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


  • 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.

Suggested Citation

  • Jayant Menon, 1998. "Laos in the ASEAN Free Trade Area: Trade, Revenue and Investment Implications," Asia Pacific Economic Papers 276, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
  • Handle: RePEc:csg:ajrcau:276

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    Cited by:

    1. Xinpeng Xu, 1998. "Export Performance of Environmentally Sensitive Goods: A Global Perspective?," Asia Pacific Economic Papers 278, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
    2. Kubo, Koji, 2016. "Myanmar's cross-border trade with China : beyond informal trade," IDE Discussion Papers 625, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    3. Chan, Sophal & Godfrey, Martin & Kato, Toshiyasu & Long, Vou Piseth & Orlova, Nina & Ronnås, Per & Tia, Savora, 1998. "Cambodia: The Challenge of Productive Employment Creation," SSE/EFI Working Paper Series in Economics and Finance 267, Stockholm School of Economics.

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    JEL classification:

    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East


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