Economic Outlook for Southeast Asia, China and India 2023

Lao PDR

 

Source: OECD Development Centre based on data from UNWTO (2022), “Global and regional tourism performance” (database), UN World Tourism Organization, https://www.unwto.org/tourism-data/global-and-regional-tourism-performance (accessed on 25 October 2022) and WTTC (2022), “Laos 2022 Annual Research: key highlights”, https://wttc.org/DesktopModules/MVC/FactSheets/pdf/704/145_20220613162912_Laos2022_.pdf.

Introduction

With more than 2 000 potential historical and cultural sites identified by the government for development, Lao PDR has many more exciting tourism products to offer in coming years, and participating investors can look forward to a growing tourism economy given the government’s generous tax-break schemes. Lao PDR has been focusing on creating responsible tourism so that its nature-based resources are sustainable. Tourism in the landlocked country depends on a limited number of airports and flight connections as well as border crossings with the Mekong Basin countries of China, Cambodia, Viet Nam, Myanmar and Thailand.

Tourist arrivals into Lao PDR have fluctuated, but were generally on the rise prior to the COVID-19 pandemic. Most of its market is from the ASEAN region, with tourists coming primarily from Thailand, Viet Nam and China. Currently, tourists can fly in to four international airports or arrive by road or via boat connections from Thailand, China, Viet Nam and Cambodia. While regional tourists from neighbouring countries stayed for an average of just two days, international tourists stayed for an average of 7.9 days (MICT, 2020).

The Lao government conducted extensive marketing in 2019, which explains in part the sharp rise in tourist arrivals and revenue for that year. In the same year, there was an increase in Western-market arrivals across the board. Lao PDR has great potential to be a key destination in mainland Southeast Asia if it continues extensive marketing, expands its infrastructure programmes and diversifies tourism product availability and accessibility with community-based tourism and natural, cultural and historical attractions (MICT, n.d.). This country note reviews the policy challenges facing the tourism sector, such as environmental damage due to improper waste disposal at natural sites, the need to facilitate more international arrivals by air, and also considers potential mitigating efforts that could revive tourism in Lao PDR.

Current situation and policy challenges

Tourism is one of six key sectors of the economy targeted for government efforts and development, yet the sector’s contribution to GDP has declined over the last decade. In 2011, travel and tourism contributed 14.6% of the GDP, while in 2019 it had declined to 10% (International Trade Administration, 2022). Some challenges need to be addressed to improve the sector’s performance.

Waste management

The government of Lao PDR advocates a green growth policy in tourism. The World Bank has recommended protecting wildlife through concessions and regulations to support responsible tourism business practices and be inclusive of village partnerships. Lao PDR has 1 200 villages within or on the margins of its 24 national forest reserves. Its policy of promoting green tourism is therefore a perfect approach. The policy works well for promoting Lao PDR as a destination for backpackers, adventure seekers and tourists interested in cultural heritage (World Bank, 2020). While green and community-based tourism are seen as integral to the tourist experience in Lao PDR, the waste that travellers frequently leave behind is a concern (Phonevilay, 2022). A national strategy is needed for communities to monitor and assess waste management so that measures can be taken to mitigate any adverse impact on the environment and local communities. Rather than imposing restrictions on tourists and limiting their movements, a salient policy would be to educate tourists with signs and information about disposing their plastic bottles and respecting local cultural practices. As people often dispose of trash indiscriminately when there is no bin readily available, plastic pollution can be further contained if more trash bins are located at key tourist attractions and residential areas (JICA, 2021).

International airlines

International airlines currently fly to Lao PDR mainly from five countries – China, Singapore, South Korea, Thailand and Viet Nam. They include China Eastern Airlines, Viet Nam Airlines, Bangkok Airways, Jin Air, Sichuan Airlines, China Express Airlines, Thai Smile Air, Thai Airways, Jeju Air, Scoot Airlines and Air Busan. The only airline that flies in from a Western country is China Southern Airlines, which offers a route from the United States. Ultimately, if Lao PDR wishes to increase tourist traffic, marketing and promotion beyond these Asian countries must be conducted. Lao PDR may also want to develop its hospitality industry commensurate to the growth of air connectivity. The government target of attracting at least 1.4 million tourists in 2023 has to be carefully measured against the availability of accommodation.

