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Lao PDR Investment Climate Assessment 2011: Policies to Promote Growth in the Non-Resource Sectors

Lao PDR Investment Climate Assessment 2011
The Second Investment Climate Assessment (ICA) presents how the current investment climate could improve in order to enable an inclusive and sustainable economic growth path.
  • Recent economic development is linked to the natural resource sector because Lao PDR is richly-endowed with minerals, water resources, and forestry products. However, for the country to sustain its growth, it is important to strike a balance between the resource and non-resource sectors.

  • The non-resource sector is expected to contribute more than half of Lao PDR’s real GDP growth and 75 percent of the GDP in the medium-term. To achieve these results, policies should focus on creating a positive, enabling environment that supports the development of the non-resource sectors.

  • While challenges exist, there significant improvements have also taken place over the past five years. Access to electricity, infrastructure development, and improved reforms have contributed to Lao PDR’s economic progress.

  • As Lao PDR’s economy continues to transform, the next challenge is to address more detailed constraints related to skills, access to finance and the implementation of a growth-friendly tax regime, specifically for small and medium enterprises.

Key recommendations for addressing investment constraints include:

  1. Balancing the taxation regime with national objectives for fiscal revenue generation, with broader concerns surrounding international competitiveness and economic growth.

  2. Improving the available information on skills requirements, current and future skill expectations, areas of skills shortage, causes of skill shortages and private sector mechanisms to reward skills acquisition in labor markets.

  3. Improving access to longer term funding for investment purposes and reducing risks in the financial system.

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