Regional Economic Integration of Laos into ASEAN, Trade and Entrepreneurship Development (RELATED)

Project description

Title: Regional Economic Integration of Laos into ASEAN, Trade and Entrepreneurship Development (RELATED)
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Laos
Lead executing agency: Ministry of Planning and Investment; Ministry of Industry and Commerce, Lao National Chamber of Commerce and Industry
Overall term: 2014 to 2017

Laos. Cross-border trade on the Lao-Thai Friendship Bridge (Bild: Lucas Wahl) © GIZ

Context
The creation of the ASEAN Economic Community (AEC) in 2015 marked a milestone in regional economic integration in Southeast Asia. The AEC has since established a highly integrated market consisting of 625 million consumers with a combined purchasing power of USD 2.3 trillion. For a small, landlocked country like Laos, the ASEAN market and production base offers great economic potential by opening up more opportunities to participate in regional value chains. Indeed, ASEAN Member States already account for more than half of Laos’ total foreign trade.

However, the new AEC-driven opportunities go hand-in-hand with a number of challenges for the country’s public and private sectors. The Lao Government, for instance, is tasked with implementing the regulatory and procedural changes required to bring the country into line with ASEAN agreements. Besides extensive technical knowledge, this necessitates the continuous coordination of government actors from many different sectors and agencies.

Meanwhile, the business sector has to cope with increasing trade liberalisation and stiffer competition from more advanced ASEAN economies. At present, Laos’ main exports are energy and mineral resources, both of which are comparatively capital-intensive and have limited effects on local employment. The vast majority of Lao businesses are small and medium-sized enterprises (SMEs). Strengthening SME development would therefore enable Laos to integrate more inclusively and sustainably into the AEC.

Objective

The Lao Government has improved the regulatory and procedural framework for regional trade and investment. The private sector in Laos is able to take advantage of AEC-driven opportunities while mitigating related risks.

Approach
Together with key stakeholders from the public and private sector, RELATED addresses three main areas, in which it aims to:

  1. Assist the government to successfully manage the regional economic integration process.
  2. Improve the regulatory and procedural framework for regional trade and investment.
  3. Enable the private sector to benefit from the AEC.

In view of the complex nature of AEC integration and the large number of stakeholders involved, RELATED is assisting its partners to steer, coordinate, communicate, monitor and evaluate this process. It also aims to raise awareness about the AEC and to intensify related dialogue processes between public and private sector stakeholders.

To enhance the regulatory and procedural framework, the project is assisting Lao authorities to translate ASEAN agreements into national legislation and to apply the amended regulations and procedures. Essentially this pertains to cross-border trade in goods and services as well as trade-related investments, particularly in the Special Economic Zones (SEZ).

In addition, RELATED is building capacity in the Lao business community, especially amongst SMEs, in order to harness the opportunities and reduce the risks involved in the regional economic integration process. RELATED aims to strengthen the private sector’s entrepreneurial and technical capacities, raise its productivity, improve the quality of its products and thus enhance its competitiveness. In addition, it is assisting Lao enterprises to get better access to markets in other ASEAN Member States.

Results achieved so far
On assuming the ASEAN Chairmanship in 2016, Laos prioritised the steering, coordination, communication and monitoring of the ASEAN economic integration process. RELATED also assisted the Foreign Trade Policy Department (FTPD) in the Ministry of Industry and Commerce to steer an inclusive dialogue and coordination process designed to identify and formulate eight strategic priorities (‘deliverables’). The aim is to ensure adequate account is taken of Laos’ interests and needs in the ASEAN economic integration process. The project is currently delivering ongoing support for the implementation of two of these deliverables in the field of sustainable tourism.

During Laos’ ASEAN Chairmanship 2016, RELATED helped its partners to successfully host several high-level events, such as the ASEAN Ecotourism Forum and the 48th ASEAN Economic Ministers’ Meeting. As a strategic partner of the 13th ASEAN Business and Investment Summit, RELATED supported a Lao Business Showcase Booth that targeted ASEAN-based senior business representatives. The objective was to represent the country as an emerging business, investment and tourism destination.

