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Quang, T. & Thavisay, C. (1999). Privatization and Human Resource Development Issue: A Preliminary Study of State-Owned Enterprises in the Lao People’s Democratic Republic, Research and Practice in Human Resource Management, 7(1), 101-123.

Privatization and Human Resource Development Issue: A Preliminary Study of State-Owned Enterprises in the Lao People’s Democratic Republic

Truong Quang & Chit Thavisay


In response to the disappointing economic performance in the 1980s, the Lao government started liberalizing the economy and turned more decisively toward a market-oriented policy under the system called New Economic Mechanism (NEM). This includes a sweeping privatization program of state-owned enterprises (SOEs).
Process-wide, privatization has been implemented rather successfully. The few remaining SOEs were given extended operational autonomy in order to survive the transition toward a market economy.
Still considering SOEs the backbone of the country’s economy, the Lao government and the enterprises’ management are now paying more attention to improving profitability, productivity and effectiveness of these units by restructuring and developing human resources for long term business goals. Despite these efforts, several structural bottlenecks related to the deeply rooted subsidy system continue to hamper the full development of human resource potentials in these enterprises.


As a part of the transition toward a market economy, the Lao People’s Democratic Republic (Lao PDR) started the privatization program in 1988 under the New Economic Mechanism (NEM) framework.

In 1996, the government clarified its privatization implementation plan by publishing a list of state-owned enterprises (SOEs) to be retained and to be privatized throughout 1997. By then, 510 out of the original 640 SOEs in total changed their status. An additional 59 units were planned to undergo the process. Thus, by the end of 1997, only 30 enterprises were expected to remain under state control (Chit, 1998: 1).

In spite of their small number, the remaining SOEs still hold strategic positions and play an important role in the development of the country. In effect, the SOEs employ about 3.4% of the Lao PDR’s total non-agricultural labor and contribute approximately 50% of the country’s gross national product (GNP).

Like in most socialist countries, SOEs in the Lao PDR often suffer heavy losses and encounter many managerial problems. It is estimated that more than 50% of the existing SOEs cannot survive without state financial subsidy and privileged treatments (Chit, 1998:1).

In order to improve the effectiveness and efficiency level of the SOEs currently in operation, a comprehensive overhaul of their entire structure is needed. One of the most critical success factors is human resources. This paper deals with the issue of human resource development (HRD) with a view to improve post privatization status of the SOEs in the Lao PDR. The findings of a survey of 10 selected SOEs (Appendix 1) will be used to illustrate the interdependency between human resource factor and the overall performance of these enterprises.

The Privatization Process

In response to increasing concern about the weak performance of the public sector, the Lao government began to formulate a strategy for privatization of SOEs and state enterprise reform in the late 1980s. Between 1988-1990, the emphasis was put on granting greater operational autonomy to SOEs and the scope of the privatization program was mainly limited to small enterprises. In early March 1991, the program’s focus was shifted to include much larger enterprises. A more concrete plan was announced in which all but a handful of ‘strategic enterprises’ had to be privatized within three years.

According to Article 2 of Decision No. 17 in 1990, the SOEs to be kept under the state control include those having strategic importance to “the economy, society, defense, and internal security”. Originally, these target industries covered such key businesses as electricity generation and distribution, post and telecommunications, pharmaceuticals, banking and insurance, commercial airlines, mining, logging, and national defense industries, etc. At a later stage, the privatization campaign broadened its scope effecting all industries, with the exception of forestry and defense. The enlargement of scope helped accelerate the process, bringing the total number of SOEs from 640 in 1989 down to only 55 in January 1998 (Table 1).

State-owned Enterprises Before 1990

At the end of 1989, public enterprises accounted for virtually all the ‘modern’ industrial sector, providing an estimated of 16,000 jobs or roughly 10% of the total non-agricultural labor force (Chit, 1998: 19-20). About one third of these enterprises, especially the largest, were centrally managed, while the rest were put under the supervision of provincial and district authorities. Three fourths of them were engaged in manufacturing, the others in construction, electricity, and mining.

