Context
The establishment of the ASEAN Economic Community (AEC) in 2015 will be of great relevance for the economic development of Laos. It will create a single market with 600 million consumers. For a small and landlocked country like Laos, the AEC offers great potential for economic development by improving its access to this regional market. Its single production base increases the opportunities to become part of regional value chains. ASEAN member states already account for more than half of Laos’ total foreign trade.
However, the opportunities of the AEC are accompanied by a set of challenges for both the public and private sector to be addressed in the short time left until 2015. The Lao Government faces the task of implementing all the necessary regulatory and procedural changes for conformity with ASEAN agreements. This requires not only extensive technical knowledge, but also the coordination of a large number of government actors from different sectors and agencies.
Meanwhile, increasing liberalisation will confront the business sector with growing competition from more advanced ASEAN economies. At the moment, Laos’ main exports are energy and mineral resources, both of which have limited effects on local employment. The vast majority of businesses in Laos are small and medium-sized enterprises (SMEs). Promoting their development offers great leverage to make the integration into the AEC more inclusive and sustainable.
Objective
The Lao Government has successfully managed the integration process and has improved the regulatory as well as procedural environment for regional trade and investment. The Lao private sector has been enabled to take advantage of the potentials and to mitigate the risks of the AEC membership.
Approach
Together with key stakeholders of the public and private sector, the RELATED project is supporting Laos to realise the benefits of the AEC while mitigating the associated risks. The project addresses three main areas: assisting the government in managing the integration process; improving the regulatory and procedural environment for regional trade and investment; and supporting the private sector to benefit from the AEC.
Given the complexity and the large number of stakeholders involved in the ASEAN integration, the project supports the steering, coordination, communication and monitoring of the AEC integration process. It also aims at raising awareness for the AEC and intensifying related dialogue processes.
To enhance the regulatory and procedural environment, the project is assisting the Lao authorities to integrate ASEAN agreements into the national legal framework as well as to apply the amended rules and regulations. This will target cross-border trade in goods and services and facilitate trade-related investments, especially in the context of special economic zones (SEZs). Furthermore, the project includes a financial contribution to the Trade Development Facility II (TDF II), a multi-donor trust fund designed to support the implementation of major national trade-related priorities.
Finally, RELATED is assisting the Lao business community, especially SMEs, to be better prepared for the potentials and challenges of regional integration. The objective is to strengthen the entrepreneurial and technical capacities of the private sector to improve its competitiveness, the quality of its products and its access to markets of other ASEAN member states.
Results achieved so far
This project builds on the results and experiences of preceding Lao German Development Cooperation programmes in the field of regional economic integration and private sector development.
These programmes helped to increase awareness about the importance of the AEC as well as the capacities to deal with its consequences. Overall 670 representatives from the public and private sector have participated in various AEC-related training courses. To support the effective realisation of the single ASEAN-market, the government has been assisted in taking stock of commitments signed as part of the AEC and in monitoring their implementation.
Furthermore, GIZ supported the identification of Lao products with export potential in ASEAN and the development of selected value chains. The capacity of relevant chambers of commerce and industry as well as business associations to offer AEC-related services to their members has been improved. Business sector satisfaction with government services has improved consistently over the past years.