The Lao People’s Democratic Republic (Lao PDR) is one of many land lock countries that locates in South East Asia region and 80 % of the country’s area is mountainous. Laos is a small developing country that covers for 236,800 square kilometers, bordered with five neighboring countries including China at the north, Cambodia at the south, Vietnam at the east, Myanmar at the northwest and Thailand at the west.
As a country that is rich on natural resources, Laos is one of many countries that are very attracted to many foreign investors in South East Asia . Foreign Direct Investment in Laos has begun in the 1980s. According to the government policy which meant to further develop Social-Economic aspect of the country, Lao government has implemented the new policy to bring the attention of foreign direct investment (FDI) in 1988. After the reformation of the economic policy, there were almost 30 countries have invested in Laos with a high number of projects accounted for more or less 656 projects with 6.7 billion in value in the same period, the most top countries in investment in Laos were Thailand, the United States, South Korea, France , China and others. Foreign Direct Investment not only brought the inflow of huge capital to Lao PDR, but it also created job opportunities for Laotians; improved technology for industries, technical skills, as well as developed social-economic sector .
2 Political, Legal Systems and Macro-Economic Analysis
2.1 Political and legal systems condition
Lao PDR is one of the world’s few remaining communist states. In 1986, Lao PDR had implemented with the economic reforms to open the country itself to the market mechanisms. During the time of Soviet Union was collapse; Laos has struggled to find its position within a changing political and economic landscape. Since August 1991, The Lao National Assembly has adopted new constitution established a market-oriented economy contribution to Lao people which definite for the right to own the poverty in the country. Besides, the new constitution also provided and protection for foreign and domestic investors, more attraction and opportunities for FDI in the country. Furthermore, after the market-oriented economic, it has given Lao people and social to open the social and the network in the worldwide, people have more freedom to travel, employees has more choice for the employment, the private sector have more opportunities to development the firm, so it can be seen that the new constitution almost pay rule effected to the Lao social and economic development, but the Lao country is still under developed. However, in 2005 the government continued implemented economic and business reform to liberalize its domestic market which focuses in long term plan to reform the hydropower projects .
The most powerful political in the country is Politburo, and dominated with an older generation who is revolutionary and have an experience, but less priority for a person who has generally limited formal education. The party central committee has elected eight members, and it is currently composed for forty-nine members, the member of the Politburo has taken the position in the power structure in the party, while the six member of the recent Politburo are generals. As Lao PDR is one-party rule remain to the political is stability with the Law and policy in the country is strongly, and the government attend to security in the good condition. Even Laos is small country which still remains undeveloped country in the Southeast Asia, but the people are stay in peach with no conflict and war in the nation. Therefore, Lao PDR is one of the countries in the Asian region with the policy attracted to foreign direct investment.
2.2 Macro-Economic Conditions
The economy has slightly grown in Laos yearly; the economic sector also supports and contributes to the environment of investment. In order to further develop the investment sector, the domestic economy should be grown as well. Therefore, the Lao government has been working hard and made impressive efforts to ensure macroeconomic constancy since the Asian financial crisis. Even the inflation was peaked at 157 percent in 1999, but it dropped to just a single digit in 2005 and settled at 7.6 percent in 2008 and it was representing the four-year long of the high rate of inflation as a consequence of the sky-rocketing increase in global commodities prices.
In the last five year, the government has taken necessary actions to address the source of inflation by promoting food production and improving agricultural productivity. This sector increased by 4.1 percent which against a planned rate of 3.3 澳洲代写 percent and accounting for 30.4 percent of the GDP. The data exemplified GDP in the last five year from year 2007-2010 with the amount of US$ 27.65 billion , which presented an annual average of US$ 5.53 billion (at constant price). As mentioned, it is generally understandable that the situation of Lao economic condition is at the good level and it is the booster for the suitable environments for investment in the recent years. The current situation of Lao economic climate most likely pose challenges for the government as the income derived from mineral exports and tourism revenues reduced.
After the government has been improving and revising the policy and law on investment, the Laos is as one country pays attention in the foreign investment. Foreign Investments exist in Laos are growing. Upon the report summarized by Ministry of Planning and investment, foreign investor applied for investment increasingly. Until now, it possible summarized the data about the investment of most companies applied for investment, those emphasized on the strategic economic development of Laos such as: industry. Agriculture, electricity, service, and other sectors and foreign investment progressively increase. This is because that Lao political and economic is stable. The trend of Lao economic has progressively increased, and Lao PDR is willing to open for wider cooperation with other countries in the world. Nowadays, Laos is also preparing and taking crucial steps to become WTO member by the Year of 2013. The advantages of FDI can be summarized as follows. Firstly, Lao PDR is a land-link country which geographically bordered to five countries. The location of Laos becomes strategically convenient for cross border and international trade and investment, including attraction for tourism. In addition, Laos is a country that is rich with unexplored natural resources. Nowadays, Lao PDR has revised the investment policy, regulations and laws to attract domestic and foreign direct investment. Finally, Laos has good infrastructure and facilities to promote the FDI.
However, in 2009, the global financial and economic crisis had a great effect on many countries’ economy in the world, and today the economic system and its situation have not yet become the same or in the better stage. Plus, lots of countries still have put restriction on credit management which brings the negative impact to Lao PDR. The advantages of FDI can be summarized as follows. Firstly, the policy and laws to attract FDI have not been explicit in the sector of investment, such as the steps applying for investment, the concession of land, and project account, it sometimes makes the investors to face complicated steps. Secondly, the investment environment in the country has not fully been accomplished such as the legislations and regulations. In addition, the investment registration procedure is not clearly determined including the allocation of land using for investment or concession. Importantly, Infrastructure to attract FDI is insufficient and in poor condition. Finally, many projects have already approved by the Lao government, but some of them cannot be operated.