Table 1
State-owned Enterprises in Lao PDR
1989 1994 Jan 1998
Number of SOEs 640 NA 55
of which centrally-controlled 200 74 35
% of GNP NA NA 50.5%
Number of employees in SOEs 16,000 NA 10,460

Prior to the introduction of the NEM in 1985, SOEs had no operating autonomy. In return for the state subsidy, they were obliged to transfer back to the state budget, under the form of contributions, all of their operating surpluses and repay the loans that they received from the government for their investment capital.

In March 1988, the SOEs became free for the first time to decide on their production levels, wage and price policies, and investment plans. At the same time, subsidies and capital transfers of all kinds to the SOEs were terminated. This caused serious challenges to most SOEs as they struggled to cope with the new situation.

Strategy for Privatization

Initially, the Decree on Privatization in March 1988 aimed at strengthening the private sector activities by reducing the dominating role of the state sector. That decree, however, failed to provide necessary guidelines for privatization, such as the selection of enterprises to be privatized, asset valuation procedures, and the bidding standards. It was only in late 1990 that the exercise became more systematic and practical. The candidate enterprises had to be chosen on the basis of the following criteria: (1) cost to budget; (2) need for capital; (3) attractiveness to investors; and (4) ability of workers to manage or own the enterprises. Other factors were also taken into consideration, such as the size of the enterprises, the ability to conduct an acceptable asset valuation, and the expected impact on employment.

Initial Results of Privatization

After a slow start, the privatization process was accelerated in recent years. Between 1989-1992, thirty nine SOEs were privatized with the total value of $US 41.4 million. During 1993-1994, another batch of 25 enterprises were added to the list with an aggregate asset of $US 26.8 million.

Although 64 enterprises were initially reported to have been privatized, only 60 of them can be consolidated in terms of mode of privatization as shown in Table 2, due to inconsistency in the reporting system (Chit, 1988: 71&72).

Table 2
Initial Results of Privatization (1989-1994)
Year Nr. of SOEs Mode of Privatization
Leased Purchased Sold
Total 60 47 2 11
1989 2 2
1990 3 3
1991 11 10 1
1992 24 20 1 3
1993 14 9 1 4
1994 7 4 3

Source: Chit (1998, Appendix 1, pp. 71-72)

Thus, at the end of 1994, seventy eight of the 60 privatized SOEs were leased, 19% sold (outright), and 3% were purchased. The new ownership was divided among domestic investors (42%), joint ventures (26%), and foreign investors (32%) (Figures 1a and 1b).

Figures 1a&b
Pie Charts of SOEs

So far, there have been no serious adverse impacts on employment as a direct result of privatization. Officially, a report of the Permanent Office of the Privatization Committee (POPC) on 28 privatized SOEs reveals that there was a drop of 14% in the total of 3,459 incumbent workers, as 430 of them were made redundant (mostly early retirement and natural attrition) after these enterprises changed their status (Chit, 1998: 22). Available data also indicates that a larger contingent of workers were absorbed by enterprises taken over by foreign investors and joint ventures. It is observed that job losses were often lower in enterprises divested to the first group rather than local owners, possibly because the former were financially more viable to bear excess employment and more willing to retrain and develop the existing workforce (Chit, 1998: 22).

Implementation Responsibility

Although line ministries were essential to the implementation of the privatization program, they were nevertheless not involved in the supervision of the process. Before 1992, the implementation responsibility rested with the New Economic Mechanism Financial Committee (NEMFC) under the Ministry of Economy, Planning and Finance. Afterward, the responsibility for policy formulation was transferred to the Privatization Committee of the Committee for Planning and Cooperation (CPC), while the policy execution was assigned to the Permanent Office of the Privatization Committee (POPC) in March 1993. Yet, due to lack of resources and information, the executing body delegated to the line ministries the tasks of identifying, classifying, valuing, and prioritizing enterprises for privatization, and remained only the overall supervision of the process.

Present Status of State-Owned Enterprises

Surely, significant progress has been made since the start of the privatization program with minor impact on employment. For a foreseeable time, this program shall remain the core of the economic liberalization of the country. Further improvement into the existing SOEs will help the Lao PDR lay the firm ground for future sustainable development.

