In the 1990s there were considerable diversification of Lao exports. Laos' largest export earner is timber and furniture (28 percent of exports), followed by garments (19.9 percent), raw logs (10.6 percent), electricity (9.2 percent), manufactured products (8.6 percent), coffee (7.7 percent), agricultural products (5.5 percent), gold re-ex-port (4.7 percent), and motorcycle assembly (3.9 percent). With respect to garment exports, Nike, for example, is now sourcing some apparel production in Laos. Imports are comprised primarily of consumer goods (44.6 percent), capital goods (40.2 percent), and industrial inputs (11.9 percent).
Approximately 52 percent of Laos' imports are from neighboring Thailand, while only 22 percent of its exports go to Thailand, reflecting a strong negative trade balance with that country. In contrast, 42.7 percent of Laos' exports go to Vietnam, while only 3.9 percent of its imports are from that country. Thus, Laos has an extremely favorable trade balance with Vietnam. Other leading export destinations for Laos are in order of importance (after Vietnam and Thailand): France (6.3 percent), Germany (5.1 percent), and the U.K. (4.7 percent). Since the Lao PDR does not have most favored nation
|Trade (expressed in billions of US$):Laos|
|SOURCE: International Monetary Fund. International Financial Statistics Yearbook.|
status with the United States, it is difficult to export to the U.S. market. Major sources of imports (after Thailand and Vietnam) are Japan (1.6 percent) and Hong Kong (1.5 percent).
Prior to the communist revolution, Laos had a severe trade imbalance with exports being only a tiny fraction of imports. While Laos still imports much more than it exports, the ratio of exports to imports has steadily improved. In 1975, the first year of the current communist regime, Lao exports were only adequate to cover 12 percent of imports. In 1999, exports of US$271 million were sufficient to cover 55 percent of imports, which stood at US$497 million. Also, the total of exports plus imports divided by the GDP has also steadily increased, reflecting the internationalization of the Lao economy. By 1998 this ratio had reached 72 percent. To decrease its dependence on international aid and to alleviate poverty, the Lao government seeks to expand its exports. That is the primary rationale for its long-term plan to build more dams to produce electricity exports, an area in which Laos has a clear comparative advantage. Laos also has a comparative advantage in the export of textiles such as clothing and garments.
Laos' current trade deficit is financed by 2 primary sources: international aid, primarily provided by Japan, Australia, and Sweden; and growing financial remittances from Lao living overseas. The State Planning Committee in a December 1999 report indicated that the latter was the single most important source of income in the Vientiane Valley. Given the recent economic crisis, the government has also turned to both China and Vietnam for important economic assistance.