Laos is not fully benefitting from EU trade preference
THE EUROPEAN Union has revealed that Laos has still not fully benefitted from the bloc's trade preference system under the 'Every Thing But Arms' initiative, which carries zero tax or a minimal tax percentage.
In the meantime, European investment in Laos is limited, with the two-way trade value between Laos and EU reaching only 361 million euros ($345 million, Bt12.4 billion) in 2015.
EU is very active in trade and private sector policy dialogue and co-chairs the Trade and Private Sector Working Group, which aims to support the socio-economic development of Laos through stronger private sector development, regional integration and trade promotion.
Last year, the EU provided 5 million euros for the Lao National Chamber of Commerce and Industry to promote business activities between Laos and the EU.
Laos is a landlocked least-developed country with non-diversified exports that consist almost completely of garments, coffee and sugar.
It is a beneficiary of the everything but arms initiative, allowing it to export goods to the EU single market duty and quota free. Though the use of EBA preference is above 90 per cent, Laos, contrary to its Asean LDC peers, has not seized the opportunities offered by the EBA to develop a labour-intensive sector and export goods duty-free to the EU.
Therefore exports to the EU remain low as Laos’ policy remains strongly resource-oriented. While the Ministry of Industry and Commerce had indicated a willingness to shift to the non-resource sector, it is not clear where this policy intent is.
EU trade-related assistance has been aimed at supporting Laos’ trade strategy by encouraging competitiveness and diversification.
The European Chamber in Laos estimates there are currently fewer than 200 EU companies in Laos.
These are divided into two distinct groups: (1) a minority of large investments in hydropower, light manufacturing and financial services and (2) a majority of small businesses (SMEs) in hospitality, consulting services, small agro processing industry and logistics mainly to serve the Lao market (except hydropower and certain agricultural products, such as coffee).
Emerging from a socially planned economy, and making the transition towards market economy reform, Laos displays many of the issues encountered in other countries such as Vietnam and Cambodia. Laos ranks poorly on the WB Doing Business ranking, ranked 139 (2015) out of 189.
Recently some progress has been achieved regarding transparency in publishing laws and regulations and the situation has improved somewhat as Laos has recently implemented the National Trade Repository, publishing trade laws and regulations on a website under the Lao Trade Portal.
Yet many obstacles remain. There are major challenges regarding the way the public-private sector works. In that regard, some concerns have been expressed regarding the way the Lao Business Forum’s input in the legislative process has been taken into consideration and duly followed up.