Types of SOEs

According to a report of the Prime Minister Office, there are two main types of SOEs (Chit, 1998: 25):

The first category involves those providing the basic needs to society and in principle, are non-profit enterprises. They used to enjoy substantial privileges and subsidies from the state and are, in practice, considerably supported by international assistance programs, e. g., Nampapa Lao and Electricite du Laos (EDL); most of them are medium up to larger size having employed between 20 and 100, and more workers respectively.

On the contrary, business-oriented SOEs are profit-seeking enterprises having full autonomy in finance and all other operating activities. In practice, the government and line ministries reserve the authority to intervene when necessary, especially in defining the operating scope, providing guidelines, and even deciding on personnel matters of these units.

Problems of Consolidation

It is difficult to conclude on the exact and consistent number of SOEs in the Lao PDR. This is perhaps due to the fact that the authority over a SOE can be commonly shared by the line ministry, the Ministry of Finance, the Prime Minister Office, the National Bank, and the local governments. According to a United Nations document published in 1997, thirty one public enterprises were estimated to be maintained under the state ownership throughout the country. However, in an official report of the Prime Minister Office, this number was established at around 90 at the end of that year (Chit, 1998: 28). A survey through the related government organizations and institutions done by this research in January 1998 revealed that the consolidated number would be 35, not including those owned by local governments. The role of the latter (20 units in total) is not significant in size and scope. The discrepancy in the number of SOEs is due to the inconsistent reporting system and duplication of ownership over SOEs between central and local governments in the country.

Management Structure

Officially, centrally-controlled SOEs should be managed by an Executive Council (EC) which normally consists of 5 to 7 members representing the Ministry of Finance, the Prime Minister Office, the National Bank, the line ministry plus the Director of the enterprise. In reality, this body only exists in name in most SOEs.

Distribution and Line of Responsibility

SOEs are mainly owned by central government and are operated under the supervision of the line ministries. Most of the centrally-managed SOEs are medium to large-sized and play a ‘strategic’ role in supporting the national socio-economic development such as electricity, water supply, and telecommunications whose headquarters are located in the capital of Vientiane with their extended service branches in the provinces.

Most of the local SOEs have been transferred from central ownership. They are small in size, using less than 20 workers and having a limited operating scope, which can eventually be dissolved due to bad management, lack of a clear business purpose, or inappropriate feasibility study.

Problems Facing SOEs

According to a report from the Office of the Prime Minister (1997), the existing problems and challenges faced by SOEs can be summarized as follows:

The confusion in the exact number and ownership of the SOEs together with their internal managerial problems will certainly make it difficult to plan and anticipate the needs for human resource development in the post-privatization period.

Guidelines for Improving SOEs

Despite the initial benefits of privatization and reform, SOEs today are operating in a very dynamic and critical situation. Only a part of them continue their normal operations, while the remaining are not certain about their future existence. Yet, some additional SOEs are planned to be created soon. In general, the current situation of SOEs can be described as follows:

A report written by the Deputy Minister of the Prime Minister Office issued in May 1996 provides the government guidelines to the issue. It emphasizes the importance of measures relating to organizational restructuring, management system and human resources with a view to improve the effectiveness and efficiency of the remaining SOEs. The following points form the core of the reform effort:

The last point demonstrates the government’s specific concern for human resource development, using it as an engine to boost SOEs mediocre performance.

Table 3
Strategic Options for Improving SOEs
Effective Not effective
Categories of SOEs Important Promote
  • Find out causes and improve.
  • Convert into administrative units.
Not important Promote
  • Divest
  • Sell out
  • Joint venture
  • Merge

Note: ‘Effective’ = making profit, ‘not effective’ = not profitable; ‘Important’ = SOEs which play a ‘vital role’ in the society, e.g.. security, defense, rural development, etc., the rest can be seen as ‘not important’ and therefore can be privatized.

