Some believe the white disk on the Laotian flag represents the unity of the people. Another theory is that it symbolizes the full moon rising over the Mekong River. A third is that it signifies the country’s bright future, and this is perhaps the most pertinent. After experiencing economic growth at an average of 7% over the last decade, the future certainly is bright — booming, even. The World Bank has predicted growth will continue at an average of 7.6% from 2013 to 2015. The smallest, least developed economy in Southeast Asia, which was once overlooked by investors, is expanding rapidly.
Laos is Southern Asia’s only landlocked country. It has five neighbors: Thailand and Myanmar to the west, China to the north, Vietnam to the east and Cambodia to the south. It covers an area of 236,800 square kilometers and has a population of approximately 6.5 million.
Like its surrounding neighbors, the country has endured a turbulent past. The national flag also has two horizontal bands of red, said to represent the bloodshed in the people’s fight for independence. The ancient fourteenth century kingdom of Lan Xang, translated as a million elephants, was regarded as the country’s golden age. Its demise in the late 1600s resulted in invasion from Burma, Cambodia, Siam and Vietnam, which ultimately led to its division into three states. In 1893 it became part of the French Colonial Empire and the three Lao territories were united once more.
The country is Laos but the people and their language are Lao. The answer to where the s came from lies at this point in history. Some hypothesize that in uniting three different Lao states, the noun became plural. Another theory is that it was a mistranslation from French. Royaume des Laos means kingdom of the Lao people.
After a brief occupation by Japan during World War II, Laos gained full constitutional independence in 1953. Years of conflict followed; civil war between the royalist government and communist national group Pathet Lao plagued the country for over two decades. Laos was also involved in the Vietnam War. According to the United Nations, it was the most heavily bombed country, per capita, in the world.
In 1975, with help from the Vietnamese, Pathet Lao overthrew the royalist government. They abolished the monarchy and formed Lao People’s Democratic Republic. Subsequently, Laos became isolated from its neighbors and completely dependent on Vietnam. Following the decline of the Soviet Union, the government came under pressure. In the 1980s, reformed economic policies took place, with a return to private enterprise and the liberalization of foreign investment laws.
Today, Laos is a single-party socialist republic governed by the Lao People’s Revolutionary Party. Following in the footsteps of China, the communist government retains a monopoly of political power but the economy is left to market forces. It was described by financial advisory firm Ernst & Young as a “fledgling pseudo-capitalist economy.”
The moon rises
Leaving its turbulent past behind, Laos is now embracing a new era of growth and development. According to the World Bank, the economy achieved 8.3% growth in 2011, the top sixteenth in the world. The industrial production growth rate was the third highest in the world at 17.7% in 2010.
The Vientiane Times reported that foreign investment is flowing in from Vietnam, Thailand, China, Korea and France. According to a Wall Street Journal (WSJ) article titled “Foreign Money Pours Into Laos,” direct foreign investment has risen 40% for two years consecutively.
With a gross domestic product of $19.15 billion, Laos is much smaller than Myanmar and Cambodia and doesn’t get as much attention as other emerging markets in the region. Nonetheless, the country is rich in natural resources, including coal, gold, bauxite, tin and copper. Mining accounts for 27% of foreign investment, and hydropower accounts for another 25%. Strategically positioned at the crossroads of the Greater Mekong Subregion of the Mekong River basin, which comprises some 300 million people, Laos aims to become the “battery of Southeast Asia.” The development of the controversial Xayaburi Dam, costing $3.5 billion, will generate 1,285 megawatts of power that will be sold to Thailand. This is one of numerous hydroelectric projects; the Chinese alone are involved in over thirty.
Tourism is one of the fastest growing industries in Laos. With over three million visitors in 2012, it was up 14% over 2011 according to Travel Daily News Asia. In May 2013, Laos was named the world’s best tourist destination for 2013 by the European Council on Tourism and Trade. Other significant growth areas are agriculture, forestry, rubber, construction, cement and garments.
Laos has recently moved from lower, to lower-middle income status. According to the CIA World Factbook, economic growth has reduced official poverty rates from 46% in 1992 to 26% in 2010. The World Bank expects it to progress from United Nations Least Developed Country status by 2020.
