Business | Laos' march from ancient kingdom to modern society
Maung Khoun, once the royal seat of the minor kingdom of Xieng Khuang, 35km southeast of Phonsavan. Photo: Wikimedia Commons
Maung Khoun, once the royal seat of the minor kingdom of Xieng Khuang, 35km southeast of Phonsavan. Photo: Wikimedia Commons

The long march forward

The once dominant nation has seen its fortunes rise and fall, from Thai and French rule to independence in 1953. Now it is enjoying the fruits of economic reform

December 10, 2016 9:48 AM (UTC+8)

In 2014, 4.16 million tourists visited the Laos Democratic People’s Republic, with most of them, 77.5%, from member countries of the Association of Southeast Asian Nations (ASEAN). Few people are likely to be familiar with the landlocked nation’s history, so here is a primer.

Laos has its roots in the ancient Lao kingdom of Lan Xang, established in the 14th century under King Fa Ngum, according to the CIA World Factbook. For 300 years, Lan Xang had influence reaching into present-day Cambodia and Thailand, as well as over all of what is now Laos.

After centuries of gradual decline, Laos came under the domination of Thailand, then known as Siam, from the late 18th century until the late 19th century, when it became part of French Indochina.

Read: Out of obscurity

The Franco-Siamese Treaty of 1907 defined the current Lao border with Thailand. In 1975, the communist Pathet Lao took control of the government, ending a six-centuries-old monarchy and instituting a strict socialist regime closely aligned to Vietnam.

A gradual, limited return to private enterprise and the liberalization of foreign investment laws began in 1988. Laos became a member of the Association of Southeast Asian Nations in 1997, and has held the chair twice (in 2004 and 2016). It joined the WTO in 2013.

Laos shares its borders with Myanmar and China to the north, Thailand to the west, Vietnam to the east and Cambodia to the south.

Today, it has a population of 7 million people, whose average wages are around US$108 per month, the Factbook records.

Buddha statues at Wat Xieng Thong in Luang Prabang. Photo: Wikimedia Commons
Buddha statues at Wat Xieng Thong in Luang Prabang. Photo: Wikimedia Commons

Much of the fast-paced development of the Lao Democratic People’s Republic can be credited to the establishment of 10 special economic zones. These cover around 19,000 hectares, and involve more than 290 foreign and domestic firms, according to a report in the November-December edition of the Foreign Affairs magazine.

Invested capital in these zones exceeds US$1.6 billion, which has brought about infrastructure improvements and the creation of 15,600 jobs. The zones vary with regard to the type of industry catered to and how they are owned and operated – either solely by the government or private developers, or in government-private partnerships.

Read: Charting the progress

“The objective of SEZs is to attract domestic and foreign investments; create a strong foundation for industrialization; contribute to GDP growth, technology transfer, and job creation; and increase government revenue,” says Bouatha Khattiya, standing vice chair of the Lao National Committee for Special Economic Zones, in the Foreign Affairs report.

“Ultimately, this is to attain our goal of graduating from LDC status by 2020.”

He adds: “The SEZ strategy envisions the establishment of 25 SEZs throughout the country by 2020,” said Khattiya.

The objective of SEZs is to attract domestic and foreign investments; create a strong foundation for industrialization

The economic zones offer tax exemptions for equipment and raw materials for infrastructure construction. They also offer lower income taxes and lower VAT compared to investments outside the SEZs.

The administrative process has also been simplified for investors.
“In every zone, there is a One-Stop Service office with the authority to make decisions regarding investments in the zone. Investors can get their business licence directly from the OSS without having to go to several offices,” Khattiya says.

The SEZs, he reports, have attracted many world class companies including Nikon, Toyota, the Danish workwear manufacturer Mascot, and Aeroworks, an producer of aerospace products from the Netherlands.

In 2011, the Lao PDR and the World Bank celebrated 50 years of a partnership that has evolved against a changing global context and advances in development best practice and knowledge.

With the World Bank’s assistance, Laos has set specific targets in its Five-Year National Socio-Economic Development Plans. Under Lao’s eighth plan, approved in April 2016, goals to be achieved by 2020 include:

  • adult literacy (in people aged over 15) of 95%
  • infant mortality of 30 per 1,000 live births
  • maternal mortality of 160 per 100,000 live births
  • social protection coverage of 80%
  • a poverty rate of below 10%
  • 4.41 million people in the labor force

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