Country Report on FTA – Laos 25 July 2012 Mekong Institute, Khon Kaen , Thailand

1. Country Report on FTA – Laos 25 July 2012 Mekong Institute, KhonKaen, Thailand Presented by Mr. SaysanaSayakone Deputy Director -General Foreign Trade Policy Department, Ministry of Industry and Commerce Tel/Fax: +856 21 450066 E-mail: saysana2010@gmail.com Website: www.laoftpd.com

2. Content • Country Overview • Economic Outlook and Trade pattern in Laos • Current progress of FTAs • Trade in goods • Trade in Service • Investment • Key challenges and Ways forward the AEC 2015

3. Country Overview

4. Laos is located in the South East Asia and has shared border with China, Cambodia, Myanmar, Thailand , and Vietnam • Laos has gained her independence in 1975 • Population is about 6.2 Millions (2010) • Area of 236,800 (sq Km)

5. Since 1986 Laos has adopted a policy of economic liberalization called New Economic Mechanism or “NEM” • Laos has made progress towards a more market-based economy. • From 1986, Laos is increasingly open to international trade.

6. Economic Outlook and Trade pattern in Laos

7. Laos economic outlook remains favorable, with continued strong growth GDP in 2011 = $ 8,421 millions (Agriculture= 28.4%; Industry = 33.8%; Services = 37.8%) GDP growth rate in 2011 = 8.3% Inflation rate = 7.5% Export of goods and services in 2011 = $ 3,111 millions Import of goods and services = $ 3,898 millions large FDI inflows fromcountries, such as China, Vietnam, and Thailand.

8. GDP Structure

9. Economic growth: Contribution to GDP growth

10. Foreign Direct Investment

11. Trade Pattern

12. At the Global Level • Lao PDR is making good progress in WTO accession process • Numbers of rules and regulations have been revised to be in line with international practices • Conclude bilateral negotiation with 09 WTO members, lastly with Ukraine. • At present, Lao negotiation team is preparing for the 10th Working Party Meeting on Laos’ WTO Accession to be held in Geneva in September this year

13. At Regional and Sub-regional Level • Laos became member of APTA in 1975: (Bangladesh, China, India, Korea, Laos and Srilanga, Mongolia) • Member of AMBDC, ACMECS, CLMV, CLV, MJ-CI on WEC, GMS • As ASEAN Member Laos has joined ASEAN and CEPT for AFTA in 1997 and 1998 respectively • Laos committed to economic integration through the formation process of the ASEAN Economic Community (AEC) by 2015

14. At Bilateral Level • Laos has trade relation with more than 50 countries, and signed BTAs with 17 countries. • Laos enjoy free market access by 48 countries such as EU, Australia, Japan, Republic of Korea, China, India and so forth

15. Trade Openness

16. Export and Import (US$)

17. There’s significant changing in trade pattern of Laos in past ten years which include: • Changing in trading partners ranking; • Changing in trade share with ASEAN and non ASEAN; • But, all these appear to be a trade creation rather than a trade diversification, trade with ASEAN and non ASEAN both enjoined positive growth rates, 29% and 14% respectively.

18. trading partner ranking • In 2000 • Thailand; • Vietnam; • EU; and • China.

19. In 2011 • Thailand; • Australia; • China; • Vietnam; • EU; and • Jap.

20. Changing in trade share between ASEAN and non ASEAN

21. Trade growth over past ten years

22. Current Progress on FTAs

23. Year 2010 • Year 2015 • 0% Goods in tariff Reduction 0% ASEAN 6 • CLMV Free flow of Goods • Improve AFTA CEPT to ATIGA (ASEAN Trade In Goods Agreement) • Ensure import tariff elimination and reductionunder ATIGA • Exceptgoods in Sensitive List customs no need to reduce to 0%should be ≤ 5% , Lao PDR has 220 items (Agricultural goods Chapter mainly in chapter I-VIII of Customs HS Nomenclature)

24. Increasing the share holder ratioto ASEAN Investor Year (2008) Year(2010) Year (2006) Year (2013) Year(2015) • 51% • 70% • PIS • 49% • 70% • 70% • PIS: Priority Integration Sectors Free flow of service • ICT, healthcare, Tourism, Air Travel • Logistics • 49% • 51% • Other • 30% • 49% • 51%

25. Service liberalization • ASEAN has concluded 8 packages of commitments under the AFAS; • The negotiation for the sector is in process to cover all sectors and all modes of supply as to achieve a free flow of services by 2015 target; • Tourism is one of the key sector that Laos has been benefit off, annual earnings approximately doubled to US$381 million in 2010. international tourists to Lao PDR from 737,208 in 2000 increase to 2,513,028 in 2010, and to 2,723,564 in 2011. Thailand accounts for roughly 60% and Vietnam around 17%

26. Service liberalization tourism earning from 2000 to 2010

27. Free flow of investment • The ASEAN Comprehensive Investment Agreement (ACIA) signed in 2009, which improved the 1998 ASEAN investment agreements (AIA Agreements), has finally entered into force on 29 March 2012. • Objectives of ACIA is aiming at Free Flow of Investment by 2015, covering the Investment liberalization, promotion, and facilitation • Laos has ratified the ACIA agreement beginning this year and now the TEL on manufacturing sectors have been facing out.

28. First foreign investment promotion law adopted in 1988, now there is a new Unified Investment Promotion Law adopted in May 2010; • The new law abolishes lengthy and cumbersome licensing approval procedures for general investment activities, and creates a level-playing field for both domestic and foreign investors by harmonizing business entry procedures and investment incentives; • Lao PDR has been able to attract large FDI inflow into the country. Actual foreign investment in 2010 reached almost $800 million compared to about $100 million in 2003; • The biggest FDI source is come from Thailand, Vietnam, China, France and others more than 40 countries;

29. Foreign Direct Investment

30. Other FTAs ASEAN-China ASEAN-Japan ASEAN-India ASEAN-Aus-Nz ASEAN-ROK ASEAN-ROK

31. Key challenges and Ways forward the AEC 2015

32. Key Challenges • Limitation: • HRDs (technical expert, economic and legal advisor, government staff) • Financial support for the implementation • Clear and accurate work plan • Institutional Structure: • Inter-agency focal point • Coordination Mechanism: • Coordination between internal Ministries/Agencies • Coordination between Public and Private Partnership • Coordination between ASEAN Countries and Laos

33. Ways forward • To improve the coordinating mechanism at inter-agencies, PPP and regional level • To improve the Public Awareness and information dissemination on the AEC • To strengthen the institutional structure and inter-agency focal point • To ensure the HRDs as well as financial resources for the implementation of AEC

34. ຂອບ​ໃຈ! Thank you for your kind attention!