April 29, 2015–Policymakers and private sector representatives in Lao PDR recently gathered to discuss the findings of a survey of businesses’ views on the impact of trade liberalization. Two years ago, Lao joined the WTO and policymakers and development partners are eager to find ways to increase trade and to see how businesses are adapting to liberalization. The report that framed the discussion, Business Perceptions Survey: Trade Liberalization in Lao PDR, was released on April 22.
Nathan Associates, which manages USAID’s LUNA II project, conducted the survey in cooperation with the Lao National Chamber of Commerce and Industry. Data were gathered from 287 businesses in four business hubs—Vientiane Capital, Champasak, Savannakhet, and Luang Prabang—from November 2014 to January 2015.
The most important finding is that a large majority of survey respondents are benefiting from international trade. Eighty percent depend on imported inputs for their business—especially imported equipment, spare parts, and raw material—and nearly half are already engaging in export sales. Trade liberalization is also stimulating many firms to improve efficiency and competitiveness.
Among exporting firms, 46 percent experienced growth in direct export sales over the past two years. Respondents say that export sales’ growth is constrained by a shortage of skilled labor and trade financing. Fifty percent say they are facing import competition in the domestic market and 14 percent see this competition as a critical problem.
Much discussed was the finding that businesses are largely unaware of national trade policies, international agreements, and government-sponsored trade information tools, such as the Lao Trade Portal and the e-Gazette. For example, only 8 percent of respondents claim to be well informed about Lao PDR’s WTO membership. A good number of respondents have problems with trade-related paperwork and customs clearance procedures.
The survey focused on international trade, but its findings suggest that the government can do much in the domestic realm to maximize gains from that trade. For example, it can encourage efficient investment, growth in competitive industries, and creation of productive jobs through legal and regulatory reform, macroeconomic policy, and financial sector modernization.
The business perceptions survey report specifically recommended that policymakers seek to ease adjustment to new trade patterns by reducing regulatory costs for businesses and providing retraining assistance for displaced workers.
The Lao National Chamber of Commerce and Industry, with support of the USAID LUNA II project, will continue working with businesses to raise awareness of trade policies and procedures so that Lao businesses can profit more from international trade.