Larger tour operators dominate the tourism industry in Lao PDR. Given this situation, there is space for growth. It can be stimulated through a stronger regulatory framework for local and international investors to participate in developing key tourist destinations. Through the Ministry of Information, Culture and Tourism, the government has already established investment schemes, such as a four-year tax exemption for investors and concessions on land leases of up to ten years (Elliott, 2017).

Hydroelectric power and tourism

Blessed with an abundance of rivers, hilly terrain and a dispersed small population, Lao PDR has been able to build dams and produce hydroelectric power not only for local consumption but also for export to neighbouring countries, such as Thailand and Viet Nam. By 2025, Lao PDR is expected to have at least 50 hydropower stations (International Hydropower Association, 2022). This circumstance:

• helps rural communities to access electricity and enhance their tourism accommodation facilities

• strengthens ecotourism with a high-value product, particularly if the site is located in proximity to the hydro industry

• creates new tourist attractions, as a hydroelectric station is an architectural marvel in itself.

The dam activities of a hydroelectric station at major rivers can be a hazard if a thorough impact study is not carried out. There is also a need for consideration of the down-river impact on nature and society. For example, the Xayaburi dam project caused damage to the river banks of Luang Prabang, where the famous heritage sites are located.

References

Elliott, M. (2017), “Lao PDR plans incentives for tourism investors”, Travel Daily, 21 July 2017, https://www.traveldailymedia.com/laos-plans-incentives-tourism-investors/.

IMF (2022), “World Economic Outlook Database” (accessed October 2022).

International Hydropower Association (2022), Country Profile: Laos, https://www.hydropower.org/country-profiles/laos.

International Trade Administration (2022), Laos Country Commercial Guide, US Department of Commerce, https://www.trade.gov/laos-country-commercial-guide.

JICA (2021), Data Collection Survey on Waste Management Sector in The Lao People’s Democratic Republic: Final Report, Japan International Co-operation Agency, with Lao PDR Ministry of Natural Resources and Environment, https://openjicareport.jica.go.jp/pdf/12345914.pdf.

MICT (2020), Statistical Report on Tourism in Laos, Tourism Development Department, Statistics and Tourism Research Division, Ministry of Information, Culture and Tourism, https://eccil.org/wp-content/uploads/2021/06/Statistical-Report-on-Tourism-2020.pdf.

MICT (n.d.), Tourism Development Plan Lao PDR 2021-2025 (draft), Ministry of Information, Culture and Tourism, https://www.laos-dmn.com/wp-content/uploads/2022/03/Lao-PDR-Tourism-Development-Plan-2021-2025_MICT_English_Draft_12.12.2021.pdf.

Phonevilay, L. (2022), “Plastic waste causing serious environmental, health and economic impacts in Lao PDR”, 1 April 2022, The Laotian Times, https://laotiantimes.com/2022/04/01/plastic-waste-causing-serious-environmental-health-and-economic-impacts-in-laos/.

UNWTO (2022), “Global and regional tourism performance” (database), UN World Tourism Organization, https://www.unwto.org/tourism-data/global-and-regional-tourism-performance (accessed on 26 November 2022).

World Bank (2020), “Developing nature-based tourism as a strategic sector for green growth in Lao PDR”, World Bank, Washington, DC, https://www.worldbank.org/en/country/lao/publication/developing-nature-based-tourism-as-a-strategic-sector-for-green-growth-in-lao-pdr.

WTTC (2022), “Laos 2022 Annual Research: key highlights”, https://wttc.org/DesktopModules/MVC/FactSheets/pdf/704/145_20220613162912_Laos2022_.pdf.