Trade for Jobs and Inclusion in the Lao PDR

Overview & Synopsis

This note looks at how trade affects jobs, labor income, and inclusion in the Lao PDR. It covers three periods: WTO accession (2008–13), before COVID-19 (2014–19), and after the pandemic (2020 onward). Growth driven by natural resources helped the economy expand. However, it also caused Dutch Disease effects and pushed out other export sectors, such as manufacturing. Labor income tied to exports has become concentrated in agriculture, mining, and utilities. Forward global value chain (GVC) participation is the main driver of labor income growth. A 10 percent rise in participation is linked to a 5 percent rise in earnings, and close to 9 percent in high-tech manufacturing. Since COVID-19, foreign-owned services firms and export-only manufacturers have performed best. Manufacturing firms that only import inputs lag behind in productivity. Globally connected firms employ more skilled workers and more women. Women make up about 80 percent of production workers in exporting manufacturing firms. However, import competition has reduced the overall share of women working in manufacturing. Export growth has also come with a gradual shift to formal jobs. The note recommends policies for people (skills training, finance, and childcare), sectors (faster customs, better logistics, and supplier development), and places (better connectivity and modern economic zones). These aim to turn trade into more and better jobs for everyone.