3. Logistics and industrial infrastructure

This section covers the following topics: ports and waterways, railways, roads, airports, telecommunications and connectivity, industrial and logistics parks.

Summary

• 3.1. Ports and waterways
• 3.2. Railways
• 3.3. Roads
• 3.4. Airports
• 3.5. Telecommunications and connectivity
• 3.6. Industrial and logistics parks

3.1. Ports and waterways

Laos is the only landlocked country in the Indochina Peninsula, yet there are approximately 4,587 kilometers of navigable waterways, mainly the Mekong and its tributaries. There are another 2,897 kilometers of waterways navigable by vessels with a draft of less than half a meter.

Until 1996, inland waterway transport (IWT) was the most widely used mode of transport in Laos, but with the completion of National Road 13, which crosses the country from north to south, inland waterway transport has been decreasing year by year.

The difficulties in the development of waterways are mainly due to

• lack of equipment for loading and unloading goods and adequate facilities ,

• passage restrictions during the dry season due to low water levels, sandbanks and rapids,

• difficulties in the rainy season due to the high current flow, turbulent and many critical points along the rivers,

• Reduction of cargo volume in waterway transport

There are 29 existing ports located along the Mekong River, some ports are located along tributaries such as Nam Oh , Nam Ngum , Nam Kading , Xe Bang Fai. The main port is the “Laos-Japan Friendship Port” ( Lak Si, capital Vientiane), some provincial ports in the northern region have been used for international shipping following the Mekong River Trade Navigation Agreement between China, Laos, Myanmar and Thailand such as Xieng Kok , Ban Mom , Houeisay , Pak Beng and Luang Prabang .

Nowadays, only the section from Houeisay to Luang Prabang and from Houeisay to Guan Lei in China are still important routes for goods, passengers and tourists, but the Lao government is developing a plan to upgrade inland navigation with a time horizon of 2030.

Thanks also to the rail link, most of the international container traffic transported by sea, originating or bound for Laos, passes through the ports of Bangkok and Laem. Chabang in Thailand, however the Laotian government has decided to invest in Vietnam in the development of the port of Vung Ang , with explicit reference in the 9th Five-Year Plan for Socio-Economic Development, also in relation to the construction of the railway line that will connect the port to the capital Vientiane.

3.2. Railways

Due to its mountainous geography, Laos has never had a real railway infrastructure. During the French protectorate, some small local lines had been built, but rail transport never played a significant role in the transport sector until the early 2000s.

In 2009, a 5km narrow-gauge line was opened, extending Thailand's national railway network into Laos via the first Thai-Lao Friendship Bridge to Thanaleng railway station south of the capital Vientiane.

Initially designed as a passenger line, the Laotian government wanted to use it also for goods, setting up a special intermodal hub, the “Vientiane Logistics Park”, inaugurated on 4 December 2021.

The previous day, on December 3, 2021, the standard gauge line connecting Vientiane to Kunming, China, was inaugurated. The Laos-China line is part of the Government's strategy to transform the country into a regional hub and is a flagship of China's Belt and Road Initiative , with a financial architecture based on 60% debt contracted by the Laotian Government with the Export-Import Bank of China and 40% on a company owned 30% by the Laotian Government and 70% by the Chinese Government.

The overall cost is estimated at nearly US$6 billion and represents, to date, the largest infrastructure project in Laos.

The line connects to the “Vientiane Logistics Park”, where the transhipment station with the line connected to Thailand was inaugurated in July 2022.

The Thai government has begun the first phase of construction of the standard gauge extension from Vientiane to Bangkok, which could be completed by 2026, linking the Thai capital directly to China via Laos.

In July 2022, the Lao government announced a feasibility study on the Laos-Vietnam railway project. This would involve building a railway line in two phases. The initial phase would connect Thakhek and the seaport of Vung Ang in Vietnam, at a distance of 139 kilometers. The second phase would connect Thakhek with Vientiane with a 312-kilometer railway line.

The project was included in the 9th Five-Year Socio-Economic Development Plan.

3.3. Roads

The Ministry of Public Works and Transport website reports statistics updated to 2014, according to which, in the previous twenty years, the road network has expanded from just 14,000 km to over 44,000 km. However, in 2014 only 17% of these roads were paved, while 35% were gravel and 48% dirt. Many sections of the road network are impassable during the rainy season and some sections are in such poor condition that they have to be rebuilt.

