Lao PDR: Journey towards World Trade Organization membership close to completion

Vientiane, December 5, 2012 --- The World Trade Organization (WTO) has approved Lao PDR’s bid to become a member. The green light from the WTO is the culmination of a 15 year process that has seen negotiations with international trading partners and the implementation of reforms to modernize trade and investment in the country.

Lao PDR, also known as Laos, is classified as a “least developed country” and, as a result, received special and differential treatment during the accession process. This meant that it did not have to give the same level of commitments as other acceding countries. It has also been given more time to fully implement these.

What WTO membership means for Lao PDR

“By acceding to the WTO, Laos is showing its commitment to operating a rules based system of economic governance,” said Keiko Miwa, the World Bank’s Country Manager for Lao PDR, “It's sending a strong signal that it is now open for business,”

She adds: “WTO accession is - more importantly - an important milestone for Lao PDR as it moves along its development path. WTO commitments will help the country diversify away from natural resource dependency, attract quality investment in the non natural resource sectors, create jobs, and reduce poverty,”

Membership means that the WTO principles of non-discrimination, transparency, and predictability (including confidence that trade barriers aren’t raised arbitrarily) are incorporated into Lao law.  In addition, substantial reform measures needed to bring laws in line with WTO agreements on subsidies, price controls, trade restrictions, state enterprises, and more.

Market access commitments have been made, allowing foreign investors to access 10 service sectors. These include banking, telecommunications, distribution, health and environmental services, tourism, construction, and air transport. As such, there are limits on how the government now regulates these sectors. The average tariff on imported goods has also been bound at 18.8 percent.

“WTO membership for Laos means that we will attract more foreign direct investment and have more power to negotiate with trade partners,” says Prachit Xayavong, Vice President of the Vientiane Capital Chamber of Commerce and Industry.

Support from the World Bank

The World Bank, in partnership with Australia, the European Union and Germany, supported the WTO accession process for Laos directly under the Trade Development Facility Multi Donor Trust Fund. This included providing financial support to the direct costs of negotiations, including the last five working party negotiations in Geneva.  

Resources from the Trade Development Facility have also been used to support the drafting of several legal texts in key areas, the holding of bilateral negotiations, and technical assistance to the negotiating team. Sector impact studies in professional services, distribution services, financial services, transport, and telecommunications have also been produced to support the accession process.

The World Bank also supported the creation of the Lao PDR Trade Portal, a website that gives traders the information they need for importing and exporting goods. This online platform allowed Laos to meet WTO Trade Facilitation Agreement requirements on transparency and publication.

Next Steps

While the WTO General Council approved the accession protocol for membership on October 26, 2012, Laos is not a member yet. The next step is for the Lao National Assembly to ratify the accession package. Membership occurs 30 days after the ratified documents are deposited with the WTO Secretariat in Geneva, which is expected in early 2013. 

“The real gains from WTO accession are likely to come only when reforms and commitments are fully implemented. This means that benefits will not be automatic and, to ensure that investment and trade continues to grow, Laos will need to work hard to follow through. Fully integrating into the multilateral trading system starts with WTO accession,” said Richard Record, a World Bank Trade Specialist in Vientiane.

The World Bank will continue to support Laos. The Second Trade Development Facility is a follow on operation to support the "beyond WTO" agenda over 2013-17, co-financed by a new multi-donor trust fund financed by Australia, the European Union, Germany and Ireland, which will support post-accession work on trade in goods, trade in services, and trade facilitation.