Lao PDR Trade Integration Study Update 2021

The 18th Trade and Private Sector Working Group Meeting in Vientiane, Lao PDR focused on the Diagnostic Trade Integration Study (DTIS). The study aimed to identify priority actions to support the country's strategy for broad-based growth through integration, particularly in agribusiness, tourism, and manufacturing sectors. Lessons learned from the 2012 DTIS were highlighted, emphasizing the importance of focus, government priorities, ownership, and coordination. The study also looked at Lao PDR's exports, which were concentrated on a few products and markets.

• Lao PDR
• Trade Integration Study
• DTIS
• Agribusiness
• Tourism

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1. 18THTrade and Private Sector Working Group Meeting , Vientiane, Lao PDR, November 10, 2021 Lao PDR Diagnostic Trade Integration Study (DTIS) Update: Preliminary Findings & Recommendations Presenter: Robert Kirk, Consultant, DPC, MOIC.

2. Purpose Identify priority actions in support of Lao PDRs strategy to deliver broad- based growth through integration. Takes stock of progress in implementing the Trade and Private Sector Plan adopted in the DTIS 2012. Focus on agribusiness, tourism and manufacturing through a trade lens. Prepare an updated Trade and Private Sector Development Roadmap.

3. Lessons learned from the 2012 DTIS for 2021 DTIS Principal Lessons Prioritize action items avoid a long list. DTIS should be focused. Government priorities matter. Ensure ownership. Strengthen inter-agency coordination. Strengthen implementation capacity in the provincial administrations. Opportunities Lends leverage to existing GOL agenda. Learn from earlier experience. Integrate the 2021 DTIS into ongoing donor funded activities. Opportunity for international cooperating partners to reaffirm support to GOL for advancing economic diversification through mainstreaming the trade agenda.

4. Lao PDR Ex Ante Tariffs, Imports and Exports, 2019 60% 45.0 2500 25% 40.0 50% 2000 20% 35.0 Share of Tariff Lines 40% 30.0 $ Million 1500 15% Tariff Rates Tariff 25.0 1000 10% 30% 20.0 500 5% 20% 15.0 0 0% 10.0 10% 5.0 0% 0.0 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00 11.00 Tariff Bands Average Tariff Imports Exports Tariff Bands Tariff Lines

5. Exports concentrated on few products Lao PDR exported 352 products in 2019 5000 4500 DEU CHN USA 4000 3500 THA No. of products exported 3000 VNM 2500 2000 1500 1000 KHM 500 LAO 0 0 20,000 40,000 60,000 80,000 GDP/Capita $

6. Exports concentrated in few markets Lao PDR exported to 58 countries in 2019 160 140 CHN DEU 120 No. of exporrt markets KHM 100 80 60 LAO 40 20 0 0 10000 20000 30000 40000 50000 60000 GDP/capita $

7. Lao PDR World Exports, 2012 & 2019 (Current prices, US$)

8. Lao PDR Exports 2019: markets and products ROW 9% EU27 4% China 33% Vietnam 9% Thailand 45%

9. Little export diversification. Modest growth in agricultural exports. Transport costs remain higher than neighboring economies. Regulatory barriers hold back investment in services. Slow progress on trade facilitation. Preliminary Findings Updating the roadmap

10. Economic diversification to build resilience and long term sustainable and more inclusive growth - new products - new markets Prioritize establishing a more supportive development environment - Doing Business - Trade Facilitation - Investment incentives - Regulatory reform - Streamline institutional framework Preliminary Findings Updating the roadmap

11. Streamline business and investment licensing procedures. Reform the Investment Promotion Law (2016) to ensure transparency, predictability and rapid approvals. Join the International Centre for the Settlement of Investment Disputes (ICSID). Revise investment incentives (move away from tax holidays). Remove entry restrictions on key service sectors. Improving the Business Enabling Environment

12. Continue to liberalize and simplify trade policy. Reducing Trade Costs Trade Policy and Trade Facilitation Trade Facilitation continue implementing the National Trade Facilitation Roadmap.. Review Non-Tariff Measures (NTM) Regulatory Impact Assessments (RIAs).

13. Strengthen communication and information outreach to the private sector, and provincial and district level implementing agencies. Establish a more supportive development environment Strengthen technical capacity in the line ministries technical departments. Make monitoring and evaluation reports publicly available.

14. Simplify regulations on agricultural inputs. Abolish the list of minimum and maximum prices. Establish mobile-friendly online information platform for farmers (price data, productivity advice, etc.). Encourage the development of cold chain for vegetables. Cross-cutting reform of doing business regulations, investment regulations and incentives to encourage private investment in transportation, logistics, storage, cold chain. Agribusiness

15. Strengthen marketing of Lao PDR as a tourist destination - establish a Tourism Marketing Board that brings together all stakeholders (learn from Thailand and Vietnam experiences) Simplify the tourism regulatory framework. Implement cross-cutting Doing Business reforms. Strengthen dialogue between the public and the private sectors. Provide training to address human resource shortfalls. Implement policy measures for environmental protection (Nature Based Tourism). Tourism

16. High costs of doing business (154/190). Manufacturing Identifying constraints to investment and growth Onerous, unpredictable and discretionary access to incentives. Few large firms/most firms informal. High Trade costs services constraints. Low labor productivity ($4,600/worker).

17. Efficiency and quality of services critical for increasing manufacturing competitiveness Business enabling environment needs strengthening (154 out of 190 economies) Manufacturing promoting growth Regulatory reform to promote competition and efficiency in transport & logistics services Special Economic Zones (SEZ) simplify procedures/learn from leading practices Reform Incentives to attract efficiency seeking diversification

18. Prioritize improving the business enabling environment simplify business registration, review investment incentives, improve the IPL, eliminate entry restrictions for service sectors, and increase transparency. Regulatory reform to automate/increase transparency for imports. Trade policy remove nuisance tariffs, zero rate intermediate inputs/introduce duty remission scheme. Trade Facilitation continue implementing National Trade Facilitation Roadmap. Specific Recommendations for Agriculture, Tourism and Manufacturing. Review SEZ regulations to assess impact and recommend reforms to encourage investment. Draft Trade and Private Sector Development Roadmap