This information comes from the assessment conducted in country for the Laos report, which was published in November 2006.
Although the government of Laos began allowing private enterprise and loosened its grip upon the economy in 1986, the country remains far behind its economically dynamic neighbors – Thailand, China, and Vietnam. There has been strong and sustained economic growth in Laos, averaging about 6 percent per annum between 1988 and 2004, except for the country’s participation in the 1997 regional downturn.
However, this growth has been narrow and shallow – an artifact of ultimately unsustainable resource exploitation (chiefly timber) and the spillover of economic activity from neighboring countries. It has not served to lift the country out of poverty, and Laos remains a ”least developed country” (LDC). The chief impediment to more robust and deep economic growth is the lack of commitment to the economic reforms necessary to provide a good business climate that might attract investment. Instead, Laos’ economy remains donor-driven, and foreign aid is its mainstay.
Some conditions have improved. In recent years the corpus of laws in Laos has been expanded, and the laws are mostly available in English versions for potential investors to examine. The Customs Office is working to streamline its procedures. On paper, the investment climate in Laos is liberal, with 100 percent foreign ownership permitted and no limits on repatriation of profits. In practice, however, Laos remains close to the bottom of international indices measuring the comparative ease of investing and doing business. An area of particular concern is the financial sector, still dominated by nonviable state-owned commercial banks and harboring regulations against foreign banks that operate outside the capitol.
Whether or not Laos is prepared, it will very soon be confronted with new trans-border regional and world trade issues. The influences and demands of its neighbors will make themselves felt as Laos integrates with a regional market economy in which rule of law, effective arbitration, and standards of commercial behavior are highly important. As detailed in this report, meeting the demands of that wider economic world will require laws, institutions, human resources, and financial wherewithal that do not currently exist in the country.
