Laos country brief
Laos is the only land-locked country in South-East Asia and is bordered by China, Vietnam, Cambodia, Thailand and Burma (Myanmar). Its total land area, much of which is mountainous and densely forested, is approximately 237,000 square kilometres (roughly equivalent to the state of Victoria). The Mekong River, almost half the length of which flows through Laos, forms most of the border with Thailand. Large population centres (including Vientiane, Luang Prabang, Pakse and Savannakhet) lie on the Mekong.
The population of Laos is approximately 6.6 million people and is diverse, with 49 broad ethnic groups recognised by the Government of Laos and four major linguistic groups. The largest language group, the Lao-Tai, consists of eight ethnic groups and forms around 35 per cent of the total population.
The official language is Lao, a tonal language similar to Thai. Among younger Lao, English is now the most widely-spoken second language.
Theravada Buddhism is followed by approximately 60 per cent of the population and a higher proportion of members of the Lao-Tai language ethnic groups. Animism is still widely practiced among a number of minority groups, especially in the more remote rural areas.
Laos became the Lao People's Democratic Republic (Lao PDR) on 2 December 1975 following the abdication of the King after many years of civil war and political instability.
System of Government
The Lao PDR is a Marxist-Leninist state ruled by the Lao People's Revolutionary Party (LPRP). The Politburo of the LPRP, drawn from its Central Committee, is the key decision-making body. A National Assembly, which is elected by the people from a list of candidates approved by the Party, meets twice a year and is responsible for scrutinising proposed legislation.
Since 1986 Laos, in line with its larger socialist neighbours, has promoted gradual economic liberalisation through its New Economic Mechanism. In doing so, the government has moved from a centrally planned economy to a more market-oriented system.
In August 1991, the National Assembly adopted a new constitution which formalised the establishment of a market-oriented economy, guaranteed the right of every Lao citizen to own property, and provided greater protection for foreign and domestic investment. Indicators of the more open society that has emerged over the past decade include freedom to travel, choice of employment, and the development of a private sector.
The ninth Party Congress took place in March 2011, with National Assembly elections held in April 2011. The National Assembly convened on 15 June 2011 and re-elected Mr Choummaly Sayasone for a second term as President, with Mr Bounnhang Vorachit returned as Vice President and Mr Thongsing Thammavong as Prime Minister.
Laos was admitted to ASEAN (the Association of South-East Asian Nations) in July 1997, and was chair in 2004-05. In accordance with ASEAN’s policy of rotating the chairmanship annually, Laos will chair ASEAN again in 2016. Laos is a member of the Mekong River Commission and hosts its headquarters in Vientiane.
Laos has strong political links with Vietnam. The 1977 Treaty of Friendship and Cooperation between Laos and Vietnam covers defence arrangements, delineation of the border and Vietnamese economic assistance to Laos.
China's profile and influence in Laos is rising. As with Vietnam, close relations with China reflect ties between the countries' Communist Parties, as well as China's proximity, size and regional importance.
Thailand is another important bilateral partner, due to proximity and cultural and linguistic affinity, as well as strong trade and investment links. Parts of the border with Thailand are still undergoing formal demarcation.
The Australian Government actively pursues initiatives designed to promote human rights in Laos, including a regular bilateral human rights dialogue. The dialogue provides a forum for open and constructive discussion of human rights issues of interest to both countries. The third dialogue was held from 24-25 April 2012 in Vientiane. Previous dialogues took place in 2006 and 2009.
To underpin this bilateral dialogue, the Australian Government is providing funding in 2012-2015 to support the human rights work of the Lao Ministry of Foreign Affairs, including in relation to raising awareness and capacity within Laos of core human rights conventions and laws. Australia has also funded other projects to strengthen human rights adherence in Laos under DFAT’s Human Rights Grants Scheme.
Australia and Laos are long-standing regional partners. Our two countries share a strong and diverse relationship underpinned by deepening economic ties, community links and development cooperation. Australian businesses are significant investors in natural resource development in Laos, and the Lao community in Australia numbers around 12,000.
