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Laos Offered WTO Membership

  • Daniel Schearf

Handicraft and souvenir vendors wait for customers and tourists at the night market of Luang Prabang, October 18, 2009.

Handicraft and souvenir vendors wait for customers and tourists at the night market of Luang Prabang, October 18, 2009.

The World Trade Organization has offered membership to Laos, an impoverished, one-party communist state. After years of slow negotiations the Southeast Asian Nation has moved its economy away from centralized control toward a market-oriented one.

After 15 years of negotiations, the World Trade Organization on Friday officially invited Laos to become a member.

The invitation is recognition of the country’s efforts to change laws and policies to comply with the trade club’s requirements and the market access demands of its more than 150 members.

It also comes after years of steady annual economic growth averaging more than six percent. This year it could top eight percent, the highest in Southeast Asia.

Michael Ewing-Chow, the WTO chair at the Center for International Law in Singapore, says membership for Laos gives it access to WTO benefits - but it signals a more fundamental change for the nation.

"The real value for Laos is really that they're moving their economy away from the more centralized, planned one of the past to one where they're really looking at how best to create entrepreneurship, free markets in their country," Ewing-Chow noted.

Small, poor, and land-locked, Laos is run by the same communist party that took power in 1975.

Like most communist states, Laos' economy was centrally controlled and it aligned itself with the former Soviet block countries.

But from the mid 1980s Vientiane slowly moved toward a more market-oriented economy.

Now, a country that was once reliant on foreign assistance is becoming a major destination for foreign investment, which this year topped $2 billion.

It is the last of the 10-member Association of Southeast Asian Nations to be welcomed into the global trade club.

WTO information officer Peter Ungphakorn says, once Laos ratifies the agreement, ASEAN will be able to speak as one voice at the WTO.

He says membership could also give the Lao economy a boost as it did for other former centrally planned economies China and Vietnam.

"It can also make Laos more attractive for foreign investment because it will be showing that it can apply predictable, transparent, ruled-based principles to its economy," said Ungphakorn.

The biggest investors in Laos are also its major trade partners and neighbors - China, Thailand and Vietnam.

But most investment is in natural resources such as agriculture, hydropower and mining, much of which is sold to its neighbors.

Analysts say membership in the WTO should help diversify foreign investment and trade into other sectors.

Nicolai Imboden is executive director of the Idea Center in Geneva, a group assisting developing countries like Laos to integrate into the world economy. He says Laos is not yet able to compete as a production base, so European and American companies will be slower to invest.

"Thailand is very big in investments. Vietnam starts now. Singapore is doing a lot, you know. I think Korea will come," he said. "There is clearly, as you know also, there is a moving out of low-cost manufacturing from China towards the south and I think Laos will profit from that," said Imboden.

ASEAN plans to form an economic community by the end of 2015 linking up the region.

Beijing plans to spend billions on train and road connections through Laos.

Ewing-Chow says that puts Laos in a prime position to become a hub for ASEAN-China trade.

"China is its big neighbor to the north and its major neighbor to the south is Thailand. Both of these are increasingly players in the Laotian economy and will continue to be the case for many years to come," he said. "However, if Laos becomes a major hub for the region it then becomes able to tap into the network of the other economies which seek to move goods and services and people up and down that particular corridor connecting China with ASEAN."

Despite the development and rapid growth in Laos, more than a quarter of the country's six and a half million people are still living in poverty.

The United Nations ranks Laos at 138 of 187 countries in terms of development.

Laos hopes membership in the WTO will help it break free from its "least developed country" status.

Its lawmakers are expected to officially accept the WTO membership offer in December.
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