The government of the Lao People’s Democratic Republic (Lao PDR) introduced the New Economic Mechanism (NEM) in 1986 in order to transform the country’s economy from natural and sub-natural to a market-oriented one. The goal was also set for the Lao PDR to lift out from its status as a least-developed country (LDC) by 2020. As such, the government has introduced a number of strategies and policies in order to develop the economy, alleviate poverty, and enhance industrialization of the country. Among the approaches, trade development and promotion of foreign direct investment (FDI) have been identified as significant tools for industrialization of the country. Foreign trade is the important source of foreign currency and the engine for domestic economy diversification, while FDI is most important for inflow of investment capital, technology, and know-how. FDI is also a means for international trade development of the country, as most of FDI products are traded within the region and internationally.
Although the primary and natural sector seems to be most attractive for FDI and the foreign trade of the Lao PDR, there is some flow of intermediate goods trade between the country and its foreign partners. Statistics also show that FDI contributes