Laos

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

Laos

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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Myanmar

The National League for Democracy continues to consolidate its position as Myanmar's new government, having installed leader Aung San Suu Kyi in the powerful new role of 'State Counsellor' in order to circumvent constitutional restrictions regarding the presidency. Nevertheless, the government faces an increasingly difficult uphill battle in accomplishing its wide-ranging goals around economic and political reforms in the country. Its first major test will be the upcoming 21 st Century Panglong Conference held on August 31. The conference represents an attempt to move forward with the country's decades-long national reconciliation process, the heart of which is a national ceasefire agreement which has only been signed by 8 out of 15 major ethnic rebel groups. Should the government find a way to accomplish even a limited peace (its lack of control over the military, as...

Laos Operational Risk Coverage (9)

Laos Operational Risk

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BMI View: As a frontier market still in the process of enacting investor-friendly reforms and regional economic integration, Laos poses a number of pertinent operational risks to businesses. The labour market suffers from poor educational achievement levels and low migrant stock, resulting in a dearth of skilled labour in the country. 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 make investing in the country problematic, an issue compounded...

Laos Crime & Security

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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, which has a 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. As such, it is 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. Laos receives a score of 42.3 out of 100 for Crime and Security Risk, placing it behin...

Laos Labour Market

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BMI View: Laos is a regional underperformer in terms of the risks presented by its labour market, despite benefitting from a low labour tax regime and competitive minimum wage structure. Poor educational achievement levels have undermined the basic skills of the workforce, and there is a significant lack of high-quality tertiary level graduates. This means employers will need to recruit foreign labour and assume significant training costs. Although employment levels, including female labour force participation, are high, extensive labour market regulations...

Laos Logistics

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BMI View: Laos presents investors with some considerable risks in terms of its logistics network. The transport system is underdeveloped and relies heavily on subpar roads, making the internal transport of goods costly and time-consuming. This is exacerbated by the high cost of fuel, and while electricity price rates are more competitive, investors do face risks of interruption to supply. Along with bureaucratic hurdles that increase import and export lead times, these factors contribute to make Laos a regional underperformer in the BMI Logistics Risk Index....

Laos Trade & Investment

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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 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...

Laos Industry Coverage (4)

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 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

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BMI View: Cambodia, Laos and Myanmar will experience strong growth in their food and drink sectors on the back of rising incomes, favourable demographics and urbanisation. Opportunities in these markets largely lie in mass market offerings as a majority of consumers fall within the low income band. Operational challenges will act as a deterrent to investment in the food, drink and mass grocery retail sectors of these markets, however.

Key Trends & Industry Developments

  • Food sales per capita in Cambodia, Laos and Myanmar (CLM) are still low by regional and global standards, and food continues to account for a great share of total household spending. Therefore, any increase in disposable...

Infrastructure

Laos Infrastructure

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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...

Telecommunications

Laos Telecommunications

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BMI View : Viettel has reportedly been chosen by the government as the foreign partner for Myanmar's fourth and final mobile operator, to be licensed by end-2016. Through a joint venture model, Viettel can replicate its tried-and-tested developing market strategy. However, the new operator's challenges include slowing organic mobile subscriber growth, ongoing price competition and corporate governance. Meanwhile Cambodia's mobile market has experienced significant growth in the last few years, but the momentum has come at the cost of one of the lowest ARPU levels in the Asia Pacific region. The lack of growth opportunities, coupled with intense price competition and a crowded market has seen prominent companies exit the market. In Laos,...

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