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6 - Macroeconomic trends in the Lower Mekong BasinIn Lao PDR, hydro power projects on the Mekong’stributaries are an important source ofgovernment revenueagain in 2001, industry remained the fastestgrowing sector, with construction and garmentproduction playing lead roles. 23 The country’stextile production is not as large as Cambodia’s,but is still significant at nearly $80 million in 2000.Energy production and services, particularlytourism, are increasingly important to the Laotianeconomy.Lao PDR is characterised by heavy economicdependence on Thailand. Much of the county’sidentifiable economic activity is confined to theMekong Corridor, the flat lowland area along theMekong, bordering Thailand, where developmenthas concentrated in otherwise-mountainous Lao PDR. It is estimated that the value of imports andexports, formal and informal, equal about the same amount as annual GDP. The Laotian economywas therefore adversely affected by the 1997 Asian financial crisis and the devaluation of the ThaiBaht. Today, the Laotian economy is being dollarised, though not to the same extent as the economyof Cambodia. Inflation was reported at 7.8 percent in 2001. This represents a significant reductionfrom the very high inflation rates of 1998 and 1999, and is one of the lowest rates of inflation since theeconomy reopened to the outside world in 1986. 24Poverty reduction through increased economic growth is the overarching objective of Lao PDR’s‘Fifth Five-year Socio-economic Development Plan (2001-2005)’. Like Cambodia, Lao PDR wantsto move out of the ‘least developed country’ category by 2020. Reforming the financial sector,improving systems of revenue generation and government expenditure and reforming state-ownedenterprises are priorities for the economy. 25 Future economic growth will have to be built uponimproved productivity in agriculture, thereby releasing labour resources to work in more productivesectors of the economy.1.4 Viet NamWith per capita GDP at $370 26 (1999 prices), which is equivalent to about $2000 in purchasingpower parity, 27 Viet Nam is not quite as poor as Lao PDR and Cambodia. The country experienceda period of very fast growth during the 1990s, with aggregate growth rates around 9 percent per year.Growth slowed down by the end of the decade, when both the Asian Financial Crisis and severedrought hit in 1998. However by the beginning of 2000, growth rates were once more on the wayup. 28 The Vietnamese population is growing ataround 1.5 percent per year. In 1999, anestimated 17 percent of the population lived inpoverty, according to the government’s definitionof poverty, and 32 percent were poor, accordingto the World Bank’s definition. 29The strong growth was driven by rapidindustrialisation. In 1988, agriculture accountedfor 40 percent of GDP. Ten years later, in 1998,agriculture’s share of the economy had droppedto some 25.7 percent, and by 2000, was evenlower at 24.3 percent (see Figure 3).Viet Nam is the world’s second largest exporter ofrice, after Thailand89