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
Myanmar's opposition National League for Democracy (NLD) dominated the incumbent, military-backed Union Solidarity and Development Party (USDP) in November's general elections, setting the stage for an entirely new government in 2016. The results were tantamount to a social and political catharsis for Myanmar, which has been dominated by the military for decades and bore witness to the decimation of the NLD in the 1990s despite the fact that the party had emerged victorious in democratic elections. Nevertheless, we note that the political situation in Myanmar is still fraught with potential stumbling blocks as the NLD, USDP, and Tatmadaw will need to find a way to work together. The formation of a new, NLD-led government will also entail a veritable trial by fire for the largely untested political party, and uncertainties regarding the appointment of a president remain. That said, we believe that the election results, as well as the statements of...
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, 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 heavily reliant upon 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, these factors mean Laos is a regional underperformer in BMI's Operational Risk Index,...
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 recent years as a result of rising drug addictions. As a result of these factors,...
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 its proximity to regional powerhouse China. Overall however the country remains a regional underperformer, with a score of 32.7 out of 100 on the BMI Trade and Investment Risk Index, placing Laos 33rd out of 38 Asia region states and 170th out of 201 states on a global basis....
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. Additionally, a forecast increase in tourist numbers over the next few years will fuel growing interest in more sophisticated food and drink products among the domestic consumer base.
Cambodia's economic growth rate does...
BMI View: The growth of Laos' construction sector will continue to moderate over 2015/16 as a weak fiscal position coupled with an unfavourable business environment will hinder public, private and foreign investment. There is a more positive long-term outlook for the country, underpinned by significant hydropower potential, growth in tourism and efforts to improve regional connectivity.
Forecast And Latest Updates
We expect Laos' construction sector to see moderation in growth over the coming one to two years and forecast the sector to expand by an annual average of 7.1% between 2015-2019 in real terms, slower than the annual average growth rate of 11.9% registered between 2009 and 2013.
A drive to improve regional connectivity will spur construction activity for the transport sector and we...
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 the Cambodian market is that of consolidation. Meanwhile, the telecommunications sector in Myanmar looks set to continue outperforming its regional peers with strong growth, and is readying itself for the emergence of the fourth market operator, which should improve competitiveness in the market further.