## 1. Wood and Wood Product Export Restrictions in Lao PDR

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### Introduction
- Lao PDR is a small land-locked country with imports estimated to make up between 40 and 60 percent of GDP, and the trade deficit has been estimated at over 20 percent of GDP.
- The paper uses mirror statistics to assess the quality of Lao PDR’s trade data for FY2014/15 (October 2014 to September 2015) and to identify likely sources and sizes of trade under-reporting.
- Prior studies and mirror-data approaches cited include Federico and Tena (1991), Yeats (1995), Hamanaka (2011), Ferrantino et al. (2007), Day (2015), Benita et al. (2016), Brusilovsky et al. (2012), and Javorsek (2016).

### Key findings on under-reporting (aggregate)
- Exports could be underreported by 8 to 50 percent for 2014/15.
- Imports could be underreported by 30 to 70 percent for 2014/15.
- The trade deficit could be 20 percent to 280 percent higher than Lao PDR-reported figures.
- Underreporting is concentrated with major partners:
  - Thailand (17 percent of total trade)
  - China (10 percent of total trade)
  - Vietnam (3 percent of total trade)
- Back-of-the-envelope fiscal impact:
  - Foregone government revenue could be as high as 1 percent of GDP or 5 percent of current government revenue.

### Challenges in trade data collection (context)
- LIDCs face institutional, human, financial, periodicity, timeliness, coverage, and definitional challenges in compiling statistics.
- Among 60 LIDCs, current balance of payments data available for only 20 countries refer to 2015, 2014 and 2012, with 6 countries not reporting at all.
- For the IIP, current data available refer to 2015 and 2014 with 18 countries not compiling the IIP.
- eGDDS recommendations:
  - Annual periodicity with a timeliness of six months (quarterly strongly encouraged) for balance of payments statistics.
  - Annual periodicity with six-to-nine-month timeliness for the IIP.
- Trade in goods remains the largest contributor to global balance of payments discrepancies; missing or unrecorded trade (cross-border, informal, illicit, processing zones) is a significant issue for many developing countries.

### Sources of trade data for Lao PDR (used in analysis)
- Five data sources used:
  - Lao PDR Ministry of Industry and Commerce (MOIC)
  - Bank of Lao PDR (BOL)
  - United Nations Commodity Trade Statistics (UN COMTRADE)
  - IMF Direction of Trade Statistics (DOTS)
  - Vietnam General Statistics Office (bilateral data)
- Data aligned on a fiscal-year basis: FY2014/15 (October 2014 to September 2015).
- MOIC presents data by partner and commodity; BOL presents data only by broad commodity.
- MOIC commodity classifications do not correspond directly to HS classification and were reclassified to match HS for comparison.
- All sources refer to exports on an FOB basis and imports on a CIF basis.

### Broad aggregates: comparisons and discrepancies
- MOIC reports higher exports than BOL by about 29 percent.
- BOL reports higher imports than MOIC by about 12 percent.
- On a net basis, the trade deficit estimated by MOIC is about 60 percent smaller than that estimated by BOL.
- Both BOL and MOIC report lower trade flows than partner-country statistics (COMTRADE and DOTS).
  - BOL appears to significantly underestimate both imports and exports.
  - MOIC reports exports more in line with international comparators but still significantly underestimates imports.
- Mirror data report much higher trade deficits for Lao PDR than MOIC or BOL:
  - Differences range from 20 percent higher (COMTRADE vs BOL) to 278 percent higher (DOTS vs MOIC).
- COMTRADE vs DOTS:
  - COMTRADE reports 5 percent lower exports than DOTS, but 13 percent lower imports, and a lower trade deficit.
- Note on FOB/CIF adjustment:
  - Insurance and freight normally on the order of about 10 percent of the value; lack of adjustment could change the magnitude and direction of some discrepancies.

