Supply Chains: Laos
Until recently, Laos had been one of the fastest-growing economies in the world. However, natural disasters in 2019 negatively impacted the economy’s important agricultural and mining sectors considerably slowing its growth. Its investment climate remains one of the most challenging in ASEAN. Since 2010, inbound foreign investment has almost exclusively been focused in the resource extraction and tourism sectors and has fallen sharply in recent years. In 2020, it received US$1 billion in inbound foreign direct investment (FDI) versus US$1.1 billion five years earlier, a decrease of 9 percent. Furthermore, due to the COVID-19 pandemic and economic fallout, Laos’s real GDP decreased in 2020 by 0.4 percent.
Laos’s high rate of growth and relatively low capital stock form an attractive opportunity for investors, but weak infrastructure, lack of skilled labor, and corruption have held back investment. Laos’s economy is reliant on a few industries and correspondingly ranks 116 out of 146 in economic complexity. However, the government has recognized the importance of diversifying its economy and has begun prioritizing the development of other industries, including light manufacturing, which would allow it to develop into an alternative production hub for manufacturers in the Indo-Pacific region.
To attract additional foreign investment, Laos has undertaken reforms in recent years with some success. In 2016, it reformed its investment law to allow for greater foreign ownership of assets and has been setting up special economic zones for manufacturing. Additionally, in its recent five-year plan (2016–2020) the government was tasked with implementing policies and laws to attract further investment. Top sources of foreign investment in recent years have included its neighbors, China, Thailand, and Vietnam.
Recent Investment/Supply Chain Policies
- On August 12, 2020, the Lao Ministry of Justice published an amended Law on Land No. 70/NA (2003) in its "Official Gazette." The amendment enables foreign nationals, regardless of employment or residence status, to own property on Laotian land; opens up condominium construction to foreign and domestic investors alike; and allows civil claims to be filed before the Economic Dispute Resolution Center.
- On May 28, 2021, the Lao Ministry of Planning published Instructions on the Promotion of Investment Incentives Concerning the State Land Rental and Concession Fee in its “Official Gazette.” This supplement to the 2016 Law on Investment Promotion clarifies the procedural requirements for obtaining incentives; provides a list of specific sectors that can receive certain incentives; and specifies other investment requirements.
- On January 21, 2020, Prime Minister Thongloun Sisoulith signed Order PM No.03/PM on the Improvement of Services Related to the Issuance of the Investment and Operating Business Licenses. The order urges "all relevant sectors and authorities at the central and local levels" to "improve platforms, time periods and obstacles on the issuance of investment and business licenses."