Laos is open for business

A landlocked country in the heart of the Greater Mekong, Laos remains unknown to many – probably most – outside its borders. When I was appointed CEO of ANZ Bank (Lao), most of my friends, family and colleagues asked "Laos? Where is that, Vietnam?"

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But I was eager to get out there and run a business in the heart of one of the most fascinating and growing regions in the world.

"Early movers that give this country a chance and respect for what it has to offer will reap the rewards in the long run."
Tammy Medard, CEO ANZ Laos

I'll happily admit Laos was a surprise to me, too. It is young and increasingly prosperous. These favourable demographics are evident in the fast-growing distribution of middle-income wealth across the Lao population.

The spending habits of Lao people centre around electronics, cars, home goods and name brands. Take mobile phones as an example. When I asked my predominantly Lao and under 35 year-old staff if I could borrow an iPhone charger, I received a resounding number of offers - but only for the more recent, expensive 5 and 6 models. I had an iPhone 4. I looked around at all of my colleagues eager to help but holding back laughter that their 'boss' is still on an iPhone 4. And it's not even a 4S!

I started canvassing and quickly realised everyone I asked had a smartphone, be it Apple or Samsung, worth at least $US500. Some even had the recently released iPhone 6 valued in excess of $US1,000.

The spending is not limited to small amounts. On any given day, if I look around when I'm stopped at a traffic light, I see a sea of cars, not motorbikes: Range Rover, Toyota, BMW. To combat unsealed roads the Lao people have taken to cars, preferably pick-up trucks (or utes as they are called in Australia) and Sports Utility Vehicles. They love their cars.

The growing middle-income cohort is also willing to invest in their homes. While on the outside some homes may look modest and are located on dusty dirt roads, as soon as the doors open you could be in any developed, western country. Marble bench tops, Bosch appliances, Toto bathtubs, 54 inch flat screen TVs. The list goes on.

Laos is a country which has had more than 7 per cent GDP growth year on year since 2005. For me and many like me, it is an incredible opportunity to see the Asian Century first hand and be a part of its history-making story.

But if you too are questioning, "where and what is Laos?" let me help you. Laos has borders touching Thailand, Myanmar, Vietnam, Cambodia and China. Laos, or more properly the Lao People's Democratic Republic or Lao PDR, became a single-party socialist government in 1975 following the fall of the Royalist Lao Government.

In 2013, Lao PDR became a full member of the World Trade Organisation and with that membership and the process leading to it came significant progress in trade matters such as bilateral trade agreements and improved ease of capital flows in and out of the country.

Currently, Lao PDR appears on the United Nation's Least Developed Countries list; however, the Government has publicly stated a goal to graduate from the list by 2020. As such, the Government continues to open its doors to Non-Government Organisations and the private sector to help improve the Gross National Income, quality of life and education, and to create a more transparent and stable business operating environment.

But enough about the political-jargon. Lao PDR is quickly becoming an important consumption market with a Special Economic Zone (SEZ) in Savannakhet, a province in the centre of Lao. The SEZ has road access to 500 million consumers and is about 500 kilomtres away from ports in both Thailand and Vietnam. It is situated along the East-West Economic Corridor which is a 1,450km route linking Myanmar's Mawlamyine Port and Vietnam's Danang Port, and has road connection to China's Yunnan Province in the north and Cambodia in the south.

Lao PDR's relatively cheap cost of electricity for the region makes the SEZ an attractive and affordable manufacturing solution for Multi-National Corporates. Increasingly, manufacturers are looking to the SEZ to adopt a “Thai plus one” model of manufacturing to mitigate geopolitical risk and the increasing cost of doing business in Thailand.

Offering up to three to 10 years of tax exemption incentives, and a low 5 per cent labour tax for foreign workers, already, household names such as Nikon and Toyota are amongst the growing list of corporates who have set up factories.

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The seven million people strong Lao PDR economy produces a respectable GDP of about $US11.24 billion. Since 2005, GDP has consistently grown by more than 7 per cent year on year, and from 2008, GDP growth by percentage terms has outpaced its neighbours and is projected to remain above 6 per cent through 2017.

And it's percentage of population below the poverty line has dropped to 23 per cent in 2012 from 46 per cent in 1992 an encouraging trajectory, and not far off from Cambodia and Vietnam, 17.7 per cent and 17.2 per cent respectively.

Clearly, in such a frontier economy, there are still growing pains in the ease of doing business in Lao PDR but there is a continuous commitment to improve. The Lao people are strong and resilient, and when committed to a goal can come together and get things down even in the 11th hour. They are centred on family and friends and their Buddhist beliefs. And they are loyal.

The spending practices, education uplift, government commitment for increased transparency in doing business all leads to one direction... growth. And it will be those early movers that give this country a chance and respect for what it has to offer who will reap the rewards in the long run.

Tammy Medard is CEO for ANZ Laos.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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