### Differences by trade partner and by product
- Exports:
  - Large negative differences (partners report higher imports from Lao PDR than Lao reports as exports) concentrated with China, Vietnam, and the European Union; significant negative differences also with Belgium, Japan and Macao (COMTRADE comparison), and India, Japan, Macao and Korea (DOTS comparison).
  - MOIC records higher exports than partner imports for some countries: UK, Germany, Netherlands, US (vs COMTRADE), and Thailand (vs DOTS).
  - Export discrepancies by product concentrated in wood and wood products:
    - China records higher imports of wood and wood products from Lao PDR on the order of 51 percent of MOIC recorded exports.
    - Vietnam records higher imports of wood and wood products from Lao PDR on the order of 66 percent of MOIC recorded exports.
  - Cases where MOIC shows higher exports than partner data include metal and metal products for China, and beverages, tobacco, rubber, mechanical parts, coffee and sugar for Vietnam — possibly due to classification mislabeling.
- Imports:
  - Under-reporting concentrated across a broader set of products: food, fuel, vehicles, machinery, chemical products, plastics and rubber, and construction materials.
  - Patterns consistent with significant informal border trade between Lao PDR and neighboring countries, and with use of exemptions for trade related to foreign direct investment.

### BOX 1 — Timeline of regulations and concentration of export discrepancies
- Timeline (selected measures):
  - September 2008: Prime Minister Order No. 17/PM on enhancement of forest management, protection and coordination in forest management and the wood business.
  - 2011: Prime Minister Order No.10/PM banning exploitation and buying-selling of prohibited wood.
  - September 2011: MOIC Notice No. 1904 on streamlining procedures of import and export of wood and wood products.
  - September 2011: MOIC Notice No. 1791 on streamlining procedures for the import and export of planted timber to facilitate industrial tree plantation.
  - March 2014: Prime Minister Resolution No. 41/PM allowed Provinces and Vientiane Capital to approve export of planted timber; Provincial Industry and Commerce Division to process export applications based on certification from Provincial Agriculture and Forestry Division.
  - May 2015: Prime Minister’s Office Notice No.790/PMO strictly prohibited exports of all kind of logs; timber from infrastructure, hydropower, mining and other development projects to be sold to domestic wood processing factories; wood from plantations encouraged to be processed locally or require permit for exportation.
  - October 2015: Prime Minister’s Office Notice No. 2156 allowed export of half of all processed wood products.
  - May 2016: Order No. 15/PM banning export of timbers exploited from natural forest of Lao PDR; timbers for export to be processed according to Decision No. 2005/MOIC; ban on illegal timbers and forestry products from abroad transiting Lao PDR territory to a third country.
- Concentration:
  - Discrepancy in export data concentrated in wood and wood products with close neighboring economies.
  - Export restrictions and quotas since 2008 aim to protect local industry and address environmental concerns.

### Sources and types of trade discrepancies (additional details)
- Unrecorded exports possibly used to circumvent export restrictions.
- Unrecorded imports of fuel to take advantage of price differentials; gasoline price in Lao PDR equalized with price in Thailand during FY14/15 (chart referenced in source).
- Undervaluation of vehicle imports:
  - Identified as an important source of undercounting in trade with Thailand, China and South Korea.
  - Lao PDR Ministry of Finance has identified pricing problems in customs compared to international prices.
  - Discrepancy magnitude on the order of US$350 million in total, or 8 percent of total imports identified by MOIC.
- Informal border trade in food products:
  - Discrepancy in food products from Thailand accounted for US$586 million, or 22 percent of recorded MOIC imports from Thailand, and 13 percent of all recorded imports.
- Other underreporting:
  - Machinery and fertilizer from China.
  - Plastics, rubber and construction materials from Thailand.
  - Printed materials (books/magazines) from Singapore.

