Lao PDR – the emerging market to the west

From hermit crab to tiger cub • 7% annual growth over two decades (1994-2014)

– 8% growth since 2008 • Poverty halved (23% in 2013) • Per capita income increased six-fold (US$1,460) • But from a small base:

– GDP USD 11.24 billion (roughly half of Tasmania) – population of 7 million

• Export & FDI-driven growth – esp natural resources

Economic activity has moderated, but remains robust …

Structure of Lao PDR foreign trade

Exports Imports

Source: Staff estimates based on data from Lao authorities (MOIC) and partner countries

Top 10 Sources of FDI (1988-2015)

Source: Ministry of Planning and Investment (March 2015)

No. Country Projects Value

(USD million) 1 China 830 5,396 2 Thailand 746 4,455 3 Vietnam 421 3,393 4 Korea, South 291 751 5 France 224 490 6 Japan 101 437 7 Netherland 16 434 8 Malaysia 101 382 9 Norway 6 346

10 Britain 52 197

China’s FDI flows to ASEAN Source: CEIC, ANZ Research

0

1

2

3

4

5

6

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

USD

bn,

ann

ual

Cambodia Laos Myanmar Vietnam Thailand Indonesia Philippines Malaysia

6

FDI by Sector (1989-2015)

Greater Mekong - Exposure to G3 and China*

02468

101214161820

Vietnam Cambodia Thailand Laos

US EU China Japan

% of GDP

*Exports by destination, average 2009-2011

Why Laos….? • Stability/ low level of political risk • Low labour costs • Young demographic • Strategic location • Significant potential in selected industries

– mining; hydropower; transport & logistics; agriculture/processing; tourism; manufacturing; services; education; healthcare

Laos’ population is growing fast…

…and it is young! Share of population aged 65+

0 100 200 300 400 500

Beijing (China)Shanghai (China)Bangalore (India)

Guangzhou (China)Bangkok (Thailand)

Kuala Lumpur (Malaysia)Shenzhen (China)

Dalian (China)Chennai (India)

Shenyang (China)Manila (Philippines)

New Delhi (India)Jakarta (Indonesia)Cebu (Philippines)

Mumbai (India)Batam Island (Indonesia)

Ho Chi Minh City (Vietnam)Hanoi (Vietnam)Vientiane (Laos)

Da Nang (Vietnam)Ethopia (Africa)

Phnom Penh (Cambodia)Yangon (Myanmar)

Monthly salary (US$/factory worker)

Mekong - the cheapest labour force in Asia cheaper than Africa and closer to China

Asia’s cheapest manufacturing workers are in the Mekong. Asia’s most expensive manufacturing workers are located in China

Economies 2010 2015 2020China 25 30 36

Hong Kong 100 100 100

India 15 23 30

Indonesia 21 26 30

Japan 100 100 100

Malaysia 40 42 45

Philippines 34 37 40

Singapore 98 99 100

Korea 100 100 100

Thailand 45 47 49

Vietnam 21 28 36

Cambodia 9 15 21

Laos 11 17 23

Asia 26 31 37

World 28 29 30

Middle income group (% of population)Economies 2010 2015 2020China 1341 1370 1388

Hong Kong 7 7 8

India 1225 1308 1387

Indonesia 240 252 263

Japan 127 126 125

Malaysia 28 31 33

Philippines 93 101 110

Singapore 5 5 6

Korea 48 49 50

Thailand 69 71 72

Vietnam 88 92 96

Cambodia 14 15 16

Laos 6 7 7

Asia 3292 3435 3559

World 6515 6871 7210

Population (m)Economies 2010 2015 2020China 329 413 497

Hong Kong 7 7 8

India 185 296 419

Indonesia 50 64 79

Japan 127 126 125

Malaysia 11 13 15

Philippines 32 37 43

Singapore 5 5 6

Korea 48 49 50

Thailand 31 33 35

Vietnam 18 26 34

Cambodia 1 2 3

Laos 1 1 2

Asia 845 1075 1316

World 1844 2010 2177

Middle income population (m)

Laos’ middle income population

Source: ANZ Research

Connectivity and the AEC…..

Source: Ministry of Planning and Investment, Lao PDR

Direct flights

to Asian major cities

New Seoul routes; Laos-Japan Bilateral Aviation Agreement January 2015; Bilateral ASA signed with Australia in July

Source: Ministry of Planning and Investment, Lao PDR

Special Economic Zones (SEZs)

1. Savan-Seno Special Economic Zone 2003

2. Boten Beautiful Land Specific Economic Zone 2003

3. Golden Triangle Special Economic Zone2007

4. Vientiane Industrial and Trade Area 2011

5. Saysetha Development Zone 2010 6. Phoukhyo Specific Economic Zone

2010 7. Thatluang Lake Specific Economic

Zone 2011 8. Longthanh- Vientiane Specific

Economic Zone 2012 9. Dongposy Specific Economic Zone

2012 10. Thakhek Specific Economic Zone

2012

Savan-Seno SEZ

Battery of Asia….

Hydropower plans… • 27 hydro projects now operating (3,294MW) • 68 projects under construction/ in pipeline

(another 8,000MW) • Laos’ total hydro potential 26,000 MW • Plans to reach 17,000MW capacity by 2030 • 30% renewable energy target by 2030 • MOUs to sell electricity to Thailand,

Cambodia and Vietnam