High Logistics Costs Impede Lao PDR’s Trade Ambitions

The Lao People’s Democratic Republic (Lao PDR) has made progress in transforming itself from a landlocked to a “land-linked” economy.  However, high logistics costs affect its continued growth, particularly its trade competitiveness.

The Lao PDR has to “reduce its logistics costs before it can further connect to entrenched regional networks of production,” says an East Asia Forum article. The country placed in the bottom 10 in the recent logistics performance survey of the World Bank. A report from the Japan External Trade Organization also says the Lao PDR has the highest logistics costs among countries in Southeast Asia.

Merchandise trade in the Lao PDR has grown at an annual average of 20% in the past 10 years, says Australian National University’s Buavanh Vilavong, who wrote the article.

The country’s access to markets have improved, thanks to increased investments in transport infrastructure. These include the completion of the fourth bridge over the Mekong River that link the Lao PDR to Thailand.

Vilavong notes however that its neighbors in the Greater Mekong Subregion, namely, the People's Republic of China, Thailand, and Viet Nam, account for 85% of the Lao PDR’s trade volume. “This is primarily because [the Lao PDR] is the only landlocked nation in the region, and being landlocked raises international trade costs by up to 50 per cent.”  

He says it is critical for the Lao PDR to improve not only its transport infrastructure but also the efficiency of customs procedures and logistics facilities.

Read the full article at East Asia Forum.