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The Great Leap Forward SPONSORED SECTION | LAOS - 1 LAOS THE GREAT LEAP FORWARD www.foreignaffairs.com/country-focus/laos WITH MUCH PRIDE, THE LAO PEOPLE’S DEMOCRATIC REPUBLIC (PDR) LAST YEAR CELEBRATED FORTY YEARS OF INDEPENDENCE. Over the course of four decades Lao PDR (Laos) has remodeled itself. From a country torn by civil war, it has changed into a stable and peaceful nation with big ambitions. Lao PDR today is counted among the world’s fastest growing economies and is set on a course of full regional and international integration. For the past two decades, the Lao PDR’s gross domestic product (GDP) has grown at an average annual rate of more than 7 percent. This has transformed the country from a largely agrarian society into a mobile, upward-oriented economy. The country completed the transition in 2011 from low-income economy to lower- middle income economy, followed by admission to the World Trade Organization (WTO) in 2013. And in 2014, the services sector eventually overtook agriculture as the country’s largest contributor to GDP. Much Thongloun Sisoulith, Prime Minister of the Lao PDR progress has also been made in achieving the Lao PDR developing into an upper-middle income country’s Millennium Development Goals (MDGs), set country by 2030, with Gross National Income (GNI) per by the United Nations. The Lao PDR has come close capita projected at five times the size of what it is today. to meeting its targets, particularly in terms of poverty “Our medium-term national development vision reduction and improvement of health and education. or Vision 2030 is to develop a more sustainable and “The achievements over the past forty years equitable modern economy,” explains Khemmani represent a leap in progress for the Lao people,” Pholsena, Minister of Industry and Commerce. “In says Prime Minister Thongloun Sisoulith. Lao PDR’s order to make contributions to achieving both 2020 government is committed to moving the nation up to the and 2030 development visions, our trade and private level of developing country. Prime Minister Sisoulith sector development strategy aims to promote a explains, “The Lao PDR is focusing all its efforts on diversified economy.” poverty reduction, infrastructure development, and Although the economy is growing fast, it is largely building an economic foundation for industrialization based on the exploitation of the country’s natural and modernization, in order to graduate the country resources. Laos trades mostly in agriculture and from the ‘least developed country’ status.” forestry products, minerals - including gold, copper, The government’s 8th National Socio-Economic zinc and lead - and in electricity generated from Development Plan (NSEDP) sets targets for annual GDP hydropower. Mining and electric power exports growth of no less than 7.5 percent over the next five currently account for more than two thirds of total years. It also makes a commitment to more sustainable exports. Economic diversification is therefore high on growth and improved access to education, which are the government’s agenda. “We adopted a development crucial factors for the country’s future competitiveness. strategy to promote diversification, built on three At the current pace of development, Lao PDR is likely pillars: enhancing enterprise competitiveness, creating to outgrow its ‘least developed country’ status by 2020. a business-friendly environment, and deepening Moreover, the government’s fifteen-year vision foresees economic integration,” says Minister Pholsena. SPONSORED SECTION | LAOS - 2 ASEAN – Turning Vision into Reality Regional integration is a principal element of the Lao PDR’s development strategy. “The Lao PDR has built mutually beneficial relations with all neighboring countries to ensure a regional environment of peace, stability, equality, and trust,” says former Prime Minister Thongsing Thammavong. “This is the foundation for socio-economic development.” The country’s location in the very heart of Southeast Meetings (SOM) Leader, adds: “We want to create a Asia’s high-growth region presents a clear opportunity as single market and production base, a market which is Sayakane Sisouvong, Ambassador to the UK, Ireland and fully integrated not only within the Asian world but also Iceland, describes: “We have a long-term vision of Laos in the global economy.” becoming [the] Switzerland in this part of the world.” Establishment of the AEC is not without challenges The country’s dedication is reflected in Lao PDR’s for the Lao PDR. Companies and sectors have to face current chairmanship of the Association of Southeast competition from within the community, especially as Asian Nations (ASEAN). The association has entered a import tariffs on even the most sensitive goods are historic moment in time, when