Alberto Vettoretti, the managing partner of Dezan Shira and Associates’ China practice, was recently part of a Hong Kong General Chamber of Commerce on a fact finding mission to Laos and Cambodia. 2point6billion.com recently caught up with Mr. Vettoretti to discover the changes that are taking place in this oft-overlooked corner of Southeast Asia.

2point6billion: Which are the high growth sectors in Laos and Cambodia and what is the local government doing to attract FDI in to the country?

Vettoretti: Landlocked Laos certainly faces an impediment when it comes to attracting foreign investment. However being at the confluence of ASEAN countries, the local government plans to strengthen its role as an important transportation hub in the region. As a result, the Laotian government provides incentives for investments in mining, infrastructure and power sectors including roads, railways, hydro power and mining. Some of the incentives the government provides foreign investors are longer tax holidays and duty free import of equipment.

The Cambodian government is for the post part politically stable. Open to investment Cambodia allows 100 percent ownership in all sectors ranging from banking to telecommunications. As the Cambodian government is trying to diversify from a garments economy, they are attracting foreign investment through competitive investment incentives and low labor costs. The local government has also approved 18 special economic zones to spur foreign investment in the country.

2point6billion: Which countries do Laos and Cambodia trade most with? What are their major imports and exports?

Vettoretti: The governments of both Cambodia and Laos are taking many steps to further international trade. Cambodia, currently exports clothing, timber, rubber, rice, fish, tobacco and footwear to the United States, the EU, the U.K. and Canada. While it mostly imports goods and machinery to boost growth in the country including - petroleum products, construction materials, pharmaceutical products and motor vehicles. Cambodia imports a majority of its products from neighboring countries including Thailand, Hong Kong, Taiwan, Singapore and Vietnam.
Laos, similarly exports garments, rice predominantly to the Unites States, Thailand, Vietnam and China, while it imports mainly from ASEAN and EU countries.

2point6billion.com: What is the state of infrastructure in Cambodia and Laos?

Vettoretti: There is a huge potential for investment in the power and infrastructure sectors in both Laos and Cambodia. While Laos is well connected to its neighbors by air, until this year, it did not have any rail link with neighboring countries. Thailand has only recently agreed to aid Laos construct a rail link to ease logistic costs. Similarly, like many other developing countries Cambodia too needs massive investments in electricity, road, rail and air links.

2point6billion: According to you which sectors will be impediments to foreign investors seeking to establish businesses in Cambodia and Laos?

Vettoretti: Besides improvements in power and infrastructure, both Laos and Cambodia need to nurture an educated, skilled workforce. Both countries have a young population – 50 percent of Laos and Cambodia’s populations are below the age of 21. However most of the young talent from these countries is migrating to neighboring countries such as Thailand because of a higher salary. This is creating a brain drain of sorts, forcing the local governments to spend more on education and create more jobs.

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