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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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 42.7 out of 100, 28th out of the 30 Asian states covered in the BMI Labour Market Risk Index, behind its sub-regional peers Thailand (10th), Vietnam (12th) and Cambodia (17th). 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.

The underperforming education sector is a key risk to investors. The risks are spread across the board from...

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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 19th place out of 30 Asian countries, with a score of 46.8 out of 100. Fellow Southeast Asian States rank as follows: Vietnam (13th), Cambodia (15th), Thailand (17th), and Myanmar (24th).

Laos is a safe place for business operations, with relatively few investors citing crime and theft as a major impediment to doing business. However, the United States Overseas Security...

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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

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 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.

Consequently, we also believe the premium car segment will become increasingly attractive, as the new rich within these countries spur demand for luxury vehicles. Improvement in transport infrastructure will...

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Food & Drink

Laos Food & Drink

Shipping

Laos Shipping

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BMI View: Although the ports' infrastructure is limited in Myanmar and Cambodia, and Laos is landlocked, we feel that their booming economies and increasingly liberalised ports' sectors will provide significant opportunities for the wider shipping sector. Stronger bilateral trade agreements, developing manufacturing sectors and a wealth of natural resources are driving growth in outbound maritime freight, while consumer demand is supporting an uptick in container imports. As investment improves the port infrastructure, we anticipate Myanmar and Cambodia will augment their connectivity, and this will in turn benefit Laos.

Myanmar has strong fundamentals, in our view, with good trade connections across the region, and occupying the ideal position to become a regional transport hub. The improving economic openness is encouraging investment and driving the development of...

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Telecommunications

Laos Telecommunications