Lao PDR and Vietnam Border Trade and Economic Linkages: Performance and Prospects

Abstract

Lao PDR and Vietnam share an extensive land border and there are a number of points at which border crossings can be made and border trade conducted. The connectivity of these crossings is to be intensified by cross-border transportation infrastructure such as the Vientiane-Bolikhamsay-Vung Anh deep seaport railroad, which would facilitate exports from landlocked Lao PDR. Such infrastructure will improve existing Vietnamese investment in its western neighbour, where more than 400 projects worth more than US$5 billion have already been licensed in activities such as hydropower, industrial tree plantation and mining. Meanwhile, Star Telecom, which is a joint venture between Viettel Global and Lao Asia Telecom, has achieved 50% market share of the mobile telecommunications market in Lao PDR and there are numerous further opportunities for investment in consumer markets as well as business-to-business markets. The Lao PDR government would certainly like to diversify its exports away from reliance on natural resource commodities but lacks resources and capacity for leadership in this area and the vital small and medium-sized enterprises sector suffers from the ‘missing middle’ phenomenon that means firms are generally unable to participate in regional value chains, including those mobilised potentially by Vietnamese partners. This paper investigates the extent of Lao-Vietnamese border trade and cross-border investment and the prospects for the future in an international environment challenged by trade wars, volatility and global climate change.