Laos, officially the Lao People’s Democratic Republic. Located at the heart of the Indochinese peninsula, it is the only landlocked country in Southeast Asia. Laos is bordered by Myanmar and China’s Yunnan province to the north, Cambodia to the west, Vietnam to the east, and Thailand to the southwest. China and Laos share a common border of 710 kilometers. Laos has an area of 236,800 square kilometers. It is a multi-ethnic country with a population of 6.51 million (in 2012). The Lao Loum, Lao Theung and Lao Soung are its three major ethnic groups. Most of the country’s residents believe in Buddhism. There are about 30,000 overseas Chinese in Laos. The country is divided into 16 provinces, one municipality and one special administration region. Its capital is Vientiane. The Lao currency is known as KIP, and one US dollar is worth about 8,400 KIP (in 2008).

 Laos has a tropical, subtropical monsoon climate, with high temperature and heavy rain. A whole year is divided into two reasons. The rainy season lasts from May to October, and from November to next year’s April is the country’s dry season. Its average annual temperature is 20 to 30 degree Celsius with average annual precipitation 1250 to 3750 mm. Laos is rich in mineral resources, including tin, lead, potassium, cooper, iron, gold, gypsum, coal and salt. Also it is a country rich in water resources. Its forest area is about 9 million hectares. About 42 percent of the country is covered by forest that produced valuable wood such as teak and rosewood.

The Lan Xang kingdom that founded in 1353 was the first feudal kingdom that ruled the entire Lao region, which was also the heyday in the history of Laos. Laos became a French “protectorate” and was incorporated into the French “Indochina federation” after the French invasion in 1893. In September 1940, Laos was occupied by Japan, and declared independence on Oct 12, 1945. Laos was invaded by France in 1946. In July 1954, the Geneva Agreement aims to restore the peace in Indochina was signed, and then France withdrew all its troops from Laos. Soon after, the United States replaced France in Laos, where US supported the pro-American forces. Therefore, Laos entered the period of resisting US aggression. In February 1973, the Lao parties signed the Vientiane Agreement to restore the peace and realize national harmony. In December 1975, it abolished the feudal monarchy and established the Lao People’s Democratic Republic.

Laos has long been fettered by the feudal monarchy and invaded and ruled by western colonial countries. Being beset by constant domestic turmoil and foreign aggression, it has been a traditional agricultural country with basically poor, backward, self-sufficient natural and semi-natural economy. After the founding of the Lao People’s Democratic Republic in 1975, Laos was eagerly to enter into socialism and followed the former Soviet Union’s highly centralized economic model regardless of its national conditions. It has carried out a series of extreme policies which left the economy in dire straits. Lao began to implement a reform and opening-up policy after the fourth Congress of Lao People’s Revolutionary Party in 1986, and gradually corrected its mistakes. Based on its actual conditions, it has been explored and found an economic development path that suited its own characteristics. Efforts have been made to establish an economic system that combines agriculture, forestry, industry and services industries. It has promoted the natural economy transformed to a commodity economy gradually. The efforts proved to be effective and achieved initial results, soon reversed the sharp deterioration of the economic situation. In 1991, the fifth Congress of the Lao People’s Revolutionary Party determined “the principled path of comprehensive reform” and proposed five basic principles including the party’s leadership and socialism orientation and opening-up policy. In 2001, the seventh Congress of the Lao People’s Revolutionary Party proposed a phased goal of accelerating the transition from natural economy to commodity economy and getting rid of underdevelopment gradually, and formulated the national development strategy and goal of eliminating poverty basically by 2010 and getting out of underdevelopment by 2020. At the eighth Congress of the Lao People’s Revolutionary Party in March 2006, it stressed that it would continue to focus on economic development and strengthen macro-management of the market economy. Also it put forward to realize the average growth rate of national economy of 7.5 percent from 2006 to 2010 and the annual per capita income of $800 by 2010.

Currently, Laos practices a market economy system with multiple economy sectors coexisting while administered by the state. The country encourages competition and cooperation among various economic sectors and promotes the development of economy and various construction undertakings. All economic sectors are equal before the law. From 1991 to 1996, the GDP of Laos has an average growth rate of about 7 percent from 1991 to 1996. Its economy was severely affected by the Asian financial crisis after 1997. Thanks to the timely measures to strengthen macro-control, rectify financial order and expand agricultural production, the social and economic stability were maintained basically. According to the Laos’ statistics, its GDP during 2008 to 2009 reached $5.55 billion, an increase of 7.6 percent and 0.1 percentage point higher than the target adjusted by the congress. In addition, the data from the Asian Development Bank(ADB) showed that national economy of Laos  was generally positive in 2009 with the GDP grew by 6.5 percent to $5.95 billion. The figure was higher that the ADB’s expected growth rate of 5.5 percent at the beginning of the year. In 2012, its per capita GDP was $1,407.

