Market Overview
• The Lao market economy has grown at a steady pace for the last two decades and
is heading into a new phase of regional and global integration. Several watershed
economic events are on the horizon for Laos, including accession to the World
Trade Organization, and possible trade surpluses from exports of electricity and raw
materials.
• Laos weigh on both governance and the economy. The Lao economic
model bears some relation to its Chinese and Vietnamese counterparts, in that it
has implemented market-based economic practices while maintaining a very high
degree of political control. Laos is politically stable.
• Laos and the United States signed a bilateral trade agreement in 2005, although the
terms of the agreement are still being implemented in Laos, with U.S. assistance.
Since 2005 trade has increased from $14 million to $85 million per year. Vietnam,
China and Thailand have dominant trade and investment roles in the Lao economy,
with participation in certain sectors by Korea, France, Japan, Australia, Malaysia
and Singapore. Bilateral trade between Laos and Thailand, its largest trading
partner by far, totaled $3.9 billion in 2010.
• Laos’ GDP was $7.9 billion in 2011, up 8.3 percent from the prior year. Laos has
had consistently high economic growth rates over the last decade, averaging above
7 percent per year. Inflation also remains high at 7.5 percent in 2011.
• The Lao economy is based primarily on agriculture and natural resource extraction,
with services and manufacturing making moderate yearly gains. In 2010, natural
resources accounted for approximately 16 percent of GDP, services 40 percent,
agriculture 30 percent, and manufacturing 14 percent. Most Lao manufacturing is
small scale, with over 97 percent of manufacturers employing 10 or fewer workers.
• The Lao population was estimated at 6.38 million in 2011. 75 percent of the
workforce is employed in agriculture, mostly in small scale farming. The Lao
population is young, with more than half of the population under 20 years of age.
• Gross National Income per capita passed an important threshold in 2011, edging up
to $1010 and allowing Laos to graduate from low-income to lower-middle income
status, according to the World Bank. However, income distribution is unevenly
spread, and the country has a small middle class.
• Laos ran a trade deficit in 2011 of approximately $1.03 billion. According to World
Bank statistics, total imports were $3.7 billion while total exports were $2.7 billion.
Laos imported $26.1 million from the United States and exported $58.9 million to
the United States in 2011. Top U.S exports to Laos in the past include precious
stones, machinery, metals and vehicles.
Market Challenges
• Commercial law and the commercial court system in Laos are developing slowly and
are not transparent. Business disputes are rarely adjudicated in favor of the foreign
investor. Sanctity of contract is not well understood in Laos and concessions or
property rights granted by the government are liable to overlap or conflict with other
claims.
• Customs procedures are opaque, and duties levied often do not comport with listed
tariffs. Customs clearance speed is among the lowest in ASEAN at 44 days for
export and 46 days to import goods.
• Despite government efforts to establish “one stop service” for business registration
and licensing, procedures for investment are cumbersome and approvals often do
not occur within stated times or rules.
• Human resources are not well developed in Laos, and employers frequently have a
difficult time finding and retaining qualified employees. For skilled employees, the
labor market offers frequent incentives to change employers.
• Laws and procedures are subject to change at short notice and without prior
consultation with, or notification of, the private sector. This includes taxation law.
Tax administration is cited as one of the largest barriers to commerce in Laos in a
survey of small and medium enterprises.
• The World Bank’s “Doing Business” project compares Laos with 180 other
economies at: http://www.doingbusiness.org/ExploreEconomies/?economyid=107
