16 May 2016
Laos: Market Profile
Major Economic Indicators
- Laos is the only landlocked country in the ASEAN bloc. It borders Myanmar, Thailand, Vietnam and Cambodia, as well as China. As the third least-populous ASEAN nation (after Singapore and Brunei), Laos is among the poorest in terms of per capita income. Its resource-rich economy, however, has recorded higher GDP growth than many other ASEAN countries in recent years.
- Laos became independent in 1953, but adopted market reforms only in the late 1980s. It has attempted to promote trade within the Greater Mekong Sub-region (GMS) and to attract foreign direct investment (FDI) to support infrastructure development (especially hydropower projects).
- Its major trading partners include Thailand, China and Vietnam, and its main exports are timber, mining commodities and hydroelectricity. Major imports include machinery, equipment and motor vehicles.
- Laos is diversifying its economy to lower its export reliance on resources and hydropower. Tourism is a new economic driver, with tourist arrivals and receipts recording rapid growth. The IMF noted, however, that Laos’s external position remains vulnerable in light of rising foreign debt (due mostly to Thailand and China), which could be aggravated if its currency depreciates.
- China pledges to strengthen ties and support to Laos under the Belt and Road Initiative through expansion of economic and trade cooperation, investment in infrastructure and people exchanges. In 2015 the Laotian and Chinese governments signed an agreement to build a railway from Laotian capital Vientiane to the Chinese border.
- Laos gained full WTO membership in 2013 and has concluded many free trade agreements, including FTAs with China, Vietnam, Thailand, India and Japan. As an ASEAN member, Laos is also part of the ASEAN Economic Community (AEC), which was launched in 2015.
- The Laotian Investment Promotion Department (IPD) promotes FDI and evaluates foreign investment proposals. Laos has set up various special economic zones (SEZs) in the country, offering benefits like income tax and value added tax reductions. More information on investment incentives and regulations can be found on the IPD website.
- China’s cumulative FDI in Laos reached US$4.49 billion as at end-2014, as reported by China’s Ministry of Commerce.
- Hong Kong and Laos are currently negotiating an air services income agreement.
More information on the Belt and Road countries’ economic and investment environment, tax and other subjects that are important in considering investment and doing business are available in The Belt and Road Initiative: Country Business Guides.