- Laos is pursuing an ambitious digital transformation, aiming to grow its digital economy from 3% to 10% of GDP by 2040.
- Despite strong momentum and advantages such as abundant low-cost renewable energy, progress is constrained by weak legal frameworks, limited enforcement, and significant digital skills gaps.
- Laos could leverage its position and energy surplus to become a regional hub for data infrastructure and digital trade in South-East Asia.
Trains in Laos are spotless, efficient, and deploy advanced technology. It’s almost paradoxical, given it sits between Angola and Djibouti in terms of global GDP, 131st of 190.
Trains reflect the Digital Silk Road, part of China’s Belt and Road initiative (BRI), and the Lancang-Mekong Cooperation (LMC) framework, an environmental program for China to manage its hydropower flow between the riparian states of the Lancang and Mekong Rivers. The drive to digitalise has similarly spread southwards.
The Laotian government has articulated a vision of the country’s digital economy to grow from its current level of 3% to 10% of GDP by 2040. Vannapha Phommathansy, Deputy Director General of the Digital Government Center in Laos, said, “For Lao PDR, enhancing economy means more than just building physical infrastructure – it involves creating an ecosystem where digital networks, data flows, and digital services are equally accessible, affordable, and reliable for all.”
In the footsteps of its northern neighbour in China, Laos expects to hit this target by following a 10-year Digital Economy Strategy (2021-2030). Its proposed five-year Digital Economy Development Plan ended last year with the government publishing a Draft Decree on Digital Transformation, with three key pillars: a digital government, economy, and society.
But how ready is Laos for digital trade?
Angling away from analogue
The first question is, what makes a country ready for digital trade?
Laos enjoys a far more forward-thinking attitude to technological developments, as outlined above. The recent ‘Smart Laos’ program aims to promote information and communication technology (ICT) across the country; focus on ‘Smart Villages’, too, ensures that solutions like off-grid renewables, internet access, and precision agriculture applications are being introduced.
It’s not GDP. Of the countries with legislation compliant with the United Nations (UN) Model Law on Electronic Transferable Records (MLETR), nine are developing, and five are developed; on the list, Mauritius has a GDP most comparable to that of Laos. Importantly, Laos aligns with these developing countries in terms of plans for a digital economy.
Comparing the Lao Draft Decree with Bahrain’s Digital Economy Strategy 2030 (given that Bahrain have adopted MLETR), for instance, reveals that:
- Drives to digitalise are state-centric, with top-down strategy design and ministries responsible for deployment
- Digital infrastructure is prioritised: telecommunications networks, cloud centres, data systems
- Emerging technologies, like blockchain, AI, and digital identities, are to be watched and experimented with
- Capacity building target closing a skills gap
If anything, the Lao Draft Decree has a stronger rural-urban focus on how digitalisation can bridge socioeconomic gaps in the country. The Draft Decree also defines digital assets, albeit briefly and broadly, including cryptocurrencies, digital tokens, and non-fungible tokens (NFTs).
Rather, in Laos, the barrier seems to be twofold: legislative and educational.
To the former, digital activities as a whole aren’t governed by clear legal frameworks, and insufficient funding makes it difficult to act on the legislation in place. The Draft Decree is just a guideline, but provides limited clarity on foreign digital service providers and cross-border transactions.
It has also been reported that enforcement of existing laws on telecommunications is weak, which exacerbates cybercrime, IP theft, and fraud in the country. As a result, the approach to digitising trade processes would likely turn foreign players off, given the paramount importance of security to investors.
To the latter, limited awareness of digital best practices could hinder innovation in trade technology. A study conducted by the Lao National University revealed that about 82% of small and medium-sized enterprises (SMEs) have never implemented innovations in their production processes, mainly as a result of skills gaps.
“The battery of South-East Asia”
Hydropower accounts for 70% of Laos’ total electricity output. Across 94 power plants, electricity exports brought over $2.6 billion in revenue for the country in 2024 – around 12% of GDP – and have high potential for other renewables, including solar and wind. This abundance of cheap, renewable energy – earning Laos the nickname of South-East Asia’s “battery” – lays a strong foundation for building data infrastructure.
Data centres are expensive, and energy costs typically comprise 30-60% of these expenses. Luckily, energy prices in Laos are low, 17% of global averages.
Laos sits at the centre of a region whose data centre market is growing fast, projected to more than double from $13.71 billion in 2024 to $30.47 billion by 2030. But the most obvious candidates to meet this demand face constraints. Singapore, despite being the region’s leading hub with 1 GW of operational capacity, faces fundamental limits on expansion from land scarcity (its total area is just 734 square kilometres); while Indonesia’s project timelines are slowed by unreliable power, slow renewable energy approvals, and drawn-out permitting procedures.
Laos isn’t there yet, being landlocked with limited international fibre links. But the physical connectivity which the Laos-China Railway and other BRI projects have brought makes digital connectivity the next obvious frontier. Capitalising on its energy advantage could position Laos as the regional driver of digital trade solutions that South-East Asia needs.
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The future of Laos is young – approximately 60% of the population is under the age of 25. The mindset in Laos, as elsewhere, is that young people are digital natives poised to drive the future of innovation. Its economy, kindled by Chinese BRI investment, appears to be on a digital trajectory. Its renewable energy is almost begging to be maximised.
Singapore is the only South-East Asian economy with legislation based on the MLETR. As it enters its second five-year plan within the Digital Economy Strategy, Laos is well poised to become the next developing economy on the MLETR hitlist: with the right skills training, legislative tightening, and infrastructure deployment.
