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Ever since Laos entered the WTO in 2013 and the establishment of the ASEAN Economic Community in 2015, it has led to a major reform of economic policies and regulations, determined to improve the business and investment environment in the country. Together with economic growth in neighboring countries like Thailand, China, and Vietnam, Laos has expanded its trade and investment. Laos holds the status of Generalised System of Preference (GSP) with 38 countries, under the Everything But Arms (EBA) scheme, as well as  LDC-specific tariff-free treatment offer to Lao goods with countries like China, Taiwan, Thailand. The Lao government focusing on the ASEAN economic integration, connection and allow the exports to lead its way and transform from being “land-locked” to “land-link” 

Laos’ economic model shares a resemblance with China’s and Vietnam’s, where it practices a market-based economy while maintaining state-control and welcoming FDI along the way.

Even though Laos had suffered from a trade deficit for many years, the trend could be reversed in the near future when the export growth is steady and more completed infrastructure projects. According to oce.co, Laos has a total export of $6.65 billion as of 2019 for products and $915 million of services as of 2018. 

Laos and ASEAN 

Laos became a member of ASEAN in 1997, this multinational organization, composed of ten Southeast Asian countries, has joined forces with the goal of building a strong economic alliance. Being a member of ASEAN, Laos has access to the ASEAN Free Trade Area (AFTA), established at the ASEAN summit in 1992, which is an agreement achieved to waive tariffs on trade between ASEAN nations. The purpose of this association is to develop comprehensive trade and industrial ties among member countries, as well as encourage FDI. The creation of a free trade area in ASEAN has allowed prevailing economic collaboration among Southeast Asian nations since its founding. Though, compared to the EU, ASEAN has a less mature and industrialized market; even so, there is an opportunity for growth, heading toward becoming one of the world’s most dynamic markets. Laos has strong trade with Thailand, as it is the easiest country to connect due to similar cultures, taking about 36.1% of trade value. Following Thailand, it is Vietnam, following its strong relationship politically since Vietnam War, with a trade value of 16.2%. In 2015, Laos and Vietnam signed an improved FTA, replacing the previous FTA back in 1998. 

Laos also work closet with the EU on the framework of the EU-ASEAN Cooperation Agreement, making EU the fourth biggest partner after Thailand, China and Vietnam, taking about 3.2% of trade value.

Laos also considering additional free trade agreements the multiples framework such as East Asia Free Trade Area (ASEAN+3), ASEAN+EU Free Trade Agreement, Comprehensive Economic Partnership for East Asia (CEPEA/ ASEAN+6), ASEAN+Canada FTA. Laos also sign into the Regional Comprehensive Economic Partnership (RCEP) where it build on the existing free trade agreement with the ASEAN noations, Australia, New Zealand, China, India, Japan, and South Korea.

Laos and Belt and Road Initiative (BRI)

Belt and Road Initiative is China’s global development strategy announced in 2013. It is a project that aims to establish China’s presence in the global economy by improving transport and logistics infrastructure, trade and finance, and socio-cultural exchanges with its partner nations across Asia, Africa, South America, and Europe.

The BRI is the major part of making Laos a land-linked country, as Vientiane - Boten expressway is completing and China - Laos railroad under construction. BRI also linked to several China-backed Special Economic Zones such as Boten Beautiful Land Specific Economic Zone and Golden Triangle Special Economic Zone. Currently, China has a trade value in Laos for 28.2% following Thailand. Not only that the BRI will connect Laos to multiple routes to many countries, but it also stimulates the local economy, pulling in more local foreign investors.  As Lao and Chinese have a strong economic and political relationship, China will be the main contributor to Laos’ rapid growing economy.