Economic minnow Laos set to join WTO club

After years of preparation, communist Laos is on the verge of joining the World Trade Organization, a milestone that the small landlocked nation owes to a slew of reforms it must now enforce.

Fifteen years since it first applied to join the global trading body, membership negotiations with Vientiane finally concluded last week.

The deal is now all but done: the accession is set to be confirmed by the 157-member WTO at a meeting on October 26, before being ratified by the Laotian parliament by the end of the year.

The process "has been long and tedious", said Industry and Commerce Minister Nam Viyaketh.

But it has also "provided us the necessary basis to achieve our goal" of graduating from least developed country status by 2020, the official said in remarks posted on the WTO website last week.

Laos -- one of the region's poorest nations, and the only one in Southeast Asia yet to join the WTO -- has enjoyed robust economic growth of more than seven percent a year over the past decade.

But about 28 percent of the population still lives in poverty, according to a 2008 estimate from the World Bank.

The Bank believes the country is "on track" to achieve its 2020 goal.

Entry into the WTO club brings with it the promise of increased trade volume and new trade partners for Laos, as well as the prospect of fresh investment pouring into the country, analysts said.

"The WTO has forced the country's leaders to remove an outdated and incomprehensible legislative framework" and offer more "guarantees" to investors, said one foreign expert who did not want to be named.

Since negotiations got under way properly in 2004, Laos has adopted dozens of laws to bring it in line with WTO requirements in areas such as investment, food safety, animal health, import and export procedures and intellectual property rights -- a flurry of activity rarely seen in the communist state.

"The Laos government has taken many steps towards liberalising its economy," said Carr Slayton of the US-ASEAN Business Council, which represents American firms in Southeast Asia.

"WTO membership is an important step in Laos's efforts to become a more investment-friendly country," he said.

Yet it remains to be seen how well these new regulations will be implemented in a country that has been ruled by the same communist party since 1975.

The impact of the WTO entry talks on the economy "has been limited, mainly as the government is reluctant to trim the cumbersome and extensive bureaucracy," argued Arvind Ramakrishnan, principal Asia analyst at risk analysis firm Maplecroft.

It is a view not shared by Nicolas Imboden, executive director at Ideas Centre, a Swiss non-profit group that has been advising the Laos government during its accession talks.

"If they apply and implement seriously the new policies and laws -- and I don't doubt one minute that they will -- it is a market economy," Imboden said.

The Southeast Asian nation of six million people, most of whom depend on subsistence farming, suffers from a lack of infrastructure and diversified industry.

Just two companies are listed on its fledgling stock market, which opened last year.

Foreign investment in the nation jumped from $300 million in 2005 to $1.5 billion in 2011, according to the World Bank -- but 80 percent of the money went into hydropower and mining projects.

It is little surprise then that Laos is hoping WTO membership will attract foreign capital to new sectors.

Geographic diversification is also seen as important as the country seeks to reduce its heavy economic dependence on its powerful neighbours China, Thailand and Vietnam, while WTO procedures will enable Laos to defend itself in the event of trade disputes.

"Laos is essentially trying to contain the flood of Chinese investors and workers that have come into its territory, because... the country fears its sovereignty is under threat," the foreign expert said.

Another benefit of joining the WTO is that the outside world could start to see Laos in a different light.

"There are a lot of areas where Laos is moving pretty fast," said Steve Parker, who runs a USAID-funded project to support Laos in implementing the new rules.

"I'm not one of these who think that Laos is just this sleepy little place. There is a lot of energy and a lot of people working very hard here," he said.

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