- Current political and economic issues succinctly explained.
In the past year, Laos has witnessed more popular unrest than at any time in decades, as well as what might have been an unprecedented gesture of government accountability. The wave of discontent began last June over economic woes that included a currency crisis and an inflation rate that has now reached more than 40 percent. Though it’s hard to know for sure, given the Laotian government’s opaque nature, the protests may even have forced former Prime Minister Phankham Viphavanh from office in December.
The discontent has manifested itself in multiple ways. There has been a massive upsurge of virulently angry criticism of the government on social media, despite the obvious risks of doing so. There has also been a range of one-off protests that have seen more intensity and less pushback from the government than in prior years, when it cracked down on virtually all expressions of dissent.
One of the world’s few remaining nominally communist states, Laos is among the most repressive countries in the world, ruled since 1975 by the single-party regime of the Lao People’s Revolutionary Party, or LPRP. It is exceedingly rare for top party and government leaders to leave office without a choreographed transition to ease the process. That made Phankham’s resignation noteworthy, especially given that when he stepped down, he had been prime minister for less than two years, out of a term that is normally five.
Many observers argued that, as one of the two recognizable faces of the government, along with President Thongloun Sisoulith, Phankham was pushed out to calm public opinion. But that still left questions about why there were few similar calls for the resignation of other senior government officials. It might have been that Phankham had become a liability for the LPRP for reasons unrelated to his poor performance in office. David Hutt, a columnist for The Diplomat, noted that the former prime minister “was up to his neck in gossip.” Among other things, Hutt pointed to “his alleged connection to a Lao-Chinese businesswoman whose corpse was found floating down the Mekong in a suitcase last year,” as well as “question marks about the number of construction permits his government had handed out.”
But this type of corruption, and other murky personal indiscretions, are commonplace in Laos and have rarely led to the downfall of top regime officials.
Under normal circumstances, the regime would typically respond to any public displays of dissent by cracking down on protesters and circling its wagons. But amid severe economic distress and a growing perception among large swathes of the public that the government is incapable of improving living conditions in Laos, many citizens are increasingly undaunted by the fear of repression.
Laos’ economy grew by less than 3 percent last year, nowhere near enough for a developing country of roughly 7.4 million people. This anemic growth has had material consequences, leaving many Laotians without the financial resources to access essential goods like cooking oil and other vital commodities. A study by the World Bank showed that Laotians are even making drastic spending cuts in areas like health care.
The ongoing economic malaise in Laos was triggered by a combination of the government’s reckless spending on expensive infrastructure projects—like a primarily Chinese-built high-speed rail project, which also required Laos to borrow heavily from Beijing in order to fund its completion—as well as by broader geopolitical developments beyond Vientiane’s control, like Russia’s invasion of Ukraine. Making matters worse, recent efforts by the government to bring inflation, debt and the country’s plummeting currency under control have been poorly considered and counterproductive. It has done little to curb speculation on the value of the local currency, the Laotian kip, against the U.S. dollar. Last year, the state bank offered a tender of six-month bonds at interest rates of 20 percent, with no real plan for how to repay them. In February, the government placed restrictions on imports in a desperate measure to cut inflation from 40 percent.
Vientiane has now turned to Beijing for assistance with reducing its debt load. That’s unsurprising, given that Laos owes more than half its external debt to China. Laos got a degree of a bailout in 2020 from China, but it was not nearly enough to reduce its overall debt burden. But Vientiane may be entering negotiations without considering how much more leverage Beijing stands to gain over it if China decides to bail out the Laotian economy.
Unlike during previous cycles of economic downturn, Laos’ population is now better educated and includes millions of social media users. Although the government would like to control the country’s internet and social media with the degree of censorship seen in China—and, increasingly in Vietnam and Thailand—Vientiane lacks the technological capability to do so. Indeed, social media has become a platform to express criticism of the government, including calls for it to be replaced.
In addition, though Thongloun, the president, is still a traditional hardliner, he has broken with convention by adopting a more open public persona than past leaders. Even before the protests, he pledged to implement economic reforms and launch a war against corruption, an initiative that should be popular in a country regularly ranked as one of the most graft-ridden in the world. But Thongloun has had mixed results on both fronts, and he may have further emboldened protesters by promising these reforms but failing to deliver—further angering many people in Laos.
Moreover, worsening economic conditions are not the only cause of unrest in Laos. in October, villagers in Naxaithong, a district north of Vientiane, protested the creation of a military camp in their community, while in an extremely uncommon move, residents of a village in Oudomxay province rejected a government offer for compensation of their farmland for a planned ecoproject last August. That same month, in the northern province of Xayabury, residents demanded audits of local development projects following allegations of corruption.
LPRP leaders realize that they must be more responsive to a public that increasingly demands more accountability, especially in the face of a weak economy and rising crime rates. After all, strong economic growth and improved living conditions has long been the party’s major source of legitimacy. But Laos’ near-term economic outlook is bleak. Many forecasts project low growth rates for the next few years, partly because of geopolitical factors Laotian policymakers can’t control, but also due to the LPRP’s resistance to implementing credible reforms of social and economic programs.
The new prime minister, Sonexay Siphandone, appears willing to implement several measures that, if they are effective, might cool public anger. Despite his origins as a princeling—he is the son of former President Khamtay Siphandone—Sonexay has proposed an agenda that should find support among ordinary Laotians, including a poverty reduction program, a bailout from the Asian Development Bank and a renegotiation of the country’s debt.
These are commonsense proposals that should go a long way to stabilize Laos’ economy and restore growth. On the political front, many observers believe that Sonexay may have more credibility than his predecessor, given his pedigreed background. That might make him better positioned to push through the tough but necessary choices needed to get the economy back on track.
If that happens, the LPRP might get a reprieve from its public. But if those reforms do not yield tangible improvements to living conditions, or if policymakers refuse to implement them at all, there is every possibility of larger, more significant protests.