Worldbox Country Risk Climate – May 2025
LAOS
NEW – Technology is an increasingly important driver of economic success, and we are now including a separate Technology sector in our quarterly country risk reports and integrating the core into our overall score.
Summary
| Overall Risk Score 20/40 (Stable)
Political risk: Stable 7/10 Economic risk: Stable 5/10 Commercial risk: Stable 4/10 Technology risk: Stable 4/10 The risk assessment of a country is made up of 3 components, being Political, Economic and Commercial. Each component is scored out of 10 with 1 being the highest risk and 10 the lowest. |
ESG Risk: 4/10 (Stable)*
*Environmental, social and governance (ESG) issues are becoming increasingly important to companies, investors and consumers in Southeast Asia. That is why we are now preparing a separate ESG score and section with our quarterly country risk reports. We explain how each country rates, looking at the E, S and G individually, and outline recent developments. |
Political Risk – Stable at 7
The Lao People’s Democratic Republic, as Laos is officially known, has been a one-party state since its foundation in 1975 at the end of the Indochina war. The only legal party is the Lao People’s Revolutionary Party (LPRP). There is no organized opposition and no truly independent civil society. A 61-member Central Committee of the LPRP, under the leadership of the 11-member Politburo, makes all major decisions. National Assembly elections are held every five years but are not free or fair, while protests are banned.
The LPRP is now facing perhaps the most challenging period since independence. It oversaw strong economic growth after liberalizing the economy in the late 1980s and early 1990s. During the decade up until 2019, the economy grew by an average of 7% per annum and Laotians enjoyed rising living standards and improved access to electricity and healthcare.
However, the Covid-19 pandemic exposed the country’s economic vulnerabilities. Economic growth fell sharply and inflation surged as the currency depreciated significantly. Many Laotians left the country, while millions more suffered extreme hardship. This background would prove a severe threat to many governments, but in Laos there is no credible alternative to the LPRP, which is why Worldbox Intelligence believes the country will remain politically stable.
Economic Risk – Stable at 5
Despite rapid economic growth over much of the past two decades, Laos remains one of the poorest countries in the world. About two-thirds of the population live in rural areas, with many working in agriculture. Yet agriculture contributes only 15% to GDP. Therefore, earnings and farm incomes remain low, and many Laotians lack access to enough safe and nutritious food to meet their dietary needs, according to the World Bank.
Laos was also badly affected by Covid-19. The pandemic severely impacted micro, small and medium enterprises (which make up the vast majority of firms) and businesses owned by women. The tourism and handicrafts sectors were among the worst-affected areas. Meanwhile, the Ukraine war resulted in a surge in inflation that hit the poorest sections of society hardest.
In April 2025, the Lowy Institute published a gloomy assessment of the country’s prospects. Its main finding is that Laos is trapped in a severe debt crisis with no resolution in sight, threatening a decade of economic and social malaise.
The Australian think tank added that exiting the crisis will require China to provide substantial debt relief. However, the politics appear unfavourable, as neither side wants to admit failure and accept the consequences.
Lowy says that China lent on a huge scale to a country with weak institutions and limited ability to productively absorb the investment which resulted in “massive overcapacity in the Lao energy sector, unsustainable financial losses, and finally the takeover of its energy grid by a Chinese state firm.”
It added that domestic Lao elites appear equally to blame for the poor decisions that ultimately led to the economic crisis. Lowy says that “China and Laos have thus settled into a hierarchical creditor-debtor relationship, underpinned through a logic of power, influence, and economic insecurity.”
Lowy estimates public and publicly guaranteed debt at around around $17 bn in 2023 or 112% of GDP, substantially higher than the official figure of $10.5 bn. Concerningly, it says that a Chinese debt restructuring offer does not appear forthcoming, while both Laos and China appear wary of involving the IMF in resolving the debt crisis.
Commercial Risk – Stable at 4
Corruption is a significant challenge. Laos ranks 114th out of 180 countries in Transparency International’s (TI) 2024 Corruption Perceptions Index, moving dramatically up from its 2023 place of 136th. In the ASEAN region, Laos is placed level with the Philippines and ahead of the Myanmar and Cambodia. The 2023 improvement may reflect a recent crackdown on corruption. In October, for example, up to 26 government officials in southern Laos’s Attapeu province were disciplined or jailed for corruption, including the embezzlement of millions of dollars from compensation funds for a dam.
