BKK Post / 11 September 1998 LABOUR Eastern job hopes dimmed Kunming land route seen as a blind alley The Thai embassy in Beijing has warned Thais not to be deceived by a promise that they could go to find work in China, South Korea or Japan via a new land route from the Thai border through Laos and Kunming. According to the Foreign Ministry, some Thais living in the country's northeastern region or those who are working in Laos have frequently used the new route from Laos to Beijing via Kunming to seek jobs in China, or to go to a third country like South Korea or Japan. The embassy last month gave help to three Thais who used this route to travel to Beijing. They were later asked to return to Thailand because they could not buy tickets to Seoul since they had only the South Korean won currency, which Chinese banks would not accept. The three were identified as Suntra Sithiprom, 36, of Udon Thani, Vichit Papochai, 30, and Sanit Papochai, 24, both of Khon Kaen. They said they were traders who bought auto parts from Nong Khai and Udon Thani and sold them in Laos. The three told the embassy they wanted to visit Seoul as tourists. However, the embassy suspected their real purpose was to seek jobs in South Korea. China has no policy to employ foreign workers, the ministry added. Laos Eager To Build $1.2B Dam By DON PATHAN / Associated Press Writer BANGKOK, Thailand (AP) -- Laos is determined to become the battery of Southeast Asia through its $1.2 billion Nam Theun II hydroelectric dam, the country's largest development project. Hoping for an annual income of $250 million to help alleviate poverty, Laos is pushing ahead with the dam, which critics say will destroy the environment and displace about 800 families. A coalition of 14 environmental groups recently called on Thailand to forgo agreement to purchase power from the dam, citing economic viability, as well as environmental and humanitarian reasons. The group said Thailand needed to reassess its power demand in light of the current economic crisis, which has slowed industrial growth. The NT2 Consortium, which is building the dam, dismissed the allegations, saying Laos affected people will be adequately compensated and the Thai economy will be back on track in about two years. The consortium is looking to the World Bank to unlock loans from commercial lenders by providing the controversial project a "political risk guarantee." "We expect to receive a final appraisal from the World Bank by next June and begin construction by the end of next year," said Khamleuang Sayarath, the Lao government's project director for the dam. "The bank has been with us every step of the way and we are positive it will come through for us." The bank, however, has been tight-lipped, having been severely criticized in the past for backing dams that have wrought environmental destruction. Other dams are being planned or built in Laos, which has few other income-producing resources. But the question of who will buy the electricity weighs heavily in Asia's economically depressed times. "We are talking about a project that will begin generating electricity at the earliest in 2004. The situation should have improved by then," said NTZ Consortium Director Jean-Christophe Devallet. Besides Thailand, Laos hopes that one day Vietnam and Cambodia will also be buying its electricity. Laos Looks for Economic Answers By DON PATHAN / Associated Press Writer VIENTIANE, Laos (AP) -- After a decade of experimenting with the market economy, communist Laos is finding out that capitalism isn't quite what it was cracked up to be. As if it didn't have enough to worry about -- such as lifting per-capita income above the roughly $400 where it now stands -- this landlocked, low profile nation has also been caught in the crossfire of the economic crisis sweeping Asia. "It's a tough time for us," said Chantavong Saignasith, head of the State Planning Committee, who stressed that now was the time to explore alternative strategies to pull Laos out of an economic quagmire. Laos switched from a centralized economy to a market- oriented one in line with changes in neighboring Vietnam and then Communist Eastern Europe. But the capitalist road was hardly without its potholes. The country came under stiff criticism last June during a visit by the International Monetary Fund for allowing its economy to deteriorate in recent years. In the 12 months through June 1998, the country's non- convertible kip currency has depreciated by 70 percent against the U.S. dollar. The depreciation, coupled with high food prices resulting from heavy flooding the previous year, has led to a sharp rise in inflation, to about 60 percent by mid-year. The IMF also noted that net reserves had fallen by over $30 million during 1997 and the reserve position had declined to 2 1/2 months of imports. The banking system, it said, was unable to correct major weaknesses in banks just as state commercial banks faced severe solvency problems. Although authorities refused to provide details of the IMF's prescriptions, Phiane Philakone, deputy governor at the Lao State Bank, insisted that the dosage was just too much for his poor country to swallow. "We will develop our economy in a way that is compatible with our social, cultural and environmental needs," said Phiane. "If it's slower then what other would like to see, then so be it." Instead, Chantavong, the planning chief, is looking to reduce dependence on imports by producing basic consumer items, and identifying a niche sector in the rural sector that could give Laos some advantages in export over neighboring countries. This mean farmers would have to be plugged into a modern economic system, said Chantavong, who admitted the bold move won't be easy since most practice subsistence agriculture. "Their supermarkets are in the forest. We have to know the consequences if we want to subject them to a system that might not allow them to turn back to their ways," he said. He noted that since many grow their own rice, brew their own beer and catch fish from local ponds, the Lao population in general has not been as harshly hit by the economic recession as more developed nations like neighboring Thailand. And on the monetary front, said Phian, the government is working with international agencies on streamlining the banking system and recapitalization. "We believe this will subject our banking system to international standards and perhaps instill the necessary confidence in the financial system," said Phian. Analysts say turning things around will not be easy. The country's exports declined by 9.5 percent while imports increased by 15 percent last year, according to the United Nations. Demand by Thailand for hydroelectric power -- seen by some as Laos' future economic salvation -- has also dropped as that country struggles with its own economic and fiscal crisis. Vientiane has yet to secure a deal with Thailand, the main buyer, over the purchase of hydroelectric power from the $1.2 billion Nam Thuen II project. Thailand accounted for nearly 40 percent of $6.7 billion in total foreign investment since 1988 when the Vientiane government did away with the centralized economy. Over half of the country's imports comes from Thailand, which is also an important export destination for Laos' goods. "When Thailand sneezes, Laos catches a cold," said Han Luther, a German economist working with the government. Furthermore, productivity of the Lao workforce is only 60 percent of that in southern China and Vietnam, while the labor cost is 32 percent higher than southern China's and about 40 percent higher then Vietnam's. This combination, said Luther, amounts to a home-grown crisis that has to be addressed.