Last updated January 15th, 2022.

 

Laos is one of the fastest growing countries in Southeast Asia. At a first glance, it may seem like a good idea to establish a company or invest in the Laos property market.

Strong growth in export and service sectors helped the nation sustain positive GDP growth back in 2020. Granted, the Laos economy only expanded by 0.2% during that year… but a vast majority of other countries in the world entered recession.

The Asian Development Bank predicts even faster GDP growth of going forward into 2022 and the remainder of this century.

Meanwhile, foreign investment is surging into Laos. Especially from China its much bigger neighbor.

China is pouring massive amounts of capital into Asia’s emerging economies through its One Belt One Road initiative. And Laos is among the main beneficiaries of China’s pet project.

The fact that Laos shares land borders with five other nations, including China, gives them the potential to become a transport hub for the entire ASEAN region.

A major example is the recently finished high speed rail line linking the Lao capital city of Vientiane with Kunming in Southern China. It was financed by Lao PDR’s larger neighbor to the north.

The high speed rail system was completed in 2022, and will eventually connect Laos to Thailand along with the remainder of Southeast Asia, leading to greater trade and connectivity in the future.

Healthy past economic performance, and possibly even better days predicted ahead, might make you consider investing in Laos.

You probably shouldn’t purchase real estate, stocks, or any other asset in Laos though. Here are a few reasons why.

 

Foreign Ownership in Laos Remains Difficult

Despite a rapidly growing economy, it isn’t easy to bring money into Laos and buy properties or stocks as a foreign investor.

A country’s strong economic performance doesn’t mean anything if you can’t truly access and profit from real estate or other business opportunities there.

Every plot of land in Laos is technically owned by the state. Foreigners can only lease land for a period of up to 30 years. Strangely enough, you can own houses and other types of real estate in Laos – yet not the land your property is built on.

Do you really want to purchase a home when it’s at the mercy of someone else’s land though?

Similar to other frontier markets, Laos just barely has a stock exchange. You can trade exactly seven companies on the Lao Securities Exchange. Most of them are quasi-public corporations including the state-owned oil firm and the electricity provider.

This means starting a business is the sole practical method of investing in Laos as a foreigner. You don’t have many options left in a country that bars foreign ownership and doesn’t have a stock market.

So, what’s the problem with that? Well, doing business in Laos as a foreigner is very difficult too. Forming and maintaining a company is a bureaucratic nightmare.

On top of that, getting a long-term visa to actually live in Laos and manage your business is a complete headache if you’re one of the relatively few foreign investors here.

Quite simply, while nearby countries are among the easiest places in the world to invest as a foreigner. Laos is one of the hardest.

 

Real Estate in Laos? It’s a Landlocked Country

Geography isn’t something that anyone can change. Yet a nation’s place on the map absolutely defines how easily it can grow.

Having natural resources, access to sea routes, and arable land are all factors that help sustain a country’s positive economic success over a timespan of multiple decades (or even centuries).

Unfortunately, Laos is landlocked, meaning that it’s surrounded by five other nations.

Sharing borders with as many countries as possible is generally positive for exports. However, in the case of Laos, its land connectivity comes at the expense of having no access to the ocean at all.

 

Life isn’t fair. Certainly not for Laos, which is at an inherent disadvantage simply because of its geographic location on the map.

 

Being landlocked means Laos will always have a hard time selling their products to the world. After all, they don’t have access to the water and can’t ship by themselves.

Laos will always be dependent on its location. Cooperation from foreign governments and investors based in neighboring countries which border the ocean, like Thailand and Vietnam, is absolutely required to maintain a healthy Lao export sector.

Not only is that inconvenient for Laos, but costly as well. Lao products being exported through Thai ports, for example, are subject to Thai tariffs.

Lao industry is therefore noncompetitive and will face numerous developmental challenges in the future.

Furthermore, Laos itself is difficult to maneuver. Approximately 70% of the country is made up of mountain ranges and highlands while dozens of rivers run throughout its territory.

The nation’s lack navigability costly and inconvenient for both foreign investors and Lao citizens alike.

Taxpayers must their spend money on infrastructure like bridges and tunnels to merely travel across the country. Laos doesn’t have the luxury of building long roads across a flat plain.

As a result, infrastructure in Laos has a higher cost and will likely stay below global standards for a while. That issue is compounded by several other factors in this article (most of them self-imposed) and will deter those wanting to invest in Lao stocks, real estate, or companies.

Laos could potentially turn its location from a negative aspect into a positive one in the future. A rail system could eventually move products between China and Southeast Asia, in addition to people, since Laos is otherwise on a centrally-located piece of land.

Of course, that requires tons of effort, money, time, taxes, and cooperation with Laos’ bordering countries.

 

You Have Better Foreign Investment Options

Nothing stated above means you can’t make a profit by investing in Laos real estate, stocks, or businesses.

Plenty of multinational firms, including ones owned by foreigners, are doing very well here. Smaller firms have found success by investing in Laos as well.

With that said, there are better options right next door to Laos. Vietnam’s stock market is fully functional and doing business is much easier. Meanwhile, Cambodia allows foreign real estate ownership and almost anyone can get a long-term visa.

There’s no reason to burden yourself with paperwork, stress, and bureaucracy in Laos when markets like Cambodia and Vietnam are right next door.

Both those countries are growing at around the same pace as Laos. Yet they have far less of the negative aspects when it comes to buying real estate or other types of investments in Laos as a foreigner.

Asia is the most dynamic continent in the world. If you’re investing in this region in the first place, it’s important to do so correctly and not sell yourself short.

 

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About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's an international stock trader and property investor based in Southeast Asia. Reid manages the world's first frontier market real estate fund and has been featured in publications such as Forbes, Property Report, South China Morning Post, and Seeking Alpha. You can learn more about him here.

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