### Quantitative scale of discrepancies and impacts on trade balances, fiscal revenue and reserves
- Large export discrepancy for FY 2014/15 on the order of US$800 million, or 23 percent of total exports identified by MOIC and 30 percent of total exports identified by BOL.
- Possible undercounting of the trade deficit:
  - By anywhere from 20 to 52 percent in the case of the BOL data.
  - By anywhere from 200 to 280 percent in the case of MOIC data.
- Implication: current account balance will be substantially worse than currently estimated, with errors and omissions increasing.
- Fiscal implications:
  - Foregone tariff revenue from undercounting of imports could be as high as 0.7 percent to 1 percent of GDP, or 3.5 percent to 5.1 percent of government revenue (excluding grants).
  - Calculation assumes underreported imports subject to overall average tariff for FY 14/15 of 3.8 percent.
- Reserve coverage metrics affected:
  - Using authorities’ data, reserves are at five months of imports and only slightly below the optimal level according to IMF reserve metric.
  - Using partner country imports, reserves are at 1 month of imports and metrics are well below optimal levels.

### Interpretations, comparisons with prior work, and implications
- Concentration of export under-reporting in wood and wood products may indicate persistent illegal logging and informal cross-border trade to circumvent environmental and industrial policy export restrictions.
- Import under-reporting across many categories suggests informal cross-border trade and possible misapplication of exemptions for FDI-related imports.
- Institutional differences in data collection and classification (MOIC customs-based data; BOL survey adjustments; reclassification to HS) contribute to discrepancies.
- Comparison with Hamanaka (2011) (2008/9 data):
  - Hamanaka found export differences on the order of 16 percent of MOIC recorded flows (this study: 9 and 15 percent for COMTRADE and DOTS).
  - Hamanaka found import differences on the order of 55 percent of MOIC recorded flows (this study: 31 and 50 percent for COMTRADE and DOTS).
  - In percent of GDP, differences for three major partners (Thailand, Vietnam and China) move from about 10 percent of GDP in 2007/2008 to about 21 and 17 percent of GDP in 2014/15 using differences between MOIC and DOTS and COMTRADE respectively.
  - Evolution of coverage since 2007/08 shows ratios have significantly improved since 2014/15 compared to 2007/8 for the same 20 main trading partners, with largest bilateral improvement with Thailand.

### Conclusions and policy recommendations
- Findings:
  - Large differences exist within Lao PDR’s compiling agencies (BOL and MOIC) and between these agencies and international sources (COMTRADE and DOTS).
  - Differences relate to both import and export underreporting with large impact on estimation of the trade balance.
  - Underreporting concentrated by partner: China, Vietnam and Thailand; and by product: exports—wood and wood products; imports—food, fuel, vehicles, machinery, chemical products, plastics and rubber, construction materials.
  - Underreporting of imports is a long-standing issue (consistent with Hamanaka (2011) for 2008).
  - These discrepancies have significant implications for external vulnerabilities, fiscal revenues and reserve coverage metrics, affecting macroeconomic policy design.
- Recommendations:
  - Reconcile data between the two agencies that compile trade statistics (BOL and MOIC) through extensive collaboration and data validation.
  - Customs services must improve the quality, coverage and timeliness of source data and minimize informal trade of products.
  - Provide technical assistance if necessary, including assistance requested from the Fund.
  - Encourage close collaboration and participation in the Fund’s STA initiatives to resolve bilateral data asymmetries.

*Source: IMF working paper chapter "1. Wood and Wood Product Export Restrictions in Lao PDR" (FY2014/15 analysis).*

### 1. Wood and Wood Product Export Restrictions in Lao PDR .................................................11

### 1. Wood and Wood Product Export Restrictions in Lao PDR

### Introduction
- Lao PDR is a small land-locked country with imports estimated to make up between 40 and 60 percent of GDP, and the trade deficit has been estimated at over 20 percent of GDP.
- The paper uses mirror statistics to assess the quality of Lao PDR’s trade data for FY2014/15 (October 2014 to September 2015) and to identify likely sources and sizes of trade under-reporting.
- Prior studies and mirror-data approaches cited include Federico and Tena (1991), Yeats (1995), Hamanaka (2011), Ferrantino et al. (2007), Day (2015), Benita et al. (2016), Brusilovsky et al. (2012), and Javorsek (2016).

