Lao People's Democratic Republic
Peace Independence Democracy Unity Prosperity
Background and Evolution of the Bank of Lao PDR
Since its establishment to date.
On the occasion of
the Bank festive 35th founding anniversary
07/10/1968 - 07/10/2003
I. Our country during the feudal reign or prior to the establishment of a banking system (before 1893)
As we are all aware that material production is a dicisive factor for the existence and development of a society. In its early history, the principalities of Lao originated from production bases, in particular, agricultural, handicraft and marketing. At that time Laos was called as “Lahd” like other countries over the Indochinese peninsular. Its early economic power was confined to the hands of tribal chiefs who, through economic relations, were unified into certain ethnic group with their heads, bearing a title of “Khoon”, leaded the administration in the principalities namely: Sipsongpanna, Shipsongchuthai, Xiengthong, Luangprabang. They had a honorary rank as Chao Phaya (meaning “Prince, he who upholds” ). Chao Khun and Chao Phaya prossesed not only economic power, but administrative as well. There were army, court and jail. A normal citizen was called as Phaimuong (a civilian of the municipality) who owned a piece of land for cultivation. Major production was in agriculture, for instance, lowland paddy cultivation, upland paddy farming, animal husbandry comprised of cattle, buffalo, duck, chicken, goose and pig raising while elephant were considered as strategic warfares.
Handicraft was developed steadily such as: silver and goldsmith, pottery, weavind and looming, carving and other which reflected the 1,500 - 2,000 year old history and culture, at least the VI - VIII th century. During the reign of King FaNgum and Phaya Samsenthai, economic matters gained emphasis mainly on agricultural development such as cropping and animal husbandry, secondly it was on handicraft and barter exchange till the end of the XV th century (1393 - 1473). In regard to economic development, particularly, animal husbandry followed it traditional way of keeping that meant at least 3 types of animals being raised in each family like: pigs, ducks, and chicken.
Trade retained its conservative way, consisted of two parts: the first part was called common treasury, which manages on the wealth of the King. It was accumulated through the collection of tribute from within and outside the treasury. He could sell those to anyone. By that time, goods that foreign traders looked for were : rice, salt, elephant tusks, sap of styrax, sticklac, cardamom, animal skin,horn, deer, gold, silver and non wood forest products for herbal medicines. A normal citizen of the principality did not have the right to trade on the aforesaid goods with foreign trader. If any civilian had those goods in possession, he/she would sell to officials at low price and if anyone wished to buy any of those he/she could buy at higher price. The common treasure was then considered as a major source of revenue generation. The second part was trade among normal civilains effected within the country or along the border which appeared as barter or money exchange. Entering a neighboring country's border or territory was then without passport as it was free to go anywhere, goods that the people took for exchange were mainly: rice, beans, sesame, salt, textile and household consumers goods, agricultural tools for fishing and hunting.
As far as currency is concerned, the currency at that time considered “baht” as a unit, the lesser was masok, larm and the least was bia while the hightest was Hoy. Currency had orders of weighted unit measured as Hoy, baht, masok, larm and bia as follows:
+ 12 bai = 1 larm (later called as Pheuang)
+ 2 larm = 1 masok or 24 bai = 1 masok
+ 5 masok = 1 baht
+ 10 baht = 1 hoy
Silver was foged into bar comprised of various shapes such as: Hang, Tu, Hoy and Lahd silver bars.
The economic situation during the Lao Kingdom of a million elephants was prosperous and the Kingdom was able to suppress foreign invaders (1481 - 1600). Its major revenue derived from agriculture: cropping (of which rice was a main product), animal raising, hunting. Handicraft was characterized by traditional and natural backward type of household economy. In addition some revenue was from the collection of tribute, exchange of goods and sale of goods from the common treasury. As stipulated in the rule and order, the ruler collected tax from the citizens and traders in the from of silver, gold and valuables. Gave order to various principalities to donate thrice per annum. The donation from each principality composed of silver, gold, silver and golden flowers, rhinoceros tusks, elephant tusks, textile, elephants, horses, animal skin and other valuables which were found in the surrounding. Moreover, there were rice, beans, sesame, fruits. As the Kingdom of a million elephants established relations with neighboring kingdoms, the exchange played increasing role, a number of ethnic groups and tribes exchanged their visits along the border which caused the exchange of goods to happen incessantly. The majority of goodsexchanged were agricultural, handicraft and non-wood forest products which were dealt on private basis. The ruler established customs check points at major principalities, bought goods to the treasury at obligatory price. The exchange was conducted mainly among neighboring kingdoms, suppressed the expansion of foreign feudal influence. And at the same time our people started to gradually acquire new culture from external kingdoms. The economic situation, especially trade and treasury of the kingdom of a million elephants continue to advance (1481 - 1540). In parallel with agricultural and handicraft development , trade was a significant factor enhancing the production to develop, generate income to the households and the common treasury of the country not only in the past but presently as well. Therefore, during the reign of King Suriyavongsa Thammikrahd, trade and exchange ketp up with progress along with other sectoral activities. The peasants and gardeners enjoyed their freedom and had an opportunity to develop their trade. Besides the common feudal trade, under the managermant of the monarch private trading (normal civilian) was based on the principal of buying selling goods, during the exchange there were foodstuff, handicraft and non-wood forest products. The authority then established a common treasury service called as Rajakod. The service had the duty of overseeing and managing all assets of the Kingdom. The revenue derived from the deduction fee called as “Nguad” in cash or in kind, from fee of cargo vessels accosting the port. Tham fee, for instance, a roll of textile sold at 10,000 gold, Tham fee collection was 1,000 or if a roll of textile sold 1,000 gold, the Tham fee deduction would amount to 100 gold that meant 10 percent only. In addition, revenue derived also from cropping land rent, tribute collection and fine collected from offenders. Besides, there was a common treasury spending service which assumed the responsibility for spending the common assets in both cash and kind according to the order given by the Tham department. The situation kept going on and on through a number of centuries. The Kingdom of a million elephant, thus, undergone changes over time, till the XIII - XIX th century when the French invaded, many transperent changes occurred as follows:
II. The French colonial period or otherwise the period of our people's struggling against the old colonialists, the period of no Lao Kip currency (1893 - 1945)
In order to retain feudalism as a tool of an old colonialist for invasion, the French imperialist invaded the country and reign Laos with the aim to take it as their colony. They praised a throne and the King of Laos to live up with the French yoke and used it as a mask hiding their invasion. The French colonialist printed out Indochinese paper money and metal currency such as: Kiphuanam (spiny head) Kip coints and Bee coints to release and circulate in Laos. Since 1893 Indochinese Kip currency had been uesd in 3 countries namely: Laos, Vietnam and Cambodia so as to facilitate the furnishing of their army and administration. The economy developed slightly during this period of time, there was an exchange between producers and consumers, and the budget revenue derived mainly from duty and tax collection with some figures as follows:
- 1896 : 142,770 kip
- 1897 : 182,348 kip
- 1898 : 189,522 kip
- 1899 : 201,409 kip
- 1900 : 256,457 kip
Of which, the opium sale shared about 30 - 40 % of the total revenue. In brief, till this period of time our country did not have bank, there was only a tresury.