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COUNTRY REPORT

LAOS

AN EXPORT DESTINATION ?

Background

The proper name for Laos is the Lao People’s Democratic Republic which is a landlocked country in Asia bounded by Burma, China, Vietnam, Cambodia and Thailand.

Australian exports into Laos include, pumps for liquids and parts, civil engineering equipment and parts, taps, cocks and valves and specialised machinery parts.

Economy

Since the global financial crisis, the economy of Laos has been growing at an average annual rate of 8 percent, supported by strong credit expansion and robust foreign investment (FDI) inflows. Due to the economic expansion inflation is accelerating, in particular due to rising fresh food prices. This growth in credit (in part driven by public spending) has raised some concern about the banking system.

The current account deficit has shown signs of deterioration due to currency appreciation in real terms, a growing fiscal deficit and strong domestic demand. There is a need to build up foreign reserves for precautionary needs.

With fiscal expansion has come a need to tighten macroeconomic policies, this is urgent so as to reduce vulnerabilities, there is also a need to replenish international reserves and a need to work to towards engineering a soft landing. To assist fiscal improvement tax collection disciplines need to be implemented with a broadening of the tax base and an elimination of exemptions while at the same time rationalizing expenditures to concentrate on priority social spending and investments.

Other needs include a strengthening of financial sector supervision and the implementation of regulatory measures to reduce leverage

A more comprehensive report will be available January 2014.

Note The Auspacific Institute has linkage with a raining organization in Laos.

Source : Selected IMF data and Laos authorities

John Brooks MECsT

Trade Economist

Trade - Supply Chain Specialist

The Auspacific Institute

4 October 2013.

Mobile : 042 12 85 888