Foreign Direct Investment in Laos

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Foreign Direct Investment (FDI) inflows to Lao PDR are expected to fall considerably in 2009 due to the impact of the global economic crisis. As discussed above, the nominal FDI value is expected to decline from about $771 million in 2008 to $614 million in 2009 (or by about 20 percent) due to recent delays of new hydropower and mining projects, as well as slow growth in the non-resource sectors. Assuming the global economy continues to recover - Annex 1), FDI to Lao PDR is expected to rise considerably in the medium term, as large resource and non-resource projects resume, compounded with the expected recovery of regional and global demand.

Majority of Foreign Direct Investment

The majority of Foreign Direct Investment (FDI) goes to natural resource sectors. Foreign investment in natural resources accounted for more than 80 percent of the total FDI during the past few years although investment in non-resource sectors has also picked up substantially but still at a low scale. Private investment in the banking sector is expected to increase substantially in 2009. Interestingly, while banking sectors in other countries have been severely affected by the global economic crisis, several new private banks have been established in Lao PDR this year (Booyoung, Indo China and ST banks). Major FDI to Lao PDR in recent years comes from the region, mainly from Thailand, China, Vietnam, Australia, India, Japan, and Korea.