Findings of the Survey and Discussions

Scope and Methodology

The HRD study was carried out during a period of two months between December 1997 and January 1998. A survey was done for this purpose throughout 10 selected enterprises from the existing 60 SOE’s. They represented a wide range of businesses and sizes, ranging from 24 to 2,866 workers and were located either in the capital city of Vientiane or in the southern provinces of the Lao PDR. Four of these SOEs provided public services, the remaining six were profit-seeking companies (see Appendix 1). On a larger scale, 500 questionnaires were distributed to the employees in these selected 10 enterprises, with the official endorsement of their management, to cross check their reaction on the policy and practice of HRM at their work. In total, 242 responses were returned, representing a yield rate of 48.3%. At the same time, face-to-face interviews with officials in charge of personnel matters at the top and middle management levels were conducted to shed light on the practical side of the issue. In addition, discussions with the general directors of 2 SOEs and 3 departmental policy makers were instrumental for deeper understanding of the current situation and suggestions for improvement at the final stage.

Human Resource Management Department and Its Role

All of the surveyed SOEs claimed to have a Human Resource (HR) department or at least a section in charge of personnel matters. However, none of the SOEs under study practiced full-fledge HR functions, but usually operated as a section within another function. Accordingly, eight SOEs placed the personnel function under the ‘personnel section’ within the administration department. The other two had their personnel department dealing exclusively with HR management. As shown in Figure 2, the first option is usually practiced in small size enterprises where the workforce is not large and the business not too complicated, hence human resources could be managed directly by the top executive. It is believed that centralization of personnel activities facilitates optimum allocation and utilization of human resources.

As a justification for HR function, 9 out of 10 SOEs under survey agreed that the role of the HR department is ‘very important’ in contributing to the overall success of the enterprise, and only one found it ‘important’. On the contrary, while recognizing the complex nature of HRM, 7 respondents shared the view that it is ‘not difficult’ to manage human resources as compared with other functions like production and marketing. The remaining 3 agreed that it is indeed difficult, but ‘not very difficult’. Given the fact that most SOEs in the Lao PDR only practiced some basic activities of personnel management such as keeping personnel records, recruitment and salary administration, many interviewed executives still did not appreciate the strategic role of HRM as would be the case in more advanced organizations.

Figure 2
Human Resource Management Practised in 80% of Surveyed SOEs
Human Resource Management Practised in 80% of Surveyed SOEs

According to findings shown in Figure 4, six SOEs did not recognize HR planning as a key activity of the personnel function. They opted to leave this responsibility to line ministries. In-depth interviews also revealed a general lack of knowledge about the ‘modern’ concept of HRM among those who are responsible for the function. Only 3 of the respondents, which are important enterprises having links with international assistance and cooperation, do have a long-term HR plan reflecting the business vision of the enterprise.

Figure 3
Human Resource Management Practised in 20% of Surveyed SOEs
Human Resource Management Practised in 20% of Surveyed SOEs

An analysis of the responses shows that recruitment and selection, keeping personnel records and salary administration, benefits administration, training and development; and performance appraisal are overwhelmingly seen by majority of SOEs under survey as the main responsibilities of HR function.

Figure 4
Human Resource Functions Practised by SOEs (N=10)
Human Resource Functions Practised by SOEs (N=10)

Interestingly, training and development (T&D) was increasingly recognized as one of the key responsibilities of HR function by all SOEs under survey, especially after the Lao PDR joined ASEAN as an official member. To be more competitive, SOEs have curtailed unnecessary recruitment, and instead put more emphasis on training and developing a more effective workforce.

Performance appraisal was equally considered an important task by all respondents. This issue will be discussed at length in the following part. However, only 40% of them recognized the importance of HR planning and 20% gave some weight to incentive system, employee-management relations, and occupational health and safety.

Performance Appraisal (PA)

1. PA Purpose:

Analogous to other socialist countries, compensation adjustment is used for PA purpose in the Lao PDR (Figure 5). All of the surveyed SOEs agreed with this statement, even 8 of them considered it the first priority. As a general practice, PA is held once a year at fixed interval, except for long-lasting projects. This perhaps emanates from the ideological exhortation “Let’s have a good performance to celebrate the National Day of 2nd December” slogan. December is also the last month of a fiscal year. On this occasion, outstanding workers/employees are congratulated and rewarded in public following the nomination of the organizations.