the ASEAN Economic phased out by 2018. But the benefits are expected to Community (AEC) is becoming a reality. The AEC will seriously outweigh the costs. “Laos will see lower-cost gradually abolish all trade barriers between ASEAN’s imports coming into its economy when most remaining ten member states to create a free market of more import tariffs are eliminated in actual terms during than 600 million people. “The Lao PDR will be the 2015-18,” explains Minister Pholsena. “This will help first country, in cooperation with the ASEAN member improve the efficiency of firms that use imported states, to turn the ASEAN Community Vision 2025 materials and benefit consumers of imports.” into reality,” says Prime Minister Sisoulith. ”We will The country is also likely to become more attractive continue the integration process, enhance connectivity, for foreign investment and for professional services and redouble efforts to narrow the development gap that are currently missing in Laos, while private among member states.” sector investments in sectors such as agriculture, Alounkeo Kittikhoun, Minister to the Prime manufacturing and services are expected to lead to Minister’s Office, and Laos’ ASEAN Senior Officials more jobs. The U.S. Dimension The U.S. is also seeking greater engagement with the “The visit by President Barack Obama region. A special U.S.-ASEAN Leaders Summit held in the United States earlier this year - the very first of its to the Lao PDR will open a new chapter kind - confirmed a strategic partnership between the in the relationship between our two U.S. and ASEAN. President Obama is expected to attend countries.” the ASEAN Summit in Vientiane in September this year. The first ever visit of a sitting U.S. President to Thongloun Sisoulith, Prime Minister of the Lao PDR the Lao PDR will be a historic event for Lao-U.S. relations. “The leaders of our two countries will have who was a signatory to the agreement, hopes that “the the opportunity to exchange views comprehensively, visit could provide important stimulus to boost bilateral covering a number of areas such as trade, investment trade and investment cooperation between our two and bilateral exchanges at all levels,” says Prime countries.” Minister Sisoulith. “The visit by President Barack The Lao PDR already works closely with the U.S. Obama to the Lao PDR will open a new chapter in the in the framework of the regional Lower Mekong relationship between our two countries.” Initiative (LMI), which the U.S. has been funding for Trade between the U.S. and the Lao PDR is still years. Prime Minister Sisoulith says, “These projects limited, but it is growing. The Office of the U.S. Trade have contributed significantly to the socio-economic Representative reports that trade in goods grew development of the Mekong countries including the five-fold in the past ten years to $70 million, while Lao PDR.” Separately, the U.S. funds an education agricultural trade grew eight-fold to $8 million. The program and is considering increasing its funding to two countries signed a historic Trade and Investment help with de-mining efforts. Earlier this year, the U.S. Framework Agreement earlier this year, opening the announced it was launching a $6 million nutritional door to more trade and investment. Minister Pholsena, program addressed at school children. SPONSORED SECTION | LAOS - 3 Time for Investment The government counts on growth across sectors growth and development. to achieve the ambitious targets of the five-year “The SEZs have the objective to attract domestic 8thNational Socio-Economic Development Plan. This and foreign investments; create a strong foundation includes growth in the agriculture and forestry sector for industrialization; contribute to GDP growth, by an average of 3.2 percent annually, growth in technology transfer, and job creation; and increase industry by an average of 9.3 percent, and growth in government revenue,” says Bouatha Khatthiya, services by an average of 8.9 percent. Standing Vice Chair of the National Committee An estimated $27 billion - equivalent to 30 percent of for Special Economic Zones (NCSEZ). “Ultimately national GDP - is required to implement the plan. A mix this is to attain our goal of graduating from Least of state investments, loans, and private investments is Developed Country (LDC) status by 2020.” expected to provide the necessary funding. The biggest Laos currently operates a total of twelve SEZs, contribution - about 55 percent – is to come from covering a total area of about 12,000 hectares. More private domestic and foreign investors. than 260 foreign and domestic firms have invested in Most foreign investments currently originate the SEZs, with activities divided between the service from China, although Thailand and
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