Overall, the investment climate seems to have deteriorated in Lao PDR between 2012 and 2016. In the 2012survey, not one area of the investment climate was identified as a serious problem by more than 20 percentof firms. In the 2016 survey, there were six areas where more than 20 percent of firms identified areas ofthe investment climate as a serious problem. Although this could suggest a deteriorating investment climate,it might also reflect growing willingness to express opinions. Perceptions regarding the severity of mainconstraints also differ between various company types. For exporters, which are the companies that are bestplaced to expand and generate (job) growth in Lao PDR, informal practices of other firms (including otherformal firms), tax rates, transportation, electricity, worker education, and trade regulations, are the areasidentified as serious problems. Addressing these issues will be critical to support export-led growth in Lao PDR. This report also analyzes firm level productivity based on the data available and finds that Lao PDR’senterprises are not productive compared to firms in neighboring countries. For example, the median levelof labor productivity is lower in Lao PDR than in either Cambodia or Vietnam, and labor productivity in themost productive firms is significantly lower in Lao PDR compared to the other two countries; also, total factorproductivity is generally higher in Vietnam than in Lao PDR. In addition, firms in Lao PDR also generally usesignificantly less capital than companies in Cambodia or Vietnam.
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