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Logistics Development and Trade Facilitation in Lao Pdr

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Logistics Development and Trade Facilitation in Lao Pdr Public Disclosure Authorized LOGISTICS DEVELOPMENT AND TRADE FACILITATION IN LAO PDR Public Disclosure Authorized Public Disclosure Authorized Prepared by John Arnold With Assistance from Dr. Ruth Banomyong and Nipawis Ritthironk Public Disclosure Authorized EDITED MAY 2003 ABBREVIATIONS AND ACRONYMS AFTA ASEAN Free Trade Area APB Agricultural Promotion Bank BCEL Banque pour le Commerce Exterieur Lao BOL Bank of Laos CAS Country Assistance Strategy CEPT Common Effective Preferential Tariff DOF Department of Forestry ETO Express Transport Organization FDI Foreign Direct Investment FIMC Foreign Investment Management Committee GMS Greater Mekong Sub-region ICD Inland Clearance Depot LFF Lao Freight Forwarder MRC Mekong River Commission ODA Official Development Assistance RCL Regional Container Line SRT State Railway of Thailand THC Terminal Handling Charge i 1. Economic Situtation.....................................................................................................................1 Background ..................................................................................................................................1 Trade and FDI..........................................................................................................................2 2. Agriculture...................................................................................................................................6 Rice ..............................................................................................................................................7 Coffee and Other Commercial Crops ..........................................................................................9 Livestock....................................................................................................................................11 Markets and Credit ....................................................................................................................12 Forestry......................................................................................................................................13 3. Industry......................................................................................................................................16 4. Transport Network.....................................................................................................................19 Road...........................................................................................................................................19 Road Type..............................................................................................................................20 Road Condition......................................................................................................................20 Road Condition......................................................................................................................20 Inland Waterways ......................................................................................................................23 Imports through Thailand ..........................................................................................................25 imports through Vietnam...........................................................................................................26 exports through Thailand ...........................................................................................................27 5. Trade Facilitation.......................................................................................................................29 Financing and Financial Institutions..........................................................................................29 Customs Procedures and Duties ................................................................................................30 Thai Customs Procedures......................................................................................................30 Lao Customs Procedures and Duties .....................................................................................32 Unofficial Cross-Border Trade ..................................................................................................34 Trade and Transit Agreements...................................................................................................35 Bilateral Agreements with Thailand ......................................................................................35 Bilateral Agreements with Vietnam......................................................................................38 Local...........................................................................................................................................39 Trilateral and GMS Agreements............................................................................................39 ASEAN Agreements..............................................................................................................40 6. Household Consumption and Poverty Concerns .......................................................................43 7. Logistics Chains.........................................................................................................................47 Fertilizer-Rice ............................................................................................................................47 Wood-Furniture .........................................................................................................................50 Paper ..........................................................................................................................................52 Paper ..........................................................................................................................................53 Paper ..........................................................................................................................................54 Fabric-Ready-Made Garments...................................................................................................54 Processed Foods.........................................................................................................................57 Coffee Exports ...........................................................................................................................60 8. Proposed Improvements ............................................................................................................63 i Agricultural and Information Logistics.....................................................................................64 Coffee and Outbound Logistics .................................................................................................65 Wood Industry and Inbound Logistics ......................................................................................66 Garment Industry and Competitive Advantage .........................................................................66 Transit Routes............................................................................................................................67 Border Enclaves.........................................................................................................................67 Inland Container Depot..............................................................................................................68 Bilateral Agreements .................................................................................................................69 North..........................................................................................................................................71 ii CHAPTER 1 ECONOMIC SITUTATION BACKGROUND Lao PDR is the sole land-locked country in the South East Asia region. It has a surface area of 236.8 thousand square kilometers and is endowed with abundant forest and water resources. Population density is only 22 people per square kilometers, the lowest in the region. With an estimated per-capita GDP estimated to be $290, its domestic market is miniscule relative to its neighboring countries. Most of the country’s economic activity is confined to Figure 1 the Mekong River corridor. Components of GDP Despite efforts to promote industry, Laos 100% remains primarily an agrarian country with 80% Import Duties agriculture, forestry, and fishing accounting for one-half of the GDP (Figure 1). The 60% Services service sector, primarily wholesale/retail 40% Industry/Handicraft trade and tourism-related activities, accounts for another quarter of GDP. External trade 20% Agriculture is relatively small, equal to about 50%-60% 0% of GDP versus 85%-125% for Thailand and 1995 1996 1997 1998 90%-100%% for Viet Nam. However, the trade figures do not include the substantial Figure 2 informal trade in wood products, rice, vegetables and consumer goods. Growth Rate for GDP Components Annual % Real economic growth in 2000 increased 20 50 to 5.5% compared with 5.2% in 1999 and 15 25 4.0% in 1998. This was a result of a strong agricultural production and more 10 0 stable macro-economic environment Import Duties following the Asian Financial crisis. 5 -25 Growth in the industrial sector was 7.3% Agrciulture, Industry, Services 0 -50 in 2000, compared with 7.5% in 1999, 1992 1993 1994 1995 1996 1997 1998 much lower than the average performance 1 Agriculture Industry/Handicraft of 13% during 1993–1996 (Figure 2). Services Import Duties 1 Thailand’s
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