2015 Index of Economic Freedom

Laos

overall score51.4
world rank150
Rule of Law

Property Rights15.0

Freedom From Corruption26.0

Limited Government

Government Spending86.8

Fiscal Freedom86.2

Regulatory Efficiency

Business Freedom59.5

Labor Freedom57.1

Monetary Freedom74.5

Open Markets

Trade Freedom58.6

Investment Freedom30.0

Financial Freedom20.0

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Quick Facts
  • Population:
    • 6.8 million
  • GDP (PPP):
    • $20.8 billion
    • 8.2% growth
    • 7.9% 5-year compound annual growth
    • $3,068 per capita
  • Unemployment:
    • 1.4%
  • Inflation (CPI):
    • 6.4%
  • FDI Inflow:
    • $296.0 million
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Laos’s economic freedom score is 51.4, making its economy the 150th freest in the 2015 Index. Its overall score is 0.2 point higher than last year, reflecting improvements in freedom from corruption and labor freedom that outweigh declines in investment freedom, business freedom, and monetary freedom. Laos is ranked 33rd out of 42 countries in the Asia–Pacific region, and its overall score is below the world and regional averages.

Economic freedom in Laos has scarcely budged over the past five years, highlighting the apparent lack of commitment to economic reform in the East Asian economy. While the country did register its highest score ever in the 2015 Index, progress has been inconsequential. Five-year improvements in half of the 10 economic freedoms, including the control of government spending and labor freedom, have been counterbalanced by deteriorations in property rights, government spending, monetary freedom, and trade freedom.

Laos remains largely absent from the East Asian trading network, and its trade freedom remains well below the global average. Government corruption is widespread, and the judiciary is largely ineffective. Businesses, especially entrepreneurs, find that business formation and capital accumulation are difficult because of regulatory costs and underdeveloped financial markets.

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Background

The Communist government of Laos, in power since 1975, wrecked the economy in the early years of its rule. Slow liberalization, begun in 1986, has yielded limited success. Corruption is endemic, laws are applied erratically, and the country remains highly dependent on international aid. Basic civil liberties are heavily restricted. Seventy-five percent of the workforce is employed in subsistence farming. In 2013, following a 15-year negotiation process, 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 26.0 Create a Graph using this measurement

Widespread corruption among government officials fuels public discontent and causes problems in tax collection and degraded public services. In late 2013, more than 50 officials in a provincial government were investigated for fraud. Senior civilian and military officials are often involved in logging, mining, and other extractive enterprises. The judicial system is inefficient, and protections for property rights are weak.

Limited GovernmentView Methodology

Laos’s top individual and corporate income tax rates are 24 percent. Other taxes include a vehicle tax and excise taxes. The overall tax burden equals 24 percent of domestic production. Government expenditures are equal to 21 percent of domestic output, and public debt is equivalent to 62 percent of gross domestic product.

Regulatory EfficiencyView Methodology

Regulatory efficiency remains poor, and the application of regulations is inconsistent and non-transparent. On average, it requires over 90 days to incorporate a company, and obtaining necessary permits takes over two months. The labor market lacks flexibility and hinders job growth. Monetary stability has strengthened somewhat. 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 goods are subject to import licensing, and foreign-based service providers may face barriers. Foreign investors typically must overcome multiple regulatory hurdles. The financial system is underdeveloped and subject to political interference. Three state-owned banks dominate the banking sector, and the government controls credit allocation.

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 Kong89.6-0.5
2Singapore89.40.0
3New Zealand82.10.9
4Australia81.4-0.6
5Taiwan75.11.2
6Japan73.30.9
7South Korea71.50.3
8Malaysia 70.81.2
9Macau70.3-1.0
10Brunei Darussalam68.9-0.1
11Kazakhstan63.3-0.4
12Thailand 62.4-0.9
13Philippines62.22.1
14Samoa61.90.8
15Kyrgyz Republic 61.30.2
16Vanuatu61.11.6
17Azerbaijan61-0.3
18Tonga59.31.1
19Mongolia59.20.3
20Fiji590.3
21Sri Lanka58.6-1.4
22Indonesia58.1-0.4
23Cambodia57.50.1
24Bhutan57.40.7
25Pakistan 55.60.4
26India54.6-1.1
27Bangladesh 53.9-0.2
28Maldives53.42.4
29Papua New Guinea53.1-0.8
30China52.70.2
31Tajikistan52.70.7
32Vietnam51.70.9
33Laos51.40.2
34Nepal51.31.2
35Micronesia49.6-0.2
36Solomon Islands470.8
37Uzbekistan470.5
38Burma46.90.4
39Kiribati46.40.1
40Timor-Leste45.52.3
41Turkmenistan41.4-0.8
42North Korea1.30.3
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