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Dalama Adventures Tale of two corporate types ditching their jobs and traveling the world for 14 months... check out all photos, blogs & interesting tid bits at http://www.dalama.net

Hints of Capitalism Seep Through in a Land of Socialism & Cartels

LAOS | Friday, 15 June 2007 | Views [712]

The way the consumer market works here in Laos is unlike any place we've been to yet. Over the past months, we've honed our negotiating skills and technique in India, Nepal, Thailand and Myanmar, and expected to continue to use our developing skills here in Laos. There are lots of family owned and local businesses here - typical with the other developing economies we've visited - people need to be entrepreneurial and own their own businesses to put food on the table and roof over their heads. Its not like a ton of "corporate" or other established employment opportunities abound or even exist here. Aside from some government jobs, the people need to be enterprising and self sufficient. That said, you'll find guest houses, restaurants, shops, bakeries, street stalls, vendors of all types, all selling their wares, yet many selling similar products. Different from our "to date" Asia experience, however, these shop owners don't negotiate on price. Neither do service providers like tuk-tuk drivers, boat drivers, trucks, guides for treks, etc. They'd much prefer to walk away from your business than come down on price. And there's rampant practice of price collusion and fixing. So they all hold firm on the same price, not undercutting their buddy who is also selling the same stuff. So, for example, a sawngthaew driver (pick up truck with a tarp over the back that transports people and cargo) wanted 4,000 kip per person to drive us 5 km from the bus station to town. There were several empty sawngthaews, with underemployed drivers, sitting in the parking lot. We had a group of 7 non-locals, and there were just two other locals looking for a ride. So we attempted to negotiate the rate down to 3,000 kip per person for the driver to get our business of 7 additional passengers - a group discount. The driver would have just left us there had we not agreed to his fare - preferring to forgo the added revenue and our business, for the sake of price conformity with the other sawngthaews. There seems to be no incentive to differentiate or compete. The same was true for our boat ride down the Nam Ou. We were asked to pay 100,000 kip/pp for the first leg of the trip. Local Laos were all asked to pay 80,000. Understandable there was a different "tax" for foreigners as our ability to pay is great than the locals. There were 4 of us, and we would all be stuffed into the same small boat with the others, and the boat was not full. They could have easily needed our fares to make a nice margin and subsidize all the other passengers and their buddies they pick up along the way at little river towns. So we tried to negotiate for the 80,000/pp fare, same as everyone else. They refused, and when we tried to negotiate with other local boat owners, they all compliantly directed us back to the cartel chief who wouldn't allow any differentiation (despite the other boat men telling us they wanted to take us for 80,000).

Capitalistic ideals seep through in Luang Prabang. It's actually set in a World Heritage protected area, and has remnants of the French occupation - architecture, food, language... you can find a small slice of france here, every shop sells baguettes... so the notion of supply and demand and a pricing strategy at "US" type prices exist. Overpriced handicraft shops line the streets and street children tout their wares to rich falang. However, notions of free market capitalism fade, when trying to bargain down the prices, they also had no interest or incentive to do so (aside from a little negotiating that they enter into at the local handicraft day and night markets)... as if they didn't need the business. Even one shop, where the same Akah Tribe doll that I bought direct from a village for $2.50, they were asking $18 in three of the street boutiques... the owners even told me that their wholesale purchase price was $2 direct from the villages, but when trying to negotiate a volume discount purchase, they wouldn't budge. It's been the most strange and frustrating experience. Guest houses would rather leave rooms vacant during the "low rainy season" then offer a discount for agreeing to stay several nights. It's not as if they haven't embraced capitalistic notions here- capitalism is evident. We wonder, perhaps, if it's an embedded culture around socialism and communism that doesn't allow for free market competition to open up and flourish here. For now, it's cartels and price fixing, and keeping in line with their other selling comrades. It will be interesting to see if some bold entrepreneurs will get that competitive edge and step out of conformity to drive a more competitive, differentiated market model. So far as we've experienced, we have observed no desire or sense of urgency around competing or excelling - status quo and "same-same" seem to be the model here, regardless of need. We think it's only a matter of time for change to occur, as the economic need and desire surely exists... the desire for accumulation of things and material wealth - TV's, satellite dishes, flashy new motor bikes, hip western clothing, cell phones, etc. have crept their way into society here, and it's very evident among the younger generation and in the cities here.

Tags: Budgets & money


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