After years of steady reforms and entry into the World Trade Organization last year, landlocked Laos increasingly offers opportunities for business with overseas companies.
This Communist country of 6.4 million people, surrounded by China, Thailand, Vietnam and Cambodia, has also launched ambitious infrastructure projects to link the country to the rest of the region, further facilitating trade.
« There is an opening of Laos that started with membership of the Association of Southeast Asian Nations (ASEAN) in 1997, » says Douangnary Ditthavong, finance manager of SDV in Vientiane, the capital of Laos. « This has allowed the country to develop and adopt some of the characteristics of other Asian countries. » The economy in Laos is expected to grow 7.2 percent this year, according to the World Bank, putting the country on track to graduate from its Least Developed Country status by 2010. The highest growth sectors include natural resources such as forestry, agriculture, hydropower and minerals including copper and gold.
Crucially, the government has embarked on massive investment in infrastructure, including the creation of a new bridge on the Mekong River linking Laos to its southern neighbour Thailand. The 480-meter « Friendship Bridge » also extends the land route for trade between China and the ASEAN countries. Previously, cargo had to cross the river by ferry, adding to transport time and costs, Ditthavong says.
In another boost to transport in the region, Laos, along with China, plans to invest in a high-speed railway line between Kunming in Southwest China that will travel south through Laos and then into Thailand. This will transform transport in Laos, linking it to China and eventually other countries in Southeast Asia.
Logistics in Laos can still be hard to navigate, however, with companies facing often opaque customs procedures. « Laos is trying to align its rules with customs regulations in the rest of Asia but there are still areas that are unclear and tariffs can be negotiated, » warns Ditthavong. For example, wine importers normally pay duty of 30 percent with value-added-tax of 10 percent but that can change depending on the size of the shipment, she adds.
In addition, the airport in Laos cannot yet accommodate cargo planes and so the goods are delivered to Bangkok airport in Thailand and then travel some 600 kilometers by road to Laos, a journey of around 12 hours.
For this reason, SDV advises clients to insure the goods against losses or breakage.
SDV has operated in Laos for the past 15 years. In a sign of the increasing interest of overseas investors in the country, its clients now span mining companies such as mineral exploration company Boart Longyear of the U.S., French rice producer Agro Mekong and Phonesavanh, a French importer of wines sold in the growing number of restaurants and hotels.
« The ruling party wants to develop the country’s economy, » says Ditthavong. « Over the last ten years we have seen not just road construction but increasing urbanization. We now have a banking network and plans for luxury shopping centers, all signs of growth and change. »