Statement of
Ambassador Hiem PHOMMACHANH
Ambassador of the Lao People's Democratic Republic
To the United States of America, Canada and Mexico

On behalf of the Government and the people of the Lao People's Democratic Republic (Laos), I would like to express appreciation at being given the opportunity to submit comments to the U.S. Senate Finance Committee regarding the extension of unconditional Most-Favored-Nation (MFN) status to Laos. We applaud the efforts of the United States to actively engage a relationship with Laos on a political and trade related basis. We are a nation that has struggled many years as one of the world's poorest countries, but a nation that is proud of its accomplishments and its plans for further achievements in the near future.

Laos has set on a course to become a member of the international community. Our commitment to reaching our reform goals is evidenced by the recent enactment of our Constitution, establishing a New Economic Mechanism, developing, approving and implementing socioeconomic plans, updating our systems and bringing them into conformity with requirements to join the Association of Southeast Asian Nations (ASEAN) and in actively negotiating with the United States to establish an agreement on trade based on the principle of reciprocal MFN trading status and signing the first southeast Asian bilateral investment treaty with the U.S.

Domestically, we have undertaken reforms and changes to move toward a market-oriented society, to an educated populace, to an empowered citizenry, and to elevate the economic status of all Lao. Article six of our Constitution ensures the well-being and security of all its people, regardless of ethnicity. Approximately 49% of the Lao population is made up of about 68 ethnic minorities. We have embraced our differences. In order to move forward as a country and create national unity, it is incumbent upon the Government of Laos to fully appreciate, respect and incorporate the varying ethnic groups. Government policies and practices are working to foster each ethnic group's cultural integrity. The Lao Government is committed to actively engaging all sectors of our society in economic reform to bring Laos into the global trading environment.

Internationally, Laos has just become a member of the ASEAN, Association of South East Asia Nations. Our membership in ASEAN signified the recognition by our neighboring countries of the resolution of Laos to elevate its people and work toward full participation in the world economy. To join ASEAN, we had to undertake several reforms and we are committed to taking further reforms to earn the right to participate on a level field with other trading partners.

On a bilateral basis, we have sought a strong economic relationship with the United States. Our most recent achievement with the United States was the conclusion of a bilateral trade agreement granting reciprocal most favored nation status and guaranteeing intellectual property rights protection and a bilateral investment treaty. Laos is the first country in Asia to sign a bilateral investment treaty with the United States. The General Counsel for the U.S. Trade Representative Susan Esserman stated the "These agreements form a solid basis for establishing trade and investment relations between the United States and Laos...They will expand opportunities for U.S. companies wishing to do business in Laos, and send an important signal of Laos' efforts to integrate into the world economy." We are prepared to finalize the trade agreement as soon as the U.S. Congress passes legislation extending MFN status to products of Laos.

In addition, Laos has offered unparalleled cooperation with the U.S. to solve the POW/MIA and narcotics issues. We have worked with the U.S. to stymie drug trafficking through and in Laos. Our country is often used as a conduit for drug traffickers in some neighboring countries. However, with the cooperation of the U.S., friendly countries and U.N. organizations, we are providing alternative economic incentives to our people, thus discouraging and eliminating participation by the Lao people in the growth and transit of illegal drugs.

We have also offered significant cooperation with the National League of Families (NLF). In a July 24 letter from Ann Mills Griffiths, Executive Director of the NLF, to Representative Randy Cunningham, she praised the efforts of Laos to work with her group and argued that Laos has been a big help in locating the loved ones of American families lost during the Vietnam war on our land. Ms. Mills Griffiths supports MFN for Laos.

Laos has also addressed the concerns of many non-governmental organizations (NGOs) in the area of environment. Some NGOs raised concern with the slash and burn techniques of some of our hill tribes which result in de-forestation. We have worked with these groups to address the problem. Our Government has committed to a relocation program granting land to hill tribes, relocating them for free and offering money and assistance in establishing a new home. At the same time, as previously mentioned, we are encouraging these people to grow legal and profitable crops on this land.

We feel very close to the United States. It is home to one of the largest expatriate Lao groups, the Hmong. A certain number of them fought beside the U.S. troops during the Vietnam war. Having left the country for more than two decades, they are not aware of the real situation in Laos, where Hmong customs and tradition are well preserved and promoted as a national heritage. Allegations of government abuses and killings of Hmong people in Laos however, are unsubstantiated. In fact, Lionel Rosenblatt, head of Refugees International has conducted several fact-finding missions in Laos for alleged systematic abuse of Hmong but has found a lack of evidence to substantiate these allegations. Mr. Rosenblatt supports MFN for Laos and has encouraged additional funding to aid in the Lao resettlement processes in his July letter to Chairman of the House Ways and Means Trade Subcommittee, Phil Crane.

