Vietnam, Laos Sign Updated Trade Pact to Boost Economic Ties Beyond Current $1.7 Billion, Address Market Challenges

Building upon a strong foundation of economic cooperation, Vietnam and Laos took a significant step forward by signing a new trade agreement on April 8, 2024, in Vientiane, Laos.

Minister of Industry and Trade Nguyen Hong Dien of Vietnam and Minister Malaithong Kommasith of Laos formalized the pact, which aims to address trade challenges and propel economic growth for both nations.

Foundations for Growth

This updated agreement builds upon the success of the initial Vietnam-Laos Trade Agreement signed in 2015. In recent years, both countries have witnessed positive growth in bilateral trade, a testament to the potential of their partnership.

However, with a current trade volume of $1.65 billion USD, the two nations recognize there's significant room to unlock the full potential of their economic relationship. This new agreement outlines key strategies to achieve this goal.

Key Focus Areas

The revised trade pact comprehensively addresses a range of issues to bolster the economic relationship between Vietnam and Laos.

Firstly, it includes preferential import tax rates ahead of the Vietnam-Laos tax reduction roadmap within ASEAN, creating favorable conditions for businesses in both countries and promoting increased trade flows.

To further facilitate trade, both countries commit to encouraging collaborative efforts such as business forums, trade fairs, and market information seminars.

These initiatives will foster stronger ties between the Vietnamese and Laotian business communities, leading to increased market knowledge and potential partnerships.

Recognizing the vital role of border trade, which currently accounts for over 90% of bilateral commerce, the agreement prioritizes developing and improving connectivity of border infrastructure. This focus aims to streamline cross-border transactions and make the movement of goods more efficient.

Additionally, Vietnam and Laos will collaborate closely to ensure stability in Laos' petroleum market. This involves exploring solutions to challenges related to standards and exchange rate mechanisms, promoting long-term stability in this crucial sector.

The agreement also places emphasis on the growth of the digital economy and safeguarding against fraudulent practices. Cooperation in e-commerce, market management, and efforts to combat smuggling and trade fraud will protect the integrity of their expanding economic relationship.

Significance and Outlook

This revised trade agreement goes beyond simply facilitating increased trade volumes. It signifies a deepening of the special relationship between Vietnam and Laos and a commitment to sustainable, mutually beneficial growth.

By reducing trade barriers, creating a more conducive business environment, and fostering collaboration, the pact has the potential to significantly boost economic activity in both nations.

With its rapidly expanding manufacturing base and increasing demand for inputs, Vietnam sees Laos as a vital source for raw materials and products. Conversely, Laos gains tremendously from access to Vietnam's large market and its global manufacturing network.

An anonymous economist says successful implementation of the updated agreement is crucial to achieving its full potential. "Addressing challenges that may arise within both domestic and global markets will be important," he says.

Nonetheless, he adds, if implemented effectively, this pact could serve as a successful model of economic cooperation for other Southeast Asian nations, demonstrating how regional collaboration can unlock shared growth and prosperity.