### Key findings on under-reporting (aggregate)
- For 2014/15, estimated under-reporting ranges:
  - Exports could be underreported by 8 to 50 percent.
  - Imports could be underreported by 30 to 70 percent.
  - The trade deficit could be 20 percent to 280 percent higher than Lao PDR-reported figures.
- Underreporting is concentrated with major partners:
  - Thailand (17 percent of total trade)
  - China (10 percent of total trade)
  - Vietnam (3 percent of total trade)
- A back-of-the-envelope estimate indicates foregone government revenue could be as high as 1 percent of GDP or 5 percent of current government revenue.

### Challenges in trade data collection (context)
- Low-income developing countries (LIDCs) face institutional, human, financial, periodicity, timeliness, coverage, and definitional challenges in compiling statistics.
- Among 60 LIDCs, current balance of payments data available for only 20 countries refer to 2015, 2014 and 2012, with 6 countries not reporting at all.
- For the IIP, current data available refer to 2015 and 2014 with 18 countries not compiling the IIP.
- The eGDDS recommends annual periodicity with a timeliness of six months (quarterly strongly encouraged) for balance of payments statistics; and annual periodicity with six-to-nine-month timeliness for the IIP.
- Trade in goods remains the largest contributor to global balance of payments discrepancies; missing or unrecorded trade (cross-border, informal, illicit, processing zones) is a significant issue for many developing countries.

### Sources of trade data for Lao PDR (used in analysis)
- Five data sources used:
  - Lao PDR Ministry of Industry and Commerce (MOIC)
  - Bank of Lao PDR (BOL)
  - United Nations Commodity Trade Statistics (UN COMTRADE)
  - IMF Direction of Trade Statistics (DOTS)
  - Vietnam General Statistics Office (bilateral data)
- Data for the study are aligned on a fiscal-year basis: FY2014/15 (October 2014 to September 2015).
- MOIC presents data by partner and commodity; BOL presents data only by broad commodity.
- MOIC commodity classifications do not correspond directly to HS classification and were reclassified to match HS for comparison.
- All sources refer to exports on an FOB basis and imports on a CIF basis.

### Broad aggregates: comparisons and discrepancies
- Notable differences between Lao institutions and mirror/international sources:
  - MOIC reports higher exports than BOL by about 29 percent.
  - BOL reports higher imports than MOIC by about 12 percent.
  - On a net basis, the trade deficit estimated by MOIC is about 60 percent smaller than that estimated by BOL.
- Both BOL and MOIC report lower trade flows than partner-country statistics (COMTRADE and DOTS).
  - BOL appears to significantly underestimate both imports and exports.
  - MOIC reports exports more in line with international comparators but still significantly underestimates imports.
- Mirror data (COMTRADE and DOTS) report much higher trade deficits for Lao PDR than MOIC or BOL:
  - Differences range from 20 percent higher (COMTRADE vs BOL) to 278 percent higher (DOTS vs MOIC).
- Discrepancies between COMTRADE and DOTS are concentrated in imports:
  - COMTRADE reports 5 percent lower exports than DOTS, but 13 percent lower imports, and a lower trade deficit.
- Note on FOB/CIF adjustment: if mirror data are not adjusted for the CIF/FOB difference (insurance and freight—normally on the order of about 10 percent of the value), adjustments could change the magnitude and direction of some discrepancies.