The US State Department’s mid-2024 Investment Climate Statement reports that Laos’ government is increasingly tying its fortunes to the economic integration of ASEAN and export-led development, and has prioritized the digital economy, logistics, green growth, and more sustainable development, in addition to continuing to develop agriculture and resource extraction.
The report adds that corruption, policy and regulatory ambiguity, and the uneven application of laws are disincentives to further foreign investment. The multiple ministries, laws and regulations affecting foreign investment in Laos create confusion and require potential investors to engage either local partners or law firms to navigate an opaque and cumbersome bureaucracy.
However, the report notes that the government’s efforts have borne fruit, citing the streamlining of application processes that means it now takes less than 17 days to obtain a business licence, compared with 174 days on average a few years ago.
NEW
Technology Risk – Stable at 4
The Global Innovation Index (GII), from the World Intellectual Property Organization, is an important index used by countries and multinational companies to assess innovation ecosystems and aid in policymaking and investment decisions.
Laos ranked 111th out of 133 countries in the 2024 GII – moving up from 113th place in 2020.
Government policies
The government is keen to drive the digitization of the economy and society. However, despite investments in digital infrastructure, Laos lags in digital adoption compared with the rest of East and Southeast Asia. Around 62% of the population had access to the internet in 2023, up from 43% in 2020, while 85% of the population are now mobile-phone users.
The Ministry of Education and Sports (MoES), in partnership with UNICEF and the European Union, has an ambitious digital transformation strategy that includes digital access, digital skills, digital learning, digital information and online safety. The strategy focuses on providing high-quality, accessible educational content in both digital and offline formats. This approach is particularly significant in remote areas, where internet connectivity remains a challenge.
Digitization is also being used to increase financial inclusion. Around 70% of the population of just over 7 million do not have a bank account, and the government is focusing on fintech solutions such as mobile payments and cross-border systems to boost financial inclusion and economic growth. In 2023, it introduced a digital kip, which allows people to pay or transfer money through a QR code regardless of whether they have a bank account.
Infrastructure
Much of Vientiane can access 5G and Lao Telecom has plans to extend that network nationwide. 4G and 3G coverage extends to all major population centres as well as many towns and villages along highways, but coverage in rural and mountainous areas remains patchy.
Average mobile internet speeds in Laos have improved substantially in recent years, thanks to the adoption of newer network technologies such as 4G. According to data from Ookla’s Speedtest Global Index, Laos ranks 86th globally for average mobile internet speeds.
Education and skilled staff
According to UNICEF, Laos still has some of the poorest education indicators in Southeast Asia. Approximately 70% of 5-year-old children are not enrolled in Early Childhood Education programmes, with those in hard-to-reach areas and from poor families being the most excluded. Many of them do not speak the Lao language, which is the official language of instruction. Moreover, only 81.9% of enrolled children complete primary education, and, according to UNICEF, learning outcomes are low, leaving children without essential knowledge and skills. Meanwhile, thousands of students drop out of higher education, vocational education and teacher training, according to the MoES. In many cases, this is due to financial hardship.
Unsurprisingly, against this background, Lao employers report that they cannot find the skilled workers they need to grow their businesses. Information and communication technology is among the worst-affected sectors. The shortages are being exacerbated by the country’s economic problems, which are motivating the most skilled staff to move abroad.
May Bulletin
Political Risk – Stable at 7
The government has launched an initiative aimed at streamlining the government. According to the Fulcrum publication, in 2024, there were just under 170,000 civil servants, equivalent to almost 2.2% of the population, with an aggregate salary bill equivalent to 6.3% of Laos’ GDP. This is more than double the 2.7% of GDP spent on health in Laos (the lowest proportion in Southeast Asia) and the 1.2% of GDP spent on education.
The initiative follows similar measures recently announced in neighbouring Vietnam. The hope is that as well as saving money, the move will streamline decision making. The restructuring is expected to incur voluntary and mandatory redundancies, according to Fulcrum.
Economic Risk – Stable at 5
The Asian Development Bank predicts the economy will grow by 3.9% in 2025 and 4.0% in 2026. President Trump’s tariff policies pose the main threat to that outlook. Trump imposed a 48% rate on Laos, one of the highest tariffs in the region and globally, due to come into effect in July. Add in the 10% universal tariff and Laos faces total tariff of 58% on US exports.
Fortunately, exports to the US are relatively minor with China, Thailand, and Vietnam together accounting for over 80% of Lao exports. However, Laos will be affected by any slowdown in global growth.
