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.
Laos Country Risk
The transition between the USDP-dominated former government and the NLD-dominated one has gone as well as could have possibly been expected so far, with the latter group having taken their places in Myanmar's parliament on February 1. However, significant questions still remain as to the identity of the NLD's presidential nominee, as leader Aung San Suu Kyi remains barred from the role by constitutional article 59(f). At the time of writing, Suu Kyi's chances at the role appear to be very minimal, with wide-ranging reports indicating that negotiations between the two parties on the subject have not been successful. Instead, the NLD is likely to elect a loyalist candidate who will be heavily influenced by Suu Kyi, in line with our long-held core view. Despite what may be seen as somewhat of a setback for the NLD, the party still holds a massive majority in parliament, and can legislate...
Laos Operational Risk Coverage (9)
Laos Operational Risk
Laos Operational Risk
BMI View: As a frontier market which is still in the process of enacting investor-friendly reforms and regional economic integration, Laos offers a number of pertinent operational risks to businesses. The labour market suffers from poor educational achievement levels and low migrant stock. The transport network is inefficient and relies heavily on a poor quality road system with a poor safety record, further increasing logistics costs, which are already elevated due to extended trade times and high fuel costs. Considerable bureaucratic hurdles also make investing in the country problematic, an issue compounded by a weak domestic financial market, and there are also risks posed by an inefficient police force and active criminal gangs. Altogether,...
Laos Crime & Security
Laos Crime & Security
BMI View: The security situation in Laos presents a number of risks for foreign businesses and investors seeking to expand their operations. While the one-party state has led to a reasonably stable environment with little violent crime, the country sits at the heart of the Greater Mekong region, with a notorious reputation for drug and human trafficking. Simultaneously, Laos is one of the poorest countries in the region and consequently suffers from poorly equipped, trained and funded security forces, including military and counterterrorism capabilities. As such, it is immensely vulnerable to domestic and international conflict, relying on its soft power tools of economic relations and diplomacy to secure its territory from aggression. The major risks to businesses stem from the country's petty crime rate, which has increased in the last few years as a result of rising...
Laos Labour Market
Laos Labour Market
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...
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...
Laos Trade & Investment
Laos Trade & Investment
BMI View: Laos' trade and investment environment presents investors with a range of significant potential risks. Corruption is endemic throughout the judicial system and government, undermining the rule of law in the country. Although Laos has taken steps to make it an attractive investment destination for foreign developers, it continues to lag behind its regional peers in terms of foreign investment inflows as investors are deterred by bureaucratic hurdles and high costs. Somewhat offsetting these risks is the rapid growth in exports and imports as Laos seeks to capitalise on regional economic integration and trade liberalisation. Overall however the country remains a regional underperformer, with a score of 34.7 out of 100 on the BMI Trade and Investment Risk Index, placing...
Laos Industry Coverage (4)
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 area for firms to develop a toehold in these frontier markets.
Between 2015 and 2020, 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, which we believe will take place when these countries achieve GDP per capita of USD3,000. Based on our forecasts, Myanmar and Laos will reach this stage in 2019 and 2021 respectively, while Cambodia will not yet have attained this by 2024. Firms which have built up their brand awareness and loyalty will then be able to reap the benefits of the motorisation boom...
Food & Drink
Laos Food & Drink
BMI View: We believe that Cambodia, Laos and Myanmar will offer substantial opportunities for investors 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. Nonetheless, the risks of operating in the region are still high, which means that multinational companies need to be here for the long run.
Latest Updates & Industry Developments
Food sales per capita in Cambodia, Laos and Myanmar (CLM) are still low by regional and global standards...
BMI View: In line with our broader economic outlook for Laos, we expect the growth in the country's construction sector to moderate over the next few years due to a decline in public infrastructure projects and a challenging business environment. That said, we believe the country's construction sector holds considerable long-term opportunities, underpinned by vast hydropower potential, rising tourist numbers and large regional connectivity projects.
Latest Updates And Structural Trends
The construction industry expanded by an estimated 6.7% in 2015, reaching a total value of USD1.1bn. Despite a healthy growth rate, this marked a visible slowdown from 11.9% expansion recorded in 2014.
We maintain our view the growth in Laotian...
BMI View : Our long-held view that consolidation is needed in Cambodia and Laos is beginning to gain some traction, which bodes well for the future development of telecoms in South East Asia. The key trend in Cambodia is one of consolidation. Meanwhile, the telecoms sector in Myanmar looks set to continue outperforming its regional peers and is readying itself for the emergence of a fourth mobile operator.
|Cambodia And Laos Mobile Sector Forecasts|