All of these changes are moving Laos in the desired direction. However, we believe it is essential that the global community recognize our efforts and assist us in becoming a more market-oriented society. We believe the granting of MFN status to Laos by the United States is fundamental to further economic development and investment in Laos. Such trading status would encourage private sector development in our country and provide confidence to businesses in Laos.

In order to provide you with confidence in the changes occurring in Laos and to support your decision to extend unconditional MFN status to Laos, I am including a brief overview of the most recent achievements of the Lao Government.

New Economic Mechanism
In 1986, the Fourth Party Congress adopted a package of reforms intended to transform its economic management from a central command system to one which is market-based and characterized by decentralized economic decision making, with the private sector playing an active role. The new economic management system emerging from the implementation of the economic reform package is referred to as the New Economic Mechanism (NEM) in Laos. Adoption of the NEM was confirmed by the Fifth Party Congress in 1991. Under the NEM, we have drastically reduced inflation, rationalized and stabilized the exchange rate, committed to privatize or make autonomous all the state owned enterprises except for those located in "strategic sectors", eliminated consumption subsidies for public sector employees and have reformed the banking system. One example of our success is in the stabilization of the Lao kip vis-a-vis the US dollar.

New Constitution
The Constitution of Laos, adopted in August 1991, provides for the separation of legislative, executive and judicial powers. The people, with whom the political power ultimately resides according to the Constitution, exercise such power through an elected National Assembly. The members of the National Assembly were first directly elected by the people in December 1992 for a five-year term, which began in 1993. Many human rights are also guaranteed in our Constitution.
The Lao Government has also restructured. This restructuring has affected the administrative arrangements for economic, financial and development management. In February 1993, at the first session of the National Assembly, a framework outlining the country's development planning up to the year 2000 was presented. The actual plan was completed approximately two years later.
These plans set forth the goals and objectives of the Lao Government on an annual basis. Part of our success can be measured by examining the results of the plan as implemented for the 1995-1996 period.

1995-1996 Socio-economic Plan
During the 1995-1996 year, the GDP increased an estimated 7.5% compared with 1994-1995 period. The plan as approved and implemented by the Government had projected an increase in GDP of 7-8%. The population in mid-1996 totaled approximately 4.729 million (an increase of 2.4% compared with 1995) and the average GDP per capita was about US$ 370/person. In the first 6 months of 1996, 24 foreign investment projects were licensed at a registered capital of approximately US$ 1.200 million, of which 72.2% was invested in hydropower projects, 8.5% in hotel-tourism, 6.6% in telecommunication and transport, 4.4% in mining and 8.3% in other sectors.
During 1995-1996, the provinces selected their respective priority areas and detailed development projects, totaling 63 focal areas in this year. Currently, over 800 projects are presently under implementation. Among such projects, over 70% are focusing on the development of infrastructure and 30% invest in the re-orientation of the population shifting from cultivation. As we move from an agrarian society to a market-oriented society we must provide training and skills to our people in order for them to benefit from the changing society.
On a regional basis, as outlined in the initial five year plan for each region, several projects have been implemented which include: major road improvement and construction projects, irrigation projects, hydropower projects, wood processing plants and other infrastructure development projects, which has allowed the regional economic structures to take form along the direction of linkage between agriculture-forestry, processing industry and services.
The value of circulated retail goods has increased approximately 27%. External trade still suffers from a high deficit, however, a portion of this is due to imported machinery and equipment for foreign investment projects. Such a deficit may impact on our financial-monetary stability in the near future, but will be beneficial in the long term for the establishment of firm national economic base.
The 1995-1996 plan emphasized education. During this period education has been further improved in terms of quality, namely in formal education, which has increased the rate of enrollment among the children of 6-10 years age group at the primary level by 73%. Illiteracy was eradicated for 17,358 persons - of which 9,533 were women in the 15-40 year-old age group. Non-formal education such as providing vocational training was introduced in combination with illiteracy eradication.
During the 1995-1996 period, significant achievements and success were accomplished, however, there are still some weaknesses and pending issues in certain areas which must be addressed. Laos is therefore committed to following the socioeconomic plans as originally set forth through the year 2000.