Laos main exports to the US include footwear, wood furniture, textiles, and electronics components all of which are likely to be hit hard by the new tariff. Small and medium-sized enterprises (SMEs), which make up the backbone of Laos’s economy, are particularly vulnerable, according to the Laotian Times. Many of these businesses, the publication says, have invested in expanding their operations to meet US demand. The US move is likely to increase Laos’ dependency on China.
Inflation fell to 11.2% in March, down from 12.7% in February and 15.5% in January. The Laotian Times attributed the decline to a more stable exchange rate, improved local production, especially in agriculture, and steady global fuel prices.
Tourism is becoming a major engine of growth with tourist numbers more than doubling in 2024 to over 3 million. The high-speed link between China and Laos is speeding tourist arrivals. The sector is thought to have brought in around US$5 bn in 2024.
Inflation tends to track the kip/dollar parallel exchange rate, as markets base prices for goods and services on the parallel rate, with a mark-up to cover exchange-rate risk. The impact of currency depreciation on private consumption is therefore significant. When the kip depreciates by 1% in the parallel exchange-rate market, private consumption is estimated to decline by 0.6%, eroding both household welfare and domestic demand, says the Lao Economic Monitor.
Commercial Risk – Stable at 4
In December 2024, Thai banks warned of challenging business conditions in Laos. Pathathai Kulachan, chief business officer for ASEAN at the Bank of Ayudhya (Krungsri), said its Lao business has slowed, with less aggressive extension of loans. Chaturong Bunnag, president of the Thai-Lao Business Council, said Thai investment in Laos is sluggish due to investor concerns over the Lao economy. While the economic outlook remains stable, significant growth is not forecast.
Technology Risk – Stable at 4
The Minister of Technology and Communications Boviengkham Vongdala said in January speech that the government is prioritizing the deployment of telecommunications infrastructure, affordable high-speed internet, enhanced digital government platforms and digital public services. It is currently, for example, working on setting up a digital identity system for use with both public and private sector services, with support from Japan and the World Bank.
Environmental, Social and Governance (ESG) – Stable at 4
The United Nations’ Sustainable Development Goals (SDGs) are recognized as a beneficial framework for responsible investment. The Sustainable Development Report from Cambridge University Press assesses the progress of UN Member States on the SDGs. It provides a useful means of ranking Southeast Asian countries on their ESG progress.
Laos is ranked 119 out of 166 in the 2024 report, with a score of 62.95.
Environment – Laos faces a number of environmental challenges. These include seasonal air pollution, mainly due to farmers burning fields to prepare for the next planting cycle. in March 2025, for example, the government reported that air pollution caused by agricultural burning was affecting all parts of the country. Outdoor air pollution is four times higher than global guidelines for human health and peaks during the crop-burning season in March and April. Other major sources of air pollution include vehicle emissions in urban areas and industrial plants using unclean forms of energy. Indoor air pollution, largely caused by using solid fuels for cooking, is another serious hazard. It is estimated to cause 7000 deaths annually.
Forest loss and degradation is also a serious challenge. According to Global Forest Watch, Laos lost 24% of its total tree from 2002 to 2023. The pace of deforestation may also be gathering pace as a result of the high-speed rail link to China. It has enabled faster fruit exports from Laos to China, attracting more investment in large-scale plantations, created by clearing forest.
Social – Laos scores very lowly in this area. According to the US State Department, key concerns include credible reports of: arbitrary detention; political prisoners; serious problems with the independence of the judiciary; serious restrictions on free expression and media, including censorship and the use of criminal defamation laws; serious restrictions on internet freedom; substantial interference with the freedom of peaceful assembly and freedom of association; and the inability of citizens to change their government peacefully through free and fair elections.
Governance – Laos also rates very poorly in terms of governance with high levels of corruption and very weak rule of law as outlined in the commercial risk section.
May Bulletin
Environmental, Social and Governance (ESG) – Stable at 4
In April, Laos introduced the Enabling Environment Roadmap for Infrastructure Asset Management (IAM EE), with the aim of promoting sustainable infrastructure development. The roadmap outlines strategies for the effective management of public infrastructure, including roads, schools, and hospitals, with a focus on resilience, inclusivity, and sustainability.
Latest economic data
f – forecasts
Source: World Bank / IMF.
Source: Worldbox
Useful Links
https://www.transparency.org/en/cpi/2021
https://www.imf.org/en/Countries/LAO
https://www.adb.org/countries/lao-pdr/main
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