Laos Treads Free-Market Path

IN the fetid and muddy stalls of Vientiane's central market, the seeds of free enterprise are beginning to take root as the communist government of Laos slowly begins to open its doors to the outside world.

For most of the past 20 years, Vientiane's market has been strictly stocked with Laotian goods.

Now imported electronic gadgets, videocassettes, and stereos share space with more traditional Laotian delicacies such as boar meat, snakes, toads, and bamboo rats.

"The market is now completely different. Last year we never saw such things as videotapes. Now we have seen them, and we want more," says Tahd Phonivang, a market vendor.

Sitting in the shade of an American military parachute left over from the Vietnam War, Mr. Tahd does a brisk business selling portable hand-held video games to curious Laotian shoppers. "I never thought the government would let me sell these machines. Before I could sell only cloth made in Laos. Now I can sell anything I want."

Tahd earns over $120 a month, more than six times the average monthly salary of senior Laotian government officials.

When the communist Pathet Lao seized power in 1975, traders like Tahd were cut off from the rest of the world by their xenophobic political leaders. But now, desperate to stay afloat in choppy socialist waters, the Pathet Lao is jettisoning its hammer and sickle emblems in favor of broad economic reforms. This "new thinking," as it is known, is as sweeping as any of the reforms in Eastern Europe or Russia, economists here say.

Farms have been fully privatized, and the state competes for crops with private traders at market prices. State-owned businesses and factories, once centrally planned, are now autonomously managed. And on the streets of Vientiane, vendors are no longer prohibited from selling goods imported from the noncommunist world.

For many Laotians, these reforms have offered the first glimmer of hope in an economy ravaged by years of war, poverty, and mismanagement.

With an average per capita gross domestic product of $180, Laos is ranked by the World Bank as one of the world's poorest nations. Eighty percent of the country's 4 million citizens subsist on what they can grow or hunt in the country's jungles.

When the Pathet Lao came to power, it banished an estimated 40,000 skilled civil servants to "re-education camps" in remote mountain provinces to build roads and clear dense forests. Faced with the threat of internal exile or worse, some 350,000 Laotians fled to refugee camps in Thailand.

"The brain drain was staggering. By denying itself access to most of the country's trained manpower, Laos's leadership has had a very difficult time making its economy efficient," says Hussein Khan, the Laos representative of the United Nations High Commissioner for Refugees.

But recently the Pathet Lao has encouraged its internal exiles and refugees to return to their homes. The men and women who recently were the enemies of the state are becoming the main engines of its economic reconstruction.

"Laos is now emerging from the shadows," says Domon Bolivar, the co-proprietor of the Asian Pavilion Hotel in Vientiane. "We now have the freedom to own our own business. Before it was an offense to be a capitalist."

A retired colonel in the Royal Lao Army, Mr. Domon served 13 years in a Pathet Lao prison camp before his release in 1989. "The government set me free, and gave me back my hotel, which they stole from me in 1975. Now I have a joint venture with Thailand and with my government to renovate it into a modern facility," he says.

Meanwhile, foreign business people are visiting Laos in record numbers to take advantage of the liberal foreign-investment codes recently enacted by the Pathet Lao.

According to Laotian and United States officials, more than 300 joint ventures have been signed since 1990, boosting Laos's foreign reserves by an estimated $70 million.

"It's the final frontier," says Eric Langhorne, an Australian geologist on a two-year assignment to explore for mineral resources. "We really have no competition."

But though business confidence may be high, some diplomats here say Laos's new prosperity still must develop deeper roots in order to succeed.

"Laos remains one of the world's last one-party states," says a senior Western diplomat. Pursuing economic reforms "without a touch of political openness could have a very bumpy future."

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