MACRO AND MICRO ENVIRONMENT ANALYSIS IN LAOS

Laos' total GDP reached 18.17 billion USD, the GDP growthrate was 4.7% and in 2019 according to the World Bank report.Despite this, the Lao economy still has many difficulties, the infra

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MACRO AND MICRO ENVIRONMENT ANALYSIS IN LAOS

The Lao People's Army is small, has little budget and insufficient resources;

Their mission focused on border and domestic security, mainly against Hmong rebelgroups and other opposition Together with the Lao People's Revolutionary Party andthe government, the Lao People's Army is the third pillar of the state apparatus and isexpected to prevent political and civil unrest or similar emergencies There is noexternal threat to Laos, and the Lao People's Army maintains strong ties with Vietnam

The political environment and social order and safety throughout Laos havebeen considered stable for many years This is evident in the view of the mostimportant policy of the Party and the State of Laos This political stability has alwaysbeen considered as the most favorable and attractive opportunity for investment andproduction and business activities for Vietnam But Laos as well as other socialiststates, Laos also followed the path to socialism, which from this point has greatlyaffected the psychology of investors from the socialist countries

Legal system

Enterprises investing in Laos are currently difficult to anticipate the difficultiesand risks especially when the legal system related to investment in Laos is in theprocess of being revised and completed, so there are many changes, inconsistencies,lack of transparency and difficulty to access, leading to regrettable obstacles in theprocess of implementing projects in Laos

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Customs procedures are unclear, and the collection of taxes is often not in linewith the set tax rates Trade law and the commercial court system in Laos are growingslowly and not transparently Trade disputes are rarely adjudicated in favor of foreigninvestors Cumbersome investment procedures and approval periods are not inaccordance with the law Lao Holdings N.V and its subsidiary Sanum InvestmentLimited submitted an application to the International Center for The Settlement ofInvestment Disputes – an independent division of the World Bank (WB) proposing toresolve legal disputes related to assets made up of Sanum Investment's directinvestments in Laos, to date, more than $85 million has been raised According toSanum, the Lao government's policies have affected investments and led to the riskthat they could lose assets worth up to $400 million There are also some operatinglicenses and franchises of projects worth hundreds of millions of dollars As a result,Lao Holdings N.V lost $1.8 million per month.

In February 2018, the Lao Government issued Order No 2 on ImprovingBusiness Coordination Regulations and Mechanisms in the Lao PDR, with theexpectation of improving Laos' position in the World Bank's Ease of Doing Businessrankings As a result, the process of establishing a business is faster due to thesimplification of the procedures for applying for licenses and registering companyseals from 174 days to less than 40 days Tax administration has always beenconsidered one of the biggest barriers to trade in Laos in surveys for small andmedium-sized enterprises The World Bank ranked Laos 154th out of 190 economies

in 2019 in terms of ease of doing business

In addition to these challenges, the Lao government is also creating a series ofmore suitable conditions through revised laws, aiming to create a foundation forinvestor trust such as land incentives, corporate income tax reduction, ensuring anequal competitive environment

Vietnam-Laos relationship

Vietnam and Laos are two countries with a long tradition of friendship Underthe leadership of the two Parties, the two peoples have "committed to suffering"

throughout the historical journey against the aggression of the empires as well as in

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the period of national defense and construction and development The two countriesalways attach great importance to this special traditional relationship, help each other

in all aspects, overcome difficult roads together, stand together on the path ofrenovation and development of the country in the direction of socialism

In the economic field, up to now, trade agreements have been signed with theaim of further expanding trade relations between the two countries on the basis ofmutually beneficial equality, respecting the tradition of cooperation and internationaltrade practices With efforts, Vietnam - Laos trade exchange is constantly increasing

The two countries are working to boost bilateral trade in 2021 by 10 to 15 percentfrom last year, potentially reaching $1 billion as planned Vietnam remains Laos' thirdlargest trading partner (after Thailand and China), one of the three largest investors inLaos with 413 projects and a total registered capital of US$4.22 billion, up 35% from

2010 Preferential mechanisms on import and export tax for goods originating fromthe two countries are continued by the two sides with an ever-expanding list

Especially in 2020, there was a breakthrough with 9 new and adjusted projects,accumulated capital of more than 143 million USD, up 130% over the same period in