Implementing reform policy over the past 20 years, Laos started to transform from centrally planned economy to market economy. In the process of marketization, the government has been gradually loosening price control, reducing the state-owned enterprises, permitting the development of private enterprises, loosening monopoly of foreign trade and attracting foreign investment. It canceled state-owned farms in rural area, and implemented contract system for the farmers. These reform measures effectively push the economic development with outstanding achievements, also was affirmed at home and abroad. Meanwhile, the eighth Congress of the Lao People’s Revolutionary Party has summarized the major problems in its economy. Its macroeconomic situation was not stable enough and the economic growth rate failed to meet the target set at the party’s seventh National Congress, or 7 percent at average annually. Also, its poverty alleviation work didn’t achieve the expected objectives. The economic activities of the main economic units haven’t realized their due efficiency and benefits. The multiple agricultural operation modes have not been expanded. The government also lacked the mechanism and necessary legal mechanism over the market economy. Moreover, the transformation of state-owned enterprises was slow. The growing of debt has not been curbed effectively. The measures to prevent negative phenomena such as abuse of power and corruption were not strong enough. An effective coordination among development planning, finance and policy makers was absent.

In the future, Laos will prioritize the development of following economic fields: continue strengthening grain production in order to maintain self-sufficient and achieve a surplus and strive to expand exports; vigorously developing the commodities production particularly the export goods; stop deforestation and land reclamation to prevent the destruction of forests and the ecological environment; accelerating the poverty alleviation in the mountainous areas; strengthening infrastructure construction; speeding up development of human resources; actively carrying out foreign economic cooperation and developing services industry, especially the international tourism.

The plain area accounts one fifth of Laos’ national territory total, and four fifths is mountain and plateau. The average elevation is more than 1,500 meters in the north of Laos, where the highest mountain is Phou Bia at 2,818 meters, and mostly mountains are higher than 2,000 meters. The northwest Laos undulates the terrain. Inconvenient transportation isolates it from outside world. The rivers overflow during the rainy season. It is a multi-ethnic residential area. The Truong Son Ra forms most of the eastern border with Vietnam. Adjacent to the Truong Son Ra are plateaus and mountains. The limestone canyons in Khammouane province are typical in the area. The Boloven Plateau next to Cambodia has a mild climate that suitable for the growing of semi-plateau vegetation. It is well known for crops such as coffee. The forest-covered plateaus and mountains are not only natural barriers for Laos, but also provide the country with timber for various usages. The arbor forests at the foot of the mountains prevent the rapids effectively and protect the soil and water, regulate the hot climate and are good for the crops growth. Laos has over 20 rivers with flow more than 200 kilometers, which promise the country huge hydropower potential. The 4,800-kilometer Mekong River, which runs through the country, is Laos' largest river and the 12th largest river in the world. The river flows through China, Myanmar, Thailand, Laos, Cambodia and Vietnam, with the a flow distance of 1,877 kilometers and 13 tributaries within Laos. The Mekong River flows mostly through hills and plains. It deposits a layer of fertile soil on both sides after the river floods every year, and the alluvial plain along the river becomes Laos' agricultural area. The Lao section of Mekong River is rich in hydropower resources.

Laos has many typical ecological environments with world significance, including: 1) The evergreen forests in foothills of Annamite Range. It is considered the most unique biological ecosystem. The endemic species distribution involves many genera such as the typical rain forest as a result of the monsoon climate and local topography; 2) The limestone topography in central Indochina; 3) The dry forest in the Mekong plain. The plain is mainly in the southern part of Laos, it is relatively flat with low altitude. Green grass and herbs are all over across the deciduous trees. some permanent and seasonal lakes on the ground are crucial for a wide variety of wildlife, from large ungulates to rare water birds; 4) Bolaven Plateau. The hills between the Annamite region and the Mekong River in southern Laos are unique ecological environment, and are only available in Laos; 5) The northern highlands. The mountains in northern Laos are biogeographically distinct from the Annamite landform in southern Laos. It is the place where different varieties gather; 6) The Mekong River. Laos plays a vital role in the protecting the biodiversity of the Mekong River basin; 8) Other rivers and creeks. Due to its mountainous terrain, Laos is full of creeks and is its main ecological environment. The Laos' creeks are characterized by a wide variety of fish species.