On February 2, 2013, after years of economic reform, Laos was accepted as a member of the World Trade Organization. The country is also a member of the Asia-Pacific Trade Agreement, Association of Southeast Asian Nations (ASEAN), the ASEAN Free Trade Area, East Asia Summit and La Francophonie.
It is preparing for integration into the ASEAN Economic Community (AEC). The AEC will unite 600 million people and bring about a combined economy of some $2 trillion (2010). Free movement of goods, services, labor and capital is set to transform the region in 2016, with full integration into the global economy.
Billions are being spent on improving infrastructure and transport connectivity. Major rail projects are underway linking landlocked Laos with China, Vietnam and Thailand. Work has begun on a 421-kilometer, high-speed China-Laos railway, running from Luang Namtha to Vientiane at speeds of up to 160 kilometers per hour. The Centre for Aviation recently reported that an influx of business travelers and tourists means the aviation industry has grown by over 100% in the last 15 months. Expansion plans involve the opening up of new routes including Luang Prabang and a series of new carriers.
Laos has an unleveraged financial position with a well-capitalized, conservative banking system and a growing securities market. Lao Securities Exchange opened in 2010 with the hope of raising $8 billion in equity and bond sales to fund new projects.
The pro-business government is committed to raising the country’s profile. The investment climate is very favorable, with 100% foreign ownership and tax incentives for foreign companies. Last year, the American Chamber of Commerce (AMCHAM) opened a sub-branch in Laos, creating a focal point for US business and strengthening economic ties between the two nations.
One of the most appealing reasons to invest in Laos is its labor force, which is one of the least expensive in Asia. The workforce is young and enthusiastic, with a median age of 21.6 years. Energy costs are among the lowest in the region too. Therefore, the country is an attractive proposition for manufacturing sectors. Coca-Cola Company has recently announced plans to invest $40 million in the next five years to begin bottling products in Vientiane, expanding its presence across Southeast Asia.
Lifestyle and locale
The youthful working populous is driving consumer demands and the underpenetrated domestic market is growing rapidly. Once a sleepy town, Vientiane is rapidly evolving thanks to the construction boom. Here, there are definite signs of increased disposable incomes.
In “Make Way for Southeast Asia’s Newest Boom Economy,” WSJ journalist Patrick Barta commented on this new-found wealth last year, stating that “shiny new Cadillacs and Mercedes Benz cars — and even at least one Ferrari — are spotted on Vientiane’s streets. Sushi restaurants, boutique hotels and wine bars are proliferating.”
Of course, cars are only an artificial indicator of wealth. Yet in Laos, the color of your number plate indicates vehicle payment status. A yellow plate means the car was fully paid for in cash, whereas white indicates it is company or finance bought. On the streets of Vientiane there are an awful lot of yellow plate cars, indicative of middle class growth. A marked shift in residential status also suggests a significant change in lifestyle. People are moving from family homes occupied by multiple generations to apartments and independent living.
Vientiane has developed a French-cosmopolitan vibe with trendy outlets and eateries. Residents are likely to be found sipping coffee in cafes, or working out at the gym as the fitness fad takes hold. Many Thai companies are supplying “lifestyle” products and services to affluent Lao residents, including cable TV, True Coffee, Fuji and Oishi.
While it shares many cultural similarities with Thailand, Laos has a strong sense of identity and national pride, creating a fervent need for localization. The National University of Laos, for example, uses the Thai curriculum, but very much wants to develop its own.
However, there is very little in the Lao language to be found on the internet. While Google and Facebook are Lao-ready, the amount of Lao web content is nominal — certainly not enough to satisfy an eager young population armed with smartphones and wanting to embrace the international scene. Despite the socialist government presence, there are no signs of web censorship.
One of the greatest challenges investors face is the Lao language. French is commonly used in government and commerce, but the level of English is very low. This is expected to change as English was elected the official language of ASEAN and AEC. As Laos’ surrounding countries are its most prolific investors, this presents the possibility of many challenging language pair combinations, such as Lao to and from Vietnamese, Chinese, Thai or Korean. On the plus side, Lao and Thai are very similar and almost mutually intelligible. Both languages face the same issues and challenges: line breaking, tone marks and text expansion. Spelling and character sets are different, as Lao includes some characters from the Khmer writing system. Unicode fonts for Lao are compatible in mainstream computer aided translation (CAT) tools and in desktop publishing applications.