2019 Many investment projects promote efficiency, production, and businessprofitably, contribute positively to the development of the two countries, create jobs,increase social welfare, help Laos well implement poverty eradication policies

Although there are still difficulties in terms of capital, Vietnam always gives certaindevelopment aid to Laos, in the period of 2016-2021 is VND 3,250 billion, funded formany different fields, the most priority for human resource development

Economic environment

Size of economy

Laos has one of the fastest economic growth rates in ASEAN and hasmaintained a rate of about 7% per year in recent years (from 2009 to 2017) Theinflation rate is quite low (1.3-2% per year) Simple investment mechanism,expanding bank credit for agriculture and small businesses, developing specialeconomic zones it has contributed to attracting foreign investors and helping the Lao

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economy develop well Laos' total GDP reached 18.17 billion USD, the GDP growthrate was 4.7% and in 2019 according to the World Bank report.

Despite this, the Lao economy still has many difficulties, the infrastructure is inthe development stage, labor productivity and labor quality are still low Laos'economic development depends largely on mining, electricity, foreign investment(FDI) and foreign aid The road system is currently at a basic level, but is improving,and there are restrictions on telecommunications in internal and external lines

Electricity is available to 83% of the population Recently, the country has facedpersistent current account deficits, falling foreign currency reserves and growingpublic debt

International companies are developing special economic zones in Vientiane,Savannakhet and Champasak provinces and others Special economic zones offer awide range of incentives and tax exemptions to investors depending on the industry,besides the Lao Government constantly strives to improve the business environment

International investors have been attracted by the abundance of cheap electricity, lowlabor costs, Laos' central location in the expanding Mekong Subregion, theimprovement of transport infrastructure

The level of infrastructure development in Laos is still low but is improvingrapidly The China-Laos railway, scheduled to begin operations in 2021, will soonconnect Vientiane with Kunming, Yunnan province via high-speed rail, and willconnect northern Lao cities such as Boten, Vang Vieng and Luang Prabang withVientiane The 113.5 km-long Vientiane-Vang Vieng Highway is expected to becompleted by 2021 Other new infrastructure projects include a highway linkingBoten in Northern Laos with Thailand in northwestern Laos; a new highwayconnecting Vientiane to Boten on the Laos-China border; road reclamation on theEast-West Economic Corridor in Savannakhet Province of Southern Laos; and in thefuture may be a highway connecting Vientiane with Hanoi of Vietnam

Access to capital: The accessibility of SMEs (small and medium-sized enterprises)

is still difficult because banks require some steps to force small businesses to borrowcapital from microfinance institutions, they may even have to pay higher

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interest rates SMEs hope the Lao government can ask banks to consider improvingthe lending process in an easier way, thereby enabling SMEs to grow faster.

Laos joined the WTO in 2013 and continues to integrate with its ASEANneighbors through the ASEAN Economic Community The following countries havegranted Common Priority System (GSP) status to Laos: Australia, Belarus, Canada,Iceland, Japan, New Zealand, Norway, Russia, Switzerland, Turkey, Austria, Belgium,Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Germany, Greece, Finland,France, Hungary, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland,Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, United Kingdom Thefollowing items provide duty-free treatment under the LDC for Laotian goods: Chile,China, Taiwan, the Republic of Kyrgyzstan, Tajikistan, and Thailand

Laos has also signed trade agreements with all nine other ASEAN membersand participated in a series of negotiations as a member of ASEAN Laos has alsosigned many bilateral agreements with Vietnam, China, Cambodia, Burma, Thailand,North Korea, Mongolia, Malaysia, Russia, India, Belarus, Argentina, Kuwait, andTurkey

The World Trade Organization (WTO) in its annual Trade Profile 2020 publicationnoted the global trade ranking in 2019, Laos ranked 107th in exports and 119th in terms ofimports of goods in the world In terms of services, Laos ranks 128th in terms of exportsand 131st in terms of imports Laos' economic freedom index is 53.9, making it the 141stfree economy in 2021 (Source: Heritage) The index fell 1.6 points mainly due to adecline in free trade Laos ranks 32nd out of 40 countries in the Asia-Pacific region andhas a lower economic freedom index than the regional and world average The Laogovernment began decentralizing control and encouraging private enterprise in 1986 Thecountry's economic growth averaged more than 6% per year between 1988 and 2008, and

it can be said that Laos' growth rate reached the fastest rate in Asia, averaging more than7% per year for much of the past decade

