Foreign direct investment in Lao PDR:
Former Deputy Director of Investment Promotion Division
Department for Promotion and Management of Domestic and Foreign Investment
State Planning Committee
Since the Lao People’s Democratic Republic was established on December 2, 1975, the Lao government has been taking various actions aiming to develop the country. These actions culminated when the government launched the New Economic Mechanism (NEM) in 1986, moving from a centrally planned economy to a market-oriented economy. A large number of state-owned enterprises became privatized.
Implementing the NEM, the Lao government recognizes that foreign direct investment (FDI) - with its capital, technology, and expertise - can play a crucial role in the country’s economic development. To attract more FDI, however, the government tends to emphasize only the liberalization of laws and regulations.
The government decided to open the country for FDI in 1988. It enacted numerous laws and decrees directly and indirectly governing FDI, yet it has not been able to ensure the effectiveness of these instruments. Furthermore, the Lao Government has not marketed the country as a desirable investment destination to potential foreign investors.
Competition among host countries is severe. Laos’s neighboring countries, namely Vietnam, Myanmar and China, are also emerging countries. These countries have advantages over Laos in terms of labor forces, domestic markets, sea ports, and infrastructure for promoted investments. These countries are campaigning hard for FDI. Furthermore, Malaysia, Thailand, Indonesia, and other developing countries in Southeast Asia are also doing their best to keep the investments they have. Other countries worldwide are also encouraging FDI.
• In order to attract good quality FDI, that will bring the greatest benefit to the country, the Lao Government must change its promotion strategies. The government needs to have a clear understanding of
o what FDI is needed
o why the country needs FDI
o profitable sectors
o target investors
• Furthermore, the country should be ready for the investments it aims to attract. An image should be created for the country to inspire Laotians and foreign investors.
• Lastly, the Government should launch aggressive FDI promotion campaigns inside the country and abroad.
Only by following these strategies will Laos succeed in attracting FDI and gain more benefits from those investments.