‘Losing Ground': Resource Booms, Enclave Development and Late Marketization in Lao PDR

Thirty years following the publication of Cardoso & Faletto’s (1979) work on dependent and enclave development, this paper discusses the notion of contemporary enclave development with a view from the global periphery in the case of Lao PDR, a country geographically and economically situated at the centre of an evolving East Asian and Southeast Asian political economy also facing broader incorporation – through a thick web of global agreements- into the larger international system of trade and finance.

The paper examines the opportunities and challenges of late development in resource-rich Lao PDR in light of the recent post-2002 global price hikes in hard, soft, and energy commodity sectors. While the 20^th century saw two brief periods of commodity price surges in the early 1950s and early 1970s, neither boom lasted a significant period (roughly 2-3 years) nor affected prices in all three commodity sectors simultaneously.  While a number of factors have contributed to the contemporary spike in global commodity prices, a significant element has been the role of China’s rapid economic growth and that of other Asian late industrializing states.  Whether the contemporary period of resource windfalls marks the best of times or the worst of times to be a commodity producer at the margins of integration into the global economy hinges largely on the decisions taken or opportunities lost within the development strategies of the 21^st century’s commodity exporters. 

A number of literatures have pessimistically converged against extractive industries and enclave development, from writings on the ‘resource curse’ (Auty 2004, Collier 2005) and ‘dutch disease’ to more recent literature drawing on convergence theory in economics which pessimistically foreclose the likelihood of aggregate growth and industrial linkages arising from enclave development (Rodrik & McMillan, 2013). Has the recent post-2002 commodity boom made economic diversification and development more difficult in Lao PDR? Has the structure of the changing global political economy landscape fostered premature ‘embedded liberal’ dependency?  This paper examines the macroeconomic management of contemporary resource rents in Lao PDR, how they have affected other traded goods sectors and contributed to the creation of risky national and private sector balance sheets.  The discussion of the Lao case provides an in-depth look at the mechanisms through which international volatility is transmitted into the structure of today’s most nascent emerging domestic markets and how the creation of domestic risk and debt play into a new geopolitics of late development.  It argues that industrial development is not a foregone issue for the global economy’s least developed enclave economies, but that new development strategies and lines of research are needed.