Investing in Laos: the last of Asia’s true frontier markets?

Written by Andrew Henderson

Dateline: Vientiane, Laos

It took Thai Airways one simple error to screw up my one-hour flight yesterday. Nevertheless, I arrived in Udon Thani, Thailand – just a short hop from the Laos border – unscathed and ready to explore opportunities and culture here.

Despite an issue that caused me to arrive five hours later than originally scheduled, it was extremely easy to get to the border, across the bridge, and through Lao immigration. The socialist government of Laos puts a smile on when you step up to the immigration desk. Similar to Vietnam and most everywhere else, they don’t particularly care about your the passport photos you’re supposed to have at the ready, or how you filled out the form.

They just want the $36.

As I headed toward the Friendship Bridge and entry into Laos, I realized that sometimes, being forced to spend your entire day eating tuna sandwiches in a Thai Airways domestic lounge isn’t the worst thing in the world. On the way over, I met a western expat who has been living in Laos for over five years doing contract work for the Lao government.

It’s chance meetings like these that make travel so important to what I do. You can’t learn this stuff sitting on the couch and reading Wikipedia. There’s a real dearth of information about places like Laos that only real, boots-on-the-ground experience can fix. The people I meet and the information I get just being out here is invaluable.

Where I’m from, people use Laos in humor as the ultimate example of a hard-to-find, insignificant country. Yet while Laos is very small and the capital city of Vientiane has barely half a million people, it’s not as backwater as you might think.

Laos has, along with any number of other places, been called “the next China”. Other than a short border with China, the two have little in common. One is a country of several million, the other of 1.5 billion. Laos is not an industrial power, although it does have resources like rich forests and earth minerals. What is does have is 8% GDP growth.

And as we rode into town, my new friend shared with me all of the recent developments in Laos.

He started by sharing how, just like in Cambodia, the middle class is growing. Lao’s mountainous terrain makes it seem a world apart, as if it were a country that’s never been exposed to the outside world.

But almost every house in central Vientiane has a motorbike these days. Decent jobs have gone from paying $100 a month or less to several hundred dollars or even more. Consumers are spending more money.

And international companies are taking notice. While Vientiane is no Bangkok, it does have the feel of a much quieter Phnom Penh. In the last couple years, Vientiane has added ATMs from Australian bank ANZ as well as local banks. It also has a wide variety of French and Italian restaurants run by real European expats who came here with a simple dream.

Laos has a growing number of western tourists. Considering its small size and weak geography, Vientiane has a ton of westerners visiting. While not ultra-cheap, its position as a value destination and a notch on the backpacker circuit should keep that in place for some time.

If you have any experience in the tourist space, I imagine you could run a decent business just providing information to visitors. There’s practically nothing online; one American I ran into earlier today said the only interesting information she could find was from blogs that were four years old. A lot has changed since then.

The entrepreneur in me sees a lot of opportunity here the same way I see opportunity in Cambodia. Considering there are already tons of cafes here along with a few western brands, Laos isn’t exactly a blank slate. But its close.

My British friend from last night did say that any large scale business requires good connections here. You can’t expect to open a franchise store here without knowing a few people and paying your respects to the government. However, you could start a small business with the intention of growing it throughout the country or throughout the region. I doubt you’d get too big before anyone started to notice too much, since it’s not like there is room here to open twenty locations of almost anything.

The key to doing business in Laos, as with most of Asia, is to keep your head down. Do business quietly and stay somewhat in the shadows. If you want to do something big, prepare to make the connections and do the work.

Such connections, of course, are important for anyone doing large-scale business like mining or big agriculture. Laos is still a socialist government, after all. That means it has a history of allowing insiders to, for example, bulldoze forests whenever China wants to build a dam.

That said, Laos feels pretty laid back. Especially for a self-titled “Socialist Republic”. People are very friendly and English seems – at first blush – to be even better than the weak English I encountered in Bangkok.

Unlike a country like Myanmar, which is still rather closed off and inaccessible for small entrepreneurs, Laos has a more open feel to it. There is a Laos-China railway being built to connect the two countries via a rail line from Kunming, China.

The goal, of course, it to make movement of goods easier, since Laos has no factories to speak of (and to give China a route to the Gulf of Thailand). Such connections could also make it easier for Chinese gamblers to get to Laos’ casinos located near the Chinese, Vietnamese, and Thai borders.

The entrepreneur in me loves the wide open potential places like Laos offer. Vientiane is pretty quiet, so you just might go stir crazy living here, but the city does combine some nice elements of European and Asian culture with tree-lined streets and a nice path next to a park along the quiet riverside.

And being next door to a growing nation with a monstrous appetite for resources doesn’t hurt business, either.

I’ll keep you updated over my next few days here…

Andrew Henderson
Last updated: Dec 30, 2019 at 4:16PM

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