For brave investors and entrepreneurs, the opportunities that lie in wait in the frontier CMLV bloc are tempting, but tread carefully. John Church reports
As Asia’s tiger economies have blossomed, the bloc of four late bloomers to join ASEAN, sometimes referred to as CMLV (Cambodia, Myanmar, Laos and Vietnam), has taken the slower route to economic development. Stifled by ineffective governments, corruption and poor legal frameworks, these Southeast Asian countries have watched their neighbours prosper as they struggle to evolve to the degree needed in Asia’s fast-paced regional theatre.
It’s not easy to conduct business in these countries. According to the World Bank’s Ease of Doing Business rankings of 189 jurisdictions, Myanmar ranks 167 (up 10 from 2015), Laos 134 (up five), Cambodia 127 (up six) and Vietnam 90 (up three).
But demand is slowly turning in their favour as plentiful cheap labour, generous tax breaks, new foreign ownership rules and other incentives now beckon big manufacturers, producers, and those with the knowledge and patience to do business on the frontiers of change. GDP growth rates of about 7% or more provide the kind of figures neighbours can only envy.
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David Aristotle, managing partner in the Vientiane office of ZICOlaw Laos, says as a member state of the ASEAN Economic Community (AEC) single market, launched on 31 December 2015, Laos has committed to implement ASEAN’s blueprint initiatives and improve the business environment for its investors.
“In order to achieve a single market, the government is working on infrastructure connectivity with its neighbouring countries to provide ease of access to the local market and linkage to regional markets,” says Aristotle. “For example, in order to realize the Kunming-Singapore Railway as part of the Trans-Asian Railway network, the government has approved the construction of a high-speed railway linking Vientiane to Kunming in China. The government is also improving the transport infrastructure by upgrading its roads to connect to ASEAN highway routes.”
Aristotle’s firm is involved in the high-speed railway project. “The challenges we are facing are mostly on the lack of a sound legal framework regulating the planning, construction and operation of railways in the Lao PDR. This is an ongoing project and the government is working on the legal framework,” he says.
Aristotle says the most significant development for Laos in recent times has been the launch of the AEC. “The government has to work on the implementation of AEC commitments such as eliminating import tariffs and non-tariff barriers, improving the current legal framework, and improving the investment environment in order to move toward the achievement of a single market,” he says.
“Lao PDR is one of the least developed countries in Asia and has averaged 7% growth in GDP in the past few years. Infrastructure, construction and the service sectors are expected to have rapid growth to facilitate development and integration with other ASEAN countries.” But legal and practical challenges remain for potential investors.
“Lao is ranked 134 out of 189 economies in the World Bank’s Ease of Doing Business Index 2016 and particularly, Lao PDR is ranked 153 in the ranks of Starting a Business,” notes Aristotle. “The requirement of the national language to be used in all applications made to the government, as well as communication with the government, the existence of unwritten practice in the application process, the lack of a unified practice by the authorities, and clear guidelines for authorities internally and for potential investors are the main challenges faced by the potential investors.”