Financing road development remains problematic, with direct government funding primarily used for smaller roads, and larger projects requiring external funding or alternative financing arrangements. Many projects are funded by foreign donors , for example, the upgrade of Route 3 in northwestern Laos, which links China to Thailand through Luang Namtha and Bokeo provinces , was jointly funded by the ADB and the Chinese and Thai governments. Additionally, the Japanese government funded the upgrade of Route 9 in southern Laos, which links Thailand and Vietnam, through Savannakhet province. In 2017, the World Bank granted $25 million to Laos to strengthen road maintenance and improve road connectivity.

The Government has also developed an alternative financing model based on land concessions, first used through the development of the “450-Year Road” project, which connects the Friendship Bridge to the Lao-Thai border in a north-south route. Fifty meters of land on each side of this road are gradually expropriated and sold to the private sector to raise funds 1. On the same route, the Ministry of Public Works and Transport is considering the application of Public-Private Partnership, with the support of the World Bank, to attract private sector investment in toll roads.

Vang Expressway was completed Vieng , Laos' first highway. Construction began in late 2018 and was originally scheduled for completion in 2021. The road, which includes twin tunnels nearly 900 meters long through Mount Phoupha , shortens the route by 43 km compared to the current Route 13, and costs 550 kip per kilometer (0.027 EUR/km), and about 62,000 kip (3.10 EUR) for a one-way trip between Vientiane and Vang Vieng (about 115km). The Vientiane- Vang highway Vieng is the first section of a planned expressway from Vientiane through the northern provinces to Boten in Luang Namtha province , which borders China.

Despite the many socio-economic benefits of road expansion in Laos, there is no shortage of criticism related to the environmental impacts of some projects, while some land concessions have been used as legal loopholes to justify logging outside of national production quotas. In other cases, expropriations have not provided adequate compensation for local communities.

3.4. Airports

Laos has 52 airports, nine of which have paved runways, the two main airports being the capital Vientiane and Luang Prabang .

The other smaller but equally important ones are in Pakse, Savannakhet, Oudomxay and Luang Namtha .

Vientiane is the main international gateway, while Louangphrabang and Pakxe accept regional traffic and provide customs, immigration and quarantine services. Another important provincial airport is Savannakhet. The two regional airports at Luangprabang and Pakxe and Wattay Airport in Vientiane cover international traffic and related services.

Several international airlines such as Air Asia, Bangkok Airways , China Eastern Airlines, Lao Airlines, Thai Airways and Vietnam Airlines provide international services. from Louang Prabang also has direct connections to Bangkok, Chiang Mai and Han oi and to Bangkok and Siem Reap. Reap from Pakxe . Scheduled domestic services are operated on main routes by Lao Airlines with regular daily services, additional flights are operated in the rainy season.

Domestic and international services are provided mainly for tourist traffic.

3.5. Telecommunications and connectivity

Bank data , from 2000 to 2010, fixed-line telephone subscribers increased from 0.75% of the population to 1.63%, while from 2010 to 2021 they reached 17.51%. Fixed-line internet subscribers are 2.03%.

From 2000 to 2010, cellular subscribers increased from 0.23% of the population to 63.31%, while in the transition to 2021 they increased to 64.96%.

62% of the population regularly uses the Internet, which also means that the majority of Internet users are connected via smartphone .

3.6. Industrial parks

The development of Special Economic Zones (SEZ) is one of the economic improvement approaches that has been prioritized by the Lao Government since the beginning of economic liberalization. In 2003, the first SEZ, Savan -Seno SEZ, was established, followed by Boten Beautiful Land SEZ and other SEZs.

SEZs are expected to be one of the main driving forces of economic development and modernization in the country, their aim is to provide a favorable business environment to host FDI and local private investment, but also to stimulate cross-border cooperation with neighboring countries, offering complementary services and stimulating the creation of regional value chains.

To date, 12 SEZs have been developed. The Special Economic Zones Promotion and Management Office (SEZO) of the Ministry of Planning and Investment (www.Laosez.gov.la) is in charge of the overall supervision of the SEZs, while the provincial SEZ management authority (SEZA) in each province where the SEZ is located is responsible for approving and facilitating business operations in each SEZ.

The SEZs are regulated by Law No. 14/NA of 17 November 2016 (Investment Promotion) and by Decree No. 188/PM of 7 June 2018 (ZES).

In general, the establishment in a SEZ enjoys special incentives, including tax exemption for a period ranging from 6 to 17 years, reduction or exemption of VAT, land concessions of up to 50 years. Other incentives can be negotiated with the local authorities.