Figure 5 also illustrates that all respondents viewed the establishment of performance objective for next year as an important PA purpose just as compensation adjustment. However, it is surprising that not many SOEs used this venue as input for T&D. Only a half of the respondents claimed that PA is used for placement decisions and career planning and development.

Figure 5
Purposes of Performance Appraisal (N=10)
Purposes of Performance Appraisal (N=10)

2. PA Method and Process:

Management by Objectives (MbO) which is widely used by many organizations as a basis for setting goals and ensuring cooperation and commitment between subordinate and superior, is not practiced in PA process in all enterprises under survey. Instead, they conduct a prescribed six-step procedure based on collective and self-assessment of an individual performance as demonstrated in Table 4.

Table 4
Common PA Process Practiced in SOEs
Organizational Hierarchy Step PA Process
Executive Council 6
  • Final decision
Director Personnel Department 5
  • Personnel staff collects the PA output at department level
  • Personnel manager reports to the Director
  • Under the supervision of the Personnel Director, the Board of Directors (BOD) reviews and re-evaluates the PA to avoid errors
  • Other participants are: all deputy directors, related managers, and representatives of the mass organizations
Department 4
  • PA done under the supervision of the department head
  • Comparison among sections’ performance and people
  • Report to the Personnel Department
  • Other participants are: Sections’ heads and representatives of the mass organizations
Section 3
  • PA done under the supervision of the section head
  • Comparison among work units’ performance and people
  • Report to the department
  • Work units leaders are participants
Work Unit 2
  • PA done under the supervision of the team leader
  • Comparison among team members according to set performance standard
  • Report to the section
Individual 1
  • Self-evaluation

Ten SOEs conformably followed the common process mentioned above while other 8 applied the same process without the self-evaluation step (step 1). The remaining one SOE practiced only steps 1, 2, 3 and 4 leaving the decision to be done at the department level with the concurrence of the mass organizations such as the Youth Organization, the Trade Union, the Women’s Association, etc. In this case, the personnel department is not involved in the process but will be informed about the decision for the record. The last option is mostly applied in large SOEs.

Generally speaking, the Personnel and Administration Department of the line ministry sets the PA standard and criteria to be followed in the SOEs. These criteria are usually imprecise and general in order to allow sufficient flexibility for implementation in all related departments and enterprises. The Personnel Department of the SOE will, in turn, inform and provide necessary guidelines to the line managers about the PA timing, methodology and issues to be raised in the discussions with the employee concerned. In most cases, as the enterprise’s Executive Council exists only in name, the final decision is practically made by the Board of Directors with the approval of the mass organizations in the SOEs as outlined in step 5. Our study also revealed that only 2 of the surveyed SOEs developed its own PA criteria and standard according to the enterprises’ business nature and operating environments. The remaining majority strictly followed the guidelines issues by the line ministries.

In the same trend, those 2 SOEs which modified their PA standard claimed that they stored the individual PA records in the personnel files of the enterprises. The other 8 SOEs admitted that these PA records were merely written down by the immediate managers in their personal notebooks. More often than not, no records of the process was formally kept with the exception of the list of outstanding performers to be praised in official occasions which is to be submitted to their superiors for approval as described earlier.

The current PA procedure also lacks a feedback channel between superior and subordinate, which would otherwise make the process more democratic and effective with regard to HR development. Typically, the interviewed personnel managers rejected the idea of holding a separate PA session with the employee. They viewed such a meeting ‘impartial’, and instead preferred having informal talk in some private (neutral) place out of the working hours. Since salary is not something confidential, Lao employees could be surprised to see their colleagues’ salary increased without their awareness.

Training and Development (T&D)

Given the critical situation in the Lao PDR at present, it is now generally believed that HRD would play an important role in expanding the survival horizon and growth perspective of the SOEs in the post-privatization period. Indeed, by providing appropriate training to the remaining workforce, can the SOEs enhance their efficiency, effectiveness and competitiveness level. Along this line, HRD was ranked one of the foremost and urgent tasks of SOEs, while the acquisition of new personnel lost its priority. Only two SOEs claimed that they still recruited new employees, whilst the other 8 SOEs put more effort on providing the existing employees with T&D opportunities. The occasional search for experienced managers and employees remains an exception rather than a rule.