### Differences by trade partner and by product
- Exports:
  - Large negative differences (partner countries report higher imports from Lao PDR than Lao reports as exports) are concentrated with China, Vietnam, and the European Union; significant negative differences also with Belgium, Japan and Macao (COMTRADE comparison), and India, Japan, Macao and Korea (DOTS comparison).
  - MOIC records higher exports than partner imports for some countries, notably the UK, Germany, Netherlands, and the US (vs COMTRADE), and Thailand (vs DOTS). Possible explanations include mislabeling of destination, re-exports from duty-free zones, or product classification differences.
  - Export discrepancies by product are concentrated in wood and wood products:
    - China records higher imports of wood and wood products from Lao PDR on the order of 51 percent of MOIC recorded exports.
    - Vietnam records higher imports of wood and wood products from Lao PDR on the order of 66 percent of MOIC recorded exports.
  - Some cases where MOIC shows higher exports than partner data include metal and metal products for China, and beverages, tobacco, rubber, mechanical parts, coffee and sugar for Vietnam — possibly due to classification mislabeling.
- Imports:
  - Under-reporting of imports is concentrated across a broader set of products: food, fuel, vehicles, machinery, chemical products, plastics and rubber, and construction materials.
  - These patterns are consistent with significant informal border trade between Lao PDR and neighboring countries, and with the use of exemptions for trade related to foreign direct investment.

### Interpretations and conjectures
- Concentration of export under-reporting in wood and wood products may indicate persistent illegal logging and informal cross-border trade to circumvent environmental and industrial policy export restrictions.
- Import under-reporting across many categories suggests informal cross-border trade and possible misapplication of exemptions for FDI-related imports.
- Institutional differences in data collection and classification (MOIC customs-based data; BOL survey adjustments; reclassification to HS) contribute to discrepancies.
- The magnitude of discrepancies implies meaningful fiscal implications (potentially up to 1 percent of GDP in foregone revenue).

*Source: IMF working paper chapter "1. Wood and Wood Product Export Restrictions in Lao PDR" (FY2014/15 analysis).*

### BOX 1

### BOX 1  WOOD AND WOOD PRODUCT EXPORT RESTRICTIONS IN LAO PDR

### Timeline of regulations and policy measures
- September 2008: Prime Minister Order No. 17/PM on enhancement of forest management, protection and coordination in forest management and the wood business.
- 2011: Prime Minister Order No.10/PM banning exploitation and buying-selling of prohibited wood.
- September 2011: MOIC Notice No. 1904 on streamlining procedures of import and export of wood and wood products.
- September 2011: MOIC Notice No. 1791 on streamlining procedures for the import and export of planted timber to facilitate industrial tree plantation.
- March 2014: Prime Minister Resolution No. 41/PM allowed Provinces and Vientiane Capital to approve export of planted timber; Provincial Industry and Commerce Division to process export applications based on certification from Provincial Agriculture and Forestry Division.
- May 2015: Prime Minister’s Office Notice No.790/PMO strictly prohibited exports of all kind of logs; timber from infrastructure, hydropower, mining and other development projects to be sold to domestic wood processing factories; wood from plantations encouraged to be processed locally or require permit for exportation.
- October 2015: Prime Minister’s Office Notice No. 2156 allowed export of half of all processed wood products.
- May 2016: Order No. 15/PM banning export of timbers exploited from natural forest of Lao PDR; timbers for export to be processed according to Decision No. 2005/MOIC; ban on illegal timbers and forestry products from abroad transiting Lao PDR territory to a third country.

### Concentration of export discrepancies in wood and wood products
- Discrepancy in export data is concentrated in wood and wood products with close neighboring economies.
- Export restrictions and quotas since 2008 aim to protect local industry and address environmental concerns.

### Trade data discrepancies: imports and partner-specific findings
- Overall: MOIC data significantly undercount the value of imports from major trading partners Thailand and China.
- Major import partners identified: Thailand, China, Vietnam and European Union.
- MOIC undercounts imports from: Thailand, China, Singapore, South Korea, Germany, India, Japan and France.
- COMTRADE and DOTS mirror statistics identify a significant positive difference in trade with Vietnam (MOIC records higher imports from Vietnam than Vietnam records as exports to Lao PDR).

