Laos: bright business opportunities ahead

Laos’ economy is growing, spurred by improvements within the regulatory and policy environment.

From my perspective as a banker, while it isn’t difficult to start or invest in a business in Laos, amendments to its Investment Promotion Law earlier in 2017 have increased incentives. The aim of the Laos Government is to increase Foreign Direct Investment (FDI).

Click image to zoom Tap image to zoom

“As I travel the country and visit customers I can see the Laos economy is changing dramatically – for the better. If I were to compare it to where I started my career in Mumbai, India – a bustling, fast and rushed environment - or even Australia, where I spent the majority of my working life – the difference would be the pace” said Rufus Pinto, CEO ANZ Laos

" The Laos government’s vision is to overcome its status as a land-locked country and become a lank-linked nation.”The new Investment Promotion Law is offering incentives such as exemption from profit tax and fee exemption on land leases while recently abolishing the minimum capital investment.

However, from a medium term perspective, it is important to further improve investment policies through sound regulatory policies and more importantly support the changes in policy framework with a seamless process implementation

Consider Laos ranked 141st in the World Bank’s Doing Business 2018 report. But Inflation pressures remain well contained (2017e: 1.1 per cent year-on-year vs. 2016: 1.5 per cent) thanks to ample food supplies and modest demand side pressures.

From a macro-economic perspective, mining activity is likely to turn supportive of growth on the back of an increase in global commodity prices. Meanwhile, sectors such as agriculture, energy and hydropower are anticipated to remain strong.  A healthy harvest has also boosted prospects for the country’s agriculture sector.

At the same time, ongoing restructuring in the sector due to increased participation of small-scale farmers in the production of export-dependent commodities is likely to be a positive driver in the near term.

“In ANZ’s sector, there are currently more than 40 banks in Laos. While having many banks is challenging, the competition can drive innovation and bring benefits to the local business environment” said Rufus

On the infrastructure front, the Laos-China railway - one of the key co-operation projects between the two sides in essence the one road one belt initiative- is underway and it is expected the line will go into operation by the end of December 2021. This minimise the transport barrier and will especially help the agricultural sector to export products and raw materials to China. 

Laos’ Gross Domestic Product (GDP)

According to ANZ Research:

  • Laos has a population of 7 million;
  • Nominal GDP per capita (USD) in 2017 is $2,472 and forecast to rise to $3,218 in 2020;
  • GDP growth is expected to pick up slightly from 6.9 per cent in 2017 to 7.0 per cent in 2018;
  • The forecasted nominal GDP growth is 9.9 per cent per annum over the next 5 years, reflecting support from infrastructure projects and power generation.

Inflation remains well contained but has likely bottomed out amid rising commodity prices. We forecast inflation to rise to 2.2% in 2018, up from 0.8% last year. However, a pick-up in commodity prices will likely ease pressure on government finances.

Top exports in the year 2017

  1. Mineral products (34.2 per cent);
  2. Electricity (30 per cent);
  3. Agricultural products (11.1 per cent);
  4. Food stuffs, beverages & tobacco (10.0 per cent); and
  5. Garments (4.1 per cent).

Opportunity – Special Economic Zone (SEZ)

The Laos government’s vision is to overcome its status as a land-locked country and become a land-linked nation. There are several routes to connect ASEAN to China such as Road No. 3 (R3) connecting Thailand-Laos-China (called North-South Corridor). 

In the centre, there is East-West Corridor which is Road No. 9 connecting Thailand-Laos-Vietnam and many other routes that help to boost logistic activity. Alongside, there exist Special Economic Zones established to attract investors.

There has been the establishment of the Savan-Seno SEZ (2003) which is located in central Laos’ Savannakhet Province – a central point of the East-West Economic Corridor, as well as the Golden Triangle SEZ (2007) located in the sub-Mekong region close to the country’s borders with Myanmar, Thailand and China. Laos also has eight other specific economic zones located near the capital of Vientiane.

The largest SEZ in Laos is Savan-Seno Special Economic Zone. It has road access to 500 million consumers and is just 500 kilometres away from ports in Thailand and Vietnam. A growing list of corporates from Europe, the Americas and Asia have set up factories there tempted by three to 10 years of tax exemption incentives and a low 5 per cent labour tax for foreign workers.

It is situated along the East-West Economic Corridor which is a 1,450 kilometre route linking Myanmar’s Mawlamyine Port and Vietnam’s Danang Port and also has road connection to China’s Yunnan Province in the north and Cambodia in the south.

Laos’ relatively cheap cost of electricity for the region makes the SEZ an attractive manufacturing option. Increasingly, manufacturers are looking to the SEZ to adopt a "Thailand-plus-one"  model of manufacturing to mitigate geopolitical risk and the increasing cost of doing business in Thailand. 

Celestica Laos

Headquartered in Toronto, Canada, Celestica has a proud 21-year history of technology leadership. Celestica Group has over 27 thousand employees across 30 locations in 14 countries throughout the Americas, Europe and Asia.

Celestica partners with customers across diverse markets from communications to aerospace and defences.