1. Training Budget and Facilities:

All SOEs under survey foresaw a training budget for their employee’s self-development interest. Three of them, e. g. Nampapa, EDL and Nakhorn Luang Bank have even set up their own in-house training facilities which are operational at least 9 months per year. Nevertheless, in the absence of an effective control system, the utilization of the training budget for T&D is often misused.

2. Training Purposes:

The breakdown in Figure 6 illustrates a wide diversity of opinions among the 10 surveyed SOEs on the purposes of T&D. Eighty percent of the respondents perceived that training is done for performance improvement in the existing job. Sixty percent saw it as an effective means to help managerial potentials to obtain higher qualifications, but the effectiveness of this good management succession planning scheme was often reduced by nepotism and favoritism. To cope with the growing demand for new technologies, 50% of the respondents used T&D as a venue to provide incumbent employees with the opportunities to familiarize with newly introduced jobs and positions. The other 40% created favorable conditions for employees to advance in their professional and educational ambitions. Most of them belong to the young generation under 30 years of age who are believed to be more dynamic and adaptive to changing business environment. Only 10% would offer senior (but cannot be promoted further) and outstanding workers the opportunities to go abroad, e.g., study tours, as special rewards for their contributions to the enterprises.

Figure 6
T&D Purposes as Perceived by SOEs (N=10)
T & D Purposes as Perceived by SOEs (N=10)

3. Learning Encouragement:

Vocational training is very popular among civil servants as well as non-public employees in the Lao PDR. All the ten SOEs under study encouraged their employees to take up part-time learning. Encouragement could be a full or partial refund of the tuition fee by the enterprise. This way of motivation was practiced by 60% of the interviewed SOEs, whereas 80% allowed the learners to attend off-house courses in working hours provided that they pay for their own expenses.

4. Training Methods:

On-the-job training conducted at work site was widely used by all the surveyed SOEs. As a common practice, trainees are put under the instruction of experienced workers or direct managers to learn about their new jobs. Simulation techniques which are usually introduced with the assistance of foreign experts in training centers, e.g. Nampapa and EDL, were equally used in the same proportion as job rotation (20%) by the respondents. Self-learning was not considered as an effective way for learning due to lack of literature and relevant manuals in the local language. Other modern techniques such as ‘distance learning’ have not been introduced so far in the country.

5. Training Subjects:

Ideally, training programs or courses offered should reflect the demand on the labor market for skilled workers in market economy. All respondent SOEs identified business management, foreign languages (English, French and Chinese) and computer-related courses as their primarily preferred subjects. Foreign NGOs, such as SIDA (Sweden) and GTZ (Germany), and UN organizations provide overseas courses to train incumbent and future public servants in business administration. In Vientiane, a faculty of business administration was created recently in the National University which coexists with 3 private centers, i.e., Rattana, Comcenter and Ekaphap College.

Generally, foreign languages (English and French) and computer courses are most attractive for Lao learners. However, the limited number of registered language and computer training centers in Vientiane and in other large provinces cannot meet the ever growing demands of potential participants.

Four SOEs revealed that they hired English instructors to teach their employees at work sites after working hours. The other 6 SOEs would allow their employees to follow some kind of long term technical training abroad as well as at home. They also sent employees to specialized courses at public vocational schools to upgrade their skills in electricity, electronics, metal alloy, carpentry, etc.

Unlike in the private sector, only a half of the respondents mentioned marketing as a preferred subject since SOEs were still holding monopoly of all public services. In contrast, those SOEs operating in such a highly competitive environment as tourism, fuel, and cigarettes would care more for improving their knowledge in marketing.

Accounting and finance were also found by 5 SOEs under survey as popular subjects. There is at present only one public school of finance and accounting with limited capacity in the country, which is exclusively reserved for public servants. Two other private centers in Vientiane and seven in the provinces offer accounting together with English courses to the public at large. These subjects are particularly in high demand among young people, who are anxious in building future career and promotion. Laws and economics were also listed in the training subjects by 40% and 30% of the respondents respectively. These subjects are included in the teaching curriculum of the National Organization for Studies of Politics and Administration (NOSPA). The Department of Laws in the National University of Laos (NUOL) also offers courses to future lawyers.