- Imports from Thailand:
  - Discrepancy between MOIC and COMTRADE for imports from Thailand is about US$ -1.4 billion excluding electricity (Table 9).
  - MOIC data excludes imports of electricity from Thailand (US$106 million).
  - Seven major categories with large negative discrepancies: processed foods, minerals, live animals and meats, transport equipment, chemicals, plastics and rubber, and construction materials (stone, plaster, cement and glass).
  - Positive discrepancies in machinery and equipment, and metals and products (MOIC identifies greater imports than COMTRADE records as exports from Thailand).
  - Three two-digit HS codes where the negative difference is most concentrated: mineral fuels and oil (mainly diesel, gasoline and petrochemicals); meat and edible offal; and vehicles and parts (cars and trucks).
  - Discrepancies also concentrated in a wide variety of consumer products — supporting conjecture of unrecorded border trade from Thailand into Lao PDR.
  - Significant positive differences plausibly explained by misclassification (e.g., MOIC classifying items as “metal and objects made of metal” while COMTRADE classifies as “iron and steel” or “article of iron and steel”).

- Imports from China:
  - Major differences in recording of imports from China between MOIC and COMTRADE mainly in metal products, machinery and equipment, transport equipment, and chemicals (Tables 12 and 13).
  - For a broad number of products MOIC does not record any trade flows while COMTRADE reports significant flows — including metal products, chemicals, plastics and rubber, mineral products, food and tobacco — suggesting significant under invoicing or other under recording.
  - Large negative discrepancy concentrated in: metal products, machinery and equipment, transport equipment, and chemicals.
  - Large positive discrepancies in miscellaneous manufactures and textiles and apparel — indicating some misclassification.
  - Three two-digit product categories where discrepancies are concentrated: articles of iron and steel, machinery and equipment, and vehicles (cars and trucks).

- Imports from Singapore and South Korea:
  - Large discrepancies in product categories for Singapore and South Korea.
  - Singapore: most discrepancy in books and newspapers.
  - South Korea: most discrepancy in land vehicles (similar to Thailand and China).

### Comparison with previous work (Hamanaka (2011))
- Hamanaka (2011) using 2008/9 data found significant under-reporting of both imports and exports in MOIC data compared to partner mirror data that cannot be explained by CIF adjustments.
- Hamanaka results:
  - Differences on the order of 16 percent of MOIC recorded flows for exports (compared to 9 and 15 percent respectively in this study for COMTRADE and DOTS).
  - Differences on the order of 55 percent of MOIC recorded flows for imports (compared to 31 and 50 percent respectively in this study for COMTRADE and DOTS).
- In percent of GDP, differences for three major trading partners (Thailand, Vietnam and China) move from about 10 percent of GDP in 2007/2008 to about 21 and 17 percent of GDP in 2014/15 using the differences between MOIC and DOTS and COMTRADE respectively.
- Hamanaka’s concentration findings:
  - Discrepancies in exports concentrated in wood and wood products.
  - Discrepancies in imports concentrated in fuel and gas for Thailand, and in machinery and equipment, metal products and vehicles for all trading partners.
- Evolution of coverage since 2007/08:
  - Replication of Hamanaka’s import/exports ratios for the same 20 main trading partners shows ratios have significantly improved since 2014/15 compared to 2007/8.
  - 2007/8 MOIC trade discrepancy for 20 trading partners: -1101 (suggesting Lao PDR exported more to than imported from its main trading partners).
  - 2014/15 trade discrepancy: +1042 using MOIC data and 4105 using DOTS data.
  - Bilateral largest improvement with Thailand: +1085 using MOIC data and +2919 using DOTS data.
  - Trade discrepancy with China: improved in 2014/15 using DOTS data from -183 in 2007/8 to +409 in 2014/15; worsened slightly using MOIC data from -183 in 2007/8 to -190 in 2014/15.

### Possible explanations for discrepancies and implications
- Methodological factors noted: time lags in recording of trade, and differences and errors in classification.
- Following Hamanaka (2011), other possible explanations include:
  - Circumventing restrictions on exports of wood. For exports, the discrepancy is concentrated in the export of wood and wood products with close neighboring economies. Since 2008, there have been quotas and restrictions on the export of raw wood and wood products to protect the local industry and for environmental reasons.

