Laos - Market OverviewLaos - Market Overview
The Lao economy has grown at nearly 8 percent for the last decade and is entering a new phase of regional and global integration. The Lao government’s 2013 WTO accession and the creation of the ASEAN Economic Community (AEC) in 2015 led to major reforms of economic policies and regulations aimed at improving the business and investment environment, and rapid economic growth in neighboring countries such as China, Vietnam, and Thailand has helped expand trade and investment in Laos. The Lao government is increasingly tying its economic fortune to the ASEAN economic integration, export-led development, and increasing connectivity as Laos seeks to transform itself “land-locked” to “land-linked.”
Laos is one of the world’s five remaining communist countries. The Lao economic model bears some resemblance to its Chinese and Vietnamese counterparts, in that it has implemented market-based economic practices while maintaining a high degree of state control, and foreign direct investment is welcome. Laos is politically stable.
Under the terms of the United States-Laos Bilateral Trade Agreement (BTA), which entered into force on February 4, 2005, the United States granted Normal Trade Relations treatment to products of Laos, and Laos committed to provide U.S. exports with preferential tariff rates on a range of products and to apply most favored nation (MFN) treatment to the remainder of imports from the United States. Since 2005 trade has increased from $14 million to $122 million per year in 2017. China, Thailand, and Vietnam are the dominant trade and investment actors in Laos, with Japan, the Republic of Korea, Malaysia, the European Union, and Australia also increasingly active. In 2016, the most recent year in which trade data is available, Laos’ bilateral trade with Thailand was approximately $3.3 billion (USD 926 million in exports, $2.37 billion in imports) and approximately $2 billion with China ($1.26 billion in exports, $733 million in imports). These figures have likely grown in 2017 and 2018, especially Lao imports from China as a result of massive Chinese Foreign Direct investment and the China-Laos Railway project.
Laos’ GDP reached $15.9 billion in 2016, and the economy is estimated to have grown at approximately 6.8 percent in 2017. The economy is projected to grow at an annualized rate of 6.7 percent in 2018.
The Lao population was 6.9 million in 2017. More than two third of the workforce is employed in agriculture, mostly in small scale farming. The Lao population is young, half under 25 years of age and 60 percent under 35. The country has a small but growing middle class concentrated mostly in the capital and cities such as Savannakhet, Pakse, and Luang Prabang.
The Lao government weathered a fiscal and monetary crisis in 2013 and into 2014, brought about by poor budgetary processes, uncontrolled provincial spending, and a large raise for civil servants. The government continues to take steps to address some deficiencies, and is making credible efforts to increase tax revenue, limit spending, and stop taking on new debt. Overall, however, fiscal and budgetary policy formulation and implementation remain weak.
Major international companies have begun to invest in Lao Special Economic Zones, particularly near Savannakhet and Vientiane. Investors include Toyota, Nikon, Essilor, and Celestica. Coca Cola opened a bottling plant in 2015, and GE opened a representative office in June 2017 to develop opportunities in the energy – specifically, hydropower – and medical equipment sectors.
Laos recorded a trade deficit of $1.172 billion in 2017, with merchandise imports of $4.779 billion, exports of $3.607 billion and net services of $311.8 million. Laos imported $25.7 million worth of goods from the United States and exported $96.4 million to the United States in 2017. Top U.S. exports to Laos include gems and diamonds, precious metals, specialized mining and industrial machines, and passenger cars. Top U.S. imports from Laos are telecommunications equipment, green coffee, nonferrous metal, industrial supplies, gems and diamonds, Jewelry, apparel household goods-cotton, apparel, textiles, nonwool or cotton, cell phones and other household good, U.S. goods returned, and reimports, footwear and jewelry.
The Lao Trade Portal, established in 2012, has information for exporters and importers. The Lao Electronic Gazette is a repository Lao legislation and offers the public the opportunity to comment on proposed legislation, though it is not 100 percent comprehensive. Though most information is in Lao, many laws have been translated into English as well.
Laos Trade Development and Promotion