2016 Index of Economic Freedom

Laos

overall score49.8
world rank155
Rule of Law

Property Rights15.0

Freedom From Corruption25.0

Limited Government

Government Spending73.8

Fiscal Freedom86.1

Regulatory Efficiency

Business Freedom55.9

Labor Freedom57.6

Monetary Freedom71.3

Open Markets

Trade Freedom58.6

Investment Freedom35.0

Financial Freedom20.0

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Quick Facts
  • Population:
    • 6.9 million
  • GDP (PPP):
    • $34.4 billion
    • 7.4% growth
    • 7.9% 5-year compound annual growth
    • $4,987 per capita
  • Unemployment:
    • 1.4%
  • Inflation (CPI):
    • 4.1%
  • FDI Inflow:
    • $720.8 million
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Laos is one of the Asia–Pacific region’s fastest-growing economies, albeit from a low base. The country has attempted to reform its trade and investment regimes, but non-tariff barriers exacerbated by regulatory inefficiency continue to constrain dynamic flows of goods and services. The pace of economic liberalization and poverty reduction has been slower than in other countries in the region.

Economic Freedom Snapshot

  • 2016 Economic Freedom Score: 49.8 (down 1.6 points)
  • Economic Freedom Status: Repressed
  • Global Ranking: 155th
  • Regional Ranking: 35th in the Asia–Pacific Region
  • Notable Successes: Monetary Freedom and Trade Freedom
  • Concerns: Property Rights, Corruption, and Investment Freedom
  • Overall Score Change Since 2012: –0.2

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Background

The Communist government of Laos, in power since 1975, wrecked the economy in the early years of its rule. Minimal liberalization, begun in 1986, has yielded little progress. To advance its “state-managed market-orientated economy,” the government has taken on increasing levels of external public and publicly guaranteed debt since 2012 to subsidize construction of hydropower and mining mega-projects. Corruption is endemic, laws are applied erratically, and the country is highly dependent on international aid. Basic civil liberties are heavily restricted. Seventy-five percent of the workforce is employed in subsistence farming. In 2013, after 15 years of negotiations, Laos became a member of the World Trade Organization.

Rule of LawView Methodology

Property Rights 15.0 Create a Graph using this measurement

Freedom From Corruption 25.0 Create a Graph using this measurement

High levels of government corruption and graft fuel public discontent and cause leaks in revenue collection and the degradation of public services. Several anti-corruption laws have been passed, but their enforcement remains weak, and no high-profile cases have been brought to trial. The inefficient Laotian judicial system is corrupt and controlled by the ruling party. Protections for property rights are weak.

Limited GovernmentView Methodology

Both the top personal and corporate income tax rates are 24 percent. Other taxes include a vehicle tax and excise taxes. The overall tax burden for the most recent year equals 15.3 percent of GDP. Government spending has increased to 29.6 percent of total domestic output. The government budget is chronically in deficit, and public debt has increased to over 60 percent of GDP.

Regulatory EfficiencyView Methodology

Regulatory efficiency has improved. Launching a business no longer requires minimum capital, and licensing requirements, although they still take over 100 days on average, are less costly. The underdeveloped labor market does not provide dynamic employment opportunities for the growing labor supply. Inflation has been rising. The government influences many prices through subsidies and state-owned enterprises and utilities.

Open MarketsView Methodology

Laos has an average tariff rate of 13.2 percent. Some imports require a license. The judicial and regulatory systems may discourage foreign investment. Numerous state-owned enterprises distort the economy. Reforms are ongoing in the underdeveloped financial sector, and the stock market has been in operation since 2011. Government attempts to reform the banking sector have been sluggish.

Country's Score Over Time

Bar Graph of Laos Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Laos to other economic country groups Download Charts

Regional Ranking

rank country overall change
1Hong Kong88.6-1.0
2Singapore87.8-1.6
3New Zealand81.6-0.5
4Australia80.3-1.1
5Taiwan74.7-0.4
6Japan73.1-0.2
7South Korea71.70.2
8Malaysia 71.50.7
9Macau70.1-0.2
10Brunei Darussalam67.3-1.6
11Thailand 63.91.5
12Kazakhstan63.60.3
13Samoa63.51.6
14Philippines63.10.9
15Vanuatu60.8-0.3
16Azerbaijan60.2-0.8
17Sri Lanka59.91.3
18Tonga59.60.3
19Kyrgyz Republic 59.6-1.7
20Bhutan59.52.1
21Indonesia59.41.3
22Mongolia59.40.2
23Fiji58.8-0.2
24Cambodia57.90.4
25India56.21.6
26Pakistan 55.90.3
27Vietnam542.3
28Maldives53.90.5
29Bangladesh 53.3-0.6
30Papua New Guinea53.20.1
31China52-0.7
32Micronesia51.82.2
33Tajikistan51.3-1.4
34Nepal50.9-0.4
35Laos49.8-1.6
36Burma48.71.8
37Solomon Islands470.0
38Kiribati46.2-0.2
39Uzbekistan46-1.0
40Timor-Leste45.80.3
41Turkmenistan41.90.5
42North Korea2.31.0
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