Lao People's Democratic Republic
This chapter examines trends in investment and investment policies in Lao People’s Democratic Republic (Lao PDR) through a sustainability lens and provides recommendations on how to attract more sustainable investment to the country. Lao PDR experienced an impressive increase in foreign direct investment (FDI) inflows between 2006 and 2017, which has been one of the main drivers of economic growth. However, the country would benefit from FDI that generates more positive spillovers to the local economy and is more conscious of the environment and local communities. Attracting more sustainable investment – which advances environmental and social goals – first and foremost requires improving the overall enabling environment for investment in the country. It would also be important for Lao PDR to integrate environmental and social considerations into investment policies and strengthen the implementation of social and environmental safeguards for investment projects.
Lao People’s Democratic Republic (Lao PDR) faces the significant challenge of raising its tax-to-gross domestic product (GDP) ratio, which remains too low despite substantial growth in per capita incomes. As a result, and without reform, Lao PDR will miss its 2025 tax revenue target. While tax policy cannot be examined in isolation from the country’s challenging macroeconomic setting, Lao PDR needs to change its approach to designing, administering and evaluating the tax system. This requires reconsidering many tax design features, such as overly generous investment tax incentives. There is also a lack of tax policy coherence across the enacted policies, and overall tax compliance remains low. In the future, the tax system should play a larger role in promoting formalisation. High-quality tax policy analysis will also be necessary in order to enact tax reforms and raise sufficient tax revenues while also promoting sustainable economic development.
[18] ASEAN (2023), ASEAN Stats Data Portal, https://data.aseanstats.org/indicator/ASE.TRP.ROD.A.002 (accessed on 20 March 2024).
This chapter examines the current context of infrastructure development in the Lao People’s Democratic Republic (Lao PDR). It reviews connectivity challenges and recent reforms to boost infrastructure investment, including private participation in infrastructure, and the remaining obstacles to improving the legal and institutional framework for private investment in infrastructure.
Water-related infrastructure could contribute significantly to the development of the Mekong region. At the same time, poor water infrastructure could lead to development challenges for the countries in the region. Innovation for Water Infrastructure Development in the Mekong Region discusses the challenges facing the region as well as the possible innovative policy options, including those used in Emerging Asian countries, and with reference to the experiences of OECD member countries. It provides analysis and recommendations for the region’s policy makers to consider in their efforts to improve water infrastructure. The report first provides an overview of the socio-economic contributions and environmental challenges of the Mekong River. It then presents some potential new financing options for the development of water infrastructure, using digital tools such as Fintech and blockchain. It also examines the potential of using the spillover effect of tax revenues to attract private finance. It then goes on to discuss the importance of strengthening water infrastructure resilience against natural disasters, including the current COVID-19 pandemic, and finally analyses the challenges of water regulations in the Mekong region.
This chapter assesses the investment framework for green growth in the Lao People’s Democratic Republic (Lao PDR).It looks at challenges and opportunities for sustainable economic growth and provides recommendations to improve the regulatory framework for green investment with a particular focus on private participation in renewable energies. It also reviews financing for green growth and how the country faces climate change-related challenges.
This chapter provides an assessment of the investment promotion and facilitation framework in the Lao People’s Democratic Republic (Lao PDR). It examines existing strategies and institutions governing investment promotion and facilitation with a particular focus on the Investment Promotion Department. It highlights key reforms and remaining challenges to improve the business environment and attract foreign investment to diversify the economy, including in special economic zones. It also provides recommendations on the investment incentives regime as well as on measures to encourage business linkages with small and medium-sized enterprises and other policies to maximise investment spillovers.
Regulatory reform in Lao PDR in recent years has been accelerated by the country’s accession to the World Trade Organization in 2013 and by ongoing regulatory developments in the Association of Southeast Asian Nations (ASEAN) Economic Community. Lao PDR has already adopted a number of good regulatory practices, including mandatory regulatory impact assessments and stakeholder engagement in the development of new regulations. The government also recognises the importance of reviewing existing regulations on a regular basis, as stipulated in its regulatory impact assessment (RIA) guidelines. In order to align Lao’s regulatory processes with regional single market objectives and to facilitate greater Lao participation in global value chains, a significant amount of new regulations is expected to be developed in the coming years. This offers opportunities for Lao PDR to introduce regulatory policies and processes that complement or comply with regional and international standards.
