Foreign capital inflows are important sources of investment finance for low
income developing countries like Laos. As Laos is long facing twin deficits,
trade and budget deficits, foreign sources such as FDI (Official Development
Assistant) and ODA (Official Development Assistant) are very important for
economic development in Laos. On the other hand, massive foreign capital
inflows also may have adverse economic e ffects. This may happen if, first,
capital inflows are directed to some special sector like mining, and secondly,
an increase in government budget revenues due to a sudden increase of
production in the special sector. This syndrome is called ‘Dutch Disease’,