Artisans Pioneer A Free Market...But Bureaucrats Bog Things Down

Sisters Viengkham and Kongthong Nanthavongdouangsy learned at a very early age about selling to survive. After their father was killed by a U.S. bomb near the Vietnam border in 1964--just months before Viengkham's birth--their mother moved the family to the capital, Vientiane, where she made ends meet by selling silk weavings. As her two daughters reached their teens, they began selling their own work. "At the time, we didn't know it was business--just a little extra money," says Viengkham.

But by the time Laos was opening its economy in the 1990s, the two sisters were beginning to train other weavers for their company, Phaeng Mai. They now sell $200,000 a year in handwoven clothing and home-decor products in a country where the average annual income is about $400.

Phaeng Mai and other small companies like it are at the forefront of Laos's shift from a tightly controlled communist backwater to a market economy. It's a slow shift, however.

Abrupt changes in government policy, including taxation, and poor infrastructure in a landlocked country mean Laos can't count on capital from the big global players. Instead, individuals or other small businesses put up a cash stake. "For investors, small business is safer for this country," says Mana Southichack, a Laotian-born, U.S.-educated economist. So it has been left to the silk and cotton weavers, wood furniture and toy builders, and gold and silversmiths to foster an entrepreneurial culture.

"KEEP IT ALIVE." Beneath the stilted wooden houses of rural Laos, the women still work the same hand looms their mothers and grandmothers did, weaving intricate, richly colored designs. The sisters at Phaeng Mai have adapted their patterns to suit Western tastes while retaining traditional elements. "Our aim is first to preserve Lao textile, keep it alive," says Kongthong, 36. Prices range from $6 each for place mats to $2,000 for a wall hanging.

On a typical day behind the company's showroom on the dusty outskirts of Vientiane, half a dozen young women clack away on hand looms under a metal shelter. As pop music blares from a radio, others spin silk yarn and watch cauldrons of boiling dyes made from leaves, bark, and other natural sources. Phaeng Mai employs some 100 weavers, who make about $60 a month, and for some, even room and board.

Rather than split time between farm chores and weaving, the women are encouraged to make textiles full-time and use the wages to buy food and save. "Before, they spent all day in the rice fields and still were not saving any money," says Kongthong.

But Viengkham notes that "we ourselves needed to change--to learn about other countries and how they do business." The 34-year-old, home on a visit, is taking a six-month marketing course in Australia. Most of Phaeng Mai's wares end up in foreign hands, either through tourists, local exporters, or overseas retailers. The only thing that can stop the sisters from expanding further is their inability to train more weavers fast enough to meet orders.

Artisans Pioneer a Free Market...But Bureaucrats Bog Things Down (int'l edition)

The emerging entrepreneurial class has to overcome bureaucratic sloth and avarice. Even something as simple as an application for a license to do business can get mired in red tape for months or even years. And if a company wants to import or export products, things get even more costly and complicated. "You have to clear all kinds of things--above the table and under the table," laments the 31-year-old Southichack, who got his doctorate in economics at the University of Hawaii. Southichack spent 17 years in the U.S. but has been in Laos for the past year setting up an economic consultancy, Mekonomists Inc. Southichack says the problem is that, after more than two decades of communist rule, many in government just don't understand how the free market works.

Nonetheless, he notes that Laos' rich forestry, mineral, and water resources offer a base to build from and its new membership in the Association of Southeast Asian Nations will help its leaders to become comfortable dealing with open markets. "The government here wants to improve the situation," he maintains. "It just doesn't know how. It's going to take time to learn." In a global region where moving too fast has helped bring economies to grief, going slow might suit Laos.

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