The Banking and Financial Sector of Lao PDR : Financial Sector Note
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World Bank, Washington, DC
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During the second half of the 1980s, Lao
PDR embarked on an ambitious program of economic reforms,
called the New Economic Mechanism, whose main purpose was to
gradually transform its centrally-planned economy into a
market-oriented economy. The initial reform momentum lasted
about one decade. The far-reaching reform program
encompassed many critical components including: (a)
promotion of private production through improved incentives;
(b) institutional infrastructure to improve market economy
operations; (c) the strengthening of Lao comparative
advantages through trade liberalization and further
specialization; and (d) the establishment of price stability
through macroeconomic policy measures. The systemic changes
introduced in Lao PDR have contributed to a significant
transformation of the country s economic system, away from a
rigorously centrally-planned economy and towards a form of
market economy based on private ownership. The percentage of
poor declined based on the national poverty line from 45 to
39 percent between 1992-93 and 1997-982. But the percentage
of very poor did not decline and remained at slightly above
30 percent evidencing the need for even broader and faster
growth. Moreover, several factors slowed down the economic
liberalization process. Such factors included the lack of
transparency in government-business relations, a weak civil
society, the position of some interest groups at the
national and provincial levels, and the existence of
noncompetitive economic structures with a few firms and
actors accounting for a large share of domestic production
(except in agriculture). In some areas, reform policy
stagnated and is lagging. This is the case in the financial
sector. The creation of a two-tier banking system in the
early 1990s with separate and well-defined functions for the
central bank and the state-owned commercial banks, has not
resulted in the expected benefits: Lao PDR is still
suffering from chronic macroeconomic instability and the
state-owned commercial banks are suffering from a large
amount of non-performing loans. Taking into consideration
the objective of the Lao leaders to improve the well-being
of the Lao People, this paper argues that there are valid
reasons for establishing rules that discipline the political
influence on the design and conduct of economic policy, and
more specifically, policy regulating the financial sector.
Palabras clave
ACCOUNTING, ACCOUNTING FRAMEWORK, ACCOUNTING STANDARDS, AMOUNT OF LOANS, ASSET CLASSIFICATION, AUCTIONS, BALANCE SHEET, BALANCE SHEETS, BANK FINANCING, BANK RATE, BANK SUPERVISION, BANKING ASSETS, BANKING INSTITUTIONS, BANKING MARKET, BANKING SECTOR, BANKING SECTOR DEVELOPMENT, BANKING SYSTEM, BANKING SYSTEMS, BANKRUPTCY, BANKRUPTCY LAW, BIDS, BONDS, BROAD MONEY, BUDGET DEFICIT, BUDGET DEFICITS, BUSINESS PLANNING, CAPITAL ACCOUNT, CAPITAL ACCOUNT TRANSACTIONS, CAPITAL ADEQUACY, CAPITAL ALLOCATION, CAPITAL MARKETS, CENTRAL BANK, CENTRAL BANK BILLS, CENTRAL BANK INDEPENDENCE, CERTIFICATE