# Economy of Laos

The economy of Laos is a lower-middle income developing economy. Being a socialist state (along with China, Cuba, Vietnam, and North Korea), the Lao economic model bears some resemblance to the Chinese and Vietnamese economies, in that it has implemented market-based economic practices while maintaining a degree of state control and welcoming foreign direct investment.
Following independence, Laos established a Soviet-type planned economy. As part of economic restructuring that aimed to integrate Laos into the globalized world market, the country underwent reforms called the "New Economic Mechanism" in 1986 that decentralized government control and encouraged private enterprise alongside state-owned enterprises. As of 2007, Laos averaged 8% a year in GDP growth. It was forecasted that Laos would sustain at least 7% growth through 2019.
The key goals for the government included pursuing poverty reduction and education for all children, with an initiative to become a "land-linked" country. This was showcased through the construction of the nearly $6 billion high-speed rail from Kunming, China to Vientiane, Laos. The country opened a stock exchange, the Lao Securities Exchange, in 2011, and has become a regional player in its role as a hydroelectric power supplier to its neighbors China, Thailand, and Vietnam. The Lao economy relies on Foreign direct investment to attract capital from overseas. The long-term goal of the Lao economy, as enshrined in the constitution, is economic development in the direction of socialism.
Laos has hydropower resources; the country has potential for hydro- and solar power. Excess electricity from hydropower is exported to other countries. The country relies on coal in its electricity production.

## History

Seizure of power by the Communists resulted in the withdrawal of mainly American external investment, on which the country had become dependent as a result of the destruction of domestic capital during the Indochina Wars.
With the revolutions of 1989 in Eastern Europe and the Soviet Union, in 1991, the PDR Lao government reached an agreement with the World Bank and the International Monetary Fund on reforms. The government agreed to introduce fiscal and monetary reform, promote private enterprise and foreign investment, privatize or close state firms, and strengthen banking. It agreed to maintain a market exchange rate, reduce tariffs, and eliminate unneeded trade regulations. A liberal foreign investment code was enacted. Enforcement of intellectual property rights is governed by 2 Prime Minister's Decrees dating from 1995 and 2002.
The economy continues to be dominated by an agricultural sector operating largely outside the money economy and in which the public sector continues to play a dominant role. A number of private enterprises have been founded in industries such as handicrafts, beer, coffee and tourism. With United Nations, Japanese, and German support, a formerly state-controlled chamber of commerce aims to promote private business: the Lao National Chamber of Commerce and Industry and its provincial subdivisions.
A round of state-owned enterprise reform in 2019 aims to ensure that the remaining SOEs become profitable ventures that are efficient and sustainable sources of income for the national treasury. These measures include closing unproductive enterprises, ensure businesses in which the state has investments are reformed into profitable ventures, and reduce corruption. As of 2019, the State-Owned Enterprise Development and Insurance Department of the Lao government has 183 enterprises under its supervision.
Laos faced an economic crisis in 2022. Caused by the COVID-19 pandemic and external debt primarily from China, it escalated into inflation and a debt crisis, bringing the country to the brink of default. A World Bank report finds that the economic instability "largely results from low revenue and accumulated debt. There is moreover a need to improve the efficiency of public expenditure and tackle the potential costs of state-owned enterprises and public-private partnerships.” The Lao kip currency value has fallen and inflation remains higher than before the pandemic. The same World Bank report states that "the main factor in the kip’s falling value has been the lack of foreign currency available (...) a result of the need to repay large external debts, despite some deferrals, and limited capital inflows." The per capita GDP of Laos has gone down from $2,595 in 2021 to $1,824 in 2023 because of the kip’s depreciation.

## Agriculture

In 2012, the Laos government issued a 4-year moratorium for new mining projects. The reasons cited were environmental and social concerns relating to the use of agricultural land.
In 2019 Laos produced:
* 3.4 million tons of rice;
* 3.1 million tons of roots and tubers;
* 2.2 million tons of cassava;
* 1.9 million tons of sugarcane;
* 1.5 million tons of vegetable;
* 1.0 million tons of banana;
* 717 thousand tons of maize;
* 196 thousand tons of watermelon;
* 165 thousand tons of coffee;
* 154 thousand tons of taro;
* 114 thousand tons of sweet potato;
* 56 thousand tons of tobacco;
* 53 thousand tons of peanut;
* 46 thousand tons of orange;
* 43 thousand tons of pineapple;
* 23 thousand tons of papaya;
* 8.6 thousand tons of tea;
In addition to smaller productions of other agricultural products.

## Tourism

As of 2011, tourism was the fastest-growing industry in the Lao economy. The government opened Laos to the world in the 1990s.

## Other statistics

Of the total foreign investment in Laos in 2012, the mining industry got 27% followed by electricity generation which had a 25% share.