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: 2017 to 2020

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 2.3 trillion US dollars. For a small, landlocked country like Laos, the ASEAN market and production base offers great economic potential by opening up more opportunities to access regional markets and value chains. 

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 in line with ASEAN agreements. Beside extensive technical knowledge, the continuous coordination of government actors from many different sectors and agencies is also a necessity. 

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.

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Approach

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

  • Improve AEC-related policy framework conditions in the areas of trade in goods, trade in services and investments.
  • Develop and provide demand-oriented AEC-related services for the private sector.
  • Improve the conditions for an increased competitiveness of AEC-oriented private enterprises.

RELATED conceptually advises the further development and regular update of the National Work Plan of the Lao People’s Democratic Republic to implement the AEC Blueprint 2025 in the areas of trade in goods, trade in services and investments. In addition, the project supports the implementation of selected measures of this work plan for 2018-2020. RELATED also technically advises relevant authorities to adapt national regulations, procedures and standards in line with AEC commitments in selected sectors.

Regarding the provision of AEC-related services for the private sector, a particular focus is given to the support of the SME Service Centres. Demand-oriented AEC-related services include sector-specific information on major changes brought about by the AEC for Lao enterprises, their implications and measures to prepare for them. Sector-specific, practice-oriented toolkits for Lao exports to the ASEAN market are also supported. Training courses and workshops help companies in Laos to meet standards for the ASEAN market, to integrate into regional value chains and to use e-commerce to access the ASEAN market. 

With regard to competitiveness, the RELATED project assists Lao SMEs to increase their productivity, improve their quality, reduce their costs and develop their products. A particular focus is put on competitiveness improvements in selected business sectors: coffee, tourism, handicraft and organic food. 

Results

The project assisted in the elaboration of the National Work Plan of Lao PDR for 2018 to 2020 to implement the AEC Blueprint 2025. The project also assists in the implementation of selected measures of the work plan, such as the analysis of trade potentials arising from Lao PDR’s integration into the AEC, the increased utilisation of preferential ASEAN tariffs by Lao exporters and the reduction of non-tariff barriers for intra-regional trade.

The project supports the identification and prioritisation of regulatory and procedural reform processes to improve the ease of doing business to be implemented by 2022. Moreover, it helps amend the Lao regulatory framework for e-commerce in line with the ASEAN Agreement on Electronic Commerce.

It has strengthened the regulatory framework for transport and logistics, amongst others by assisting in the elaboration of the Prime Minister’s Decree on Dry Ports and the Ministerial Regulation on Truck Terminals.

The project has supported the launch of the national SME Service Centre (SSC) as well as two provincial SSCs. 

The project assists in the SSC Breakfast Talks, a series of public-private dialogue events that bring together key government officials and business representatives in order to discuss major issues for the private sector development.

An SME Business Clinic as well as 1-on-1 coaching for SMEs and start-ups help Lao businesses to succeed in the AEC.

Practice-oriented manuals have been developed for Lao coffee trade procedures, entering into the ASEAN market. As a result, Lao coffee cooperatives reduce their dependency from traders and can directly sell their coffee at an adequate price to more lucrative markets. The support to the ASEAN Business Awards encourages Lao enterprises to enter into new business relations.

The project assists in a study on the competitiveness of Lao enterprises, comparing them to their ASEAN neighbours. RELATED then supports Lao SMEs with materials, trainings and coaching based off the results.

RELATED strengthens the application of resource efficiency measures in travel agencies, hotels, guesthouses and restaurants, not only protecting the environment, but also saving on costs. 

The project has supported the introduction of the Plastic Free Lao Label, which serves as a guideline and incentive to help hotels and guesthouses eliminate single use plastics. 

RELATED supports the local value addition in handicrafts and organic food, as part of the tourism value chain, to generate income and employment for broader parts of the population in tourism destinations.  

In the coffee sector, the project helps Lao coffee farmers to improve the quality of their coffee and to strengthen its access to regional and international markets.