Laos – market trends and developments

Laos is one of the smaller economies in the Asia-Pacific region but holds an important strategic position in the heart of South-East Asia. Chambers currently ranks law firms and lawyers based in Laos in our General Business Law section, as well as having an Expertise Based Abroad table for those based outside Laos handling legal work there.

The Lao kip (the nation’s currency) has depreciated in value in recent times, in relation to the US dollar, and interviewees noted that “lots of entities who borrowed in USD need to restructure loans.” However, it seems that issues with the Lao economy have provided some opportunistic investment potential, with a commentator suggesting that “the Lao kip has lost a lot of value recently and this is actually making Laos more appealing to investors as an opportunity.” Transactional activity has been taking place in traditional areas of work in Laos, such as mining, infrastructure and energy, as well as real estate.

In relation to real estate, a source says: “Since Covid, Laos is now very busy on the streets, for example the building of hotels in Vientiane. Laos will be the ASEAN chair next year, so we expect the acceleration of hotels to be ready for that and it will mean more tourism, especially with China now open and the China-Lao railway opening.” The combined factors of renewed tourism, enhanced infrastructure and geopolitical trends suggest that Laos has some economic hope going forward following on from a difficult period during the pandemic, although of course challenges remain regarding the currency issues.

In terms of newer areas of activity in Laos, our research indicates that the technology sector is growing. One interviewee says that “there is a bit of a boom in e-commerce here,” whilst another says that “we have seen an increase in IT-related investments, such as payment providers and IT services” and “cryptocurrency is an emerging industry.” This will be something to look out for going forward.

One of the main topics mentioned in relation to Laos during our research was its relationship with other markets - particularly China. Chinese investment into Laos has been high for a number of years, and a source reports that, in relation to Laos, “most investment and enquiries are from China.” This interviewee also mentions that Thailand, Vietnam and some European jurisdictions also show interest, “but it remains scarce compared to China.” As already mentioned above, the building of the Lao-China railway and the strong tourist numbers from China to Laos mean that Laos’ economy remains intertwined with China’s.

This creates opportunities for economic growth, although one note of caution is the mention by sources of recent work on restructuring and managing Chinese debt in Laos that has been accumulated by companies in Laos.

Commentators also mentioned that Chinese law firms, if only in small numbers, are starting to open up offices in Laos to serve client interests there. This trend isn’t only specific to China, since it was also mentioned in our research that there has been a similar trend in terms of Korean practices setting up in Laos. Chinese law firm DeHeng Law Offices and the Korean law firm Jipyong LLC are examples of law firms with a base in Vientiane.

Apart from China and Korea, other foreign-headquartered law firms have operated in Laos for many years, particularly from Thailand. In the words of one source, the opening up of Chinese and Korean-focused legal practices is “a sign that the uptick of investments gives interest to different legal practitioners setting up law firms, for example, Korean or Chinese (firms) cornering investors from their own jurisdictions.”

An interesting trend that commentators report is attempts by Laos to diversify its energy production, heralded by the Monsoon wind project which will produce wind energy for export to Vietnam. One interviewee predicts that “we will start to see solar and wind projects in Laos after the Monsoon project,” whilst another explains that Laos’ geography lends itself to hydropower production but “being able to do wind and smaller scale solar gives some diversity.”

Laos has referred to itself as the battery of South-East Asia, owing to its plethora of hydropower projects and sale of energy to neighbouring jurisdictions, especially to Thailand and Vietnam, but a range of concerns, including ecological ones related to dam construction, have led to attempts to diversify.

Lawyers operating in the Lao market have traditionally been very active in hydropower project finance and development, so this pivot towards diversification should provide opportunities for a different balance of legal work going forward. This seems to be important for Laos to avoid overreliance on any one sector or geographic source of FDI.

Whilst there is some hope for a continued economic recovery in Laos after the difficulties of the pandemic, its GDP growth forecast for 2023 was recently lowered from 4.0% to 3.7%, due to a combination of weaker growth in China, monsoons in Laos, and the ongoing Lao currency problems (Lao PDR’s Growth Slower than Expected in 2023, Stable Outlook for 2024 — ADB | Asian Development Bank). This report did however forecast stable growth of 4.0% in 2024.

Despite these issues, there seem to be many avenues of potential work for lawyers, including the more traditional areas for Laos of hydropower, mining and infrastructure, as well as emerging areas such as wind power and various sub-areas of technology. There seems to be a convergence of interest from many different jurisdictions in Laos, particularly from countries in South-East Asia and East Asia, and Chambers continues to monitor these with interest.

The Chambers rankings for Laos, published as part of the 2024 Asia-Pacific Guide, will be released on chambers.com on 14 December 2023.