"Within one month our revenues had jumped over 50%."

Opportunities in Laos: What’s open?

 

opportunities in Laos

Are there any opportunities in Laos for business and global trade? From the data we’ve collected, it doesn’t seem likely that there are many business opportunities in Laos right now that really stand out when compare to doing business in other countries. Let’s take a look a

Laos is a single-party socialist republic. The capital city is Vientiane. Other large cities include Luang Prabang, Savannakhet and Pakse. The official language is Lao. Most people are Lao with a significant proportion of indigenous peoples as well. It is a rising power in providing electricity to neighboring countries such as Thailand, China and Vietnam and the economy is accelerating rapidly with the demands for its metals, as reported by the Financial Times. It is a member of the Asia-Pacific Trade Agreement, Association of Southeast Asian Nations, East Asia Summit and La Francophonie. Its population was estimated to be 6.5 million in 2012, by the US State Department.

The Lao economy depends heavily on investment and trade with its neighbours, Thailand, Vietnam, and, especially in the north, China. Pakxe has also experienced growth based on cross-border trade with Thailand and Vietnam. In 2011, the Lao Securities Exchange began trading. Subsistence agriculture still accounts for half of the GDP and provides 80% of employment. Only 4.01% of the country is arable land, and 0.34% used as permanent crop land,the lowest percentage in the Greater Mekong Subregion, as reported by the Asian Development Bank. Rice dominates agriculture, with about 80% of the arable land area used for growing rice. Approximately 77% of Lao farm households are self-sufficient in rice, as reported by the Lao_IRRI Project. The economy receives development aid from the IMF, ADB and other international sources, and foreign direct investment for development of the society, industry, hydropower and mining, most notably copper and gold. Tourism is the fastest-growing industry in the country. Economic development in Laos has been hampered by brain drain, with a skilled emigration rate of 37.4% in 2000, as reported by the World Bank.

Laos is rich in mineral resources but imports petroleum and gas. Metallurgy is an important industry, and the government hopes to attract foreign investment to develop the substantial deposits of coal, gold, bauxite, tin, copper and other valuable metals. In addition, the country’s plentiful water resources and mountainous terrain enable it to produce and export large quantities of hydroelectric energy. Of the potential capacity of approximately 18,000 megawatts, around 8,000 megawatts have been committed for exporting to Thailand and Vietnam, as mentioned in a report by the Asian Development Bank. The tourism sector has grown rapidly, from 80,000 international visitors in 1990, to 1.876 million in 2010. Tourism is expected to contribute US$679.1 million to gross national product in 2010, rising to US$1,585.7 million by 2020. In 2010, one in every 10.9 jobs was in the tourism sector. Export earnings from international visitors and tourism goods are expected to generate 15.5% of total exports or US$270.3 million in 2010, growing in nominal terms to US$484.2 million (12.5% of total) in 2020, as predicted by the World Travel & Tourism Council.

Overall, there are still some major problems with trading in Laos. The market is still relatively poor to sell into, with a nominal GDP per capita measured at $1,003.71 by the IMF in 2010. In turn the nominal GDP was also small, at $6.341 billion. The World Bank also ranked Laos at 165th in its Ease of Doing Business rankings for 2012, so it was ranked in the very lowest tier of countries. The same survey ranked Laos 182nd for Protecting Investors, 168th for Trading Across Borders, and 110th for Enforcing Contracts. So clearly these rankings indicate, that Laos still has a long way to go before its considered as a friendly environment for businesses to invest in.

-Jay Zadey

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Author:Globial International Business Team

The Globial International Business Team researches, analyzes, and reports on all things related to global trade and business.

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