Three analytical reports on trade in Lao PDR provide insight into important factors that impact the country’s ability to integrate into the regional economy and the impact current policies have on exports, imports, labor market outcomes, and linkages between the services and manufacturing sectors. These reports present policy recommendations that could contribute to making Lao PDR more competitive and allowing the private sector to integrate into regional and global value chains.
The reports were prepared as part of the Second Trade Development Facility program carried out by the World Bank in Lao PDR, and financed by Australia, the European Union, Germany, Ireland, and the United States.
- Lao PDR’s growth prospects are directly linked to its ability to integrate into the global economy.
- Regulatory hurdles and non-tariff measures continue to affect imports and exports and hamper the ability of the country to reap the gains of deeper trade integration.
- The report recommends that Lao PDR should further pursue reforms to reduce the administrative burdens associated with applying for and obtaining import licenses for the trading community.
- The country’s economy is shifting away from agriculture, but finds that workers are primarily moving into low-skilled jobs in services sectors. There is also no strong concurrent rural-to-urban shift of workers as has occurred in other Southeast Asian countries.
- A key obstacle to attracting investments in high-value manufacturing is the Lao labor force’s low education and skills levels.
- Jobs in agriculture continue to dominate the employment market, but agricultural products account for only a small share of Lao PDR’s exports.
- The garment sector, which accounts for 10% of Lao PDR’s exports, employs less than 2% of the labor force.
- The report recommends that enforcing policies to facilitate better labor outcomes, access to technology and enhancing the skills in the labor market are necessary to attract and induce higher-value activities.
- The service sector plays direct and indirect roles in modern economies, and contributes to the manufacturing sector in Lao PDR.
- The service sector contributed over a quarter of Lao PDR’s domestic production in 2011 when also counting services that are embedded in other products and services, a low share by international standards. Modern services such as accounting, finance, or Information and Communication Technologies (ICT) play a particularly limited role.
- The report recommends that Lao PDR should continue to improve the regulatory framework for key service sectors such as transport and energy, including electricity, water and internet connectivity; and to complement these reforms by empowering relevant agencies with adequate financial resources and skilled staff.