Leveraging export potential and tariff advantages to attract foreign direct investment into Lao PDR: Wood processing and coffee
Foreign direct investment to Lao PDR has declined in recent years, and may continue to do so due to the global COVID-19 pandemic. This study supports Lao investment promotion actors and potential investors by identifying opportunities for foreign investment to Lao PDR based on trade data. It focuses on wood processing and coffee, two sectors that present important opportunities to diversify foreign investment in Lao PDR consistent with a sustainable development path. In both sectors, Lao PDR has considerable untapped export potential that investors could leverage. Furthermore, the country’s preferential access to regional markets could benefit international companies serving these markets. A short analysis highlights other sectors with potential to attract investment and increase diversification. The most important ones include vegetables and electronic equipment.Export Potential in Lao PDR Processed Wood and Specialty AgricultureEnvironmental and economic sustainability is a key challenge for the Laotian economy and its strategy towards exports. This report identifies sustainable export growth potential in two priority sectors, processed wood and specialty agriculture. It highlights opportunities to increase exports in existing products as well as to diversify into new products and move up the value chain.Expected demand growth in ASEAN and China ensures significant export potential in those markets. Despite being less dynamic overall, the European Union is an important market for the sustainable products in the priority sectors. While increasing exports to ASEAN and China requires making the right investments, conquering EU markets involves addressing frictions that have kept trade below its full potential so far.Trade implications of Lao PDR’s graduation from LDC statusITC estimates that Lao PDR could face a trade loss of $102 million with its envisaged graduation from the status of least developed country (LDC) in 2024, corresponding to 1.2% of its projected exports in that same year. The novel methodology uses projections of trade and tariffs, thereby accounting for a geographical shift of exports that will ease Lao PDR’s exposure to tariff changes by the time of graduation. The paper suggests three strategies for Lao exporters to mitigate the trade losses: first, attaining the EU Generalized System of Preferences Plus (GSP+) rather than the standard GSP could reduce the trade loss by 70%. Second, targeted trade promotion to remove market frictions will help sectors that currently do not exhaust their export potential in certain markets – this is the case for rice exports to the EU and food product exports to Japan. Third, export diversification could help focusing resources on alternative products and markets that offer room to increase exports and thereby compensate the graduation-induced losses.The publication is also available in Lao.
Assessment results on COVID-19 in the Lao People's Democratic Republic:
COFFEE EXPORT ROADMAP
WOOD PROCESSING EXPORT ROADMAP
Responding to the changing environment caused by the global COVID-19 outbreak, ITC conducted two sector specific COVID-19 rapid assessments to reflect any changes in the two sectoral export roadmaps, which are being developed as part of the ARISE Plus project. The reports highlights the key results of the assessment on the wood processing and coffee sector of the Lao PDR respectively.
In collaboration with the Ministry of Industry and Commerce
Ms. Emilie Dairon
Office for Asia and the Pacific
Telephone: +41 22 730 06 14
Street address: ITC, 54-56, rue de Montbrillant,1202 Geneva, Switzerland Postal address: ITC, Palais des Nations, 1211 Geneva 10, Switzerland
Ms. Marie-Claude Frauenrath
Telephone: +41 22 730 02 95