Laos Celestica’s operation provides Electronic Manufacturing Services (EMS) solutions to multinational clients in the IT and telecommunications industries. The Lao operation is an extension of Celestica’s Thailand facility, providing customers with an alternative manufacturing solution beyond Thailand.

Laos Celestica’s newest surface-mount technology (SMT) assembly and box build site is located in the Savan-Seno special economy zone, Savnnakhet province, Laos. It has been operating since the second quarter of 2015 with a production area of around 85 thousand square feet and warehouse area of around 30 thousand square feet. The Laos facility is an extension to the Thailand site and focuses on high volume products or assemblies requiring a lower cost production base.

Celestica Laos (CLA) is currently focused on customers in the communications market segment and already has a world leading telecommunication companies as one of their customers.

Logistics into and out of CLA are via all-weather roads that are part of the East West Economy Corridor (EWEC), a road-corridor stretching 1,320 kilometres between the Andaman Sea in the Indian Ocean and the South China Sea (Vietnam, Laos, Thailand and Myanmar).

Inbound and outbound logistics are handled through Thailand’s Suvarnabhumi Airport (BKK) and Laem Chabang seaport. Celestica is a founding member of the Electronics Industry Citizenship Coalition (EICC) – an industry-wide standard on social, environmental and ethical issues in the electronics supply chain. CLA, like all of Celestica’s worldwide manufacturing sites, conforms to the latest EICC standards. 


The Lao People’s Democratic Republic (Lao PDR) is primarily an agricultural economy, with this sector contributing 51 per cent of the GDP. Approximately 1.9 million individuals are involved in agricultural work. Recently the Lao PDR conducted a major agricultural census which provides an excellent overview of the basic nature of Laos’ agricultural system.

Given its subsistence nature, Laos’ agriculture has not played a major role in the country’s foreign trade.

The major export products from Laos’ agricultural sector are:

  • Timber (this is currently frozen due to anti-logging initiative by the Government);
  • Lumber;
  • Plywood; and
  • Coffee.
  • Crops & vegetables

The major agricultural imports are:

  • Sugar;
  • Condensed milk; and
  • Long-grain rice.

To boost and attract investment to support the FDI growth in Laos, the Lao government is improving regulations to suit investor focus, especially for businesses that contribute for social sustainability development.

Recently, the Government of Lao PDR organised a joint meeting between Laos Chamber of Commerce and Australian Chamber of Commerce in Sydney during the ASEAN on 18th of March 2018 to enhance the business cooperation for both countries.  The main focus was on the agricultural industry and provided useful information to Australians on how to invest in Laos as well as how keen the Lao government was in supporting the business and investor. The event was attended by the Laos Prime Minister, ThongLoun Sisoulith and the Australian Foreign and Trade Minister, Julie Bishop.

(Australia’s current foreign direct investment in Laos is USD 135 million, ranking it 15 out of the 53 foreign countries invested in Laos.)

The 414 kilometre railway will link Boten, the northern Lao town bordering southwest China’s Yunnan Province, and Vientiane – capital of Laos will also help to boost Laos’ economy on exporting agricultural products.


Laos is mineral resource rich. More than 500 mineral deposits have been identified including gold, copper, zinc and lead. During 2012, the mining and quarrying sector’s contribution to GDP was 7 per cent.

Reserves include:

  • Gold – 500 tons;
  • Copper – 8 million tons; and
  • Zinc – 2 million tons.

The mining sector accounts for 12 per cent of government revenues and 10 per cent of national income with 80 per cent of foreign direct investment.

Hydropower and Energy

Laos’ geography and water resources are behind a government strategy to become the “Battery of ASEAN”.

A number of investors have already come in – mostly either in joint ventures or jointly with the Laos government – to fulfil the demand of the economic growth.

ASEAN has signed a memorandum of understanding (MOU) with neighbouring countries which states Laos will supply electricity for them. The Thai and Malaysian governments agreed to purchase electricity from Laos in an ASEAN Energy Ministers meeting which was held in Manila, Philippines. The initial phase will supply 100 megawatts of energy to Malaysia via a transformation channel in Thailand from 1st August 2018.

On the energy side, the development of energy in Lao PDR has been rapidly increasing in parallel with the domestic demand. Additionally, the Lao government has supported and encouraged privates to invest in the energy sector.  They promote sustainable renewable energy, improve laws and regulations and provide incentives to the investors who produce clean and green energy.

From our perspective at ANZ and looking at the bright future of the industries above, it seems the consumer and the markets are more ready in Laos than we first thought.

Vignarsone (Nick) Mounalard is Implementation Manager 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.

editor's picks

14 Aug 2018

Agri sector ripe for picking in APAC

Anna Green | CEO Philippines, ANZ

Conditions in the Philippines and broader APAC region are perfect for further agriculture M&A.

12 Oct 2016

ASEAN trade path clear: ministers

Anna Green | CEO Philippines, ANZ

As the world gathered in Laos in September for the ASEAN business summit, an increased interest in developing stronger, more tangible relationships with ASEAN bloc countries among senior global leaders became clear.