Foreign direct investment : implication for economic development in Lao PDR

Abstract

Most developing countries rely on some form of trade and foreign investment for Foreign Direct Investment (FDI) has considerable significance for transitional economy countries like Lao PDR as well their economic development. This study is aimed at understanding of role of FDI in economic development in Lao PDR through focusing on resource sector and also this study examined the FDI situation in Lao PDR since 1988. The study found that, since 1988, Lao PDR offers investment opportunities for foreign companies and has adopted a number of policies to attract foreign direct investment into the country. Law on foreign investment was revised three times. FDI in the Lao People’s Democratic Republic has improved clearly since around mid-2000. Mining and electricity generation sectors account for much of FDI, and are likely to remain the most active sector for foreign investment. FDI are expected to bring benefit to host country. The study also found that FDI has positive impact on economy in the form of higher economic growth, an increase in revenues, and export performance. From 2006 to 2010, average GDP growth rate in Lao PDR was 7.9% and in 2011, it was 8.4%. Export increased significantly over the decade due to the increase of export in mining and electricity. However, aside from benefit, resource sectors have a negative impact in term of environmental problem.