People to people links
Australia has supported more than 1,100 Lao leaders to develop their skills and knowledge through tertiary study in Australia and contribute further to the development of Laos.
For the 2014 intake, a total of 86 new awards were offered to Laos, comprising 50 long-term and 36 short-term awards. There will be approximately 50 new long term awards offered to Laos in 2015. A total of 517 awards were provided to Laos from 2007-2013, comprising 374 long term awards and 143 short term awards. Australia Awards focus on areas of importance to the development of Laos, including education, trade and rural development. They are administered by the Laos-Australia Institute in Vientiane.
More than 97 per cent of scholars successfully graduate and return home, with most working in fields that support aid priorities. Half of these scholarships are targeted for the government sector and half are open to the private sector. The aim is to directly address skills shortages within the country and improve capacity to create and implement sound policy and management. Longer term this will develop a core of tertiary trained Lao nationals able to contribute to Laos' development.
The Australia Awards program is complemented by the Laos-Australia National Scholarships program, which provides 70 scholarships annually to students from disadvantaged backgrounds to study in Laos. The program will enable students to graduate with bachelor degrees from the National University of Laos.
For more information www.australiaawards.gov.au
The Australian Volunteers for International Development (AVID) program promotes economic growth and poverty reduction in the Indo-Pacific region by assisting host organisations to deliver effective and sustainable development outcomes. See www.australianaidvolunteers.gov.au [external link].
35 new volunteers have taken up assignments in Laos over 2013-14. The volunteers are predominantly placed within education, trade, rural development and water resource management sectors, which align with Australian development priorities in the Lao PDR. Scope Global (formerly Austraining International) and the Australian Red Cross are the two AVID core partners operating in Laos.
The Lao Disabled Women’s Development Centre and the Lao Disabled People’s Association have been long standing partners of the AVID program and have hosted a series of short-term and long-term Australian volunteers whose assignments have focused on institutional strengthening, communications and marketing.
Australia is one of the largest bilateral donors to Lao PDR (Australian total aid flows in 2014-15 will be an estimated $55.6 million), and we work in areas critical to Laos’ long-term development and economic growth, including trade and investment reform, education and rural development. Australia’s support will help Laos continue to develop as a stable, well-managed and increasingly prosperous regional neighbour with growing economic links with Australia and the region.
Laos is making steady progress in reducing poverty but remains one of the poorest countries in the Mekong region. Like its neighbours, Laos is achieving strong growth, particularly in urban areas, driven by a wide-ranging reform agenda, demand for natural resources and its transition to a market economy. Despite the economic and social gains, poverty is widespread and its causes are increasingly complex. Around 23 per cent of the population live under the national poverty line. Twenty seven per cent of children under five are underweight and 44 per cent have stunted growth.
Australia has been a key partner in Laos’ development over the last 50 years. Our support is guided by the Australia-Laos Development Cooperation Strategy 2009-15.
We work in partnership with multilateral development agencies, other donors, the private sector and civil society organisations.
For further information on Australia’s bilateral program refer to our bilateral development cooperation page. For additional information on Australia’s regional programs that engage with Laos refer to our South East Asia Regional page.
Laos is classified as a Least Developed Country (LDC) and relies heavily on donor assistance. At the same time, Laos has a number of economic advantages. It is situated in an economic growth area, sharing borders and common interests with Thailand, Vietnam, Cambodia and China. While the domestic market is very small, millions of people within 100 kilometres of Lao borders should generate new market opportunities as transit routes are further developed and as trade and investment governance is simplified and more effectively implemented. Laos is also relatively well-endowed with mineral resources.
Real GDP growth has averaged more than 8.1 per cent since 2009. The resources sector has largely driven this strong growth. The World Bank forecasts economic growth of 7.2 per cent for 2014. Per capita average annual income was around US$1,260 in 2012. The resource sector (mining and hydropower) and related services account for more than half of total investment and exports.