The export value of Laos in 2019 reached 5,764 million USD and importsreached 6.252 million USD, a deficit of 488 million USD In terms of services, in

2019, Laos exported 1,101 million USD, imports reached 1.274 million USD, a deficit

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of 173 million USD Thus, the total balance of import and export turnover of Laosreached a negative growth of 661 million USD in 2019 The export value of Laos in

2019 reached 5,764 million USD and imports reached 6.252 million USD, a deficit of

488 million USD In terms of services, in 2019, Laos exported 1,101 million USD,imports reached 1.274 million USD, a deficit of 173 million USD Thus, the total

CÁN CÂN THƯƠNG MẠI CỦA LÀO GIAI ĐOẠN 2014 - 2019

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ĐVT: triệu USD

Investment activities between Vietnam and Laos

According to statistics on the trademap.org (ITC International Trade Center),Vietnam is the third largest supplier of products to the Lao market and the third largestpartner to import goods from Laos

According to statistics of the General Department of Customs, in 2020 alone,the total value of import and export of goods between Vietnam and Laos reached1,030 million USD, down 11.5% compared to 2019 In particular, the export of goods

of Vietnamese enterprises to the Lao market reached 572 million USD, down 18.6%

compared to 2019, accounting for 0.2% of the total export value of Vietnam to theworld In the opposite direction, imports of goods from Laos reached 458 millionUSD, down 0.7% over the same period, accounting for 0.17% of the value ofVietnam's imports from all trading partners

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In the period of 2016-2020, Vietnam's trade balance held a surplus of more

than US$100 million due to the situation of super-continuous exports to Laos In 2020

alone, both exports and imports will be reduced due to the impact of covid-19

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- Some of Vietnam's main export products to Laos in 2020

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Leading among Vietnam's exports to the Lao market in the period of 2016-2020

is iron and steel of all kinds According to statistics of the General Department

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of Customs, in 2020, exports of this item to Laos reached 72 million USD, down16.5% compared to the same period last year, accounting for 12.6% of total exports tothis market Thi "Lao Enterprise Product Introduction Week in Ho Chi Minh City" laoschool accounted for only 1.4% of total exports of products of the same type ofVietnam Previously in 2018 and 2019, Vietnam's iron and steel exports were thestrongest in the whole period with the value of 87.1 million USD and 86.2 millionUSD, respectively.

Laos' economy has a growth rate comparable to Vietnam's, and manydeveloped countries are looking to invest in Laos Most recently, Laos has signed theRCEP Agreement, although there are still some issues that are not ready, but the factthat Laos actively participates in the new playing field and tries to exploit theadvantages of joining this Agreement shows the high determination in Laos'integration, at the same time, when participating in the RCEP Agreement, Laos willhave to amend and reform much to meet the new requirements Recently, theinvestment situation of Vietnamese enterprises in Laos has shown signs of slowingdown, some State-owned enterprises investing in Laos have not been effective,however, there are still many enterprises that are operating effectively According tothe assessment, the economic cooperation between Vietnam and Laos is notcommensurate with the political relations between the two countries

In the coming time, Vietnamese enterprises will have to compete withbusinesses in some countries, especially when those governments have stronginvestment policies in Laos in the fields of banking, energy and telecommunications;

at the same time, Laos is gradually existing connecting the region through theinauguration of new routes such as Laos - China railways, Vientiane - Vangvienghighway, while promoting a series of projects along the East-West corridor, the roadsalong the North -South axis will open up many opportunities for investors, especially

in the logistics sector, so Vietnamese businesses prepare the conditions to be ready tocompete and participate in the fields of investment

Meanwhile, the Government of Vietnam focuses on funding Laos forinfrastructure projects, transport projects, energy, staff training, social security so

Tiêu đề	Macro and Micro Environment Analysis in Laos
Trường học	University of Laos
Chuyên ngành	Economics and International Business
Thể loại	Essay
Năm xuất bản	2024
Thành phố	Vientiane

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