Lao businesses hassle in AEC


Laos Economy 2016

Following the launch of the ASEAN Economic Community (AEC) on the 31st of December 2015, this has allowed an increase in business transactions across ASEAN. With a higher mobility of capital, labor, goods and services within the ASEAN region, this has resulted in more opportunities in neighboring ASEAN countries. Consequently, this has spurred many firms in ASEAN to invest in other countries within the area, such as in Laos.
With the current rising Laos economy, many countries globally are interested in investing in the Laos market. With a relatively lower labor cost, high economic growth in both the short and long run, and an attractive market, many investors are interested in entering the market.
On the contrary, most of the Lao businesses have yet to expand to other nations within ASEAN. Despite the low barriers to entry in other countries, due to AEC, many Lao business owners do not wish to expand their business to other ASEAN countries yet. One reason for this is due to their wish to maintain their business presence domestically. As a result, in doing so, they also wish to learn how to develop their strengths from their competitors, which then would be used to help expand their firms to other ASEAN countries in the future.

Impact of AEC towards Laos Market

However, despite the great benefits the influx of foreign investment will bring towards Laos economy, this poses a concern for the domestic firms. Regardless of the reasoning Lao firm owners have, a more pressing concern for business in Laos is whether or not they can survive the competition. As the Laos economy will be flooded with new businesses from neighboring ASEAN nations, this is detrimental for local firms if the domestic firms are not strong enough to withstand the pressure. With no protection for domestic firms given by the government, as a result of the economic integration brought by AEC, only the strongest businesses will survive.
However, it is still possible for Lao businesses to survive despite the incoming challenges posed by AEC. According to Valy Vetsaphong, Vice President of the Lao National Chamber of Commerce and Industry, by partnering with entrepreneurs from neighboring ASEAN nations that are searching for local partners for joint ventures, this can increase the chances of survival for Lao firms in the Laos market. Thus, it is important for both government and businesses to work together when creating policies in order to create policies that can support the growth of businesses.

Recommendations for firms in Laos Economy

With the incoming competition from throughout ASEAN it is important to have the right elements when doing business in Laos. As such, Dr. Leeber Leebouapao, senior economist of the National Economic Research Institute, has pinpointed several important points to keep in mind for business in Laos.

  •      High Product Quality
  •      Competitive Pricing (Low Prices)
  •      Enhancing the capability and enthusiasm of local entrepreneurs

With these things in mind, this can enable Lao firms to survive in the Laos Economy despite the incoming new firms from neighboring ASEAN countries.