A vote on Friday that formally approved Laos’s application to join the World Trade Organization marked a key coming of age for the small, landlocked Communist country, which has quietly posted some of the world’s strongest economic growth over the past several years. It also marked the latest step in a Southeast Asian push to integrate economies in the region of 600 million people as it tries to present itself as a single-market, more-viable investment alternative to China.

Over the longer term, Laos’s membership in the WTO is expected to provide a badge of approval for the country that could make it easier for global firms to do business there, especially as manufacturers look for substitutes for China, where wages have risen rapidly. Accession to the WTO “sends a very positive signal to the international community that Laos has arrived,” said Jayant Menon, lead economist in the Office of Regional Economic Integration at the Asian Development Bank. “They’re on the radar now.”

It will also help make it easier for Southeast Asian leaders to make investors view the region as one giant market, with the ability to connect supply chains across its 10 countries, all of which will now be subject toWTO mechanisms for the first time. Even Myanmar joined in 1995, before the West launched its most crippling economic sanctions, which are only now being lifted after the country’s recent reforms.

In particular, WTO membership could help Laos further develop its small, but growing, garments sector, an industry that has become a major source of jobs in other lesser-developed nations such as Cambodia and Bangladesh. Laos’s landlocked position between Thailand, Vietnam and other countries means that anything it produces faces added transportation costs to get it to global markets. The country is heavily reliant on just a few industries, including copper and gold mines, and it lacks some of the institutional capacity to enforce WTO rules of larger countries such as China. But it has already made enormous progress in recent years, investors say, and its WTO membership talks accelerated rapidly over the past year after a slow start with years of little progress.

This year, Laos is expected to post 8.3% growth according to the International Monetary Fund, which likely would make it the fastest-growing economy in Southeast Asia. That follows a decade in which Laos averaged 7% growth a year, driven largely by investments in mining and hydroelectric power, with 20 hydrodam projects now under development.

Under the terms of membership, Laos is agreeing to cap its tariffs at an average of about 19% and expand market access. It has also passed or is working on legislation to boost protections for intellectual property, improve customs procedures and otherwise bring the country into line with international trade norms.

After Friday’s vote at the 157-member WTO, Laos must still formally ratify the agreement. It is expected to do so in the coming weeks.

October 28, 2012

Source: Work Live Laos