6. T&D Source of Funding:

Since the government is the direct owner, T&D budget is allocated by the line ministries to the related SOEs. As a general practice, this budget combining with international assistance are first offered to high-ranking officials and highly educated people to attend long training courses abroad or at home. However, a large part of the budget has been rewarded to young supervisors and outstanding employees for the same purpose. In addition, government and international institutions contribute significantly to organizing short courses and seminars in a combined effort to upgrade the skills of the middle management and employees.

In terms of source of funding, 90% of the interviewed SOEs received T&D budget allocated from the government. Only big public services enterprises such as Nampapa, EDL and banks enjoy international assistance in T&D. They made up 30% of the SOEs under survey.

Practically, employees do not pay for their long training courses due to high costs and low income. On the contrary, 80% of the respondents said that their employees paid for their short courses in vocational training centers.

7. Promotion:

On the criteria for promotion, all interviewed managers primarily agreed that it should be based on performance. However, their opinions differed on either more priority should be given to seniority (70%) or qualifications (60%). Only one respondent supported relationship-based promotion which favors relatives and close friends over others. This principle, somehow, follows the official guideline issued by the Lao Revolutionary People’s Party Central Committee at the end of 1997, that “qualified, competent and talented people” should be selected to the SOEs’ management to improve their performance.

8. Employees’ Satisfaction:

Table 5 shows the general feeling and satisfaction level of the employees in the enterprises under survey with regard to their working conditions.

Table 5
Employees’ Satisfaction (N=242)
Rank Criteria Mean S-Dev.
1 I enjoy working in the enterprise 4.25 0.798
2 I’m satisfied with my working team 4.06 0.653
3 I’m satisfied with my colleagues 4.03 0.695
4 I’m satisfied with my immediate supervisor 3.96 0.739
5 My job challenges me to use my skills and knowledge 3.92 0.940
6 The PA in the enterprise is equitable 3.46 0.955
7 Training and development in the enterprise is effective 3.22 1.020
8 Compensation and reward are reasonable and equitable 3.05 0.989
9 Working here, I have the opportunity for further advancement 2.70 1.018
10 I’m satisfied with my salary 2.69 0.829

Note: The responses were weighted on a 1-5 scale; 1 = very little, 5 = very much.

The survey found that none of the satisfaction criteria is under the average level. If true, this reflects the general situation that Lao employees are, by and large, pleased with their jobs and seem to take pride in working for their enterprises. The main reason is that SOEs provide them with a more stable and secured working environment. On a relative comparison, a research shows that their average salary, although still considered low, is respectively 44% and 32% higher than their Vietnamese and Chinese counterparts working in the same state-owned environment (Chit, 1998: 17).

The high score for satisfaction with their working team can be explained by the fact that competition is generally not very serious among Lao people and discrimination is not significant. Laotian is often friendly and helpful to his/her colleague. At the same time, superior-subordinate relationship reflects a sense of ‘brotherhood’ rather than authority dominance. As it was already highlighted in the case of PA process, the subordinates are often involved in the evaluation of the performance of their immediate superiors. This practice somehow helps develop a democratic and cooperative working atmosphere in the SOEs.

As 69.3% of the respondents were between 30-50 years of age, and therefore were in the period of career building, their concern for training and development opportunity was justified (rank 9). Given the prospect of job security and opportunity for further advancement, not well-paid workers would still be motivated at work (rank 10). An effective management should take this issue into serious consideration to compromise between the enterprise and personal goals.

Conclusion and Recommendations

The findings of the survey of selected SOEs, together with interviews and discussions with managers and policy makers concerned, lead us to conclude that the effort to improve and develop SOEs should first be tackled at macro (national) level. In this respect, a consistent and coherent economic development policy will provide well designed and coordinated implementation mechanism that will, in turn, facilitate the process of organizational restructuring and human resource development at micro (enterprise) level. This is more important in such country as the Lao PDR where resources are scarce and infrastructure conditions are still insufficient. Against this background, some recommendations can be drawn to improve the effectiveness and efficiency of the privatization program and the enterprises’ reform afterward.

