By the end of 2023, Vietnam's investments in Laos had reached $5.5 billion across 245 projects, making Laos the top destination for Vietnamese investments abroad. Vietnam consistently ranks as one of the top three foreign investors in Laos. Bilateral trade between the two nations has shown strong growth, with trade volume peaking at $1.65 billion in 2023, and standing at approximately $1.3 billion for the first eight months of 2024. Both countries continue to offer preferential import tariffs, with over 95% of goods benefiting from 0% tariffs under the ASEAN Trade in Goods Agreement (ATIGA), along with a 50% reduction in import duties for certain products.

Geographically, Vietnam and Laos share a 2,330-kilometer border, creating a vast cross-border trade area from Northwest Vietnam to the Central Highlands. This area offers significant opportunities for economic cooperation, with key international border gates like Lao Bao and Cau Treo playing a vital role in boosting socio-economic development. An example of successful cross-border cooperation can be seen in the transportation of coal from Sekong Province in Laos to Quang Tri province, which has generated substantial tax revenue and attracted significant infrastructure investment.

The strong diplomatic relations between Vietnam and Laos, forged over generations of leadership from both Parties and States, have laid the groundwork for Vietnamese businesses to thrive in Laos. For Laos, this relationship also plays a critical role in ensuring national defense and security. Vietnam, in turn, has been a key partner in supporting Laos' economic development, human resource training, and social welfare efforts.

Building New Momentum

Despite favorable geographical proximity and strong diplomatic relations, the trade and investment cooperation between Vietnam and Laos has not yet reached its full potential. While there has been a steady increase in trade, with noticeable improvements year by year, the overall scale of this trade remains modest. One key limiting factor is the size of Laos' relatively small economy, which impacts its export capacity, especially in relation to Vietnam. To address these challenges and fully unlock the potential of this partnership, experts are advocating for fresh strategies and initiatives aimed at driving growth.

A significant area of untapped potential lies along the East-West Economic Corridor, which serves as a strategic link connecting Southeast Asian nations via Quang Tri province in Vietnam to the Pacific Ocean. This corridor is anticipated to become one of Asia's most vital transportation routes in the future, facilitating the movement of goods and services across the region. However, regulatory obstacles, particularly those related to transportation laws and vehicle management, continue to pose challenges. These hurdles not only complicate the logistics of cross-border transport but also discourage businesses from fully engaging with the corridor's potential. Addressing these regulatory issues would help create a more favorable business environment, enabling smoother, more efficient trade and boosting investor confidence in the region.

In addition to the corridor, both countries have great potential for establishing cross-border economic zones at key border crossings. These zones could offer favorable conditions such as tax exemptions, easier residency requirements, and property ownership incentives, making it easier for businesses and workers to operate on both sides of the border. A notable example is the Lao Bảo-Densavan Special Economic Zone, located between Quang Tri province in Vietnam and Savanakhet in Laos. This zone has become a bustling hub for cross-border trade and development, showcasing the benefits that such economic zones can bring in terms of trade facilitation, job creation, and infrastructure development. Expanding similar models to other key border points could further stimulate economic cooperation between the two nations.

Another crucial factor for unlocking the full potential of bilateral trade and investment is infrastructure development. Enhancing connectivity, whether through road, rail, or air links, is vital to ensuring seamless trade flows between the two countries. At present, there is a pressing need to upgrade transportation networks, especially those linking important economic hubs in Vietnam, such as Hanoi, Ho Chi Minh City, and Da Nang, with developing centers in Laos. Constructing better road networks that lead to key border crossings, along with direct connections between major cities and economic hubs, will be instrumental in accelerating trade, reducing transport costs, and boosting the overall efficiency of bilateral trade and investment.

Nguyen Minh Tam, Deputy Head of the Central Committee for External Relations, emphasized that promoting trade remains a priority for both countries. A range of critical legal frameworks have already been put in place, including the signing of a new bilateral trade agreement, the Border Trade Agreement, and a revised Protocol on Goods Transit between Vietnam and Laos. These agreements are designed to facilitate smoother trade flows, provide legal certainty, and foster a more business-friendly environment. However, both sides recognize that the legal frameworks must be supported by concrete trade promotion activities and continued efforts to remove barriers to business operations. Only through sustained, long-term cooperation can Vietnam and Laos ensure the sustainable growth of their trade and investment relationship.

With the right measures in place, Vietnam and Laos have the potential to overcome current challenges and push their bilateral trade and investment ties to new heights. The continued collaboration on infrastructure development, regulatory reform, and trade facilitation will not only enhance economic cooperation but also further solidify the strong diplomatic bond that has characterized Vietnam-Laos relations for decades.