The problem is, only just over half of the population is ethnic Lao. This means only half actually speaks the official language. The remainder speak various ethnic minority languages such as Khmu and Hmong, especially in the midland and highland areas. Hmong accounts for 40% of the population. Making this language even more challenging, there are several dialects including Green and White Hmong. It is thought we will see more ethnic languages as the government and nonprofits step up social initiatives.
The localization industry is very much in its infancy in Laos, with just a handful of small translation agencies and freelance single linguists, pricing by the page with no separate editing. Methods are primitive and many translators lack technical experience. There are no CAT tools; at best translators are using Microsoft Word, and at worst some still use typewriters. Processes are old-fashioned and there is no real knowledge of industry best practices such as glossaries or quality assurance workflows. Turnaround times are slow and providers lack the urgency and responsiveness required to meet client demands.
This is compounded by the fact that expectations are high. Clients used to dealing with established markets have come to expect same day turn-around in combination with specialized tools. Yet it’s impossible to treat Lao as if it were French or Spanish. There is a definite misalignment with modern business expectations.
Our company, Bangkok-based EQHO Communications Ltd., opened our subsidiary EQHO Laos in November 2012, becoming the first localization company to open in Laos. We hired over 20 Lao linguists, and with the help of shareholders we are working to integrate a translation and localization curriculum into the National University of Laos, replicating what we did in Thailand with Chulalongkorn University and the University of the Thai Chamber of Commerce.
In coming to Laos, we experienced the difficulties investors face first-hand. One such issue was recruitment. Most translators were by definition not professional translators. They were part-time, without formal qualifications and didn’t use tools of any description. This meant 90% of candidates failed or dropped out of the recruitment process. Thus, we had to redefine our usual criteria and make the required qualifications and experience relative.
Brain drain is a problem in Laos. According to International migration, remittances, and the brain drain, a 2006 World Bank publication, the skilled emigration rate was at 37.4% in 2000. This is rapidly reducing due to the increasing presence of non-government and international organizations, unfortunately producing another problem. The best-caliber candidates are being snapped up, flocking to these large organizations due to the higher salaries offered. Therefore, all international companies are assumed to follow similar pay structures and salary expectations have become inflated.
Recruitment for EQHO Laos was a matter of trial and error, experimenting with both traditional and contemporary techniques. This included social media, LinkedIn and rigorous testing as part of the assessment process. Having a website and advertising in the Lao language made it much easier in this particular case.
The human resources team shared an anecdote that paints a picture not only of the challenges faced, but of the enthusiasm of the Lao candidates and their desire to succeed. One particular applicant took a technical translation test about agricultural machinery. To ensure that he used the correct terminology, he literally went into the fields to ask a farmer what one of the parts was called. That’s dedication.
Bureaucratic and administrative
Investing in an emerging economy is not without its difficulties. Bureaucracy is a big one. Translation and localization in Laos is considered a sensitive business. This means localization companies need to be approved by the appropriate ministry before they can commence operations. In our case, we applied to the Ministry of Industry and Commerce, the Ministry of Information, Culture and Tourism, and the Ministry of Science without getting anywhere. Finally, permission was granted by the Ministry of Posts and Telecommunications.
Delays are lengthened by the use of paper-based systems. The sabai way of life seems to permeate every aspect too. Sabai literally means comfortable but is much more than just a word. It’s a philosophy to “take it easy, my friend.” Laos is predominantly Buddhist and the idea of sabai is rooted in spiritual teachings about patience, or khanti. Patience is one of the perfections or paramitas one must develop on the path to enlightenment. Slow and steady is the Lao way. Patience and perseverance are key.
It’s essential to have the right partners on the ground for legal, accounting and other administrative matters. Support from key organizations such as AMCHAM is also important. Since opening last year, AMCHAM has held a series of networking events including a gala dinner and trade show which was attended by US Beauty Pageant winner Miss Minnesota, an ethnic Lao.
Thus, Laos presents plenty of opportunity for the companies with the right profile. To counter increasing costs in the more developed countries, it has lots to offer manufacturing and production. The growing domestic consumer market could be an interesting add-on to companies that already operate in the region.
It is a natural fit for those with experience, connections and distribution in Southeast Asia, particularly Thailand. Those that are Thai localization savvy and have good distribution networks will find entry into the Laos market easier and more cost-effective than those new to Southeast Asian languages.