Vientiane, Lao PDR, February 18, 2021—Developing a holistic investment strategy along with continued regulatory reforms will help Lao PDR attract more diverse and higher-quality foreign direct investment (FDI), according to a new report released by IFC, a member of the World Bank Group. The approach will allow the country to expand its economy, generate more jobs, and achieve shared prosperity.
Conducted in partnership with the government of Japan, the report—Investment Reform Map for Lao PDR - A Foundation for a New Investment Policy and Promotion Strategy—lays out a proposed action plan for targeted reforms to realize the positive impact of FDI on the local economy.
Over the past 15 years, FDI has been a major contributor to Lao PDR's strong economic growth. However, the report reveals that most of the investments have been in natural resources, generating limited job opportunities and failing to unlock the full potential of FDI. It says the volume of investments has been low in non-resource sectors, which have high potential for job creation.
"We welcome this new IFC report, which provides a timely and in-depth analysis of the private investment context in Lao PDR. This will help policymakers determine the current and potential positioning of domestic economy in light of regional and international linkages. The report's proposed reform action plan will also help advise the government on priority reforms to capitalize on FDI opportunities, enabling economic diversification and promoting productivity and efficiency," said H.E.Mr. Sonexay Siphandone, Deputy Prime Minister and Minister of Ministry of Planning and Investment.
The report recommends a strategic FDI shift to help the economy venture into knowledge-intensive industries, as well as removing unnecessary restrictions on FDI entry and establishment, providing enhanced incentives, and introducing an investor grievance mechanism.
"This IFC report clearly shows how targeted reforms can help spur a favorable investment climate and enhance Lao PDR's competitiveness in attracting higher-quality FDI. This will help create jobs, transfer knowledge to domestic firms, and foster their integration into global value chains, diversifying the economy for a sustainable and inclusive growth," said Kyle Kelhofer, IFC Senior Country Manager for Vietnam, Cambodia and Lao PDR.
The report shows FDI in the non-resource sectors made up less than 40 percent of total approved FDI stock during 2005-2017. This can be primarily attributed to the high cost of doing business in Lao PDR, triggered by a range of complex and time-consuming investment entry procedures. In laying out its recommendations, the report also provides a comprehensive analysis of the current investment climate in Lao PDR,
About IFC
IFC—a member of the World Bank Group—is the largest global development institution focused on the private sector in emerging markets. We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries. In fiscal year 2020, we invested $22 billion in private companies and financial institutions in developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity. For more information, visit www.ifc.org.
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