam Ngum reservoir, electric power production expanded by 22% 1993 reaching a level of 919 million KWH. Since 1985 when electric power generation was similarly recorded at 919 million K", there has been an erratic trend in the production of electric power depending mainly on the water level of the aforecited reservoir.

So far, there are only three hydroelectric power generating plants in the country with a combined capacity of 200 MW: (1) Nam Ngum I with an installed capacity of 150 MW;(2) Xeset with 45 MW; and (3) Selabam with 5 MW. In view of abundant water resources suitable for hydro power generation, the Government attaches high priority to hydropower ,a its development plan up to 2000 and beyond. An additional 5000 MW generating capacity ,s envisioned to be put in place within the next fifteen years. Within the next five years, the biggest plant envisioned to be completed is Nam Theun 2 with a generating capacity of 600 MW and Theun-Hinboun with 210 MW, Houi Ho with 150 MW etc...

Within the manufacturing sector, production of garments has been most promising in terms of growth production, which is mostly exported, increased by 150% from 3.75 million pieces of clothing in 1992 to 9.37 million in 1993. Exports of garments was recorded at '37.0 million in 1993, up by 37% from $27.3 million in 1992, thereby making it the second biggest source of foreign exchange earnings.

The sustained growth of the industrial sector since 1990 has been indicative of its positive response to the reforms under the NEM, which are intended to enable and encourage the private sector to participate in directly productive economic activities.

The legal framework for private sector participation in economic/financial/commercial transactions in Laos has been evolving for the past several years. The enterprise and land decrees which define the basic legal parameters for doing business and for using land, respectively, were finally issued in early 1993.A revised Foreign Investment Law to further improve the environment for foreign investment in the Lao PDR was passed in early 1994 by the National Assembly Subsequently, a law on business operation and on taxation were also passed by the National Assembly in August 1994. A draft arbitration decree has been ending consideration by the Government.

Privatization of state-owned enterprises (SOES) continued in 1993. Almost half of the 550 SOES have been-privatized or in the process of being privatized. Except for SOES "strategic" areas, the policy is to privatize all of them.

Services Sector

The services sector accounts for almost one fourth (24.3%) of the country's GDP. The three most important sub-sectors in terms of their share to total sector value added are retail and wholesale trade (33.3%); transport and communication services (20.2%); and government services (17.6%).

Most of the growth of the sector in 1993 came from wholesale and retail trade at 18.5% and hotels and restaurant services at 14.8%. The fast growth of these sub;-sectors is reflective of the open door policy of the Government. The other sub-sectors which contributed substantially to the growth of the sector were ' banking and housing services. They posted a real growth of 13.2 and 8.0%, respectively, in 1993. It is worthy to note that value added from government services has been declining since 1990 in line with the NEM, which calls for disengagement of government from directly productive activities. As a result, the share of government to the total service sector has also been declining since then.

The Government has been implementing a financial sector reform program with external assistance. In line with the NEM, the central and commercial -banking functions of the State Bank were separated. The branches of the State Bank now operate purely as commercial banks. In addition to the state-owned commercial banks, five new commercial banks were licensed to operate in 1992-1993. Consequently, the share of the sub-sector to the sector value added, which more then doubled from 2.0% in 1991 to 4.2% in 1992, further increased to 4.5% in 1993.

The outline public investment program (PIP) for 1994-2000 indicates that transport and communication sector will continue to receive substantial allocation of public funds to support and encourage the private sector to participate in economic activities in the Lao PDR. The telecommunication development program calls for expansion of the telephone network within the next several years from the current 8,800 lines (of which 70% are in the capital) to 17,550 lines in various parts of the country.

A number of projects were underway to improve the transport network preparation of a civil aviation master plan was completed in 1992 with UNDP technical assistance. Its implementation commenced in 1993 with financial assistance from the Asian Development Bank and from a number of bilateral sources.