The World Trade Organization is poised this month to accept Laos, the
smallest economy in the 10-member Association of Southeast Asian Nations and
the last one outside the global trading club.
The terms of Laos’s membership
were agreed to last week by a working party on its accession, and now must be
endorsed by all 157 members of the WTO, according to a posting on the
Geneva-based group’s website.
Vietnam was the last member of
Asean to join the WTO, in January 2007. Laotian accession further bolsters the
association’s international position, as China and the U.S. compete for
influence in the region and Myanmar moves away from decades of political isolation.
“It’s another feather in the cap
for Asean,” said Markus Taussig, an assistant professor in the business school
at the National University of Singapore, who researches emerging economies.
“With Myanmar having turned from a pariah into the sexy emerging-market story
and with Laos in the WTO, Asean can be fully represented in international
discussions.”
The membership package is
scheduled to go to the WTO’s General Council for formal approval on Oct. 26.
Laos’s National Assembly will probably complete ratification in December,
according to Lao Minister of Industry and Commerce Nam Viyaketh.
Providing Incentives
“Just as important as gaining
better market access for Laos in its accession, is providing incentives for and
anchoring domestic reforms,” said Mia Mikic, an economist at the United Nations
Economic and Social Commission for Asia and the Pacific in Bangkok. She cited
the need for updated regulations in areas including intellectual property
rights, food safety, customs valuation and import licensing.
“There are also commitments
regarding the treatment of state-owned enterprises and price controls which are
perceived as further helping the development of the private sector,” Mikic
said.
Laos committed to maximum import
tariffs on goods that average almost 19 percent. In services, the country made
market- access pledges in 10 industries, according to the WTO.
Working to overcome domestic
opposition and “convince our internal partners of the justification of the
reforms requested was one of our most difficult tasks,” Lao industry chief Nam
said in a statement posted on the WTO’s website.
Laos has “made tremendous efforts
in improving the investment climate and opening its market for goods and
services,” Nam said. “As a landlocked country with long porous borders which
are difficult to control, our ability to protect the internal market with high
tariffs is thus very limited unless we simply want to encourage fraud.”
Stock Exchange
Laos has been accelerating its
process of opening up in recent years. The country opened a stock exchange in
January 2011, beating neighboring Cambodia, which opened its bourse about six
months ago. Still, the Laotian exchange was only able to list two companies: a
bank and a power provider.
Next month, Laos will host the
Asia-Europe Meeting summit of heads of state and governments, which is held
every two years, with the Laotian capital of Vientiane following in the
footsteps of Brussels, the site of the 2010 meeting. The government is spending
about 240 billion kip ($30 million) to organize the summit, the Vientiane Times
reported last month.
The country’s 6.5 million people
had a per-capita gross domestic product of $1,204 last year, according to the
International Monetary Fund. By comparison, for the five countries with which
Laos shares borders, China’s was $5,414, Thailand’s was $5,394, Vietnam’s was
$1,374, Cambodia’s was $852 and Myanmar’s was $832.
Myanmar’s Growth
The economy of Myanmar -- which
has been a member of the WTO since it was created in 1995 -- is benefiting from
investment in oil, natural gas and power and expansion in tourism, construction
and exports, with the growth forecast for this year “edged up following policy
changes that improved its outlook,” the Asian Development Bank said this week.
The Laotian economy is forecast
to grow 7.9 percent this year and 7.7 percent in 2013, driven by construction
for hydropower and mining, according to the ADB.
Investment in the country by
PanAust Asia, a unit of Australian-listed PanAust Ltd. (PNA), which operates
mines in Laos that produce copper, gold and silver, “has coincided with the
gradual liberalizing of the Lao economy, including internal banking, taxation
and other constraints, as well as external barriers such as import rights and
duties,” said Alistair Maclean, the company’s Vientiane-based general manager
of external affairs.
“The legal and regulatory
framework is developing in a generally positive direction, although it will be
important that the momentum toward certainty and predictability for foreign
investors is maintained,” Maclean said.
Indonesia, Thailand
Growth in five Asean economies --
Indonesia, Thailand, Philippines, Malaysia and Vietnam -- along with China and
India will probably outpace the rest of the world in the next two years, the
IMF said in an April report. The Asean-5 will grow 6.2 percent in 2013,
compared with 2.4 percent in the U.S., 0.9 percent in the euro region and 1.7
percent in Japan, it said. The other five members of Asean are Brunei,
Cambodia, Laos, Myanmar and Singapore.
Like Vietnam, Laos is a one-party
state, ruled by the Lao People’s Revolutionary Party. Both countries began
introducing market-oriented economic measures in 1986.
“The process has been slow, but
progressively more liberal, and foreign direct investment has flowed in as a
result, particularly from Thailand and Vietnam, and significantly more recently
from China,” said Martin Stuart- Fox, an emeritus professor of history at
Australia’s University of Queensland. “In Laos, as in China and Vietnam, economic
liberalization in no way presages political liberalization.”
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