Laos, Asia's second-poorest country, is relying more than ever on foreign aid, but some donors are getting fed up with corruption and waste in the isolated nation.
Three decades after taking power, the secretive and army-dominated regime seems largely impervious to outside pressure, despite receiving foreign loans and aid equal to about 80 percent of its state budget.
The Buddhist country, once a French colonial backwater, relied heavily on US support until the revolutionary Pathet Lao took over in 1975, when the flow of greenbacks was replaced with rubles from the former Soviet bloc.
Since the fall of the Iron Curtain, when Laos gradually started to adopt free-market reforms in the 1990s, international donors have made up the shortfall and more.
Tourism, logging and mining have earned some foreign revenue, and a major dam promises to bring more cash through power sales to Thailand, but for now foreign donors are key to keeping afloat the US$2.4 billion-a-year economy.
The four-wheel drive vehicles of UN agencies, Western countries and their major charity groups are a highly visible presence on the dusty streets of Vientiane, possibly Asia's most laid-back capital city.
But grindingly slow bureaucracy, opaque decision making and ubiquitous graft have frustrated some foreign development agencies.
When the Lao People's Revolutionary Party met two weeks ago behind closed doors for its party congress, it approved a five-year socio-economic plan that factors in US$500 million per year in aid.
The plan seems ambitious as annual aid to Laos in recent years has dropped off from US$400 million a few years ago to less than US$350 million, largely due to Japanese cutbacks.
"The budget assumes a rise of annual aid to US$500 million," said one foreign diplomat, voicing quiet annoyance. "It's not going to happen. There is no credibility to the budget process whatsoever."
Many Westerners feel Laos' attitude toward developed countries aims mainly at obtaining funds.
"Laos' foreign policy is about balancing Thailand, Vietnam and China and attracting foreign aid," the diplomat said.
The IMF, World Bank and other backers have long urged the regime to become more self-sufficient, in part by reforming the tax system.
Very little revenue is collected in a country where income tax is virtually non-existent, corporate tax laws are poorly enforced and rampant smuggling cuts into import and sales taxes.
"The donors may accept to increase aid if the government also increases its share," UN representative Finn Reske-Nielsen said. "But if the government's contribution over the years is flat, the aid is unlikely to grow."
Some critics have charged that it is the aid cushion that is allowing Laos' communist rulers to avoid serious reform.
In Vientiane, aid workers have long ago learned to grit their teeth and work within the system, where some observers say three quarters of development projects are marred by irregularities.
"I think it's assumed and accepted that 20 percent of the funds for every project will disappear," said one of them. "At US$400 million dollars' aid per year, that's a lot of money going into people's pockets."
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