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The recent visit to Laos by US Secretary of State Hilary Clinton is a sign of the growing interest in a small country with huge potential.
Blessed with abundant natural resources and low labour costs, Laos is strategically located near the heart of Southeast Asia and has one of the highest GDP growth rates in the world – 7.9% in 2011 (a growth rate it has enjoyed for most of the past decade.) Laos has similar resources and strengths to Myanmar but is about one-third the size and has one-seventh the population.
As less-developed countries, Laos and Myanmar will both have preferential access into Europe and the United States.
Compared with Myanmar, which is just opening up after decades of isolation, Laos has the advantage of more developed infrastructure and a more advanced legal system. A foreign investor law has been in place since 1994, and last year Laos opened its first stock market which currently has two listed companies: Laos’s largest commercial bank, BCEL, and the electricity company EDL-GEN.
In the near future two more companies are expected to list: Enterprise de Telecommunications Lao and the Lao Indochina Group. The banking sector, also well developed, is regulated by the Bank of the Lao PDR, and includes about 10 foreign banks, mostly Thai.
One of the huge advantages of Laos, compared with other countries at a similar level of development, is an ample supply of electricity. Indeed, Laos produces a surplus that is sold to Thailand. This is certainly important for the manufacturing sector and a number of manufacturers, especially in the textile and food industries, are setting up bases in Laos.
Meanwhile, transport corridors including high-speed trains are providing comprehensive links between Laos and China and other markets, which will support manufacturers to become integrated into the global supply chain.
It is not surprising, then, that Laos is becoming a magnet for Thai companies preparing international expansion plans and looking for alternative production bases with low-cost labour.
A few weeks ago I joined a group of around 100 Bualuang SME members on a trip to Laos, where we explored investment and trade opportunities and met with potential partners in Vientiane as well as with the Finance Minister Phouphet Khamphounvong.
Thailand is the biggest trading partner of Laos and last year, total trade between our two countries rose by almost 30%. Thailand’s main exports to Laos are fuel, commodities, vehicles, tools, textiles and electronic goods, while Laos’s main exports to Thailand are copper, ready-made cloth, wood and timber and energy.
Trade and investment will continue to expand strongly with more and more developments taking place, including the opening of a new bridge at Kum Muan, Nakhon Phanom and the establishment of a new economic zone in the same area.
Thailand had 393 investment projects in Laos in 2011, mainly in energy, logistics, telecommunications, hotels and tourism, banks, timber, textiles and handicrafts. With growing interest from Thai entrepreneurs and manufacturers I am sure we will see considerable diversification in the future.
Given Laos’s position near the centre of Asean, it will be a major beneficiary once the Asean Economic Community is formed in three years, and it is sure to experience tremendous changes within the next few years. Investors who establish a base early on in this small, stable and high-potential country, are likely to enjoy excellent returns in the future.
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