OF DEPOSITS, CERTIFICATES OF DEPOSITS, COMMERCIAL BANK, COMMERCIAL BANK CREDIT, COMMERCIAL BANKING, COMMERCIAL BANKS, CONTINGENT LIABILITIES, CREDIT AVAILABILITY, CREDIT PROGRAMS, CREDIT RISK, CREDIT RISKS, CRISIS COUNTRIES, CURRENCY, CURRENCY BOARD, DEBT OBLIGATIONS, DEBTS, DEFICIT FINANCING, DEPOSIT, DEPOSIT INSURANCE, DEPOSIT MOBILIZATION, DEPOSITS, DEVELOPING COUNTRIES, DEVELOPMENT BANK, DIRECTED CREDIT, DISBURSEMENTS, DISCLOSURE REQUIREMENTS, DOMESTIC CREDIT, DOMESTIC DEBT, ECONOMIC DEVELOPMENT, ECONOMIC EFFICIENCY, ECONOMIC LIBERALIZATION, ECONOMIC TRANSACTIONS, EXCESS LIQUIDITY, EXCHANGE RATE, EXCHANGE RATES, EXPENDITURE, EXPENDITURES, FINANCES, FINANCIAL ASSETS, FINANCIAL CRISES, FINANCIAL CRISIS, FINANCIAL DEVELOPMENT, FINANCIAL HEALTH, FINANCIAL INSTITUTION, FINANCIAL INSTITUTIONS, FINANCIAL INSTRUMENTS, FINANCIAL SECTOR DEVELOPMENT, FINANCIAL STABILITY, FINANCIAL STATEMENTS, FINANCIAL SYSTEM, FINANCIAL SYSTEMS, FISCAL CONSTRAINTS, FISCAL DEFICIT, FISCAL DEFICITS, FISCAL DISCIPLINE, FISCAL POLICIES, FISCAL POLICY, FIXED ASSETS, FLOATING EXCHANGE RATE, FOREIGN CAPITAL, FOREIGN CURRENCIES, FOREIGN CURRENCY, FOREIGN DIRECT INVESTMENT, FOREIGN DIRECT INVESTMENTS, FOREIGN EXCHANGE, FOREIGN EXCHANGE MARKET, FOREIGN INVESTMENT, FOREIGN INVESTORS, GOVERNMENT ACCOUNTING SYSTEM, GOVERNMENT BUDGET, GOVERNMENT DEFICITS, GOVERNMENT SECURITIES, GOVERNMENT SECURITY, GROSS DOMESTIC PRODUCT, HOLDING, HOLDINGS, INFLATION, INFLATION RATE, INFLATIONARY PRESSURES, INFORMAL LENDERS, INFORMATION ASYMMETRY, INFORMATIONAL ASYMMETRY, INSTRUMENT, INSURANCE COMPANY, INSURANCE INDUSTRY, INTEREST BURDEN, INTEREST COSTS, INTERNAL AUDIT, INTERNATIONAL DEVELOPMENT, INTERNATIONAL FINANCIAL INSTITUTIONS, INTERNATIONAL SETTLEMENTS, ISSUANCE, JUDICIAL ENFORCEMENT, JUDICIAL PROCESS, LACK OF TRANSPARENCY, LEGAL FRAMEWORK, LEGAL SYSTEM, LENDER, LENDER OF LAST RESORT, LENDING DECISIONS, LENDING INTEREST RATES, LEVEL OF INFLATION, LIABILITY, LIFE INSURANCE, LIQUIDITY, LOAN, LOAN PORTFOLIOS, LOCAL BUSINESS, LONG TERM ASSETS, LOSS STATEMENTS, MACROECONOMIC ENVIRONMENT, MACROECONOMIC INSTABILITY, MACROECONOMIC MANAGEMENT, MACROECONOMIC POLICIES, MACROECONOMIC POLICY, MACROECONOMIC STABILITY, MARK TO MARKET, MARKET ECONOMY, MARKET INFRASTRUCTURE, MARKET INSTRUMENT, MARKET MECHANISM, MARKET SHARE, MATURITY, MICROFINANCE, MONETARY AUTHORITIES, MONETARY CONTROL, MONETARY FUND, MONETARY POLICIES, MONETARY POLICY, NATIONAL SAVING, NON-PERFORMING LOANS, OUTSTANDING LOAN, PAYMENT SYSTEM, POLITICAL STABILITY, PRICE STABILITY, PRIVATE BANKS, PRIVATE INVESTMENTS, PRODUCTIVE INVESTMENTS, PROPERTY RIGHTS, PRUDENTIAL REGULATIONS, PUBLIC BANKS, PUBLIC FINANCE, PUBLIC INVESTMENT, PUBLIC INVESTMENTS, REAL INTEREST, REAL INTEREST RATES, REGULATORY FRAMEWORK, RESERVE, RESERVES, RETURN, RETURNS, REVOLVING FUNDS, RISK MANAGEMENT, SAVINGS DEPOSITS, SAVINGS RATE, SAVINGS RATES, SECONDARY TRADING, SHARE OF CREDIT, SHAREHOLDER, SOLVENCY, STATE BANK, STOCK EXCHANGE, STOCK MARKET, STOCK MARKETS, T-BILLS, TAX, TAX DEDUCTION, TAX SYSTEM, TRADE LIBERALIZATION, TRADING, TRANSACTION, TRANSACTION COSTS, TREASURY, TREASURY BILL, TREASURY BILL AUCTIONS, TREASURY BILLS, TURNOVER, UNDERLYING ASSET, VALUATION