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Laos in the ASEAN Free Trade Area: Trade, Revenue and Investment Implications

Listed author(s):
  • Jayant Menon

The Lao People’s Democratic Republic (PDR) is a transitional economy, and one of the few least developed economies in the Southeast Asian region. Laos became a member of ASEAN in July 1997, and will participate in the ASEAN Free Trade Area (AFTA) from 1 January 1998. This paper examines the likely impact of AFTA membership on Laos’s trade, government revenue and foreign investment flows. It is found that: (i) trade diversion is likely to be low, and that AFTA will provide the vehicle to negotiate market access issues with Thailand; (ii) the reduction in government revenue from trade taxes is likely to be low, particularly in the light of the high share of informal trade and low levels of trade diversion; and (iii) foreign direct investment (FDI) flows are likely to grow sharply, as the legal, administrative and institutional framework in Laos develops to meet the ASEAN standard.

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Paper provided by Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University in its series Asia Pacific Economic Papers with number 276.

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Length: 28 pages
Date of creation: Feb 1998
Handle: RePEc:csg:ajrcau:276
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