VIENTIANE, Laos — The South East Asian nation of Laos is fringed by the Mekong River delta, and has a population of 6.8 million. Trade drives Laos’ economy, which has experienced a decade of annual growth greater than seven percent, but the nation has a poverty rate of 23.2 percent.
Laos has had a tumultuous century. After the collapse of French colonial rule in 1953, Laos became embroiled in the Vietnam war, where high civilian casualties and the threat of chemical weapons left the economy under strain. Primary industry and agriculture produce Laos’ main exports of copper, coffee and wood. In 2014, Laos recorded a significant trade deficit between exports of 3.7 billion U.S. dollars and imports of 6.98 billion.
An uncertain economic climate and sluggish growth in Europe contributed to this decline, and consequently there was a sharp drop in Foreign Direct Investment (FDI) in the Laos garment industry. Similarly, the Laotian coffee industry is under pressure due to the plummeting in the price of coffee; coffee revenues fell from 72 million U.S. dollars in 2013 to 50 million in 2015.
To counteract price volatility and protect its produce, Laos hopes to form a buffer by certifying its home-grown coffee with a geographic indication. As a member of the International Coffee Organization, it hopes to be in a better position to protect this crucial export.
Laos’ economy continues to be driven by trade relationships, through both ASEAN (Association of South-East Asian Nations) and the European Union. The EU works with Laos through the EU-ASEAN Cooperation Agreement, and Laos’ position in ASEAN has helped it to receive massive amounts of investment from Vietnam. More recently, the creation of the ASEAN Economic Community (AEC) in 2015 is helping Laos to access regional markets and further develop its trade opportunities.
Laos has strong ties with China, one if its biggest importers, with trade between the two nations accounting for 1.67 billion U.S. dollars of Laos’ export revenue. Laos shares a border with the Chinese province of Yunnan, and trade in the first half of 2016 between Laos and Yunnan topped 400 million U.S. dollars. A trade fair held recently in the Laotian capital of Vientiane further promoted trade exchange between the two countries.
The growth of small and medium enterprises (SMEs) is currently driving employment and trade opportunities in Laos, and a project called Regional Economic Integration of Laos into ASEAN, Trade and Entrepreneurship Development (RELATED) is also helping SMEs with regional and economic trade integration. This is aimed at raising the competitiveness of the private sector in Laos.
Furthering cooperative trade agreements will drive Laos’ economy forward. Expanding regional markets, and a strengthened public and private sector could give this small, land-locked nation the economic capacity to support all of its people, businesses and infrastructure.
– Shivani Ekkanath