Lao PDR has experienced rapid economic growth over the past 25 years. While this growth has contributed to lower rates of poverty, it has not been widely shared, and inequality has widened. Growth has been largely attributed to natural resource-based sectors, large infrastructure projects, and public sector spending. To sustain strong growth in the future, the private sector will be critical to diversify the economy and create more jobs. Increasing private sector-led growth is a priority of Lao PDR’s 8th National Socio-Economic Development Plan (2016-2020).
Currently Lao PDR ranks 154 out of 190 on the World Bank Group’s 2019 Ease of Doing Business Index, reflecting a complex and opaque business environment, with barriers to regional trade and integration that limit its attractiveness as an investment destination. Investors complain about high costs of doing business and the absence of a transparent, dynamic, and streamlined business environment. Overall, the economy remains inward-oriented (only 2.9% of firms export directly), and local firms invest and innovate little.
To support private sector-led growth and increase Lao PDR’s competitiveness, it will be necessary to deepen reforms to improve the business environment, advance connectivity with neighboring economies, and raise productivity of local firms. This requires simplifying regulations and making the business and trade environment more transparent and predictable, to level the playing field, encourage entry, and increase competition.
The Prime Minister has issued an order to improve the business environment, demonstrating a high-level commitment to reform. PM Order No. 2 was issued on February 1, 2018, calling for a significant improvement in the Doing Business indicators.
The World Bank Group, including both the World Bank and the International Finance Corporation, is supporting projects, knowledge, and technical assistance to improve the environment for private sector-led growth in Lao PDR. Learn more about our work and findings on the links on this page.