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Laos Freight and Logistics Market - Growth, Trends, and Forecast (2019 - 2024)

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  • 250 Pages
  • July 2019
  • Region: Laos
  • Mordor Intelligence
  • ID: 4514813
Market Overview

The Laos freight and logistics market is estimated to be valued at USD 497.46 million in 2018 and is estimated to grow at a CAGR of 8.47 % during the forecast period.
  • Laos is one of the fastest-growing economies in the ASEAN region. The country has witnessed economic growth of more than 7% in recent years.
  • With a population of just more than 6.5 million, the logistics sector in the country is less developed, when compared to other countries in the region. The logistics infrastructure is weak in the country, which results in high logistics costs. For instance, according to industrial sources, more than 30% of the business costs in the motor fuels retail and supply in Laos were related to logistics.
  • The contribution of the transport and storage sector in the country is estimated to be around 5% of the GDP, which is lower than the average contribution for developing countries of 8%. This can be attributed to the low level of participation of Lao companies in international transport and the high level of informal employment in the Lao transport industry.
  • The Laos government has allocated a huge budget for developing and improving the infrastructure facilities to link with the neighboring countries. The country has signed bilateral trade agreements with neighboring countries, which include Cambodia, Vietnam, and Thailand.
  • In addition to this, to boost the trade activity, Laos has also signed multilateral agreements, such as Laos-Vietnam-Thailand, Laos-Vietnam-Cambodia, the Great Mekong Sub-Regional Cross-Border Transport Agreement (GMS CBTA), and the ASEAN Framework Agreement.
  • The country is located at a strategic geographic location bordering the major countries of China, Thailand along with Vietnam, Myanmar, and Cambodia. Moreover, the Mekong River that flows across the country presents a huge opportunity for reducing the logistics costs.

Scope of the Report

A complete background analysis of the Laos freight and logistics market, which includes an assessment of the economy and contribution of sectors in the economy, market overview, market size estimation for key segments, and emerging trends in the market segments, market dynamics, and logistics spending by the end-user industries are covered in the report.

Key Market Trends

Land Transport is the Major Mode of Transportation

Road transport dominates freight transport in the country with the country being landlocked. More than 80% of the freight traffic (ton-km) is carried by roads. Out of the total road length in the country, more than 90% of it is unpaved. The road density in Laos has improved over the years and stands at more than 20 km per 100 sq. km. This is low when compared to other ASEAN countries. In terms of regional connectivity, many national roads in Laos have been upgraded and linked with the road networks in the neighboring countries.

Laos has almost 20 cross-border linkages to its neighbors (9 between Laos-Vietnam, 8 between Laos-Thailand, 2 between Laos-China, and 1 between Laos-Cambodia). Thailand is the major trading partner in the Intra-ASEAN region for Laos, whereas, China is the major trading partner in the Extra-ASEAN region.

The rail services in Laos are almost non-existent. The country has only a short section of 3.5 km railway from Thanaleng to Nongkhai (Thailand). Rail offers a cheaper mode of freight transportation. According to industrial sources, the transport of goods by railway can reduce the costs by 30% to 50%, when compared to road transportation costs.

Laos has become one of the priorities in the Belt and Road Initiative (BRI) of the Chinese government, which aims at increasing connectivity and the economic and political ties of China with more than 60 countries in Asia, Africa, and the Middle East, mainly through infrastructure projects. One of the key projects of the BRI is a railway connecting Kunming, in southern China, to Singapore, running through Laos, Thailand, and Malaysia. In Laos, the project stretches from Boten, in the Lao-China border, to Vientiane, Lao capital, and a bordering city with Thailand.

The Boten-Vientiane is a complex engineering project where 62% of the track’s length is made up of tunnels and bridges. The construction was launched in December 2016 and the line is expected to open in December 2021. The project, once completed, is expected to reduce the time it takes to travel from Mohan-Boten to Vientiane from three days to three hours. The passenger trains will run at 160 km per hour, while the freight trains will run at 120 km per hour.

Logistics Services plays a key role in the Growth of Laos Agriculture Sector

The Agriculture, Fishing, and Forestry sector account for more than 15% of the economy of Laos. According to a five-year development plan until 2025 by Lao Ministry of Agriculture and Forestry, the GDP of agriculture and forestry sector to grow at an average rate of 3.4%, which indicates that the sector would contribute 19% to the national economy.

The agriculture exports of the country have increased in the recent years, driven by the increased participation of traditionally small-scale farming households in the production of export linked commodities, such as rice, fruits, vegetables, rubber, etc. The agriculture sector of the country is traditionally focused on rice, but the improved commodity prices and external demand has promoted commercialization and export of other non-rice crops, such as vegetables, rubber, fruits, cassava over the past decade. The production of meat, eggs, fish and aquatic animal are on rise and the exports of meat products are also expected to rise as production and processing operations are being modernized.

