Laos
In-depth country-focused analysis on Laos's economic, political and operational risk environment, complemented by detailed sector insight

Our comprehensive assessment of Laos's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Laos, as well as the latest industry developments that could impact Laos's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Laos before your competitors.

Country Risk

Laos Country Risk

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November's ASEAN summit in Myanmar shone the spotlight on the country's political reform drive, which we believe has lost considerable momentum over recent months. In particular, the government has not shown the willingness to make substantive amendments to the constitution, suggesting that opposition leader Aung San Suu Kyi will not be allowed to run for president in 2015's general elections. Furthermore, it looks increasingly likely that the military (Tatmadaw) will retain its automatic 25% share of seats in parliament. Combined with efforts from the ruling USDP to adopt a proportional voting system rather than the first-past-the-post system that has been used in the past, it is likely that the USDP and Tatmadaw will maintain a considerable preference beyond the upcoming elections. At the same time, we also note rising risks that general elections may be postponed, as the government has tied the elections to a nationwide ceasefire which is looking more tenuous by...

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Laos Operational Risk Coverage (9)

Laos Operational Risk

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An unfavourable market size and a reliance on foreign aid decrease the attractiveness of Laos as an investment destination. Operational risks that further lower the country's ability to attract investors stem from an underdeveloped logistics network, considerable trade costs due to high levels of bureaucracy, the country's geographic position and the unreliability of its utilities. The country is therefore awarded a below-global-average score of 32.3 out of 100 in the BMI Logistics Risk Index. This places it in an uncompetitive 24th place regionally out of 29 Asian states, behind its neighbours Thailand (seventh), Vietnam (11th) and Cambodia (20th).

Businesses in Laos benefit from lower-than-average electricity prices, but are negatively affected by limited utility accessibility. Moreover, the domestic landscape is underdeveloped for international trade, which impedes market size. Laos sits in the middle of the...

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Laos Crime & Security

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Laos is a generally safe place for foreign business travellers, expatriates and tourists, despite being one of the poorest countries in the world. The security situation is positive at present as the country faces no imminent terrorist or interstate threats. However, as Laos is a one-party communist state, political violence could kick off in the future, though public dissatisfaction and dissent are likely to simmer beforehand, thereby offering forewarning. Laos sits in the bottom half of the regional pack in the BMI Crime and Security Index, in 18 th place out of 29 Asian countries, with a score of 47.0 out of 100. Fellow South East Asian States rank as follows: Vietnam (12 th), Cambodia (14 th), Thailand (16 th), and Myanmar (23 rd).

Laos is a safe place for business operations, with relatively few investors citing crime and theft as a major impediment to doing...

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Laos Labour Market

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Laos has a low-skilled labour force, with basic literacy and education levels. While this benefits industries requiring low-skilled labour, such as manufacturing, it means that investors in other sectors will have to look outside the country for specialised and highly skilled talent. Laos scores 40.0 out of 100, 25 th out of the 30 Asian states and territories we cover in our Labour Market Risk Index.

The education system is heavily biased towards urban students from higher socio-economic backgrounds, to the detriment of the 65% of the population who live in rural areas. Meanwhile, labour costs are relatively high, with high severance costs and expenses associated with importing skilled labour, which increases the financial burden on employers.

However, there are a number of significant advantages for private sector development, notably a large population with good growth prospects, high rates of female...

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Laos Logistics

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Laos' supply chains are reliant on an underdeveloped road network, and are subject to major barriers to trade in terms of import and export costs. While the country makes gains in terms of utilities availability and costs, its unfavourable market size and reliance on foreign aid decreases its attractiveness as an investment destination. This is highlighted in the country's score of 32.2 out of 100 in the BMI Logistics Risk Index, placing it in 24th position regionally, behind its neighbours Thailand (seventh), Vietnam (11th) and Cambodia (20th).

Supply chains in Laos are reliant on its road network, despite the fact that just over 13% of the roadways are paved. The logistics sector is further impeded by the country's landlocked status, which sees it rely on Vietnam and Thailand for port access. This increases the time and cost to trade internationally. Inland waterway and air links offer alternative options for...

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Laos Trade & Investment

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Laos has taken big steps to attract investment in order to graduate from its status as a 'least developed state'. The government provide attractive incentives and tax holidays for foreign investors, however to benefit from theses, foreigners must first overcome the infrastructure and institutional hurdles associated with frontier markets. Corruption and poor enforcement of legal protections also expose investors to increased risks. As a result Laos is a regional underperformer in the Trade and Investment Risks Pillar of the BMI Operational Risks Index. We award the country a score of 24.3 out of 100 placing it 26 th out of 29 Asian countries, below its South East Asian counterparts; Thailand (9 th), Vietnam (16 th) and Cambodia (21 st).

Laos officially welcomes foreign investment and plan to use it as a propeller for economic growth. To this end the government offers...

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Laos Industry Coverage (3)

Autos

Laos Autos

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The common theme in Cambodia, Myanmar and Laos is that used vehicles make up the overwhelming majority of their auto markets. The low GDP per capita of these economies makes it difficult for consumers to afford new cars. However, as long as carmakers maintain their expectations, we do see an advantage for firms to develop a toehold in these frontier markets.

Over our 2014-2020 period, we forecast GDP per capita to exceed 6.0% annual growth in all these economies, aided by their young demographics. As incomes rise, new vehicle sales will inevitably increase when motorisation finally takes off. Firms which have built up their brand awareness and loyalty will then be able to reap the benefits of the motorisation boom.

We also see tremendous opportunities for parts makers and after-sales service providers in these markets due to their large used vehicle fleets. In order to keep their vehicles in a roadworthy condition,...

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Food & Drink

Laos Food & Drink

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BMI View:  We believe that Cambodia, Laos and Myanmar (CLM) will offer substantial opportunities for investors over the coming decade, as their economies grow rapidly and become more integrated with the world economy. Growing populations, growing GDP, increased urbanisation and a demographic profile favouring a young target base all offer opportunities for food and drink operators looking to establish a foothold in the region. Additionally a forecast increase in tourist numbers over the next few years will also fuel growing interest in more sophisticated food and drink products amongst the domestic populations. 

Headline Industry Data (local currency)

Cambodia

? 2014 total food consumption sales growth (local currency): +2.22%; compound annual growth rate

(CAGR) 2013-2018: +2....

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Telecommunications

Laos Telecommunications

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BMI View :   Demand is already outstripping supply in Myanmar following the launch of mobile services by Ooredoo , Telenor and the rebranding of MPT in partnership with KDDI and Sumitomo . Affordable prices for SIM cards has seen each operator sell over 1mn new subscriptions in the first month of operation, with the competition expected to drive further uptake. A s a result of this, Myanmar is set to become the fastest growing market in the world. The influx of foreign capital into the telecoms sector highlights the...

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