From the New Economic Mechanism (NEM) reforms launched in 1986 until the
present, remarkable changes have occurred in the economy and society of Laos that have
helped to integrate the country into the world economy. These changes have had
dramatic implications for trade and investment flows, and economic growth. NEM
started Laos’ transition from a centrally-planned economy to a socialist-oriented market
economy, leading to a broad range of social, political, and economic changes. Major
reforms under NEM include removing price controls; abandoning socialist cooperative
farming; unifying the exchange rate system; removing the government’s monopoly on
trade; reducing the number of state-owned enterprises; promoting private-firm
establishments; and pursing fiscal, banking, and financial reforms.
Laos joined ASEAN in 1997 for geopolitical and economic development reasons. It
has subsequently participated in ASEAN integration on a step-by-step basis in the
lowering of intra-regional tariffs through the Common Effective Preferential Tariff
(CEPT) Scheme for AFTA. Although ASEAN was established in August 1967, its
commitment to pursuing regional economic integration in East Asia has intensified since
the 1990s through arrangements such as ASEAN+3 and ASEAN+6. The East Asian
economic community has evolved through multiple agreements under the frameworks of