Rice is the major commodity produced by Laotian farmers and it supports many jobs in milling, trading, and food services. Rice stock is stored and managed at a central location, warehouses do not exist at the local level and farmers sell paddy to an assembler who sells it to mills. The assemblers drive up to three days from farmer to farmer buying a few bags (50 kg) of paddy from each to fill their truck.

Some medium-sized rice mills located near to the capital Vientiane, transport rice to customers in their own trucks instead of relying on transport companies. This is due to the small volumes of trade. The large size mills in the country are relatively few and most of them are operated by the Government and donor funded. The government mills have large warehouses and drying facilities. The number of large private mills and warehouses is limited as the surplus is widely dispersed. The transport costs internalized by mills are about 20–30% cheaper than rates available on the market.

Alongside, the Laos freight and logistics market is expected to witness significant growth from other end-users such as manufacturing, construction, and others. Laos can emerge as a vital link in the regional value chain. With the economy of the country growing rapidly, Laos is being considered by foreign firms as a destination for production base.

Competitive Landscape

The Freight and Logistics market in Laos is less competitive due to the presence of a smaller number of international players and those players hold a major market share, mainly in international freight transportation. However, the competition in the market is increasing with the entry of new players into the market. For import and export of goods, there is a high dependence on foreign, mostly Thai, Vietnamese and Chinese trucks, and only a minimal Lao presence in the international freight transit market. Offerings for value-adding services to agricultural, manufacturing and trading sectors by Lao firms is also very limited. The technical standards of freight operations, i.e. in terms of safety, vehicle maintenance, vehicle loading, driver performance, vehicle age, and specification do not meet the requirements of international supply chains.

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Table of Contents

1.1 Study Deliverables
1.2 Study Assumptions
1.3 Scope of the Study
2.1 Analysis Methodology
2.2 Research Phases
4.1 Current Market Scenario
4.2 Market Dynamics
4.2.1 Drivers
4.2.2 Restraints
4.2.3 Opportunities
4.3 Government Regulations and Initiatives
4.4 Insights on the E-commerce Industry
4.5 Insights On Greater Mekong Sub-region (GMS) and Other Transport Agreements And Initiatives
4.6 Insights on Key Transport Corridors
4.7 Insights on Special Economic Zones (SEZs)
5.1.1 Freight Transport Road Inland Water Air Rail
5.1.2 Freight Forwarding
5.1.3 Warehousing
5.1.4 Value-added Services and Others
5.2.1 Manufacturing and Automotive
5.2.2 Oil and Gas, Mining, and Quarrying
5.2.3 Agriculture, Fishing, and Forestry
5.2.4 Construction
5.2.5 Distributive Trade (Wholesale and Retail Segments - FMCG included)
5.2.6 Other End Users (Telecommunications, Pharmaceuticals, etc.)
6.1 Overview (Market Concentration and Major Players)
6.2 Company Profiles
6.2.1 Nippon Yusen Kabushiki Kaisha (Yusen Logistics Co. Ltd.)
6.2.2 Bollore Transport & Logistics
6.2.3 Ceva Logistics
6.2.4 Linfox Pty Ltd
6.2.5 Deutsche Post Dhl Group
6.2.6 Geotrans Logistics and Movers
6.2.7 Savan Logistics
6.2.8 Nissin Smt Co. Ltd
6.2.9 Sayfon Logistics
6.2.10 Exim Company
6.2.11 Jo Bounmy Group
6.2.12 Hung Huang (Lao) Logistics Co. Ltd
6.2.13 State Land River Transport*
8.1 Macroeconomic Indicators
8.2 Insights on Capital Flows
8.3 External Trade Statistics - Export and Import, by Product
8.4 Insights on Key Export Destinations
8.5 Insights on Key Import Origin Countries
8.6 Some of the Key End Users

Companies Mentioned

A selection of companies mentioned in this report includes:

  • Nippon Yusen Kabushiki Kaisha (Yusen Logistics Co. Ltd.)
  • Bollore Transport & Logistics
  • Ceva Logistics
  • Linfox Pty Ltd
  • Deutsche Post Dhl Group
  • Geotrans Logistics and Movers
  • Savan Logistics
  • Nissin Smt Co. Ltd
  • Sayfon Logistics
  • Exim Company
  • Jo Bounmy Group
  • Hung Huang (Lao) Logistics Co. Ltd
  • State Land River Transport*