ABSTRACT
Since the introduction of the reform program known as the New Economic Mechanism (NEM) in November 1986, Lao PDR has been in a slow transition from a centrally planned economy towards a market economy. Various measures have been introduced under the NEM to reduce price and production controls, improve the managerial and financial autonomy of state-owned enterprises, and promote the development of a private sector. Openness and outward orientation have been stressed as central policy objectives, and simplification and liberalization of trade and exchange rate regulations have contributed to a more transparent environment for both export and import activities. These unilateral reforms were strengthened by the country’s accession to ASEAN’s Free Trade Agreement (AFTA) in 1997, which has gradually improved access to the regional export market at the same time as it has reduced the import tariffs towards other AFTA members. The negotiations for WTO membership, which commenced in 1997, have also helped clarify the country’s trade policy ambitions. Like many other countries, Lao PDR sees globalization – in the form of international trade and foreign direct investment inflows – as a vehicle for economic growth and development.