Furthermore, RELATED has provided assistance with training. For example, it helped the Foreign Trade Policy Department (FTPD) to organise a one-week training course for public and private sector stakeholders to strengthen the trading and investment skills they need to operate in the AEC. On this basis, RELATED has assisted with the development and delivery of flexible 1-day, 3-day and 5-day AEC-specific modules for different target groups.

Throughout 2016, RELATED has repeatedly taken stock of AEC-related commitments and their implementation in Lao PDR. In this context, RELATED assisted with an FTPD-organised inter-ministerial workshop that led to the finalisation of an Action Plan for the remaining measures of the AEC Blueprint for 2015. Furthermore, stakeholders have also made preparations for Laos’ implementation of the Strategic Action Plan for the AEC Blueprint 2025.

With regard to trade in services, RELATED has continuously supported technical consultations by the Investment Promotion Department (IPD) in the Ministry of Planning and Investment. Geared to line ministries, these consultations aim to finalise the 10th package of commitments under the ASEAN Framework Agreement on Services (AFAS). Furthermore, with RELATED’s support, Lao partners are conducting two ex-ante impact assessments in the transport and health sectors as a basis for trade and investment policy decisions.

As for trade-related investments, RELATED has provided intensive support for Lao PDR’s two main investment laws – the revision of the Investment Promotion Law and the elaboration of the new Law on Special Economic Zones (SEZ). This involved incorporating international best practices and overseeing alignment with the ASEAN Comprehensive Investment Agreement (ACIA). These measures are designed to improve framework conditions for intra-ASEAN investments in Lao PDR. Furthermore, RELATED has also advised on the elaboration of the Lao Strategy on SEZ Development 2030.

RELATED assisted in conducting a baseline study on the level of AEC awareness among private and public sector stakeholders in Lao PDR. The findings will be used to produce and disseminate appropriate information materials on the AEC. The project has supported several events – for example on regional value chains, intra-regional trade in goods and investments – to intensify AEC-specific dialogue between public and private sector stakeholders.

With RELATED’s support, the Lao National Chamber of Commerce and Industry (LNCCI) and the Department of Small and Medium Enterprise Promotion (DOSMEP) in the Ministry of Industry and Commerce are in the process of setting up the first ASEAN SME Service Centre in Lao PDR. This centre is to provide advice, information and training for SMEs preparing to do business in the AEC. In the run-up, RELATED helped conduct a survey on the AEC-related service needs of Lao SMEs. This included a study tour to ASEAN Service Centres in Thailand and Malaysia to learn about best practices – both for work procedures and products.

RELATED has enabled Lao private sector stakeholders to participate in B2B events in ASEAN Member States. Besides promoting Laos as a business and investment destination, these measures aim to give Lao businesses better access to the ASEAN market. Lao tourism operators organised more than 300 business meetings at the Singapore-based ITB Asia 2015 and 2016 respectively, resulting in a significant number of new business deals. In addition, RELATED – together with the GIZ project ‘Support to the Initiative for ASEAN Integration’ – has helped develop regional tourism products in cooperation with tour operators from Cambodia, Myanmar and Viet Nam.

RELATED has successfully enabled Lao businesses to strengthen their competitiveness, giving them a better chance of succeeding on the ASEAN market. Total Quality Management (TQM) training courses on coffee post-harvesting processes have benefited cooperatives with more than 2,000 smallholders in the Southern Provinces. Pictorial manuals and on-the-job advisory services have helped participants to implement this new knowledge in their day-to-day work. Training courses for Lao managers in the tourism sector – conducted jointly with the Lao National Institute of Tourism and Hospitality (LANITH) – have made Lao tourism businesses more competitive.

Gender and economic development

Keen to empower female entrepreneurs and employees, RELATED encourages women to participate in its training courses. Activities implemented by the RELATED project always take gender-specific needs, concerns and impacts into account. Moreover, economic studies prepared by the project list economic outcomes by gender, income and population segment. A large proportion of entrepreneurs and employees in the sectors supported by RELATED are women.

Laos  © GIZ

Contact

Hartmut Janus
hartmut.janus@giz.de