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First steps of Lao liberalization
There is a new wind blowing through Laos and it feels like the wind of change. The old structures of Lao society have been set up more than three decades ago and the international environment around Laos is changing. Adoption of new developments is needed. Neighbors Vietnam and Cambodia are opening their markets at a fast pace, and this year, we even saw a tiny crack in Myanmar’s totalitarian brick wall when a small proportion of international humanitarian aid was allowed by Myanmar’s military government.
The peer pressure of Laos’ quickly liberalizing neighbors, Vietnam and Cambodia, has reached Laos and came to the attention of its governors. The lesson learned from them is that opening your market to foreign investors significantly increases the strength of your economy. Laos simply wants a piece of that – desperately needed – international pie. With the help of the South Koreans and Thai, Laos will get its first stock exchange in 2010. The target date for official establishment of the stock exchange and electronic trading is Oct. 10, 2010.
The Stock Exchange of Thailand (SET) contributes its experience and information about trading to the Lao bourse. The Koreans invested an amount of 10 million US dollars in the development of an electronic quotation system. Through this deal, the Koreans will hold a 51 percent stake in the venture which seems a somewhat “unusual” deal for Laos. The control “appears” to be on the side of the Korean investors.
Does this mean that we can all buy our shares of any Lao company in the near future? No, well, not really. Initially, stocks are only sold “over the counter” of three state firms: a power utility company, a telecom company and a national bank. Over-the-counter (OTC) trading is to trade financial instruments such as stocks, bonds, commodities or derivatives directly between two parties. It is contrasted with exchange trading, which occurs via corporate-owned facilities constructed for the purpose of trading (i.e., exchanges), such as futures exchanges or stock exchanges.
Although choice on the Lao exchange is limited to three state flavours, the setup of such a capitalistic oriented system is a true indication of further liberalization plans. For their capital needs, the Lao government is heavily depended on foreign investors and they realize this more every day.
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