*Source: BOX 1, wp17251 - BOX 1 (IMF staff analysis).*

### Box 1 more details). The discrepancy identified here may stem from unrecorded exports

### Box 1 more details). The discrepancy identified here may stem from unrecorded exports

### Sources and types of trade discrepancies
- Unrecorded exports possibly used to circumvent export restrictions.
- Unrecorded imports of fuel to take advantage of price differentials with other countries; gasoline price in Lao PDR equalized with price in Thailand during FY14/15 (chart referenced).
- Undervaluation of vehicle imports:
  - Identified as an important source of undercounting in trade with Thailand, China and South Korea.
  - Lao PDR Ministry of Finance has identified pricing problems in customs compared to international prices.
  - Discrepancy magnitude on the order of US$350 million in total, or 8 percent of total imports identified by MOIC, suggesting informal trade could be part of the explanation, especially from Thailand and China.
- Informal border trade in food products:
  - Could explain unrecorded imports of processed food, animals and meat from Thailand and (less so) from China.
  - Discrepancy in food products from Thailand accounted for US$586 million, or 22 percent of recorded MOIC imports from Thailand, and 13 percent of all recorded imports.
- Underreporting of other products:
  - Machinery and fertilizer from China.
  - Plastics, rubber and construction materials from Thailand.
  - Printed materials (books/magazines) from Singapore.

### Quantitative scale of discrepancies and impacts on trade balances
- Large export discrepancy for FY 2014/15 on the order of US$800 million, or 23 percent of total exports identified by MOIC and 30 percent of total exports identified by BOL.
- Breadth of underreported import products points to a systemic problem in recording trade in Lao PDR.
- Possible undercounting of the trade deficit:
  - By anywhere from 20 to 52 percent in the case of the BOL data.
  - By anywhere from 200 to 280 percent in the case of MOIC data.
- Implication: current account balance will be substantially worse than currently estimated, with errors and omissions increasing.

### Fiscal and reserve implications
- Foregone tariff revenue from undercounting of imports could be as high as 0.7 percent to 1 percent of GDP, or 3.5 percent to 5.1 percent of government revenue (excluding grants).
- Back-of-the-envelope calculation assumes underreported imports would be subject to the overall average tariff for FY 14/15 of 3.8 percent.
- Reserve coverage metrics affected by import calculations:
  - Using the authorities’ data, reserves are at five months of imports and only slightly below the optimal level according to the IMF’s reserve metric.
  - Using partner country imports indicates that reserves are at 1 month of imports and metrics are well below optimal levels.

### Conclusions and policy recommendations
- Findings:
  - Large differences exist within Lao PDR’s own compiling agencies (BOL and MOIC) and between these agencies and international sources (COMTRADE and DOTS).
  - Differences relate to both import and export underreporting with large impact on estimation of the trade balance.
  - Underreporting concentrated by partner: China, Vietnam and Thailand; and by product: exports—wood and wood products; imports—food, fuel, vehicles, machinery, chemical products, plastics and rubber, construction materials.
  - Underreporting of imports is a long-standing issue (consistent with Hamanaka (2011) for 2008).
  - These discrepancies have significant implications for external vulnerabilities, fiscal revenues and reserve coverage metrics, with consequences for macroeconomic policy design.
- Recommendations:
  - Reconcile data between the two agencies that compile trade statistics (BOL and MOIC) through extensive collaboration and data validation.
  - Customs services must improve the quality, coverage and timeliness of source data and minimize informal trade of products.
  - Provide technical assistance if necessary, including assistance requested from the Fund.
  - Encourage close collaboration and participation in the Fund’s STA initiatives to resolve bilateral data asymmetries.

*Source: Lao PDR authorities including Bank of Lao, Direction of Trade Statistics (DOTS), IMF and COMTRADE, United Nations.*

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_Source: https://www.imf.org/-/media/files/publications/wp/2017/wp17251.pdf_