Study On Motivation And Trade Effects Of Foreign Direct Invesment In Lao

Since the reform and opening up, Laos has been implementing policies of attracting foreign investment to develop its economy. In the near future, the foreign investment in Laos increases in a fast speed, but it is of small quantity, small scale, low quality, and poor benefits. Besides, it does not fit with Laos’ investment advantages and has quite limited driving effect on Laos’ foreign trade. By using the current international direct investment theory as the basic theory, this paper firstly analyzes the motivation of the foreign direct investment in Laos. Secondly, by choosing the top three countries that has the biggest investment in Laos, and based on the macro annual data like Laos’ import and export trade value and the same period’s foreign direct investment volume from 1990 to 2014, this paper implements a static and dynamic analysis to find the reason behind it.By regarding other countries’ direct investment volume in Laos and Laos’ import and export trade volume as the research object, this paper analyzes the relationship between them. Besides, it is trying to establish two different models that includes 13 countries models and covers almost all the main countries that has invested in Laos. Moreover, by adopting other countries’ panel data and choosing the explanatory variables, this paper discusses some direct investment effects like complementary or substitution effect in different industry in Laos. It is to measure the quantitative influence of the direct investment on import and export in the long term and in the short term. On this basis, it finds that China, Thailand and Vietnam have made the most significant promotion for Laos’ trade. Besides, based on the Laos’ special current situation in investment trade, this paper continues establishing regional trade factors influence model and finds that Laos’ trade gets different impact in different sectors. For example, in agroforestry, the complementary effect is distinct; while for the import of industrial products, it gets the biggest facilitation impact; and on total volume trade aspect, the foreign direct investment is of a driving effect on Laos’ trade and it is more distinct in the long term. Lastly, this paper proposes some corresponding policy suggestions.