1996-1997 Socio-economic Plan
Most recently, the Lao Government has undertaken and adopted the "1996-1997 Socioeconomic Development Plan" to help build up our people and to actively participate in the global trading market. General tasks in the 1996-97 annual plans include the initial development of the Fifth Party Congress Resolution and implementation of the 5 year state plan, by: further ensuring consistent socioeconomic growth; widely expanding economic structures and market-oriented production; further upgrading the quality of material and cultural life for civil servants and the pluri-ethnic people; establishing a firm position and base to progress into the 21st century and national industrialization and modernization after the year 2000.
To achieve the tasks and general guidelines the Government has outlined a number of 1996-1997 plan's targets as follows:
Actively ensure financial-monetary stability by firmly promoting revenues and strictly managing expenditures.
Actively manage import-export and circulation of goods.
Firmly promote training, create a professional labor force, technical workers for supply to major programs in socioeconomic development and strive to create new employment for the Lao labor.
Sectoral Development Plans:
Food
Food production must be firmly improved and ensured for poor families, namely in remote ethnic areas. The main emphasis will be placed on further implementing the priority programs of the Government, which are: food production, commercial production and shifting cultivation stabilization.

Communication, Transport, Post and Construction
In 1996-1997, Laos's plans call for the further improvement and building of national roads to the North of the country. Preparation will be made for the construction of strategic bridges and roads to create a strong communications network.
We also plan to continue to build the navigation route, namely in the northern section of the country to meet acceptable standards of the international community. We will improve and build ports to accelerate transport services. Additionally, we will upgrade and improve air transport services to meet international standards. Our plan calls for the development of cargo and passenger air transport to neighboring and regional countries.
The 1996-1997 State Planning Committee plan also calls for: Further improvement to guarantee and accelerate postal services - both local and outgoing. At the same time, concentrate on expanding postal network at the district level and in priority socioeconomic areas, expanding telephone centers and continuing to install the microwave system according to adopted plans.
Bring solutions to sewerage systems, roads and construction in Vientiane Municipality and other main urban areas in view of progressively meeting the standards.
In 1996-1997, the state will make a total investment of Kip 89.47 billion in the sector of communication, transport, post and construction, of which Kip 23.55 billion of domestic funds and Kip 65.92 billion of foreign funds.

Trade
Laos plans to increase the supply of basic necessary consumption goods to the population. We are also preparing for accession to the World Trade Organization (WTO). We also plan to improve our cooperation mechanisms with trading partners. For example, as previously mentioned, negotiating bilateral agreements with key global trading entities such as the trade agreement currently being negotiated between Laos and the United States.

Socio-cultural sector
In the 1996-1997 year, further emphasis will be placed in three main areas: (1) on compulsory primary education to increase the primary school enrollment by 5% and net enrollment by 75%; (2) on the eradication of illiteracy among 60 thousand people within the target group (15-40 years of age); (3) on upgrading educational attainment at the primary level for 30,000 people and to lower secondary level for 7,000 civil servants, and to upper secondary level for 2,000 persons.

Information and culture
Our plans include the continued improvement and upgrading of quality in radio broadcast, television, press and newspapers, magazines to ensure a coverage of 100% throughout the country.

Labor and social welfare
As Laos moves toward a more market-oriented economy we must improve the salary system, pension, policies toward public and private employees and improve the social security system in Laos. We plan to build housing for handicapped persons and a number of civil servants.

In general, during the 1996-1997 socioeconomic plan, we will strive to elevate the standard of living for our people, to open our economy, to become a global competitor, and to expand our efforts at becoming a market-oriented society. We will increase cooperation with ASEAN countries and continue to cooperate with international organizations and international financial institutions.

Summary
The challenges we face are not too great to be overcome and conquered. Our socio-economic plans include many opportunities for American businesses. We look to those countries, such as the U.S., who have gone before us in developing a sound economy in the global environment for guidance. We turn to the United States for its assistance not only through monetary contributions and training, but through the granting of MFN status to Laos. Such status will enable us to represent our country on par with all of the U.S. trading partners. The action of granting unconditional MFN to Laos will send a message to the people of Laos that the United States supports them in their endeavors to become a strong nation. It will put Laos on an even playing field with the rest of the world vis-a-vis trade with the United States. The active engagement of Laos will encourage the move toward a market-oriented economy. We believe that Laos is on the right path. We also believe that the United States should treat Laos with the same trading privileges it grants to almost all other nations. On behalf of my Government and its people, I strongly encourage the U.S. Congress to expeditiously seek the granting of unconditional MFN to Laos.