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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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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BMI View: Laos presents investors with substantial risks across each of the four pillars of the BMI Operational Risk Index. The labour market suffers from poor educational achievement levels and low migrant stock. The transport network is inefficient and heavily reliant upon a crumbling road system with a poor safety record which further increases costs for businesses already affected by high fuel costs. Considerable bureaucratic hurdles 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, with an overall Operational Risk score of 38.6 out of 100 which places the country 32nd out of 38 Asia states and 152nd out of 201 states globally.

Laos is one of...

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Laos Crime & Security

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BMI View: While Laos generally does not present foreign workers, business travellers or tourists with significant risks in terms of crime or the potential threat from terrorism, concerns remain regarding the effectiveness of the police force in combating crime and the capability of the country's extremely limited armed forces which leave it vulnerable to regional unrest. These factors detract from the country's overall security situation, and thus we have given Laos a score of 44.2 out of 100 on the Crime and Security Risk Index. This places the country 27th out of 38 states regionally and 112th out of 201 countries worldwide.

Laos releases few official statistics relating to crime rates, which makes assessment of the crime risk more...

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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

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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 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...

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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 2015-2020 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 - 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 2049 and 2021 respectively, while Cambodia will be yet to attain this by 2024. Firms which have built up their brand awareness and loyalty will then be able to reap the benefits of the motorisation...

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Food & Drink

Laos Food & Drink

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BMI View: We believe that Cambodia, Laos and Myanmar (CLM) 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 also fuel growing interest in more sophisticated food and drink products among the domestic consumer base.

Headline Industry Data (local currency)

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Shipping

Laos Shipping

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BMI View: Although port infrastructure being limited in Myanmar and Cambodia, and Laos is landlocked, we feel that their booming economies and increasingly liberalised port 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, which 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...

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Telecommunications

Laos Telecommunications

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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 Southeast Asia. In Q115, one of Cambodia's smallest operators Beeline was acquired by regional giant Viettel (Metfone). We are gradually seeing the emergence of three strong mobile companies in Cambodia; Metfone, Smart Axiata and Mobitel (CamGSM). There remain a few remaining small players but we expect the mobile market will coalesce around these three, as the smaller become acquisition targets. This should encourage increased investment from the major players, ending price wars which are hurting company financials. This will mostly benefit 3G technology, which has shown strong growth throughout the region and is driving internet uptake. While mobile...

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