General Recommendations

Figure 7
Integration of Personnel Plan in the Corporate Plan
Integration of Personnel Plan in the Corporate Plan

Source: Adapted from Nampapa Master Plan for the year 2000

Recommendations for Training and Development

End note: The list of privatized and to be privatized SOEs, and the outcome of the survey are available on request at E-mail:


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Ichiro Otani & Pham, Chi Do (1996). The Lao People’s Democratic Republic: Systematic Transformation and Adjustment. Washington DC: International Monetary Fund.

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Appendix 1

Number of SOE’s under survey: 10

Nr. Name of Enterprises Ministry Owner Nr. of Labor
1 Electricite du Laos Industry 2866
2 Lao Fuel Commerce 479
3 Lao Water Supply (Nampapa) Communication 375
4 Education Instrument Manufacturing Education 24
5 Phattana Khet Phoudoi National Defense 2500
6 Development de l’Agriculture-Foret-Industrie (DAFI) National Defense 872
7 Nakhorn Luang Bank National Bank 74
8 Youth Printing Youth Organization 24
9 Lao Tour National Tourism 31
10 State Printing Culture 129

The enterprises under survey were chosen according to the following criteria that could best represent the current situation of the state-owned enterprises:

The first contact was made with the ministries concerned for the official approval of the list, in order to secure full cooperation of the management and employees of the enterprises selected for the research.

Appendix 2


With the consent of the enterprise’s management, the questionnaires were distributed to 500 employees working in different sections or work units of the 10 selected SOEs. The target covered different qualifications, education levels, sex, age, etc.

The purpose of the survey was printed in Lao on the top of the questionnaire. It was explained orally by the researcher to groups of employee to ensure their understanding and cooperation. In each enterprise, the researcher was assisted by a staff throughout the survey.

1 2 3 4 5
I enjoy working in the enterprise
I satisfied with my salary
I’m satisfied with my immediate superior
I’m satisfied with my work team
I’m satisfied with my colleagues
My job challenges me to use my skills and knowledge
The Performance Appraisal (PA) here is reasonable and equitable
The Training & Development (T&D) here is effective
Rewards and compensation are reasonable Working here, I have the opportunity for further advancement

Note: 1= very little, 2 = little, 3 = average, 4 = much, 5 = very much.

Guidelines for direct interview with personnel officials


Position of Human Resource (HR) Section in the enterprise
The role of HR in the overall success of the enterprise
Problems facing and alternative solutions

Performance Appraisal (PA)

How do you see it? (common concept)
What is it for? How does your enterprise utilize the output of PA? (purposes)
How do you conduct it? (procedures, processes and methods)
How often is it held? (frequency)
Based on what criteria is performance appraised?
How effective is your current PA system?
What are its advantages and disadvantages?
What are related problems?
How do you solve them?
What are your suggestions concerning improvement?

Training and development (T&D)

What do you think about orientation?
What are the methods currently practiced in your enterprise? Rationale?
What kind of people (staff and employees) does the training focus on according to each method?
How effective is it?
What are the sources of fund for training?
What are required subjects?
What are preferred subjects?
What are related problems?
What are your suggestions concerning improvement and solutions?

Guidelines for direct interview with policy makers

What do you think about privatization?

What do you think about the remaining SOE’s

Human resources issues

Appendix 3

Number of employees participated in the survey:
questionnaires distributed (500), returned (224)

Age Under 30 Between 30-40 Between 40-50 Over 50
Percentage 25.5% 48% 21.3% 5.2%
Gender Male Female
Percentage 74% 26%
Education level Primary school Lower High School Upper High School
Percentage 9.3% 25.3% 65.4%
Diploma/Degree Primary School High School University Post-Graduate Doctor
Percentage 30.6% 30.5% 38.1% 0.8% 0%
My qualification fits my job Yes No
Percentage 81.7% 18.3%
Your qualification (skill) neglected; perhaps due to fear for having revealed too much personal information
Position in SOE
Number of working years neglected; perhaps due to bad memory or just disregarding the questions
Number of attending training times