Lao PDR has focused its SME policy on improving the legal and regulatory environment to support SME development. It has been developing targeted SME policies since the early 2000s and benefits from a relatively good institutional framework and a dedicated fund for SME development. It is increasingly interested in policies to enhance SME productivity and integration into GVCs, but these areas currently lack sufficient funding.
The 1991 Constitution of the Lao People’s Democratic Republic (Lao PDR, commonly known as Laos) guarantees the principle of gender equality. Although equality is promoted further in a number of specific laws, legal awareness remains low, partly because more women than men are illiterate.
Lao People’s Democratic Republic (Lao PDR) has made significant headway on its development path over the past three decades. The country’s sustained economic growth has been led by booming commodity exports and substantial inflows of external financing. Many Laotians have seen significant improvements in their well-being. Poverty has declined as household income has increased, and many important development goals in education and health have been achieved.
In the face of macroeconomic challenges, a shift from commodity-driven growth to a more inclusive prosperity paradigm that emphasises the creation of broad-based opportunities, human capital development and green sustainability can unlock Lao PDR’s future development. This report presents priorities for overcoming the country’s current fiscal constraints and finding ways to fund this shift. Recommendations address strengthening Lao PDR’s sustainable finance and debt management, revenue generation and tax reform, investment promotion, and data capacity in order to tap into green finance mechanisms.
Subnational governments in Asia and the Pacific are key providers of the public services and infrastructure required to achieve the Sustainable Development Goals. Given this role, it is essential that policymakers and development partners understand and support the effective functioning of multi-level governance structures and subnational government finances across the region.
This joint OECD-ADB report provides a comprehensive overview of subnational governments across Asia and the Pacific. It covers over 467,000 subnational governments from 26 countries, which represent 53% of the world’s population and 40% of global GDP. On average in 2020, subnational governments in the region accounted for 29% of total public expenditure (8.8% of GDP), 35% of total public revenue (8.5% of GDP) and 38% of public investment (2% of GDP).
Harnessing unique data from the 3rd edition of the OECD-UCLG World Observatory on Subnational Government Finance and Investment, the analysis highlights how decentralisation and territorial reforms have reconfigured the structures and finances of subnational governments in the region. It covers a range of topics including fiscal rules, financial management capacity, priority-based budgeting, asset management and the use of public-private partnerships.
Countries in Asia and the Pacific face a heightened risk of flooding as disasters increase worldwide due to climate change. Yet these countries often lack the infrastructure necessary to prepare for and respond to floods effectively. When flood protection measures exist, they generally rely only on grey, hard-engineered infrastructure, which has been increasingly challenged in recent years. Nature-based solutions (NbS) offer a new approach for flood management, with several co-benefits beyond the reduction of risks. This approach has gained recognition from policy makers in the region, but they are confronted with a number of challenges, including the lack of a clear, common definition and guidelines, as well as financing issues. The growing imperatives of climate adaptation call for complementary, innovative and forward-looking solutions, such as a combined approach incorporating both NbS and grey infrastructure.
This review analyses regulatory barriers to competition in the logistics sector in ASEAN, with the goal of helping authorities make regulation more pro-competitive while fostering long-lasting growth. This report is based on a competition assessment of laws and regulations conducted by the OECD in the framework of the project “Fostering Competition in Asean”. Besides developing recommendations to promote the competitive and efficient functioning of markets under review, this report also includes estimates of how the implementation of certain recommendations could impact the economy. An OECD Competitive Neutrality Review of Small-package Delivery Services in ASEAN was launched together with this study.
This first OECD Investment Policy Review of Lao PDR uses the OECD Policy Framework for Investment to assess the investment climate in Lao PDR and discusses the challenges and opportunities faced by the Government of Lao PDR in its reform efforts. It includes chapters on trends in foreign investment and trade, the legal framework for investment, regulatory restrictions on foreign investment, corporate governance, investment promotion and facilitation, promoting and enabling responsible business conduct, infrastructure connectivity and the investment framework for green growth.