The economy is dominated by subsistence agriculture (on which 80 per cent of the population relies), and the cash economy has made little inroad into remote areas. Notwithstanding significant improvements in recent years, infrastructure constraints limit the efficiency of agriculture.
Laos is currently experiencing some fiscal challenges, as a result of lower than expected taxation receipts and significant public sector wage and capital expenditure growth. This has increased the government deficit, public debt and constrained the non-wage recurrent budget allocations essential for effective development expenditure.
Laos is increasingly open to international trade. The country is on track to reduce its tariffs on imports from other ASEAN nations to less than five per cent, as required under the ASEAN Free Trade Agreement, and tariffs on most product groups for trade with non-ASEAN countries are less than 20 per cent. However, the regime lacks transparency and in practice trade and investment are more heavily regulated, including through import and export licensing. A Law on the Promotion of Investment approved in 2009 is delivering some benefits to foreign investors by facilitating, standardising and streamlining application processes, although its implementation is not always comprehensive.
In February 2013, Laos became the 158th member of the World Trade Organization (WTO). Australia supported Laos's bid to join the WTO, serving two terms as Chair of the Working Party for Laos's accession. Australia also provided technical assistance during negotiations. Laos is currently in the process of implementing its post-WTO accession agenda, which includes a focus on non-tariff measures and trade in services facilitation, with further assistance from Australia.
While the Lao Government aims to graduate from LDC status by 2020 further improvements in development outcomes will be necessary if Laos is to achieve this goal. Broadening the country's economic base, through accelerated private sector growth in the non-resources sector, is a central policy priority of the Lao Government, and essential if future growth is to be more inclusive. The country also needs to improve the management of its resources sector to ensure it is able to benefit fully from its limited natural resource wealth.
Trade and investment
Australia's total merchandise trade with Laos stood at $92 million in 2013, with Australian goods exports to Laos valued at $39 million. Major Australian exports included pumps for liquids and parts, taps, valves, civil engineering equipment and parts. During 2013, merchandise imports from Laos, dominated by gold and coffee, totalled $52 million.
The dynamo in the economic relationship is investment in mining. An agreement on the promotion and protection of investment between Australia and Laos has been in place since 1995 and a number of Australian companies have mining investment and exploration interests in Laos. Australian mining companies have a proud record in the Lao PDR, in terms of contributing to government revenue, environmental management and workplace health and safety, community development work and skills training for their predominantly local Lao workers and managers.
Australia and Laos are parties to the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) which entered into force on 1 January 2010 in Australia and 1 January 2011 in Laos.
We are now both participating in negotiations for a Regional Comprehensive Economic Partnership, which will cover ASEAN countries and ASEAN Free Trade Agreement partners.
Australia's trade and investment strategies
As part of its efforts to assist growth in the Lao economy, Australia has, since July 2003, provided duty-free and quota-free access for Lao goods exported to Australia. Australia also supported Laos' accession to the WTO, including through provision of technical assistance to Laos for WTO accession. In June 2011, Australia and Laos concluded bilateral negotiations on market access, in support of Laos' WTO accession bid.
2014 marks the 20th anniversary of the Australian-built and funded 'Friendship Bridge' linking Laos and Thailand, which opened in 1994. The bridge remains a focal point for trade and a symbol of Australian commitment to Laos and its integration with other economies. On 5 March 2009, a Lao-Thai railway link was opened on the bridge, further enhancing accessibility to and from Laos.
The Lao Government has imposed a moratorium on the issue of mineral exploration licenses, which currently impedes foreign investment in extractive industries in Laos.
Donor-funded projects offer significant commercial opportunities. Multilateral agencies such as the World Bank and ADB are active in education, health, energy, agriculture and other infrastructure development. Opportunities include advisory consultancies, tenders and the supply of equipment.
The private education market in Laos is very small but growing, and Australia is a favoured destination for those Lao students who can afford to study abroad.
