Competitiveness challenges as labor productivity lags in Laos

VIENTIANE, Laos — The labor force is cheap and this makes the country a competitive investment destination. But this perception may no longer be accurate as the World Bank’s data has revealed that the productivity of the Lao workforce is much lower than that of neighboring nations.

According to the 2018 enterprise survey, which was released recently, the median level of labor productivity in Laos is about $4,600.

This figure is about 10 percent lower than the figure for Cambodia and less than half that of Vietnam.

The productivity of a Cambodia and Vietnamese worker is around $ 5,100 and $10,000 respectively.

The Lao labor productivity is slightly higher than that of Thailand, which stands at around $3,500.

The survey, titled ‘Doing Business in the Lao PDR, Constraints to Productivity’, which was financed by the World Bank, also showed that labor productivity of Malaysia is around $9,500 while the figures for the Philippines, India, Brazil and Russia are around $10,000, $7,000 and $19,300 respectively.

The labor productivity of China and the United States is around $19,500 and $22,000 respectively.

According to the survey, in the garment sector, Laos performs similarly to the comparator countries at the median level, however it lags in the food processing sector.

Retail and service firms also appear to be relatively unproductive in the country.

The authors of the survey said the lower productivity of the Lao workforce may be due to lower skills. This would suggest that the Lao government needs to invest more in education to ensure the supply of skilled workers.

The business community said lower labor productivity is one of the challenges in investing and doing business in Laos. Garment firms insist that an increase in minimum wages should be associated with the improvement of labor productivity, otherwise this barrier would make Laos an uncompetitive investment destination.

Currently, the minimum wage of the Lao labor force is around 900,000 kip ($109) per month. The Lao Trade Union has proposed that the government increase the wage to 1.2 million kip per month as the cost of living is rising.