By Chawadee Nualkhair

KM 52 Village, Laos, May 16 (Reuters) In a quest to lift itself out of poverty, Communist-run Laos may be hurting some of the very minorities it says it is trying to help.

Among Asia's poorest countries, the landlocked nation has gradually opened up its economy to spur development and try to close the gap with wealthier neighbours Thailand and Vietnam.

But its 49 different ethnic groups scratching out a living in the mountains of the north -- some of whom, like the Hmong, have an awkward relationship with Vientiane for siding with the United States in the Vietnam War -- risk being left behind.

With this in mind, the government has been enticing minority groups to new lowland settlements with promises of basic facilities, schools and healthcare.

But aid groups say the relocation drive may actually end up doing more harm than good as migrants leave their ancestral jungle homes for communities -- such as this Hmong village north of the capital -- that lack adequate facilities or jobs.

''We don't have any work to do. We don't have money. We have to ask our cousins for food and we can't send our children to school,'' said Bongyae Yah, 40, who lives with his seven children in ''KM 52 Village'', named after its distance from the capital.

''It's very difficult for us,'' he said, squatting in the grass with a cigarette as his children chased chicks in the yard.'' His dreams of a better life turned to disappointment after he was met with 2 kg of rice and little else -- a plight that awaits hundreds of others under the relocation plan, which began in earnest in 1986 as the shutters started to come off the economy.

As many as 50 per cent of villages are already thought to have have moved in the last 20 years, even though foreign aid groups say the scheme is compounding poverty rather than eradicating it -- and violating the basic rights of minorities in the process.

''Whether or not these policies have been well-intentioned, it is now very clear that their effects have mostly been disastrous for people and communities,'' said a report issued by Toronto-based Probe International last year.

''While usually undertaken in the name of poverty alleviation, these initiatives often, in fact, contribute to long-term poverty, environmental degradation, cultural alienation and increasing social conflicts.'' NO LOVE LOST No group's clashes with the government have been more prominent than those of the Hmong, many of whom fled to the United States after the Pathet Lao communists seized power in 1975 in arguably the final act of the Vietnam War.

A 2005 census says 450,000 remain, but exile groups say the Lao army continues to prosecute a war against rebel Hmong remnants of the French colonial ''Montagnard'' army of the 1950s who went on to fight alongside the United States.

They have since become known as the ''CIA's forgotten allies''.

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