Through its Lao-registered subsidiary, Phu Bia Mining (PBM), PanAust Limited is the largest Australian investor in the Lao PDR. The company's flagship Phu Kham Copper-Gold Operation commenced production in 2008. Annual production at Phu Kham is around 65,000 tonnes of copper in concentrate, 55,000 ounces of gold and 500,000 ounces of silver. The Ban Houayxai Gold-Silver Operation, located 25 kilometres west of Phu Kham, commenced production in 2012 and is forecast to produce 100,000 ounces of gold and 700,000 ounces of silver annually over a nine-year mine life. PanAust has other prospective exploration targets within its 2,631 square kilometre contract area in Laos. PanAust is a major contributor to the Lao economy through direct investment, employment, royalties, taxes and internationally-awarded community development initiatives.
ANZ Vientiane Commercial Bank (ANZV) commenced operations on 24 September 2007 after ANZ acquired a 60 per cent stake in the Vientiane Commercial Bank and majority representation on the board of the joint venture. ANZ has since expanded its operations to a second office in Vientiane and a third in Pakse, and is also expanding its network of ATMs throughout Laos. ANZ moved to 100 per cent ownership in August 2010.
Australia's investment interests in Laos continue to diversify, including into areas such as legal and education services, tourism and wine imports.
High level visits
October 2014: GAVI Alliance facilitated a visit by seven Australian federal members of parliament to see GAVI’s vaccination work in Laos.
September 2014: The Hon. Dr. Souvanpheng Bouphanouvong, Chairperson of the Economic Planning and Finance Committee of the Lao National Assembly, visited Australia. This was her third visit, following participation in parliamentary delegations in 2012 and 2013.
September 2014: Minister for Education, the Hon. Christopher Pyne, led Australia’s delegation to the 2nd East Asia Summit Education Minister’s Meeting in Vientiane. He also met with the Minister for Education and Sports.
September 2014: Speaker for the House of Representatives, the Hon. Bronwyn Bishop, led an Australian parliamentary delegation to Laos to attend the 35th ASEAN Inter-Parliamentary Assembly in Vientiane.
July 2014: Minister for Foreign Affairs, the Hon. Julie Bishop MP, travelled to Laos and met the Lao Prime Minister, Mr Thongsing Thammavong, the Deputy Prime Minister and Minister for Foreign Affairs, Dr Thongloun Sisoulith, the President of the National Assembly, Madame Pany Yathortou, the Minister for Education and Sports, Dr Phankham Viphavanh and the Minister for Industry and Commerce, Madame Khemmani Pholsena. She also met Australian business and Lao women leaders.
June 2013: The Lao Vice-Minister of Foreign Affairs, Madame Sounthone Xayachack, visited Australia.
February 2013: Then Minister for Foreign Affairs, the Hon. Bob Carr, travelled to Laos and met the Lao Prime Minister, Mr Thongsing Thammavong, the Deputy Prime Minister and Minister for Foreign Affairs, Dr Thongloun Sisoulith, and the Planning and Investment Minister, Mr Somdy Douangdy. He also met Australian business leaders, and representatives of health and non-government organisations.
November 2012: Then Prime Minister, the Hon Julia Gillard travelled to Laos to attend the 9th Asia-Europe Meeting in Vientiane.
November 2012: The Lao Minister of Health visited Australia to attend the Malaria 2012 conference and the Lao Minister for Education and Sports visited Australia to learn about Australia's education system.
October 2012: Then Deputy Speaker of the House of Representatives, Anna Burke, and then Deputy President of the Australian Senate, Stephen Parry, attended the 7th Asia-Europe Parliamentary Partnership Meeting (ASEP-7) in Vientiane.
August-September 2012: Senator Claire Moore led a parliamentary delegation to ASEAN countries including Laos.
August 2012: The President of the Lao National Assembly, Ms Pany Yathotou, also led a parliamentary delegation to Australia, as guests of the Australian Parliament.
February-March 2012: The Deputy Prime Minister and Foreign Minister, Dr Thongloun Sisoulith, visited Australia and met the Minister for Foreign Affairs, the Hon Julie Bishop in her former role as Deputy Leader of the Opposition.