In recent years, Laos’ GDP grows at an average annual rate of 6.5 percent. The agriculture, forestry and hydropower development are the sectors that attract the most foreign investment and area also the highlights of its economic reform. Laos also faces a series of environment problems as the development of economy. Though some of its manufacturing industries have caused pollution, Laos’ main biggest threat to the environment and ecology is the protection of natural resources in the economic development, since its industry is weak basically. The projects of hydropower and agriculture particularly brought many problems, such as, severe land degradation, loss of biodiversity, reduction of forest coverage and loss of cultural heritages.

The surface water is the main water supply for most cities along the river, while the groundwater is the source of water supply in the rural area. As the continuous growth of urban and rural population, the water pollution problem is becoming increasing prominent. Currently, only 64 percent of Lao population enjoys safe drinking water. There is a high incidence of gastrointestinal disease that caused by inadequate water supply, poor sanitation and drainage and poor hygiene practices in Laos, such as dysentery and diarrhea. There is 70 percent urban households have relatively good sanitation, however, such kind of households only accounts for 36 percent of the country’s total households. At present, Vientiane is building a sewage treatment system, but many wastewater treatment facilities (mainly sewage tanks) are hard to perform their functions due to poor design, construction and maintenance. Some major industrial and mining enterprises are still polluting water resources now.

The generation of solid waste is on the rise in Lao urban areas and poses a threat to its surface and groundwater. The growing urban population, together with improper waste collection and inadequate treatment facilities, has exacerbated the pollution. Currently, Laos produces 270,000 tons of waste every year, and the household waste accounts for the majority. The average daily waste produced per person in cities is 0.75 kg, this figure in Vientiane and other four secondary cities is about 0.8 to 1.4 kg. Landfill disposal is carried in Vientiane and other four secondary cities, but only in a small area; moreover, it has no leachate collection system and detection wells. Over two thirds of urban waste is recyclable, but the recycling scale in Laos is still quite limited.

At present, the air pollution in Lao cities is at a safe level. However, the air pollution would be worse if no sufficient mitigation measures be taken. In Vientiane, in particular, the number of cars grows with a rate of about 10 percent annually in the past decade. The indoor air pollution in Laos is mainly a result of the widespread use of carbon stoves.  

Table of major indicators of natural resources, environmental quality and environmental management

The Lao government has approved the National Environmental Strategic Vision 2020 (NES), among which the National Environmental Action Plan (2006-2010) has main contents including: 1) the sustainable management of natural resources; 2) improve environmental management in industries, infrastructure, urban development and special economic sectors; 3)strengthen the system construction of environmental management and capacity building; 4)improve the participation of private sectors in environmental management; 5) improve corresponding financial means and mechanisms; 6)strengthen international cooperation.

Laos does not set separate accounts for environmental budget allocations and expenditure. The expenditure involves many government departments, but still there has never been a specific and comprehensive audit. In addition, the environmental expenditure has no clear definition. For example, Laos does not include the spending of water supply and water resource in the environmental budget currently. Despite these uncertainties, the World Bank has given an estimation of the value and trends of environmental expenditure in Laos as a whole. It is estimated the Lao annual environmental expenditure is $600,000 at average.According to the statistics, the environmental expenditure of Laos in 2002 accounted for 0.6 percent of the total government expenditure, about half of the figures in Vietnam (1%) and Thailand (1.4%). The recurrent environmental expenditure has increased from about $60,000 in 2001 to $110,000 in 2005. About half of the recurrent environmental expenditure was administered by the ministries of technology and environment, and 40 percent was spent by other ministries, provincial technology and environment offices and provincial agriculture and forest offices. Though the government financial support is increasing gradually, it is still far to meet the need for environmental management. From 2001 to 2005, the total capital expenditure is $500,000 per year at average, about five times of the recurrent expenditure. The information, transportation and postal ministries spent about 90% of it for the environment and social assessment and mitigation that related to the road projects funded by ODA. The capital expenditure of other departments will not exceed their current costs. However, the environmental capital expenditure varies from year to year because the need to supple the projects funded by ODA.