Foreign direct investment in the Lao People's Democratic Republic: Challenges and prospects

Abstract

In the article the inflow of foreign direct investment (FDI) into the economy of the Lao is examined, in particular, the evolution of the policy, methods and rules of FDI attraction and regulation, as well as the dynamics and sectoral structure of FDI inflows. In result of Lao’s targeted proactive government policy, the FDI inflow since 2005 have risen substantially, owing primarily to domestic and foreign investments in hydropower and mining. Since the 3rd five-year National Plan for 1991-1995, the promotion of FDI has become a priority for the government. Since 2005, the annual rate of economic growth has exceeded 5%, and by 2020, the poverty of the people has dropped significantly. Through continuous, inclusive and sustainable economic growth the country managed to get out of “least developed countries” status by 2020. The Lao PDR government continues to improve the legal framework and law enforcement practice in the field of FDI. China, Thailand and Vietnam lead the investment process among the 10 most active foreign investors. Lao government clearly defined the desirable industries for foreign direct investment, which meet national interests - hydropower, mining, infrastructure facilities, industrial and agricultural enterprises, tourism. In this article an overview of the most important FDI sectors in Laos is provided. Authors have come to conclusion that the scope, volume and focus of implemented and ongoing FDI projects has benefited the Laos in terms of socioeconomic growth, foreign exchange earnings, job creation, as well as modern equipment, technology and skills transfer. The attention of the Lao government to practical details of foreign investment in important national projects contributes to successful use of external resources for national goals.